Posted on 09/09/2009 2:26:12 PM PDT by h20skier66
As gold tries to break and hold $1000 it brings up the larger question of how long the USD has to last. At the very least, after the markets digest the debate over deflation which is USD bullish, the question becomes: how long can the USD hold together before it falls in value drastically.
Big drumbeat out there
I am sure that you know about China vigorously complaining about the abuse of the USD, most loudly complaining about the Fed's quantitative easing (buying any and all bad assets from banks and putting them on their balance sheet - called monetization, which is printing the money to replace the losses). The Fed had to back off this Summer from that plan and significantly reduce those policies, said in large part due to China's vigorous complaints.
No, we cannot
Or, in other words, the Fed is finding it cannot just print its way out of its problems, it cannot just ‘drop money from helicopters', Bernanke does not have the latitude he thought he would have when he made that infamous statement, the bond markets won't tolerate that without crashing the USD and skyrocketing interest rates. Skyrocketing interest rates would totally stop any remaining credit growth, which will strangle the remaining life out of the economy.
If you agree with that, then the prognosis for the US and Western economies will be a second round of credit deflation, and must result in much lower stock markets.
(Excerpt) Read more at commoditynewscenter.com ...
x
Deflation makes our money worth more. It also makes it harder to get credit because interest rates tend to zero out. Besides, who wants to loan you a dollar today if it’s worth more tomorrow. Better to just keep those dollars in hand.
Excerpt:
But a recent development just out, that the UN stated that a new world currency not dependent on the USD must be created:
“In a radical report, the UN Conference on Trade and Development (UNCTAD) has said the system of currencies and capital rules which binds the world economy is not working properly, and was largely responsible for the financial and economic crises.
It added that the present system, under which the dollar acts as the world’s reserve currency , should be subject to a wholesale reconsideration. Although a number of countries, including China and Russia, have suggested replacing the dollar as the world’s reserve currency, the UNCTAD report is the first time a major multinational institution has posited such a suggestion...” Telegraph.co.uk
The UN and China can issue a new currency and peasants throughout the world will continue to stuff counterfeit $100 bills in their mattresses.
What will happen when 0bama runs out of political capital?
Will he just print more?
Simple solution.
Tie the USD to the international price of Gold.
The dollar is deflated domestically, because...yes, we’re not buying! :-) It’s inflating internationally. So we’ll do better with domestic production, as soon as we’re willing to do real work again.
And how much might that be?? I’d feel sorry for anyone who had gold fillings in their teeth, they’d be targets.
Tie the USD to the price of Ammo.
But when it goes, it will go violently.
I’m jus’ sayin’. Paranoia got nothin to do with it. Do the math — If gold is revalued at eleventy zillion, that ain’t gonna work. Maybe there are less expensive alternatives for fillings? Gold isn’t “essential” in many industrial applications, although it has a few where it is about perfect. Platinum is used for catalysts, Silver is a better conductor of electricity, etc.
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