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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: djf

Bump to find later


41 posted on 04/13/2009 3:09:47 PM PDT by Darnright (There can never be a complete confidence in a power which is excessive. - Tacitus)
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To: Southack

or had to run under fire........ all the gear, latest gadgetry, weaponry, and ammo in the world don’t make a bit of difference if you can’t move from point A to point B with it.


42 posted on 04/13/2009 3:26:18 PM PDT by Repeat Offender (While the wicked stand confounded, call me with Thy Saints surrounded)
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To: slowhandluke

You misunderstand. With an international devaluation of the dollar, the price of carrots in Mexico remains the same, but because international markets *say* the dollar is devalued, carrots imported into the US would technically cost $30/pound, here. Ergo, they aren’t going to sell carrots here. And our farmers can’t sell our products there, because they would be repayment for debt we owe them. We have no credit.

The same with other imports. Unless they are both critical, and not something the US can grow or make itself, the US will not be able to import it, at international prices. “Buy American” will be the only option.

These are not artificial tariffs, these are natural tariffs. But the end result is actually a positive one, forcing the US to rebuild all the industries it outsourced for decades.

As far as the SPR, I am well aware that its output is very restricted. But a combination of very limited demand, because of the depression, and the active production of “new oil” in the US, we will hopefully muddle through with just limited shortages.

It won’t do any good for domestic US oil to be exported, for the same rules as for carrots. The oil would just be taken as repayment for existing debt.


43 posted on 04/13/2009 3:34:52 PM PDT by yefragetuwrabrumuy
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To: yefragetuwrabrumuy
You misunderstand. With an international devaluation of the dollar, the price of carrots in Mexico remains the same, but because international markets *say* the dollar is devalued, carrots imported into the US would technically cost $30/pound, here. Ergo, they aren’t going to sell carrots here. And our farmers can’t sell our products there, because they would be repayment for debt we owe them. We have no credit.

This is a strange argument. Farmers most certainly could sell in Mexico at the world market, and they would. You don't need credit to sell. You need credit to buy, but only if you don't have cash.

The world doesn't just *say* that the peso is now worth US $10, it backs it up by actually trading 1 peso for 10 US dollars. That means if I can sell my pound of carrots for 3 pesos in Mexico, I can go to a Mexican bank and trade that for 30 dollars. And, I'd be a fool not to do so if I could only sell that pound of carrots for $3 in the US.

So, I bring that $30 back into the US, and some goes to taxes, and the tax revenue is turned around to pay the US debt. I'm sure the government will be much happier with the taxes from a $30 sale in Mexico than a $3 sale in California.

Our exports won't be 'taken' as repayment. That's an act of war. We get to sell them, the proceeds are taxed, and the tax revenue is used to pay off the bonds.

Expropriation like you are talking about happened when Napoleon took Europe, or Alexander took Persia. Modern examples include Japan taking China, China taking Mongolia, Russia taking Eastern Europe, etc. Are you really assuming a war that we are going to lose? Otherwise, give me an example of a devaluation followed by expropriation not backed up by gunboats or armies.

Lots of currencies have been devalued, and your scenario of expropriated exports hasn't happened. And if the debts were denominated in the failed currency, the debtor loses: see Weimar Republic for an example. Since most of our debts are denominated in dollars, the debtors are in a real hurt if the dollar is greatly devalued. My guess is that they'll get a heads up on the devalutation (and you and I won't) so they can attempt to minimize the hurt.

What countries tend to do when devaluation hits is to tighten their belts, and export like hell to get the necessary profit to pay off their debts. I can't see any logic in or historical example of your claim that exports can't happen after a devaluation.

44 posted on 04/13/2009 4:05:03 PM PDT by slowhandluke (It's hard work to be cynical enough in this age)
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To: Southack
Now there's a man who's never had to swim to shore...

LOL!
45 posted on 04/13/2009 4:05:27 PM PDT by CottonBall
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To: Jack Black
Still, I don’t see the mechanisms in place to ALLOW us to devalue the dollar.

Wouldn't rapid inflation, especially hyperinflation, accomplish the same thing?
46 posted on 04/13/2009 4:08:37 PM PDT by CottonBall
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To: TenthAmendmentChampion

LOL! You’re too funny, TAC.

BTW, I miss you over on the survival thread.


47 posted on 04/13/2009 4:09:24 PM PDT by CottonBall
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To: Reeses

Roth gains aren’t taxed at withdrawal, unless the government changes the rules...


48 posted on 04/13/2009 4:09:37 PM PDT by Axenolith (Government blows, and that which governs least, blows least...)
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To: djf
HSBC is insolvent?

They are one of the only Brit Banks NOT to take govt. money, and they recently floated an $18 billion rights issue, as well as selling a couple pieces of prime real estate for $4 billion.

Apparently they thinking of acquisitions in Asia...?

Cheers!

49 posted on 04/13/2009 4:15:20 PM PDT by grey_whiskers (The opinions are solely those of the author and are subject to change without notice.)
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To: grey_whiskers

HSBC is *not* really a brit bank. Hong Kong Shanghai Bank Corp...


50 posted on 04/13/2009 4:17:09 PM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: Pearls Before Swine

“the more traditional idea of a formal currency devaluation by the government against the other currencies”

The US Dollar -as the world’s reserve currency & trade currency- is not an exact comparison to other currencies. The vast majority of the time that is a good thing, as it maintains high global demand for Dollars and Treasuries for the purpose of selling into the US trade deficit, for lending into the budget deficit, and for buying/selling oil. However, it’s also the achilles heel of the global system - any loss in confidence in the US Treasury or in the US Dollar or in the Federal Reserve’s independence can so massively reduce global demand for dollars for the above-3 purposes as to be catastrophic for us.

When we went off Bretton Woods, we effectively replaced the gold backing for dollars with an unsustainable backing of perpetual US budget deficits, trade deficits, energy dependence and over-consumption. The system suffers from the Triffin Paradox, where US economic health depends on the impossible combination of both net dollar inflows into the US and also net dollar outflows from the US. As Herb Stein replied to objections over that Nixon-era faustian bargain, “If if can’t go on forever, it will stop.”

There is no question that it will stop, and there is no known way to stop it that is not painful for the entire world. The only questions now are if the pain will be inflicted on this generation or some future generation; and if it will stop in a time and manner of our own choosing, or in a time and manner of someone else’s.


51 posted on 04/13/2009 4:33:29 PM PDT by sanchmo
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To: Southack
Yeah, I know.

But they have a big presence in London, and are always mentioned in the same breath with RBS, etc., so...

Cheers!

52 posted on 04/13/2009 4:52:11 PM PDT by grey_whiskers (The opinions are solely those of the author and are subject to change without notice.)
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To: djf

I’ve been reading Jim Willie for the last 6 months. He offers a shocking amount of detail in his free articles, makes me wonder what kind of info is in his paid newsletter.

A recent interview: http://www.youtube.com/watch?v=dKbGc_wluPw&feature=related


53 posted on 04/13/2009 7:01:56 PM PDT by ovrtaxt (Now is zee time on Schprockets ven ve dance!)
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To: ovrtaxt

Man! He’s rippin Bernanke a new one...!!!


54 posted on 04/13/2009 8:08:48 PM PDT by djf (Live quiet. Dream loud.)
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To: fanfan; LucyT; SatinDoll; Beckwith
CEF is a good investment to shelter currency value. And so are these Companies:

Check 'em out:

1)Silver Wheaton

2)Kinross gold

3) NDM.TO

4) EDR.TO ( small cap Silver)

5) First Majestic Silver( small cap silver)

6) ABX.TO ( Gold)

55 posted on 04/13/2009 9:43:26 PM PDT by Candor7 (The weapons of choice against fascism are ridicule, and derision. (member NRA)
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To: Jack Black

I think you misread what FDR was doing. The American money supply had shrunk by 30% before he took office, due to the collapse of thousands of small banks during the 1930-33 period. Such a drastically reduced money supply limited the ability of banks to make loans, which would stifle economic recovery. The revaluation of gold to the dollar by 30% had the effect of increasing the money supply. It doesn’t appear to have accomplished much, but I think that is the reasoning behind why they devalued the dollar vs gold at that time.


56 posted on 04/13/2009 10:02:56 PM PDT by Pelham (America, an extinct culture formerly occupying Mexifornia and New Aztlan.)
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To: CottonBall

It would. Even slow inflation devalues the dollar. You can use “the rule of 72” to find out how quickly inflation cuts the value of your money in half. Divide 72 by the inflation rate to get your answer.


57 posted on 04/13/2009 10:09:23 PM PDT by Pelham (America, an extinct culture formerly occupying Mexifornia and New Aztlan.)
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To: djf
The Treasury's auction of 5-year bonds ran into problems

You mean the bid-to-cover ratio was only 2.05? Why is that a problem?

Though there will be rumblings, any devaluation would be very swift where one goes to the bank the morning and finds them on holiday

Since the US does not fix the dollar against any currency or commodity, how does he imagine the government would suddenly change the (nonexistent) peg?

And why would there be a bank holiday?

This post is not meant to spook anybody

LOL! Or give anybody any useful information.

58 posted on 04/15/2009 7:41:56 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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