Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Canadian Cannabis Stocks CRASH as Canopy Growth Hits a Dead End - 14th Dec 19
Retail Sector Isn’t Dead, and These 6% Dividend Paying Stocks Prove It - 14th Dec 19
Top 5 Ways to Add Value to Your Home - 14th Dec 19
Beware Gold Stocks Downside - 13th Dec 19
Fed Says No Interest Rate Hikes In 2020. What About Gold? - 13th Dec 19
The ABC’s of Fiat Money - 13th Dec 19
Why Jo Swinson and the Lib Dems LOST Seats General Election 2019 - Sheffiled Hallam Result - 13th Dec 19
UK General Election 2019 BBC Exit Poll Forecast Accuracy Analysis - 12th Dec 19
Technical Analysis Update: Tadawul All Share Index (TASI) - Saudi Arabia ETF (KSA) - 12th Dec 19
Silver Miners Pinpoint the Precious Metals’ Outlook - 12th Dec 19
How Google Has Become the Worlds Biggest Travel Company - 12th Dec 19
UK Election Seats Forecasts - Tories 326, Labour 241, SNP 40, Lib Dems 17 - 12th Dec 19
UK General Election 2019 Final Seats Per Party Forecast - 12th Dec 19
What UK CPI, RPI INFLATION Forecasts for General Election Result 2019 - 11th Dec 19
Gold ETF Holdings Surge… But Do They Actually Hold Gold? - 11th Dec 19
Gold, Silver Reversals, Lower Prices and Our Precious Profits - 11th Dec 19
Opinion Pollsters, YouGov MRP General Election 2019 Result Seats Forecast - 11th Dec 19
UK General Election Tory and Labour Marginal Seats Analysis, Implied Forecast 2019 - 11th Dec 19
UK General Election 2019 - Tory Seats Forecast Based on GDP Growth - 11th Dec 19
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19

Market Oracle FREE Newsletter

UK General Election Forecast 2019

Fed Pushing U.S. Dollar Closer to Collapse

Currencies / US Dollar Nov 10, 2010 - 07:18 AM GMT

By: LewRockwell

Currencies

Best Financial Markets Analysis ArticleJeff Fisher writes: Every day the US Dollar moves closer to collapse.

International investors, unlike most Americans, are aware of the risk, and are nervously watching Gold and Silver march higher.


As the primary reserve asset on central bank balance sheets, the US Dollar is a major risk for central banks and their solvency.

How will central banks deal with this balance sheet risk?

First, it is clear that no central bank can sell Dollars and buy their own fiat money which is a balance sheet liability.

If they did, it would be a direct deflation of their banking reserves and highly disruptive to their own domestic credit system.

Therefore, a central bank must sell dollars for anything but their respective currency.

For example, we recently witnessed China buying Japanese JGBs.

This creates a potentially very chaotic condition for markets.

US dollars may at any moment move very quickly from storage on central bank balance sheets into the global economy chasing anything and everything capable of being a reserve asset.

The dollar's velocity would be very likely to spin ever higher as buyers and sellers toss it back and forth like a hot potato.

The effect of the Dollar repudiation US Treasury bond prices will be extremely negative.

QE II is an attempt by the Fed to get ahead of any Dollar selling to stabilize long-term interest rates.

We are already seeing sovereign debt prices collapse in Ireland, Portugal, and Greece.

The factors pushing up yields in those countries exist in the US, UK, Spain, and Japan.

However, any attempt to cap yields will just tend to push rates higher.

Ludwig von Mises explains this very well in his book, The Theory of Money and Credit:

At first the banks may try to oppose these two tendencies that counteract their interest policy by continually reducing the rate of interest charged for loans and forcing fresh quantities of fiduciary media into circulation. But the more they thus increase the stock of money in the broader sense, the more quickly does the value of money fall, and the stronger is its countereffect on the rate of interest. However much the banks may endeavor to extend their credit circulation, they cannot stop the rise in the rate of interest. Even if they were prepared to go on increasing the quantity of fiduciary media until further increase was no longer possible (whether because the money in use was metallic money and the limit had been reached below which the purchasing power of the money-and-credit unit could not sink without the banks being forced to suspend cash redemption, or whether because the reduction of the interest charged on loans had reached the limit set by the running costs of the banks), they would still be unable to secure the intended result. For such an avalanche of fiduciary media, when its cessation cannot be foreseen, must lead to a fall in the objective exchange value of the money-and-credit unit to the paniclike course of which there can be no bounds. Then the rate of interest on loans must also rise in a similar degree and fashion.

As the dollar falls, the asset side of central banks will be falling in value, too.

This will pressure a dollar heavy central bank's solvency.

How will Japan respond? Will they panic and begin adding Yen assets?

If so, that will inject base money into the Japanese fractional reserve banking system and be wildly inflationary.

What about the other Asian central banks? They all have balance sheets loaded with dollar assets.

If they begin purchasing assets in their respective currencies, massive inflation will break out in their economies, too.

What about Gold and Silver? On a net basis, central banks can not increase their gold or silver reserves.

Quite simply, there is not any way of increasing supply in a meaningful way.

The next big risk is how will international trade be settled?

If India and China no longer want dollars, how will they settle trade?

The Indians will surely not want to grant the Chinese the luxury of settling in Yuan, nor will the Chinese want to grant India the luxury of settling in Rupee.

What about Russia/China trade? Or Japan/Saudi trade?

The IMF, controlled by the US, will likely suggest SDRs.

SDRs are too dollar centric and esoteric to be accepted internationally.

Trade must be settled and mutually beneficial or it will not happen.

Without trade global economies will collapse.

This is the biggest risk of all, and it must be addressed immediately.

Gold is the only commodity that can fill the void that the collapse of the dollar will create.

The Dollar stole Gold's historic role as money at Bretton Woods, and only Gold can replace the dollar in international trade.

The unique conditions created by World War II facilitated the rise of the Dollar.

Those initial conditions will never be replicated for the US or any other Nation.

Jeff Fisher [send him mail] is an independent investor and professional trader living in Austin, TX. Formerly, he co-managed a successful hedge fund.

    http://www.lewrockwell.com

    © 2010 Copyright LewRockwell.com - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules