01 March 2011

Simmering Panic over Loss of US Reserve Currency Status?

More: Is the US Dollar Still a Safe Haven? asks the same question in less strident tones. Clearly Americans elected a wrecking crew in 2008 to run their government, rather than responsible leadership. A deep fatalistic Carteresque malaise appears to be smothering the American Dream. Is the economic prophecy of doom displayed in the video below a realistic scenario?

The video above lasts over 1 hour, presenting a message of impending collapse of the US dollar and the US economy due to hyper-inflation and the loss of US dollar reserve currency status. But is the idea realistic, or even frightening?

There are rumours that China plans to shift to a new gold-backed international reserve currency to replace the US dollar. If that happens, will the resulting monetary shock overturn the US economy?

First, China may be holding a lot more US securities than it has admitted up until now. It will not be easy for China to throw these securities away, or do anything to significantly depreciate their value. Second, the US dollar may not be so easy to replace.
...the definition of reserve currency: "A foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate."
Foreign Currency Reserve Factors
  1. Trade Volumes
  2. Trade Deficits
  3. Currency Manipulation
  4. Hot Money
Mish then goes on to explain how the US dollar fits into the four factors as an international reserve currency. It will be difficult -- but not impossible -- to replace.

But even if a better reserve currency can be created, will the utter devastation predicted by the video above actually come to pass inside the US? Mish has a lot to say about that as well. In a two word summary: "no disaster."

The true disaster to be faced is the US fiscal and monetary policies of the Obama government, combined with suicidal US energy, business, and foreign policies. Those are the things to worry about.

Should you be worried? Sure, if you are unprepared you should worry just enough to motivate yourself to become prepared. Do not expect a government or organisation to take care of you. That's your job.

As mentioned previously on multiple occasions, precious metals are a vital part of any integrated preparation for a prolonged chaos of an economic or other type. Food, water, medicines, backup power supplies and lighting, backup heating, sanitation, a low profile, etc. etc. are all crucial for the short term. For a longer term disruption, skill competencies, materials, food-growing capacity, water-purification, organisation into groups for trade and defense, etc. become more important.

The Obama regime is still in power. Any meaningful long-lasting financial recovery is out of the question -- although pockets of economic sanity may crop up in parts of the US willing to face the creeping rot head-on, such as Wisconsin.

Hope for the best. Prepare for the worst.

Labels: ,

Bookmark and Share


Blogger neil craig said...

Bearing in mind that there are 10s of thousands of metallic asteroids out there weighing over a million tons & running to fractions of a % or more gold it may not be as inflation proof as all that.

On the other hand that means that ther very process of going for a gold standard would stimulate commercial space development enormously.

On the 3rd hand if China is expecting to become the big cheese in space going for a gold based currency system makes a lot of sense for them.

Wednesday, 02 March, 2011  

Post a Comment

“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

<< Home

Newer Posts Older Posts