Is it worth saving money anymore?

I still believe in keeping some savings, but what about long term financial planning?



I'm 31. Where should I be financially?

[...] Once you have a retirement goal in mind, you want to be able to refer to benchmarks along the way to see how you're doing. Otherwise, you could find yourself at the end of your career well short of the savings you'll need.

The best yardstick is the size of your nest egg relative to your income. To quit working at 65 with a decent shot at replacing 80% of your pre-retirement earnings, you'll need savings equal to roughly 12 times your income (that assumes you'll collect Social Security but no pension). [...]

I used to believe in this kind of advice. I still do, in theory. But is it worth doing NOW, when our money is being devaluated?

In my youth, till I learned to manage my money properly, I went hungry a few times between paychecks. Then, after going into debt with credit cards, I learned to save money to pay off the debt. After that, I was good at saving money so I kept doing it, enabling me to buy property. Since then, I've always had savings. But nowadays, I keep thinking I need to spend it, before it becomes worthless. Like it happened in Germany in the 1920's, where people's entire life savings were wiped out overnight.

James Turk did the following interview with Moneychanger.com. Turk maintains that our currency has already collapsed, that we are already in the "process", and it just hasn't reached critical mass yet. The interviewer argues forcefully against Turks assessments, but Turk holds his ground, answering a lot of good questions by the interviewer. Here's a sample:

JAMES TURK ON THE DOLLAR’S COMING COLLAPSE

[...]
Moneychanger Since, at least the New Deal and the succession of Roosevelt and all his monetary/inflationary tricks, people have been predicting that the dollar would collapse. Aren’t you ashamed to come along 70 years later and predict again that the dollar is going to collapse?

Turk By any logical interpretation the dollar has already collapsed. Today’s dollar only purchases five cents of what it purchased in the 1930s, ten cents of what it purchased in the 1960-70s, and maybe 50 cents of what it purchased in the 1980s. So inflation has already brought the dollar to an ongoing collapse. The sound money people have been warning about this through the decades: the dollar is no longer an effective form of currency.

That raises another question: will the dollar’s problems become more severe? That’s where it becomes a bit more troublesome in terms of projecting and looking at the future. Can this decades-long situation continue, or must it end in some cataclysm? In our view it must come to end in a cataclysm, and that’s what we lay out in the book.

Moneychanger But isn’t the word “collapse” misleading? The people who mange the dollar, the Federal Reserve and the Treasury, have managed the collapse from 1934 until 2004, 70 years, so that the economy did not collapse along with the dollar. Can you really call that a collapse? Also, what’s to prevent their managing it a bit longer, through this decade? Even if it loses (as I expect) at least 75% of its value in this decade -- and it’s already lost nearly 30% from February 2002 to March 2004 -- it still won’t disrupt the economy too terribly.

Turk Let’s look at the first part of that question, the claim that the economy hasn’t collapsed. You’re widening the point that I was making earlier about the dollar collapsing in terms of purchasing power. When you bring the economy into the discussion you have to ask yourself another question. Are people better off now than they were 20-30 years ago? Looking at real wealth and adjusting for the dollar’s debasement, people are less wealthy today than they were 20-30 years ago. Incomes are lower today than they were 20-30 years ago, partly because the dollar’s been debased, partly because people take home less money after taxes. By any logical measure, I don’t think people are as well off as they were in the 1960s or 1950s when the dollar problems weren’t as severe as they’ve become in recent decades.

But there’s more to that question: we’ve created a debt mountain, a debt bubble. Bubbles always pop. We mortgaged our future trying to maintain standards of living by debasing the currency and borrowing. This is unsustainable and will ultimately bring about the dollar’s collapse.

Moneychanger But the Federal Reserve and the Treasury have managed the collapse. That’s what they do. They are crisis managers. They exist to manage the debasement of the dollar so that this infection does not give the whole economy a fever resulting in death. Would you agree?

Turk Yes, and as a clear result of their managing an unsustainable situation, we have less and less freedom. The Patriot Act just presents the latest example. Look at US financial history. They continue to erode and encumber our freedom. Why? Because they recognise that the present system is not sustainable and they are trying to keep the bubble in the air.

Moneychanger You claim the present system is not sustainable. Allan Greenspan says it is. George Bush says it is.

Turk Well, are they going to tell you that it’s not sustainable?

Moneychanger No, but they have 70 years of success to argue on their side. What makes it different this time? In the dollar’s darkest hours of 1980, when gold hit $850 and silver $50 and they pushed interest rates over 20%, well, yes, it’s a crisis, but we’ll muddle through this one, too. They’ve been muddling through since 1934. What is to prevent their muddling through this time? What specific things will make the dollar collapse this time? By “collapse” I don’t mean “erode” or even “erode quickly”, but I mean collapse in the sense that currency collapsed in Germany in 1923 or Argentina in 2002.

Turk That is exactly what I envision for the dollar. To answer your question we have to consider both supply and demand. In recent decades demand for the dollar has been, more or less, fairly consistent. As the financial bubble has been inflated and the Debt Mountain was built, people have continued to demand the dollar. They still use it for their day to day transactions. But what happened in Argentina and in Germany in the 1920s? Eventually, in a very short period of time, people realised that the hollow promises they were using for currency weren't worth what they had previously valued them to be. Then began the flight from the currency. The demand for those currencies dropped dramatically. In a long-term time frame, you could say almost overnight, but it was really over a period of weeks and months. People moved out of that currency as quickly as they could into other alternatives.

Demand for the dollar will ultimately drop for essentially the same reasons that demand for the Argentine peso and the Reichsmark dropped: they were fiat currencies oversupplied to the market.

Today far too many dollars are sloshing around the global economy. All it takes is a little break in confidence, then people quickly understand that the dollar is not worth the paper it’s printed on. There are a lot of hollow promises backing your dollar. That will lead to the flight from the currency that will ultimately bring the dollar down. But it’s the same outcome for every fiat currency. That’s the point that Americans don’t yet get. There is no logical reason why the dollar should end any differently than any other fiat currency.

Moneychanger But help me see the unseen. In 1923 Germany the people had already suffered through the inflation of World War I. They had seen their currency lose value as prices rose 800%, they had caught on. That “catching on” was necessary to precipitate the flight from the currency.

In Argentina in the decades of the 1980s and 90s, they had three different currencies, if I’m not mistaken. It may have been four, I can’t keep up with it. All Latin America has a century-long tradition of monetary instability. In the U.S. the last two generations have grown up without seeing gold in circulation, the last generation has grown up without seeing silver in circulation. Since 1971, the whole world has been on a fiat standard. Every currency has been inconvertible, backed by nothing. So why would American confidence break now? They don’t know anything else. They have only known a regime of inflation and ever-depreciating dollars. What will put the idea in their mind now that they have to flee out of dollars?

Turk What will trigger the flight from the dollar? We can’t really predict that. It could be some geopolitical event, some domestic financial event, a bankruptcy of Freddie Mac or Fannie Mae. We just don’t know what the specific trigger will be.

Look at the overall picture of what the dollar is today, and ask yourself a question. Do I want to prepare for this coming event by moving assets out of dollars into other alternatives – other currencies, precious metals, tangible assets. Never mind asking what specific event will starts the flight.

Where we stand today in this country is not unlike where Russians stood in the Soviet Union in the late 1980s. If you had possessed the terrific foresight to say that in two years the Russian Rouble will collapse and the Soviet Union will be history, the average Russian would have just laughed at you. And you know what he would have said? “The government will never let that happen.” Exactly what Americans say today.

“The government will never let that happen.”

But the reality is that the market is bigger than the government. Truth can be hid for only so long, and we have been hiding the truth. We’ve been creating illusions of prosperity, while in reality we’ve been consuming infrastructure and building a debt mountain. The Debt Mountain is ultimately going to be the problem that causes the dollar to collapse. [...]

Turk claims that we have not had a sound currency since 1934, even though a sound currency was written into our constitution. He also predicts the American people will demand that we go back to it.

This interview was made in 2004. Yet he predicts some things that have since happened, or are happening now. Read the whole thing, it's a real eye-opener.

What can we DO about any of it? Idaknow. Do what we can, I suppose, to get ready for the Brave New World of Finance that seems to be inexorably coming our way?


Related Links:

Commentary: Stimulate the economy, not government

What would a U.S. currency collapse look like?

Argentina's Example: Are we heading there?

Our true national debt: $130,000,000,000,000.
     

What should the Federal Reserve be doing?

From Judy Shelton's interesting lunch with economist Robert Mundell:

Currency Chaos: Where Do We Go From Here?
'The most important initiative you could take to improve the world economy would be to stabilize the dollar-euro rate.'

[...] Mr. Mundell has a knack for boiling things down to simple terms. He grew up on a four-acre farm in Ontario, went on to earn a Ph.D. from the Massachusetts Institute of Technology, and would ultimately challenge the renowned Milton Friedman at the University of Chicago during the late 1960s. Both economists were strong proponents of free markets, but Mr. Mundell disagreed with Mr. Friedman's advocacy of floating exchange rates.

The sound of a buzzer indicates lunch has arrived. Mr. Mundell suggests that we continue our discussion at the table and politely invites his assistant Ivy Ng, who has been taking careful notes, to join us.

"We've been talking about the possibility of global monetary reform," I continue, deciding to switch gears. "Let's talk a bit about domestic monetary policy. What do you think the Federal Reserve should be doing right now?"

It's a seamless transition for Mr. Mundell. "The Fed is making a big mistake by ignoring movements in the price of the dollar, movements in the price of gold, in favor of inflation-targeting, which is a bad idea. The Fed has always had the wrong view about the dollar exchange rate; they think the exchange rate doesn't matter. They don't say that publicly, but that is their view."

"Well," I counter, not particularly savoring the role of devil's advocate, "I suppose Fed officials would argue that their mandate is to try to achieve stable prices and maximum levels of employment."

Mr. Mundell looks annoyed. "Well, it's stupid. It's just stupid." He tries to walk it back somewhat. "I don't mean Fed officials are stupid; it's just this idea they have that exchange-rate effects will eventually be taken into account through the inflation-targeting approach. In the long run, it's not incorrect—it takes about a year. But why ignore the instant barometer that something is happening? The exchange rate is the immediate reaction to pending inflation. Look what happened a couple weeks ago: The Fed started to say, we've got to print more money, inflate the economy a little bit. The dollar plummeted! You won't get a change in the inflation index for months, but a falling exchange rate—that's the first signal."

Clearly on a roll, I press a bit. "You mentioned gold?"

'The price of gold is an index of inflation expectations," Mr. Mundell says without hesitation. "The rising price of gold shows that people see huge amounts of debt being accumulated and they expect more money to be pumped out." He purses his lips. "They might not necessarily be right; gold could be overvalued right now."

Sensing that the soup is getting cold, I decide to cut to the chase: "What would be your winning formula today? What advice would you give to Washington that would help turn around our moribund economy?"

He pauses to think, but only for a moment. "Pro-growth tax policies, stable exchange rates." [...]

Pro growth tax polices sound good. I don't know about stable (fixed) exchange rates. I would like to hear Milton Friedman's argument against it.
     

Gold, the Dollar, and a new currency

The Tyranny of the Dollar

[...] As Madame Speaker said, we’d know what was in the Health Control bill after we passed it. The other day, we learned the health bill augments the 1099 tax form to track gold coin transactions.

This is another surprise attack in the economic war of the government against the people. You should know more about this war, since you’re in it.

[...]

So if you want freedom from government oversight and overreach, then you’ll either keep false books or you’ll resort to barter transactions that don’t appear on the books at all. Either path sets you on a collision course with authority. But is there anything a citizen can do that’s both safe and legal, or at least closer to being safe and legal? Can we ease away from the Federal monopoly dollars?

The government is deathly afraid of losing control of your assets. If the idea of a money-substitute such as gold catches on, the government will react by pushing the people back onto their radar. Hence the new law slipped into the health control bill.

I have a dream. And I’ll admit that this is a stupid dream; an unrealistic dream; a dream that is not thought out. So please mute your enthusiasm, because I’m doing nothing here but speaking in the vaguest possible terms about where we want to get to. But the goal is to give “we the people” an alternative to the dollar. Rather than being forced to hold our assets in government paper, there should be a new private currency (call it a “NewBuck”), managed by an authority that acts with integrity and is accountable only to the people that hold NewBucks.

The dollar was once respected because you could exchange it for gold. Now it’s respected only by custom and force of law. We take the dollars because the next guy will take the dollars from us. Not to mention that it’s illegal to refuse dollars. But our confidence in the underlying integrity of the dollar is dwindling.

[...]

Several years ago, someone actually tried to create an alternative currency called a “Liberty Dollar”. The idea was to mint coins with silver or gold in them and get merchants to accept those coins. This operation has been stomped down by the Feds. Their website, LibertyDollar.org, now announces: “Site Removed Due to Court Order”. So much for freedom of expression.

I don’t want to rush to defend the Liberty Dollar. I don’t know enough about the situation to offer a definitive opinion. The Wikipedia entry reports that the government saw an unsavory element of multilevel marketing in the operation. I can’t say that’s not the case. And it may be that the term “dollar” should have been avoided, in that it implies legal tender.

On the other hand, it’s not clear how Liberty Dollar’s offences are more than mere technicalities. It seems that people were interested in the notion of Liberty Dollars because they understood how unsound the ordinary dollars have become. I think the government hit hard against the Liberty Dollar out of fear rather than due to any serious transgression. [...]

I used archive.org to find a copy of the LibertyDollar.org website. Here is the last reported page before the Feds closed it down:


http://web.archive.org/web/20080615190237/http://www.libertydollar.org/

The archive shows that the website existed from 2002 to 2008. So the Feds were content to let it exist for several years. I don't know if there was anything crooked about it or not, but the site presents an interesting idea: a viable, private currency. I can see why the government wouldn't allow it, but I can also see why people would want it. Many people believe that the dollar is a fiat currency, and that our US currency has already collapsed; that the current financial crisis is just the first stage of the collapse manifesting, with more to come. I'm not certain of that, but there are some compelling arguments to be made for it. Either way, people do want a sound currency like we used to have. Will the American people demand that we go back to one?
     

Lifespan of Dollars is longer in Zimbabwe

That's because they launder dirty money - literally:



Zimbabweans wash dirty US dollars with soap, water

HARARE, Zimbabwe – The washing machine cycle takes about 45 minutes — and George Washington comes out much cleaner in the Zimbabwe-style laundering of dirty money.

Low-denomination U.S bank notes change hands until they fall apart here in Africa, and the bills are routinely carried in underwear and shoes through crime-ridden slums.

Some have become almost too smelly to handle, so Zimbabweans have taken to putting their $1 bills through the spin cycle and hanging them up to dry with clothes pins alongside sheets and items of clothing.

It's the best solution — apart from rubber gloves or disinfectant wipes — in a continent where the U.S. dollar has long been the currency of choice and where the lifespan of a dollar far exceeds what the U.S. Federal Reserve intends.

Zimbabwe's coalition government officially declared the U.S. dollar legal tender last year to eradicate world record inflation of billions of percent in the local Zimbabwe dollar as the economy collapsed.

The U.S. Federal Reserve destroys about 7,000 tons of worn-out money every year. It says the average $1 bill circulates in the United States for about 20 months — nowhere near its African life span of many years. [...]

Unlike here, they can't take worn notes to the bank and exchange them. Chemical cleaning fades the color, so they gently launder the bills.

     

The euro and the yen have surpassed the dollar as the favored currency by central banks

From Neal Boortz:

HOW'S THE HOPEY, CHANGEY, SPENDY THING WORKING OUT FOR YA?

When Barack Obama was elected, he and the Democrats insisted that we could spend our way out of this crisis. Remember that? Remember the $787 billion stimulus bill that needed to be passed IMMEDIATELY in order to start our economy on its way to recovery? Yeah ... the bill that was essentially written by hard-left, anti-capitalistic activist groups like The Apollo Alliance. Well more than six months later, we have unemployment creeping up on 10%. And we have this ..... from Bloomberg:

President Barack Obama's effort to lead the world economic recovery by spending the U.S. out of its recession is undermining the dollar, triggering record commodities rallies as investors scour the globe for hard assets.

Did you hear that, folks? Isn't that just wonderful? Isn't that just the type of change you voted for? All of this spending ... all of this printing of money ... all of these government dreams and schemes and bailouts .... they are starting to affect America. Big time.

The dollar went into "crisis mode" earlier this week when the euro and the yen surpassed the dollar as the favored currency by central banks.

Thank you Oh Great Chosen One ... the American dollar on the back bench. That's the type of change we voted for, isn't it?

Then we get reports like this from the New York Post:

After printing up trillions of new dollars and new bonds to stimulate the US economy, the Federal Reserve chief is now boxed into a corner battling two separate monsters that could devour the economy -- ravenous inflation on one hand, and a perilous recession on the other.

"He's in a crisis worse than the meltdown ever was," said Peter Schiff, president of Euro Pacific Capital. "I fear that he could be the Fed chairman who brought down the whole thing."

Bringing "the whole thing" down! Even MORE change you can believe in!

Don't you see what has happened here, folks? Obama has succeeded in weakening America. Low interest rates, flooding the economy with money by simply printing it, a mounting pile of debt. So now ask you again ... how's this hopey, changey, spendy thing working out for ya? Better yet, how is it going to work out for your grandchildren?

I keep hearing on from the MSM that the recession is over, yet unemployment continues to rise. And that continues to affect what could otherwise be a recovery:

HIGH UNEMPLOYMENT ADDS TO THE DEFICIT

Speaking of unemployment ... that, too, is having an impact on our massive government deficit, which is currently $1.4 trillion in 2009. This makes perfect sense if you think about it.

High unemployment means two things: more taxpayer dollars spent on unemployment checks and less tax revenue. This will cost the government about $100 billion a year.

I bring this up for one reason and one reason only. The Democrat solution to this is to throw more money at the unemployed ... to extend unemployment benefits. In the meantime, they wish to increase taxes on the very people who would be able to create jobs for these people .. to get them off the government dole. Creating jobs, not spending money, is the solution.

There. How hard was that?

I don't see anything being done to create jobs, only things being done to cripple, limit and restrain those who can, could and would create jobs.

If you think that a 1.4 TRILLION dollar deficit is bad, consider that our national debt is pushing 12 TRILLION dollars, and climbing:

U.S. NATIONAL DEBT CLOCK

Our situation is becoming increasingly unsustainable, as we continue to do exactly the wrong things to get out of the hole our government is digging us into.
     

Has US Currency already "collapsed"?

A post I did a while back, "What would a U.S. currency collapse look like?", has been getting more hits and rising up in my site meter. I found out it's been linked to at Ask.com, regarding the search words "currency collapse". I went to that page, and there were many interesting links to that topic. Here are a few that I found informative:

How Does a Currency Collapse? and the U.S. $?

When a currency loses the confidence of its people, its fall becomes exponential, as has happened to the Zimbabwe $, where in 1982 one U.S.$ equalled 1 Zimbabwe $. Today around Z$200,000 buys one U.S. $ if you can find someone idiot enough to sell one for the Z$.

In day-to-day terms, the smallest note in Zimbabwe a Z$500 is the size of a U.S.$. The price of a single-ply sheet of toilet paper is more expensive at around Z$867.

The U.S.$ is nowhere near there, but clearly the U.S. Administration has no plan or even desire to rectify the U.S. Trade deficit. Consequently, we are seeing a growing number of Central Banks turning to the Euro for its reserves and away from the U.S.$.

Whilst most observers and particularly U.S. observers like to have tangible facts and numbers with which to mathematically gauge the present and the different possible futures, a collapsing currency situation is not as neatly gaugeable. Indeed it is driven in stages of ‘confidence’, which are rarely measurable in advance.

For instance we see today the move of the Pension and other long-term funds into the gold E.T.F. one finds there are no mathematically measurable factors with which to measure the pace of change to these funds. Yes, the number of ‘Road-shows’ the World Gold Council does affects this move to some extent, but how do you measure the spread of that knowledge and resulting investment in the E.T.F.s outside of that? How does one measure the forces causing uncertainty and falling ‘confidence’.

It is an emotional progression, one that moves in lurches as particular incidents destroy confidence limb by limb. In such a climate a steady degeneration of confidence lead to an effect we shall call a "plateau - cliff" process.[...]

Read the whole thing. See the steps of the "process". See the graph. Yikes.


Then James Turk does an interview with Moneychanger.com. Turk maintains that our currency has already collapsed, that we are already in the "process", and it just hasn't reached critical mass yet. The interviewer argues forcefully against Turks assessments, but Turk holds his ground, answering a lot of good questions by the interviewer. Here's a sample:

JAMES TURK ON THE DOLLAR’S COMING COLLAPSE

[...]
Moneychanger Since, at least the New Deal and the succession of Roosevelt and all his monetary/inflationary tricks, people have been predicting that the dollar would collapse. Aren’t you ashamed to come along 70 years later and predict again that the dollar is going to collapse?

Turk By any logical interpretation the dollar has already collapsed. Today’s dollar only purchases five cents of what it purchased in the 1930s, ten cents of what it purchased in the 1960-70s, and maybe 50 cents of what it purchased in the 1980s. So inflation has already brought the dollar to an ongoing collapse. The sound money people have been warning about this through the decades: the dollar is no longer an effective form of currency.

That raises another question: will the dollar’s problems become more severe? That’s where it becomes a bit more troublesome in terms of projecting and looking at the future. Can this decades-long situation continue, or must it end in some cataclysm? In our view it must come to end in a cataclysm, and that’s what we lay out in the book.

Moneychanger But isn’t the word “collapse” misleading? The people who mange the dollar, the Federal Reserve and the Treasury, have managed the collapse from 1934 until 2004, 70 years, so that the economy did not collapse along with the dollar. Can you really call that a collapse? Also, what’s to prevent their managing it a bit longer, through this decade? Even if it loses (as I expect) at least 75% of its value in this decade -- and it’s already lost nearly 30% from February 2002 to March 2004 -- it still won’t disrupt the economy too terribly.

Turk Let’s look at the first part of that question, the claim that the economy hasn’t collapsed. You’re widening the point that I was making earlier about the dollar collapsing in terms of purchasing power. When you bring the economy into the discussion you have to ask yourself another question. Are people better off now than they were 20-30 years ago? Looking at real wealth and adjusting for the dollar’s debasement, people are less wealthy today than they were 20-30 years ago. Incomes are lower today than they were 20-30 years ago, partly because the dollar’s been debased, partly because people take home less money after taxes. By any logical measure, I don’t think people are as well off as they were in the 1960s or 1950s when the dollar problems weren’t as severe as they’ve become in recent decades.

But there’s more to that question: we’ve created a debt mountain, a debt bubble. Bubbles always pop. We mortgaged our future trying to maintain standards of living by debasing the currency and borrowing. This is unsustainable and will ultimately bring about the dollar’s collapse.

Moneychanger But the Federal Reserve and the Treasury have managed the collapse. That’s what they do. They are crisis managers. They exist to manage the debasement of the dollar so that this infection does not give the whole economy a fever resulting in death. Would you agree?

Turk Yes, and as a clear result of their managing an unsustainable situation, we have less and less freedom. The Patriot Act just presents the latest example. Look at US financial history. They continue to erode and encumber our freedom. Why? Because they recognise that the present system is not sustainable and they are trying to keep the bubble in the air.

Moneychanger You claim the present system is not sustainable. Allan Greenspan says it is. George Bush says it is.

Turk Well, are they going to tell you that it’s not sustainable?

Moneychanger No, but they have 70 years of success to argue on their side. What makes it different this time? In the dollar’s darkest hours of 1980, when gold hit $850 and silver $50 and they pushed interest rates over 20%, well, yes, it’s a crisis, but we’ll muddle through this one, too. They’ve been muddling through since 1934. What is to prevent their muddling through this time? What specific things will make the dollar collapse this time? By “collapse” I don’t mean “erode” or even “erode quickly”, but I mean collapse in the sense that currency collapsed in Germany in 1923 or Argentina in 2002.

Turk That is exactly what I envision for the dollar. To answer your question we have to consider both supply and demand. In recent decades demand for the dollar has been, more or less, fairly consistent. As the financial bubble has been inflated and the Debt Mountain was built, people have continued to demand the dollar. They still use it for their day to day transactions. But what happened in Argentina and in Germany in the 1920s? Eventually, in a very short period of time, people realised that the hollow promises they were using for currency weren't worth what they had previously valued them to be. Then began the flight from the currency. The demand for those currencies dropped dramatically. In a long-term time frame, you could say almost overnight, but it was really over a period of weeks and months. People moved out of that currency as quickly as they could into other alternatives.

Demand for the dollar will ultimately drop for essentially the same reasons that demand for the Argentine peso and the Reichsmark dropped: they were fiat currencies oversupplied to the market.

Today far too many dollars are sloshing around the global economy. All it takes is a little break in confidence, then people quickly understand that the dollar is not worth the paper it’s printed on. There are a lot of hollow promises backing your dollar. That will lead to the flight from the currency that will ultimately bring the dollar down. But it’s the same outcome for every fiat currency. That’s the point that Americans don’t yet get. There is no logical reason why the dollar should end any differently than any other fiat currency.

Moneychanger But help me see the unseen. In 1923 Germany the people had already suffered through the inflation of World War I. They had seen their currency lose value as prices rose 800%, they had caught on. That “catching on” was necessary to precipitate the flight from the currency.

In Argentina in the decades of the 1980s and 90s, they had three different currencies, if I’m not mistaken. It may have been four, I can’t keep up with it. All Latin America has a century-long tradition of monetary instability. In the U.S. the last two generations have grown up without seeing gold in circulation, the last generation has grown up without seeing silver in circulation. Since 1971, the whole world has been on a fiat standard. Every currency has been inconvertible, backed by nothing. So why would American confidence break now? They don’t know anything else. They have only known a regime of inflation and ever-depreciating dollars. What will put the idea in their mind now that they have to flee out of dollars?

Turk What will trigger the flight from the dollar? We can’t really predict that. It could be some geopolitical event, some domestic financial event, a bankruptcy of Freddie Mac or Fannie Mae. We just don’t know what the specific trigger will be.

Look at the overall picture of what the dollar is today, and ask yourself a question. Do I want to prepare for this coming event by moving assets out of dollars into other alternatives – other currencies, precious metals, tangible assets. Never mind asking what specific event will starts the flight.

Where we stand today in this country is not unlike where Russians stood in the Soviet Union in the late 1980s. If you had possessed the terrific foresight to say that in two years the Russian Rouble will collapse and the Soviet Union will be history, the average Russian would have just laughed at you. And you know what he would have said? “The government will never let that happen.” Exactly what Americans say today.

“The government will never let that happen.”

But the reality is that the market is bigger than the government. Truth can be hid for only so long, and we have been hiding the truth. We’ve been creating illusions of prosperity, while in reality we’ve been consuming infrastructure and building a debt mountain. The Debt Mountain is ultimately going to be the problem that causes the dollar to collapse. [...]

Turk claims that a sound currency was written into our constitution, and he predicts the American people will demand that we go back to it. And that we have not had a sound currency since 1934.

Also, this interview was made in 2004. Yet he predicts some things that have since happened, or are happening now. Do read the whole thing.
     

The demise of the dollar as oil trading currency

The demise of the dollar
In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

[...]

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East. [...]

Read the whole thing, to see what this transition away from the US dollar is going to mean. What's next, dumping US dollars as a reserve currency, which would devalue our money even further? It would help bring about exactly what many countries have wanted: a weaker America. Or even worse.

I have to wonder if some people in our government would like to see our currency ruined, so they can switch it over for... something else? I've read that George Soros favors the creation of a Global Currency.


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The Devaluing of American Currency Continues

Is Obama compounding Bush's mistakes?
     

The Devaluing of American Currency Continues

Commentary: Time for another tea party?

[...] as the federal government continues to print money that isn't worth the paper it's written on and as our national debt soars past $11 trillion, a United Nations panel is set to recommend that the world ditch the U.S. dollar as its reserve currency in favor of a shared basket of currencies.

One of the enduring strengths of the dollar has been that it has always been the currency of choice in times of crisis. But that's not the case anymore. Our ballooning deficits have driven down the value of the dollar so much that the Chinese government recently asked for guarantees from Washington that the Treasury bills they own are safe. [...]

If the dollar is perceived as unreliable, it could lead to global "dumping" of all assets in American currency, further devaluating the dollar.

Fed to pump another $1 trillion into U.S. economy

[...] to the surprise of investors and analysts, the committee said it had decided to purchase an additional $750 billion worth of government-guaranteed mortgage-backed securities on top of the $500 billion that the Fed is already in the process of buying.

In addition, the Fed said it would buy up to $300 billion worth of longer-term Treasury securities over the next six months.

[...]

In effect, the central bank has been lending money to a wider and wider array of borrowers, and it has financed that lending by using its authority to create new money at will.

Since last September, the Fed's lending programs have roughly doubled the size of its balance sheet, to about $1.8 trillion, from $900 billion. The actions announced on Wednesday are likely to expand that to well over $3 trillion over the next year.

Despite a trickle of encouraging data in the last few weeks, Fed officials were clearly still worried and in no mood to cut back on their emergency efforts.

Fed policy makers sharply reduced their economic forecasts in January, predicting that the economy would continue to experience steep contractions for the first half of 2009, that unemployment could approach 9 percent by the end of the year and that there was at least a small risk of a drop in consumer prices like those that Japan experienced for nearly a decade.

The Fed rarely buys long-term government bonds. The last occasion was nearly 50 years ago under different economic circumstances when it tried to reduce long-term interest rates while allowing short term rates to rise. [...]

So we are creating this massive debt for ourselves, which is also devaluating the dollar internationally, which also weakens it at home. We have to pay interest on this debt, which keeps growing. What happens when interest rates go up, the interest on our debt it compounded, nations globally begin dumping our currency, and we can't borrow any more? And that causes a massive run on our banks, requiring the Fed to print up even more money, in order to comply with the FDIC? You might as well ask, What would a U.S. currency collapse look like?