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Is a Major US Dollar Devaluation Imminent?
Stock Market Trend Analysis ^ | 3/26/09

Posted on 04/13/2009 8:44:20 AM PDT by djf

Jim Willie Ph.D. is a well-placed statistical analyst in market research and retail forecasting. Since I first started reading his articles in early 2007, which was before our current economic crisis was a blip on the radar screen, he accurately predicted the severity of our current financial crisis many months in advance and how the events would unfold. In his latest article, he speaks about what one of his trusted colleagues:

This message was just received by a trusted colleague. This summer could be very bloody, in terms of global retribution against the United States, its debt peddlers. The gloves could finally come off. The person has global connections, decades of gold and banker experience, connections with the Euro Central Bank, numerous commercial contacts in Russia, China, and Arab world, and lives with several feet in several ponds, fluent in a few key languages. He is involved in many meetings of international importance, and lately has had the advantage of being involved with both bilateral barter arrangements created by Russia (with China, with Germany). He has a strong reliability record, with advanced notice often provided in a valuable manner. Here is a quote from this morning, which was in response to some queries about continued US Treasury Bond support, recently difficulty with UK Gilt bond auctions, and general monetary debauchery by major nations like US, UK, and Switzerland.

He wrote: “However, come the end of May/June/July 2009, the United States will be put through the meat grinder once and for all. You have no idea how pissed off the creditor nations are with the unmitigated arrogance and delusional bulxxhit coming out of Washington DC / Wall Street. I have never heard people be so furious and vocal on how the US needs to be dealt with from here on forward, as demonstrated during an early morning conference call we had with Europeans, including Russians and Asians. (The emphasis is all his) All on the call are heavy-duty decision makers.” A time of reckoning comes for the US, and my opinion is that what lies directly ahead is a dark place with more economic hardship and far less liberty. Be prepared with ownership of gold & silver bullion, bars, and coins. If not, a likely outcome is more destruction of personal finances, savings, and pension holdings, along with job cuts.

We're now monetizing debt, which is something only "banana republics" do - - right??? The Treasury's auction of 5-year bonds ran into problems Wednesday for the first time causing the market to drop several hundred points before the PPT jumped in and bumped it back up. This should be a warning to all that the US dollar has serious problems. If a new international currency comes into play; e.g., the "drawing rights" as set up by the IMF, the billions of US dollars circulated in other nations will be repatriated to the US. There is no effective mechanism to take all of this money out of circulation once in. We will likely have to monetize a couple trillion dollars more of debt just in 2009 as we attempt to roll over our past deficits and the new proposed spending.

Jim Willie's article follows the lead of several European "think tanks" like LEAP/E2020 who reported a major US dollar devaluation will take place no later than September 2009. They predict a 90% devaluation, which if true, would create hardships and suffering in the US at levels we have experienced in our history, maybe excepting major wars.

Though there will be rumblings, any devaluation would be very swift where one goes to the bank the morning and finds them on holiday (i.e., a banker's term for "closed until further notice"). When they do open up, your money is devalued.

As the US is primarily an import nation, we will find goods imported from other counties soar in price after a major devaluation. Using the 90% devaluation number byLEAP/E2020 and others; it would mean the lawnmower you want to buy now for $150 would cost $1,500 then, or that $40 dinner with your wife might cost $400, or a gallon of gas would cost $30.

Hopefully it won't be that bad, but even with a 50% devaluation, the hardships would be immense. Also, the US is a net importer of food, so food shortages would take place. With $10+ for a gallon gasoline, fertilizers and shipping would raise the costs for food grown domestically. In a major devaluation, incomes will rise some, but no where to the extent of the devaluation. The value of pension plans and savings would decline or be wiped out.

Everybody should have at least 20% of their net worth in gold and silver bullion and 20% in foreign currencies (I like the Yen and the Swiss Franc). The popular GLD and SLV stock ETF that trade in gold and silver are good for stock speculation, but will go belly up in any real crisis. There's been several reports of impropriety related to where their gold/silver holdings are actually located. They are owned by JP Morgan and HSBC who themselves are insolvent.

A good alternative is the Central Fund of Canada (CEF), which have audited and insured gold/silver bullion on hand. The value of their stock rises with the value of their precious metal holdings plus a premium typically ranging from 6% to 10%. My Roth account is entirely vested in CEF.

This post is not meant to spook anybody, but the writings on the wall. You can choose to believe our leaders when they say monetizing debt is a good thing to keep interest rates down, or spending trillions to bail out the banks is a good thing, or spending a trillion for stimu-less will make us better off'; or you can take positive actions to get your financial house into order. There's nobody looking out for you except yourself. When the next big shoe drops - - and it will, you don't want to be under it.


TOPICS: Business/Economy; Society
KEYWORDS: gloomdoom; thecomingdepression
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To: allmost

Want a 2,200% return on capital? Hire big shot Capitol Hill lobbyists and let them do their thing.

A study reported in the Washington Post Sunday says companies that hire lobbyists see $220 in revenue for every $1 it costs them.

University of Kansas professors looked at the impact of a one-time tax break that let multinationals “repatriate” profits earned overseas, cutting their tax rate from 35 percent to 5.25 percent. The over 800 companies that got in on the deal saved an estimated $100 billion in the process.

The Post says:
http://www.businessinsider.com/best-investment-there-is-dc-lobbyists-2009-4


21 posted on 04/13/2009 9:30:54 AM PDT by FromLori (FromLori)
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To: djf

Bump for later.


22 posted on 04/13/2009 9:34:03 AM PDT by nomad
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To: gusopol3
This was such a howler, and so easily sourced and discredited, it very much casts suspicion on the rest of the article:

I suppose. But I also recall all the naysayers around here that said the housing collapse would never happen.

23 posted on 04/13/2009 9:35:22 AM PDT by mc6809e
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To: djf

I think this song sums-up my feelings on the matters of all these bailouts:
http://www.youtube.com/watch?v=HmeRd-AF7gI


24 posted on 04/13/2009 9:41:11 AM PDT by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
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To: mc6809e

Or that the stock market would never in a million years fall below 10,000


25 posted on 04/13/2009 9:43:10 AM PDT by djf (Live quiet. Dream loud.)
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To: mc6809e

certainly the food shortage could develop as a result of the increased purchasing power and rising exports of U.S. foodstuffs as well as foreign purchases of U.S. farmland. That was happening last year with the commodities soaring, wasn’t it? Skim milk was close to $4/gal then , now at $2.15 where I buy.


26 posted on 04/13/2009 9:43:46 AM PDT by gusopol3
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To: gusopol3

make that “increased foreign currency purchasing power. “


27 posted on 04/13/2009 9:45:30 AM PDT by gusopol3
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To: PAR35; TigerLikesRooster; AndyJackson; Thane_Banquo; nicksaunt; MadLibDisease; happygrl; ...
*Ping!*
28 posted on 04/13/2009 9:53:30 AM PDT by rabscuttle385 ("If this be treason, then make the most of it!" —Patrick Henry)
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To: djf
My Roth account is entirely vested in CEF.

He's expecting his tax rate to be lower in retirement? That's a red flag. I don't think my tax rate will ever go down even after I'm dead.

29 posted on 04/13/2009 9:59:12 AM PDT by Reeses (Leftism is powered by the evil force of envy.)
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To: djf

any reason for delay in posting a Mar. article?


30 posted on 04/13/2009 10:37:41 AM PDT by 1234 (NO BO-NOBAMA)
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To: djf
This reminds me of Rodney Dangerfield's comment when he was asked about how his wife was. He replied, "Compared to what?"

With respect to currencies, all of the major ones are being mismanaged for political reasons, with the possible exception of the Chinese currency (I just don't understand all of the issues there). So, the "compared to what" is the right comment when one talks about devaluation of the dollar. I think that if we compare to gold, or commodities, or assets that are tied to something physical, a significant devaluation is in the cards, because I believe that the government will succeed in reflating. But that's not the same thing as the more traditional idea of a formal currency devaluation by the government against the other currencies. Instead, what we have is the potential for a mass devaluation of virtually all fiat currencies by markdown against the real world.

31 posted on 04/13/2009 10:48:26 AM PDT by Pearls Before Swine (Is /sarc really necessary?)
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To: Billg64

question is—where do you get it? with the new law regarding ammo possibly being passed, all ammo manufacturers are holding back on their production and release! can’t find large caliber ammo anywhere! glad I bought some extra last Fall for our hunting rifles. wish we had more. :(


32 posted on 04/13/2009 11:14:13 AM PDT by GOP_Thug_Mom (Iibera nos a malo (Obama))
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To: djf

I doubt it. The USD has been strong so far and 0bomo just made it stronger with the hostage rescue


33 posted on 04/13/2009 11:15:30 AM PDT by dennisw (0gabe our very own Kenyan subprime president)
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To: Walmartian
It seems to me that every chart of anything I’ve seen lately looks like a hockey stick. I guess you could say the amount of charts looking like hockey sticks is growing exponentially.

If someone made a chart that charts the number of charts that look like hockey sticks, would it look like a hockey stick?

34 posted on 04/13/2009 11:40:35 AM PDT by Disambiguator
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To: Disambiguator
If someone made a chart that charts the number of charts that look like hockey sticks, would it look like a hockey stick?

I think that's right but I might be wrong.

35 posted on 04/13/2009 11:48:04 AM PDT by Walmartian
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To: djf

I read Jim Willie all the time over at 321gold.com. He is very interesting, but consistently the most alarmist of anyone one the site. And, considering the site is full of gold bugs who are totally pessamisstic, that is saying something.

Which isn’t to say that he isn’t right, perhaps he is.

Still, I don’t see the mechanisms in place to ALLOW us to devalue the dollar. The last great devalution of the dollar was FDR’s taking the USA off the Gold Standard in 1932. That’s the one everyone points to, and with all the talk of “the worst economy since the depression” it’s an obvious touch point.

But, lets look at what happened in 1932. Gold coins and paper money circutlated at the same time. Both Officially and practically US paper money was “as good as gold” because you could go to a bank, give them a $20 bill, and get a $20 gold piece in exchange.

FRD hated that. He couldn’t inflate the money supply to run his endless socialist policies. So he ordered all gold turned into FedGov. (Imagine the hubris of this man!)
and made the dollar non-convertable to gold for US Citizens.

However foreign governments could still exchange paper dollars for gold at the rate of $20 per oz.

After FRD had all the gold turned in he devalued the dollar by telling foreign dollar holders that they could now turn in their dollars at hte rate of $35 per oz of gold.

So that was a massive devaluation. If you were a US citizen foreign goods cost more, but of course imports had slowed drastically in the depression.

In 1971 Nixon ended the convertability of the US Dollar into gold, at any rate.

Since then we have had a pure fiat currency.

Now comes the talk of devaluation? How would that be accomplished? The US Dollar ‘floats’ against all other currencies. The rate to buy Dollars in Yen, or sell Dollars for Euros is set in the FX markets.

Given this for the USA to “devalue” the dollar, in the classical sense” they would first need to re-aquire control to “value” the dollar, which is currently not in their control. In other words the USA would have to try to put the dollar back on a fixed exchange rate system.

This is not something I’ve heard suggested by anyone, nor is it clear that the rest of the world would even go along with it. Color me extremely sceptical about this coming to pass.

Unless and until this step is taken talk of formal eliberate “devaluation” is meaningless!

Of course there still could be rampant money creation, leading to massive inflation, which would have the same effective result as a formal devaluation. But such a process (and there is a lot of reason to think we’re already well into it) would lack the planned, deliberate central control that is the basis of Jim Willie’s thesis.

There will not be a specific date when banks are closed. Why? That would only upset people. The whole plan of the Fed and FedGov is to continually reassure people.

In other words, boiling the frog (ie: debasing the currency via inflation) is working just fine. No one is screaming about it. Why would you even consider going to any other plan.

So, as much as I like JW, I think he’s way off base on this and basically indulging his paranoid fantasies in this essay.


36 posted on 04/13/2009 11:57:12 AM PDT by Jack Black
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To: Rocky12

ping


37 posted on 04/13/2009 1:09:42 PM PDT by TenthAmendmentChampion (Be prepared for tough times. FReepmail me to learn about our survival thread!)
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To: Walmartian; Disambiguator

38 posted on 04/13/2009 1:26:27 PM PDT by TenthAmendmentChampion (Be prepared for tough times. FReepmail me to learn about our survival thread!)
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To: djf

While his prediction of economic disaster is possibly correct, his solution is flawed. He makes no distinction between the international behavior of the US dollar and the national behavior of the dollar. In practice they are like two different currencies.

Even if every other country on the world stops backing our gigantic debts, all this means is that the price of *imports* will jump. But what does this mean, really? If the price of carrots from Mexico become $30 a pound, but the price of carrots from California remain $1.50 a pound, whose carrots are you going to buy?

But the rest of the world can stamp its feet all it wants. If it gets too aggressive, the the US could just default on its national debt. The end result would be about the same, that is, imports would dry up.

Now, he is correct that the government may try hanky-panky like having bank holidays. However, this only works if you keep all of your money in the bank—something I don’t recommend for anyone right now. Instead, if you keep a few thousand dollars of cash at home, in a safe place, it is safe from the hornswagglers.

And if they go hog wild, with massive inflation and nonsense like that, individual States, cities, and even cooperatives of the people can just issue “scrip”, which is an alternative currency. As long as everybody agrees to use it, the US government can go pound sand. Scrip is legal, even if it isn’t legal tender, and some cities used it during the Great Depression, which made their life easier.

The author is wrong about something else, as well. The US is only a net importer of *specialty* foods. We produce way more staple foods than we consume, and many other nations are reliant on us for them.

Food is something we have in abundance, as well as housing, and police and military security. With those three things, we are well situated to weather an awful lot of problems.

Sure, things can get tight for a while. But W. Bush filled up the US Strategic Petroleum Reserve to 98% full, and if congress will just lighten up (under threat of torches and pitchforks), and lets the oil industry do its job, then we will have plenty oil for what we want to do.


39 posted on 04/13/2009 1:59:07 PM PDT by yefragetuwrabrumuy
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To: yefragetuwrabrumuy
But W. Bush filled up the US Strategic Petroleum Reserve to 98% full,

This is off the mark. The Strategic Petroleum Reserve is sized to run the Navy and Air Force for a short while. There's no way we can draw enough oil from that for our trucks and cars until we can draw oil from the new wells & new pipelines.

There are oil wells off CA that were capped when they shut down off-shore production. These might be brought on line quickly.

However, regardless of where the oil comes from, we are likely to pay market rate for it, unless you are thinking of expropriating private property. If you think anybody will sell oil in the USA at $30/barrel when the international market is paying $300, you are nuts.

The same goes for carrots. If carrots are $1.50 a pound here, but $30 a pound in Mexico, the US farmers will be shipping all their carrots to Mexico.

And if you think tariffs are going to help, you are insane. The only way to dig ourselves out of such a hole is to start making or growing things the world wants and selling them at the world price. Otherwise, you'll just have the Chinese buying the stuff cheap, and shipping it out of that California port they bought, and earning the difference between $1.50 carrots and the world price.

40 posted on 04/13/2009 2:57:21 PM PDT by slowhandluke (It's hard work to be cynical enough in this age)
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