Posted on 01/20/2010 11:12:14 AM PST by blam
How Can Localities Cope If The U.S. Dollar Crashes?
Currencies / US Dollar
Jan 20, 2010 - 06:34 AM
By: Richard C Cook
A “run on the dollar,” or any currency, for that matter, takes place when the currency is losing its value. This happens when a country’s debt becomes so great that there is danger of a major default–that is, large scale or even national bankruptcy.
At that point, people whose wealth is in that currency, or in relatively liquid assets denominated in the currency, try to get rid of them as fast as they can. Today, that includes foreign countries like China or Russia that are holding large quantities of U.S. government bonds.
The U.S. currently is at risk. We see it in personal and business bankruptcies and foreclosures. One result can be a high rate of inflation in certain products like food or gasoline, even while asset prices, as with homes and stocks, are going down.
The question is now whether the “recovery” that is underway can be sustained or will there be another crash like there was in late 2008 to early 2009.
Forecasters are projecting this recovery to last until June 2010 but are foreseeing slippage at that point. Investors at this time are still putting money into the stock market and getting out of dollars.
By June, the U.S. government had better come up with a strategy for real economic growth–which means jobs–or we will likely see the “double-dip” recession many have predicted.
Personally I see no way growth can be sustained unless the national debt burden shrinks. This can only be done through an orderly process of debt forgiveness, a resurgence of economic production, or a default that could be catastrophic.
Is there any way people and localities can protect themselves? The best way, in my opinion, is to put our resources, including our time and labor, into producing something of value in the real physical economy.
Since most people’s largest asset is their homes, home maintenance and repair might work. It won’t make you rich, but it could put food on the table.
Speaking of food, growing it is another option. In many locations, there is a greater demand for locally-produced food than there are producers to meet that demand. In a couple of months it will be time to start planting this year’s garden.
People could get together as a community and make plans for gardens big enough to sell the surplus at local outdoor markets. Buying and selling products at the local level can also become an economic engine to fuel the creation of a local currency.
A strategy of local food production can also address the problem that the era of cheap food in the U.S. is coming to an end. This is happening partly because a large portion of food prices consists of the cost of the fossil fuels used in growing, harvesting, and transporting the food to market. Gasoline prices are on the rise again. This will take food prices upward as well.
Local farming, by contrast, places food production close to the end consumer. Personal health also benefits from higher quality food and from getting outdoors and becoming more physically active.
As the national economy gets worse, it’s time for people to roll up their sleeves and get to work doing for themselves what big finance, big oil, and big government can no longer do.
At some point the dollar might go so low that it will be cheaper for foreign countries to manufacture goods here in the good Ole' USofA.
Betcha a 50 round box of 380, 9mm or 45 cal. would be worth more than a [good] buck’s worth of goods each.....betcha.....
Can’t we just ignore the collapse and go on like normal (broke?)
“...But clearly big changes are coming. Our country has become so fragile. Most of our population is a month away from starvation when you look at the food pipeline.”
Ominous.
someone told me to buy blue steel and lead
I agree. the dollar crashing just hinders the international stuff, not the local economy.
Uh, a 50rd box of ammo already is worth much more than a buck!
(I think you meant to but some inflated figure, say 1000 in front of the “buck's worth”. LOL!
>>Forecasters are projecting this recovery<<
Um, what recovery are they talking about?
>>someone told me to buy blue steel and lead<<
That’s what I did, and a small farm as well.
Actually thinking about the kind of goods you could get for a buck back in 1850 or so.....either way, they are gonna be much more valuable than Obama paper.
Racing to the bottom will only see that the ‘winner’ gets a lower standard of living than the losers in the long term, as imports get more expensive. Unless you like living a rustic life were you grow all your own food, make all your own clothes and can cobble together all your own complex machinery, this WILL affect you.
The world needs to return to a gold standard and honest money...
I’d actually meant to say ‘per round’ value worth more than a buck way back when....
~~Ludwig Von Mises
Or we start making our own stuff again.
Today at least the dollar is up compared to oil and gold. Perhaps this is temporary as it was before when investors got out of stocks and parked their money in dollars. Why wouldn’t they park the money in precious metals or commodities?
“Um, what recovery are they talking about?”
Apparently, if you keep mentioning the word “recovery” enough times, it becomes a fact. All evidence to the contrary is merely “unexpected.”
I know gold is probably the best thing we’re going to come up with, but I still have a problem the concept of using it as a standard. Said problem applies to pretty much anything as well.
So the other day I started trying to hash out a base labor standard, where the value of a dollar is measured against a unit of basic, pretty much anyone can do it, labor (sweeping a floor, for example). Say a dollar is worth ten minutes of basic labor.
While it seems like a good way to measure inflation and technological progress over long periods of time, it fails miserably as a standard. Totally unworkable, darn it.
“Maybe we should take all of the textile factories, steel mills, etc. out of mothballs”
First we’d have to buy back all the equipment from China.
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