Most Popular
1. Dow Max Drawdown Bear Stock Market 2022 - Accumulating Deviations from the Highs - 21st Feb 22
2.Putin Starts WW3 in Ukraine, Will Use Tactical Nuclear Weapons, China Prepares Taiwan Blitzkrieg - 28th Feb 22
3.World War 3 Phase 1 - Putin WINS Ukraine War! - 25th Feb 22
4.INVESTORS SEDUCED by CNBC and the STOCK CHARTS COMPLETELY MISS the BIG PICTURE! - 10th Feb 22
5.Will There Be A 2024 US Presidential Election? - 3rd Mar 22
6.Gold and SIlver, Precious Metals Sector Is at a Terrific Buy Spot - 6th Feb 22
7.Why Putin Wants the WHOLE of Ukraine - World War 3 Untended Consequences - 6th Feb 22
8.Dow Stock Market Expected Max Drawdown 2022 - 19th Feb 22
9.Stock Market Calm In the Eye of the Inflation Storm - 4th Mar 22
10.M = F - Everything is Waving! Stock Market Forward Guidance - 7th Mar 22
Last 7 days
Why Ray Dalio is WRONG About China - Principles for Dealing with the Changing World Order - 24th May 22
Globalists Convene to Plan Central Bank Digital Currencies - 24th May 22
After Recent Highs, What’s Next for the Gold Junior Miners? - 24th May 22
Why APPLE Could CRASH the Stock Market! - 21st May 22
Why Is Crude Oil Ignoring US Inventories? - 21st May 22
Here is Why I’m Still Bullish on Gold Mining Stocks - 21st May 22
THE INFLATION MEGA-TREND QE4EVER! - 20th May 22
US Real Estate Investors – Is There An End In Sight? - 20th May 22
How Technology Affected the Gaming Industry - 20th May 22
How To Set And Achieve Reasonable Goals For Your Company - 20th May 22
How Low Could the Amazon (AMZN) Stock Price Fall? - 19th May 22
Bitten by FANG? Clocked by Cryptos? -- 'Air Pockets' Everywhere - 19th May 22
Northern General Hospital Orthopedics Fractures and and Ankle Clinic Consultations Real Patient Experience - 19th May 22
Cathie Wood Goes All in on Teladoc, ARKK INSANE Noob Investing Strategy! - 17th May 22
This is Anything but Positive for US Housing Market - 17th May 22
What Should We Do If There Is No Fed Monetary Policy Pivot? - 17th May 22
All Possible Ways to Earn Free Litecoin - 17th May 22
How low Could the Amazon Stock Price Fall? - 16th May 22
Cathy Wood ARKK INSANITY There is NO Coming Back! - 16th May 22
NASDAQ 100 Stock Market LOWER LOWS & LOWER HIGH - 16th May 22
Sanctions, trade wars worsen US inflation - 16th May 22
AI Tech Stocks Earnings BloodBath Buying Opportunity - 14th May 22
Futures Contract – Trading Crude Oil With USO - 14th May 22
How to Get Kaspersky Internet Security for 80% Discount! Do not Pay Renewal Price! - 14th May 22
Sagittarius A* Super Massive Black Hole Monster at Centre of Our Galaxy REVEALED! - 14th May 22
UK Public Debt Smoking Inflation Gun - 13th May 22
What Happens When the Stock Market Dip Keeps Dipping? - 13th May 22
Biden Seeks Inflation Scapegoats; Gold Advocate Wins GOP Primary - 13th May 22
Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - 12th May 22
The War on Gold Ensures the Dollar’s Downfall - 12th May 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Dollar Devaluation is Inevitable, Just Like 1934

Currencies / US Dollar Apr 03, 2009 - 01:28 AM GMT

By: Submissions

Currencies

Diamond Rated - Best Financial Markets Analysis ArticleVronsky writes: It is evident to all the US economic environment is an unmitigated disaster. In fact we seem to be hell bent for leather falling into another Great Depression (the recent Bear Market Rally in Wall Street notwithstanding). This begs the question: What can President Obama do to avert the excruciatingly sad events of the 1930s?

Here are the economic problems causing havoc today in the USA:


- The banking system is collapsing
- Tidal waves of foreclosures sweep the country
- Tumbling housing prices
- A bear market ravages Wall Street stocks
- Massive unemployment throughout the nation
- Overall we are in a deflationary spiral
- Interest rates are abysmally low
- Consumer confidence is bottomless

And what were the economic maladies causing economic havoc in 1933?

- The banking system was collapsing
- Tidal waves of foreclosures swept the country
- Tumbling housing prices
- A bear market ravaged Wall Street stocks
- Massive unemployment throughout the nation
- Overall we were in a deflationary spiral
- Interest rates were abysmally low
- Consumer confidence was bottomless

As Yogi Berra might have expressed it:
"It's déjà vu all over again!"

Any differences some ill-informed might mention are irrelevant and immaterial to the overall burdens weighing upon the USA today.

What Can the US Government Do To Avert Another Great Depression?

President Obama's Stimulus Plan is to spend our way out of the economic quagmire…i.e. unprecedented massive spending for the next 11 years. The chart below clearly demonstrates that our nation will incur on-balance Trillion Dollar Budget Annual Deficits until 2011.

Source: http://blog.heritage.org/2009/03/24/bush-deficit-vs-obama-deficit-in-pictures

Never in the history of our country have we suffered such a Herculean financial burden. To be sure, 11 years of humongous yearly deficits will have its 'hidden cost' - The Devaluation of the Currency.

Dollar Devaluation To Fix (ANOTHER) Great Depression

History is testament currency devaluation proved effective in ending the Great Depression. In 1930, Australia was the first to leave the gold standard, immediately devaluing the Aussie by more than 40%, and the economy quickly recovered. New Zealand and Japan followed suit in 1931, each with the same result. By 1933, at least nine major economies had enacted a devaluation of their currency by removing it from the gold standard, all of whom emerged from depression.

In 1933, through a series of gold-related acts, culminating in the Gold Reserve Act of 1934, America realized a dollar devaluation of 41% when the price of gold was adjusted from $20.67 per ounce of gold to $35 per ounce. America, like the others before, had its economy bottom and recover as a result. Of the larger economies, only the French and Italians continued to adhere to the gold standard, and their economies remained depressed until finally, in 1936, they allowed their currencies to devalue, and their economies then recovered.

I see no reason to believe we would have any different result today. Only debt would remain the same. All other assets would immediately be worth more (in nominal terms), whether it be a home, a stock, an ounce of gold or a used car...all would rise in price. Furthermore, Bank balance sheets would immediately improve, as many loans would be moved from non-performing to performing status. Banks would be paid with devalued dollars.

In my considered opinion the current use of government's multi-trillion dollar stimulus program through the creation of dollars will certainly lead to a similar or even greater devaluation, so this is likely a net gain for the banks too.

DOLLAR DEVALUATION IS A WIN-WIN SITUATION FOR THE ENTIRE NATION

History teaches that inflation cures deflation. And one sure way to create INFLATION (ie to generate inflation) is via a sharp devaluation of the currency.

What Happened After Franklin Delano Roosevelt Devalued the Dollar in 1934?

In early 1934 F.D.R. devalued the US greenback via increasing the price of gold by 69% ($20.67 to $35/oz). Within a few weeks nearly all of the nation's economic indicators began to materially improve, indicating the beginning of the end of the Great Depression. See charts below:

Price Levels (Inflation) - Vertical line is when FDR takes office

Investment

Commodity Prices

Stock Market Prices

Source of above charts: www.safehaven.com

Some erroneously believe it was World War II that pulled us out of the Great Depression. Unfortunately, that is a popular myth! It was the draconian measures and efforts of F.R.D. that turned the US economy upward --- starting in early 1934 as may be seen in the above charts. Nonetheless, it was indeed World War II that fueled the US to full production capacity and economic stability.

US debt monetization = Dollar devaluation = Higher gold prices

The implementation of President Obama's 11 years of Trillion Dollar Budget Deficits will oblige the Federal Reserve to monetize a goodly portion of the multi-trillion dollar issuance of US Treasury debt paper. Markets understand this, even if the Council of Economic Advisors does not.

Source: http://blog.heritage.org/wp-content/uploads/2009/03/wapoobamabudget1.jpg

To be sure Obama's 11-year Budget Deficit Plan will fuel gold and silver to over $2,500 & $30 in the years ahead.

********

And What is President Obama Thinking about these days?
Verbatim of President Obama in his 60-Minute TV interview on March 22, 2009:

"Rest assured we have learned our lessons from the Great Depression of the 1930s."

And who has the expertise to advise President Obama in the implementation of a Dollar Devaluation? No one is better qualified than the Chairman of the Federal Reserve Board, Dr Ben Bernanke, whose doctoral thesis was precisely: An Analysis of the 1930s Great Depression.

May God illuminate President Obama's path to steer us away from another Great Depression.

I. M. Vronsky
Editor & Partner - Gold-Eagle
www.gold-eagle.com

© 2009 Copyright Gold-Eagle - 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.


Comments

Eric
06 Apr 09, 21:06
Insane madness

What you sre proposing is madness , yes ok devalue my 6000$ savings account by 40% , so it basically worth less , taking 3 years to build ,all that hard earned wealth evaporate overnight . What you are proposing is for everyone to have to carry wheelbarrows of $$ to buy a loaf of bread , Hyperinflation never did any national any good , only decimated the middle class ,and hammering it into poverty . Very poor analysis, must definetly work for the Oligarchy , no doubts about that


Muggles
10 Apr 09, 03:33
Gold confiscation

I agree. Let's copy FDR and confiscate everyone's gold. Gold bugs will be compensated by the government by receiving about $20 an ounce as per FDR


Post Comment

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