We are trapped. There is no way out. And nobody in Washington – not Republicans, not Democrats, and not even Tea Partiers – want you to realize how precarious our governments finances really are. They cant afford for you to understand this dilemma... or what it means. Because heres the thing... And this is the big secret the government hopes you never understand... According to even my most conservative calculations (again, using numbers provided by the Congressional Budget Office) a debt default by the U.S. government would be inevitable – were it not for one simple anomaly...the one thing that has saved the United States so far. Im talking about our countrys unique ability to simply print more money. You see, the U.S. government has one very important weapon to use in this crisis so far: We are the only debtor in the world that can legally print U.S. dollars. And the U.S. dollar is whats known as the worlds reserve currency. The dollar forms the basis of the worlds financial system. It is what banks around the world hold in reserve against their loans. Again, thats a secret most politicians dont understand: As things stand now, the U.S. government cant go broke in any ordinary sense of the word because it can simply print dollars to pay for its bad debts. (Its been doing so since March of 2009.) That might sound pretty good at first. Since we can always just print more money, what is there to worry about...? Well, let me show you... Why Our Biggest Advantage Is About to Disappear You see, as things stand today, America is the only country in the world that doesnt have to pay for its imports in a foreign currency. Heres what I mean... Lets say youre a German and you want to buy oil from Saudi Arabia. You cant just pay for your oil in German marks (or euros), because the oil is priced in dollars. So you have to buy dollars first, then buy your oil. And that means the value of the German currency is of great importance to the German government. To maintain the value of its currency, Germans must produce at least as much as they consume from around the world...otherwise the value of its currency will begin to fall, causing prices to rise and its standard of living to decline. But in America...? Weve been able to consume as much as we want without worrying about acquiring the money to pay for it, because our dollars are accepted everywhere around the world. In short, for decades now, we havent had to produce anything or export anything to get all the dollars we needed to buy all the oil (and other goods) our country required. All we had to do was borrow and print more money. And boy did we. Take a look at this chart... Even as late as the 1970s, America was the worlds largest creditor. But by the mid-1980s wed become a debtor to the world. And since the late 1990s weve been the worlds LARGEST debtor. Today, our government owes more money to more people than anyone else in the world. With all of these bad debts piling up, weve had to begin repaying our debts by printing trillions of new dollars. With QE3, the latest round of quantitative easing, the Fed is printing $65 billion a month. Thats nearly a trillion dollars a year. And now, finally, the impact of this is being felt in a big way. As our creditors figure out whats happening, we are beginning to have very, very big problems. I believe our creditors (which include foreign countries and other investors here and abroad) will either completely stop accepting dollars in repayment... or greatly discount the value of these new dollars. Im sure you think that sounds crazy, but as Ill show you, it is already happening. In fact, Zha Xiaogang, a researcher at the Shanghai Institutes for International Studies, recently said: The shortcomings of the current international monetary system pose a big threat to Chinas economy. Thats why China is now actively taking steps to phase out the U.S. dollar because of its frustration with the U.S. governments mismanagement of our currency. And how does our government respond? We have the audacity to label China a currency manipulator! Do you see the irony here? As a result of what our government is doing today, Im confident we will soon see an end of the U.S. dollar standard. In fact, Im 100% sure of it. Its not a matter of if, but when. And I think its going to happen much, much sooner than most people think. In fact, I believe that the series of new laws, that went into effect on July 1st, 2014, are going to accelerate this trend... in very dramatic fashion. Even more importantly, these new regulations will make it nearly impossible for most Americans to legally protect their savings... so its imperative that you get the facts, learn what you can do, and take action before that date. And Im going to get to all of that in just a minute. Of course, Im not the only one talking about the U.S. dollar losing its reserve currency status. Even some mainstream publications like the New York Post are recognizing the inevitability of this event. The Post recently reported that, The US dollar is getting perilously close to losing its status as the worlds reserve currency. Should it cross the line, the 2008 financial crisis could look like a summer storm. And billionaire Ray Dalio of Bridgewater Associates, the largest and best-performing hedge fund in the world, told CNBC that it is inevitable that the dollars role as the worlds currency will diminish from the dominant world currency to one of a few. It will fade probably fairly quickly, so the United States, which accounts for almost two-thirds of the reserves will probably go down to 50 percent of the worlds reserves. Keep in mind, the U.S. dollar has been the worlds reserve currency for decades now... so most Americans dont have a clue about what the repercussions are of losing this status. And maybe you think it could never happen... but the truth is, this is exactly what happens when countries get too far in debt or when they consume too much or produce too little. In fact, the same thing happened to Great Britain in the 1970s. First Britain… Now America Most people dont know this, but Britains sterling was the reserve currency for most of the world for nearly 200 years... for most of the 18th and 19th centuries. It continued to play this role until after World War II, when America was forced to prop up Britains economy with foreign aid –remember the famous Marshall Plan, when we gave billions to help European countries rebuild? Unfortunately though, Britain pursued a socialist national agenda. The government took over all of the major industries. Like Barack Obama, Britains leaders wanted to spread the wealth around. Pretty soon the country was flat broke. The final straw for Britain came in 1967, when things got so bad the Labour Party (the socialists) decided to devalue the British currency by 14%, overnight. They believed this would make it easier for people to afford their debts. In reality, what it did was make anyone holding British sterling 14% poorer, overnight, and it made everything in Britain, much, much more expensive in the coming years. And for the country as a whole, it ushered in one of the worst decades in modern British history. Most Americans dont know about Britains Winter of Discontent in the late 1970s, when the government put a freeze on wages. There were continuous strikes in nearly every sector... grave diggers, trash collectors... even hospital workers. Things got so bad at one point that many hospitals were reduced to accepting only emergency patients. And mothers giving birth had to bring their own linens. In 1975, inflation in Britain skyrocketed 26.9%... in a single year! The government also imposed what was known as the Three Day Week in 1974. In short, businesses were limited to using electricity for only three specified consecutive days each week and they were prohibited from working longer hours on those days. Television companies were required to cease broadcasting at 10:30pm... to save electricity. Just how bad were things, exactly? Well, heres a photo of the garbage that piled up because they didnt have enough money to pay trash collectors a fair wage... Imagine... Britain was a global superpower for 150 years. But when they started intentionally devaluing their currency, things went straight downhill. Its now obviously clear that the same thing that happened to Britains sterling when it was the worlds reserve currency, is now happening to the U.S. dollar. In fact, the exchange value of the U.S. dollar has fallen nearly 20% since mid-2003, according to data from the Federal Reserve itself. As the U.S. dollar continues to lose its position as the worlds currency, gas, oil, and other commodities will continue to skyrocket. Almost EVERYTHING we consume will get dramatically more expensive. All the clothing, furniture, and household goods we import from China. All the food we get from Central and South America... all the electronics, televisions, computers, and cars we get from Asia and Europe. And when you look back over the past few years, the numbers are startling... The chart below shows how much a few key commodities have skyrocketed in price, just since the beginning of 2009... And the point here is simple... As we print more money, the price of the worlds most essential commodities have soared. This is NOT a coincidence. Around the world, as we print, prices soar... citizens protest... governments get overthrown. And its only going to get worse... Because heres the important fact you simply must understand about the United States right now: Our government can NOT stop printing money because there is no possible way for us to actually afford our existing debts. No one wants you to know this. No one. Thats why, despite the obvious inflation going on all around the world, the Fed continues to say theres no inflation at all. And thats the scary part, to me. Just like in a Third World country, the government is radically devaluing the dollar and simply lying to everyone about what is really happening. Whether you realize it or not, there is already a run on the dollar. Many of our creditors, like the Chinese, are getting out of the dollar as fast as they can via strategic commodities, like copper, gold, and oil. Thats partly why commodity prices are soaring. Unfortunately, skyrocketing commodity prices are just the beginning. There are other disastrous consequences to the U.S. dollar losing status as the worlds currency... For example, as demand for U.S. dollars around the globe decreases, interest rates will skyrocket. Instead of getting a mortgage at todays incredibly low rates of around 3%, it might cost you 8%... or even 10%... or 15%. Imagine what that would do to housing prices! Stock prices could plummet by at least 40% in a matter of weeks. But believe me, its going to get much, much worse from here. As investment banker and best-selling author James Rickards writes in his new book Currency Wars: If the currency collapses, everything else goes with it... stocks, bonds, commodities, derivatives and other investments are all priced in a nations currency. If you destroy the currency, you destroy all markets and the nation. Thats the harsh reality we are facing. And its what no politician will ever tell you. Whats happened over the past few years is that investors are finally wising up to the mess that we are in. This is why countries like Germany are taking a vast amount of their gold stored around the world, and bringing it back home. They are worried. And they have every right to be. In the financial world, they refer to this as capital flight. And what it means is, when people figure out that their savings in U.S. dollars are in jeopardy, they look for better and safer alternatives. And the really scary thing to me is, the U.S. government is trying to make protecting yourself all but impossible, with the new rules that just went into effect on July 1st. Ill get to the specifics in just a minute. This is why gold prices went up for 12 straight years before finally taking a break in 2013. They began skyrocketing at the start of 2014. Its happening because people want to protect their savings. As far as we are aware, no other asset has ever gone up for 12 straight years, in the history of our nation. This is why truly outlandish ideas like Bitcoin and other cryptocurrencies are now making the cover of mainstream magazines like Time and Bloomberg BusinessWeek. People are getting truly desperate to protect their savings. But remember, we are not the first to go through this... When Germans realized their currency was being destroyed in the 1920s, they got their money into Swiss francs and gold as quickly as possible. When Argentineans realized their currency was being destroyed in recent years, they did the same—by moving money as quickly and as quietly as possible into a safer currency and into hard assets like land and precious metals. And its the same with the U.S. dollar right now. As it continues to lose its position as the worlds reserve currency, it will cause a brutal downturn in our economy, which will be about 10-times worse than the mortgage crisis of 2008. Remember, we bailed ourselves out of the last crisis by simply printing trillions and trillions of new dollars. In a currency crisis, thats not possible. Printing money only makes the situation worse. Again, Im not the only one saying this... As Barrons reported... The demand for dollars from the rest of the world has been of inestimable benefit to the U.S. economy. It quite simply allows Americans to consume more than they produce and save less than they invest; in other words, to live beyond our means. And listen to what Sam Zell, one of the richest people in America according to Forbes magazine, said on a rare interview with CNBC. Zell said: My single biggest financial concern is the loss of the dollar as the reserve currency. I cant imagine anything more disastrous to our country. Im hoping against hope that aint gonna happen, but youre already seeing things in the markets that are suggesting that confidence in the dollar is waning. I think you could see a 25% reduction in the standard of living in this country if the U.S. dollar was no longer the worlds reserve currency. Thats how valuable it is. You see, what will also happen as a result of this looming currency crisis, and the end of the U.S. dollar as the worlds reserve currency, is a massive inflation in America, the likes of which we have never seen before. When everyone is trying to get rid of their U.S. dollars and our federal government just continues printing more, this crisis will reach epic proportions. Remember, we as Americans are not immune to the basic laws of economics and finance. Over the past 100 years, many other governments have tried to do what our government is doing today... that is, printing money to pay for insurmountable debts. And in the past 100 years, this type of inflation and debt crisis has reared its ugly head in Germany, Russia, Austria, Argentina, Brazil, Chile, Poland, the Ukraine, Japan, and China, just to name a few. Greece is falling apart. Italy, Ireland, Portugal and Spain are all in trouble. And now the same process is well underway in the United States. As Bill Gross, founder, managing director and co-CIO of PIMCO wrote recently: The future price tag of printing six trillion dollars worth of checks comes in the form of inflation and devaluation of currencies... And George Melloan of the Wall Street Journal echoed these sentiments when he said: Indeed, it is unlikely that Americans themselves will escape the inflationary consequences of current Fed policy.... The Fed is financing a vast and rising federal deficit, following a practice that has been a surefire prescription for domestic inflation from time immemorial. Its painfully clear that we have a major, major problem on our hands. Perhaps we could right the ship if we could drastically reduce costs and cut spending. But thats the EXACT OPPOSITE of what our politicians are doing today. But our political leaders are now on a runaway, suicide course. Theyve come to believe that narrowing the tax base and printing billions and billions of dollars is the formula for prosperity. It has never worked, EVER, in human history, and it will never work now. Like I said, these theories have all been tried in many other places around the world – Zimbabwe, Argentina, Germany after World War I... and they never work. No nation in history ever became wealthier by going deeply into debt and then printing the money required to repay the loans. And despite what nearly all politicians seem to think... and what many pop-culture economists appear to believe, I 100% GUARANTEE it will not work here, either. Unfortunately, the success the Fed has enjoyed (so far) in expanding the monetary base and manipulating the Treasury bond market has greatly emboldened our politicians. But when you take a closer look, you realize that everything on the federal and state level is a complete and absolute mess, because our government has been living way beyond its means for so long...
Posted on: Mon, 07 Jul 2014 21:47:27 +0000
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