U.S. Dollar Can and Will Drop 56 comments
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Recently there's been a wave of blogosphere opinion that USD is a win-win bet. It goes like this: if the world economy gets worse or stays in the dumps, then USD will remain strong, as demonstrated by its performance since Sept 08; if the world economy rebounds, then USD will of course be strong.
It is the "of course" part that I have a problem with. There're two scenarios under which USD will drop, and only one under which USD will remain strong in the intermediate term (a year or two). But even under the last scenario, USD is likely to drop in the longer term.
- The world economy stabilizes. Make no mistake, we're not there yet. It won't happen until at least the clouds of CEE debt/currency crisis, US/European banking and credit crisis, housing price, unemployment, and consumer demand start to dissipate. But when that happens, the world will be shifting away from USD assets. Furthermore, it is very unlikely that the Fed has enough political will to siphon the massive amount of USD cash it will have printed off the system early enough and fast enough to pre-empt the surge of inflation once the economy stablizes and credit starts to flow again.
- The world economy stays sickly for years. Under this scenario, the Fed would likely continue printing massive amounts of money for awhile. This would put other countries at a disadvantage since nobody else has this kind of monetary leverage. Therefore, they would be increasingly determined to seek alternative reserve currencies. True, right now there is no alternative. But I don't think it's wise to underestimate the world's determination and creativity when defending their own economic and strategic interests. When such alternatives emerge, a big part of the world would not feel sorry to abandon USD, a once safe asset abused and discredited by the Fed and US government.
- As I mentioned above, there're still numerous cloud overhangs. We are quite likely yet to encounter a few more trigger events. Under this scenario, USD would strengthen. But there's a limit to how long the perception of USD being the safe harbor can last. If the crisis mode continues for another year or two, the world would increasingly re-examine the assumption and seek alternatives.
In particular, I find the assumption that China will remain content sitting in the USD trap laughably arrogant, short-sighted, and lacking imagination. It may happen in the end. But don't take it for granted. It'd take a fundamental shift in US's China policy for China to stop trying to get out of the trap. So far they've talked about SDR, arranged a slew of bilateral currency swaps, and piled up on gold. None of the approaches is the end solution. But it'd be foolish not to take their effort seriously.
I've been long USD (against EUR and JPY), gold and TIPS (TIP) since the beginning of the year. I remain comfortable with all three right now. I trade the intermediate time horizon, from weeks to months. But I'll be ready to flip USD in short order going forward. Against what I don't know yet. We'll find out. But with the wave of opinion of USD win-win bet, I suspect we'll find out soon.
Disclosure: Long USD, gold, TIPS.
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This article has 56 comments:
if dollar weakens the american goods become competitive, comodities go up and trade balance widens
only those countries have a choice whose exports are elastic like oil
so i agree with the flight to liquidity move.
There is still no real alternative to the $ in terms of deepness of investment pool and liquidity.
Finally, even if I think that the $ will loose its status, it's going to be a very progressive event. It's not going to be a crash with everybody rushing to buy gold or what else. Talk about in 10 years or more and it will depend on the relative performance of other economies.
Don't be too complacent about maintaining our reserve currency status. People can only be pushed so far, even sometimes against their own interests in the short term for the perception of leadership.
We do it all the time.
Also, as consumer spending in China and India continues to grow, those countries' economies are becoming more self-sustaining-less reliant on US consumers, which leads me to believe that prices for US retail orders will increase-potentially spurring domestic demand for American made goods, which would also be good for this country.
it looks like another big mortgage reset is coming in 2010? 11?
buying siver on small dips and gold on any big ones.
I think this is proof that the *US govt* is going balls out, and one consequence is probably to force a revaluation of the renminbi. Not to mention the taxpayer getting royally screwed by its own govt. But that's nothing new.
On Apr 29 08:51 AM dybydx wrote:
> its important to keep in mind that the Chinese gov is famous for
> going balls out doing outrageous things that, for better or worse,
> western govs would not dream to do. its difficult to say what kind
> of firework they got for us to see, but past record shows its gonna
> drop alot of jaws.
>
> so i agree with the flight to liquidity move.
If the dollar drops, then ohter exporting economies go into recession.
SO what chance is there of S. Korea buying memory chips from Idaho? What chance is there of China, Germany buying cars from Detroit? Waht chance is there of the US writing Software for INDIAN companies (who probably wouldn't know what to do with a streamlined business process in the first place!)? What chance is there for US selling plasma screens to Japan? What chance is there of US selling oil to Kuwait/saud? The only thing the US can export is fear...and then weapons.
THERE IS SIMPLY NO WAY THE US CAN EXPORT ITS WAY OUT.
The Chinese buying gold is just the tip of the iceburg. If they announce the went from 600 tons to 1054, what did they really do? What would you do with all those dollars that arent really worth much and now arent flowing accross the Pacific? Their stimulas package to subsiidize kitchen appliances may help Whirlpool, but it wont change the balance of payments deficit.
I basically agree with your premise, but for those that don't want to, or are unable to directly trade forex, an alternative is to buy foreign stocks, esp. from those countries one thinks may fare better, currency-wise. (Think Brazil, for example).
On Apr 29 01:09 PM Bull Run wrote:
> I agree; but I would not short the US dollar, but take another stance,
> going long in CDN dollars. As the US dollar weakens , the treasuries
> yield will go higher. The 30 yr. note is now pushing very close to
> 4%, which is more like the historic levels for the 10 yr. note> The
> Feds are buying their own debt to maintain their low rate policy,
> but will this continue? Printing US dollars, buying treasuries. The
> US continues to have an unmanageable monetary policy...Issuing record
> amounts of debt to pay for banking, state, unemployment benefit,
> muni bond, and auto, bailouts, and at the same time their buying
> thier own debt back by printing dollars to keep rates low..Only in
> America..My concern is that while M2 , money supply numbers are way
> up, the real dragon in the smoke is about to appear. The Feds have
> lent about $15 trillion to banks, (investment-financial) and corp.
> paper, but this printed dollars does NOT show up in M2,(all chequeing
> and saving and currency in cirrculation) because it has not entered
> the economy. So far the banks have NOT lent this money out, and when
> it does, that's when we'll see a fall in the US dollar..BIG time.
> because though banks do not print money they do create money, with
> the mutiplying effect, which normally is in excess of 8 1/2 times,
> so $15 trill, becomes $120 trill of extra M2, that is hyperinflation
> and that will KILL the US dollar. my thoughts
There are many situations where a weak dollar is good and it would have done the US much better in the past to let the dollar weaken, however the "experts" at SeekingAlpha would not let you say such a thing.
US dollar strong...no alternative...blah, blah, blah.
Can bloggers and internet commentors stop acting like they know what the largest Governments of the world are or should do...its ridiculous. I have to read umpteen comments a week from commentors about what the Chinese government is thinking...The same people will call the Chinese government the smartest people alive and then turn around and call them chumps...
Maybe you all can write an economic bible to explain what doesn't make sense to you, but just cause your write it doesn't make it true.
On Apr 29 04:52 AM User 334773 wrote:
> Chaina and export driven economies have no choice but keep buying
> dollars
>
> if dollar weakens the american goods become competitive, comodities
> go up and trade balance widens
>
>
> only those countries have a choice whose exports are elastic like
> oil
On Apr 29 04:52 AM User 334773 wrote:
> Chaina and export driven economies have no choice but keep buying
> dollars
>
> if dollar weakens the american goods become competitive, comodities
> go up and trade balance widens
>
>
> only those countries have a choice whose exports are elastic like
> oil
I mean things are not that good manufacturing wise, why would copper go up so much?
My company has an employee in China and she reports that many many factories are closed with empty buildings everywhere.
In a way it's unfair to US. UK and Japan started it way earlier. But once Fed did it, now the moral inhibition against QE has disappeared. Instead of being the last resort, the world will consider QE the first choice when the next crisis trigger event hits, if only to protect their self-interest. A classic example of Prisoner's Dilemma.
I'm reminded of Bernanke's blank gaze he wears as he gets schooled on economics by Ron Paul (regularly done on YouTube). Bernanke knows his best course of action is to stare straight ahead, ignore all the questions and sense Ron Paul makes as he (Bernanke) knows there will be no outrage, no accountability, no public revolt. The US Government knows they have unlimited power to do whatever they want and no one on this planet will stop them. Until this fact changes, it is full steam ahead into oblivion and/or war.
So, just what is it they want to do? Get rich, homie! Knowing the game being played is the first step to winning the game. But do not try to make sense of the game.
Congress is not a long term investor in America or the USD. Based on their voting record, this is exactly what Americans deserve.
(it could happen. it happened in 1929-1939 time frame) and quits buying much of any thing, and quits investing and is very leary of banks, then other countries will have to change their economies big time as the biggest consumer will be gone.
In addition, the problems in Europe and Japan look at least as severe as those in the US. If their currencies were to appreciate against the USD, their problems would become even worse.
I don't particularly like the dollar, but I think the euro and the yen are dangerous.
Massive debt monetisation
Credit crunch induced supply shock
Bankruptcies induced industrial concentration
Rising economic nationalism and deglobalization
Higher nominal profit rates required to rebuild the global product supply chain
Inflationary public sector goods and services provisioning
Weakening dollar and cost-push inflation from energy imports
Delayed inflationary impact of excessive money growth
Inflationary institutional policy bias
On May 01 01:46 PM Bo Peng wrote:
> Not sure about supply destruction, Mashuri. The capacity in Germany,
> Japan, China, and Korea has been reduced, but not damaged, not unless
> the depression lasts a few more years. If inflation does surge as
> expected, it'd be due to pure monetary factors rather than supply
> and demand of goods/services.
What's the "BUY" indication?
Imagine now if all the countries start buying and selling in a side trade bypassing IMF and G-7. China is already buying Oil in Euros. It's buying up stakes really cheap on commodities company's like BHP and RIO which provides it further gains in dollars. It's not only hoarding gold, it's also selling gold. CHINA IS THE REASON GOLD IS SO CHEAP RIGHT NOW!!! They are holding down the price. The US is going to try and bring down the price of gold some more, watch. All that will do is eventually make gold rise when the dollar is devalued. However they forget Zinc, copper and steel. Right now China has a dumping citation in the world council. Think China cares. China will take care of China, just like India will take care of India and US will take care of US. That's the bottom line. Expect one crazy ride.
But when a US engineer (being priced out of the market, btw) can buy a car on 4 months wages while a Chinese or Indian engineer has to work 2-3 years, then is it really so shocking to think the dollar may devalue further without losing its status as reserve currency? Dollars don't just purchase American goods and services, they can be used to purchase oil and pretty much anything on any black market anywhere in the world.
Here's a link I'd recommend you read to get more perspective:
hubpages.com/hub/The-D...
Wouldn't the deleveraging process underway in these markets only deflate the USD, as the Fed can never print enough money (which by the way does not require a buyer) to offset the hundreds of trillions of USD deleveraging? Though the Fed is surely trying.
Wouldn't there be a strong USD vs EUR simply because there is more demand for the USD to deleverage USD denominated debt than demand for EUR to deleverage EUR denominated debt?
Doesn't the Fed have more flexibility than the ECB (endogenous QE only) to increase or decrease its balance sheet? Couldn't the EUR get stuck in inflation (if they are able to contain deflation first) a lot easier than the USD from quantitative easing due to that lack of flexibility?
How can any central bank allow high inflation or stagflation? Wouldn't the notional $500 trillion in interest rate swaps cause a crisis that would make the 2008 notional $60 trillion CDS crisis look like child's play? Wouldn't central bankers sell their gold before they let that happen?
It seems to me that central bankers are indeed walking a tight rope between 0 and 2% inflation, but the USD can only gain in relation to other currencies as the deleveraging process brings us back to 1998 levels of GDP. 1998 being the year before Clinton and Congress repealed the Glass-Steagall Act.
Now, if you were a cash rich capitalist who was looking forward to pretty much everything going into bankruptcy so you could buy it for pennies on the dollar you may feel you were robbed. But you may have been burned at the stake by a wild mob (perhaps led by President Obama) after your purchases, so I wouldn't lose too much sleep over it.
Basically Salbuchi is saying to get your money out of the bank and buy tangible assets like houses, cars, etc. and Jim Rogers is saying to put your money into commodities. Both predict the dollar collapsing and rampant inflation but Salbuchi goes a step further. He is looking for our dollar to be replaced with some other type American currency which will cause our old currency to be obsolete. Thus he says buy stuff. I am taking a slightly less drastic approach and say.....put your money into commodities fast.
I believe the time is historic on making lots of money with your investments if they are in the right place. Will you get rich this year or next. I just don't know. When will be the next collapse, war, 9/11 event, etc. That is when commodities will skyrocket.
My recommendations: DXO - EFT double bull oil futures, DBA - ETF agriculture commodities, UNG - tracks Natural Gas prices which are at historic lows and finally SLV - based on silver future contracts. Why silver instead of gold, I personally believe it has more upside potential. However any precious metal would be good except perhaps copper. Chinese seem to be creating a small bubble in the metal right now and no one is quite sure why.
That gives you oil, natural gas, agriculture and silver for investment vehicles. When the dollar collapses it won't take your investment down the drain with it if in these commodities.
I think USD will drop once the world economy stabilizes. In the interim it depends on the timing of events. The current rally is based on the premise that US economy will rebound ahead of Europe/Japan. But even if this turns out to be true, USD will drop once the cloud clears over Europe/Japan, which could easily be a year away.
That said, I'll let the market tell me what to do. Everybody knows about the Turtles by now. Even idiots can use it. But I'm not sure how many people really get it AND have the capacity to follow it.
Good luck!
On May 01 02:36 PM Just Say Whoa! wrote:
> >But I'll be ready to flip USD in short order going forward.
>
> What's the "BUY" indication?
>
What the US does not make is cheap consumer goods like DVD players. It does make jet engines, tractors, construction equipment and food.
Add it all up and the US is the largest manufacturing country in the world. By far. 300 million Americans make almost twice more stuff than 1.3 billion Chinese. What America does is support a high standard of living by investing capital to improve the productivity of its worker. It's why farm and manufacturing employment keeps dropping - and why an American engineer can be paid so much more than a Chinese engineer.
Do your research.
mjperry.blogspot.com/2...
cafehayek.typepad.com/...
investing.curiouscatbl.../
On May 01 09:47 PM cynewulf wrote:
> What is the U.S.A. selling? Treasuries, backed by U.S. dollars, of
> which there are more all the time, thanks to quantitative easing.
> Americans do not make things, like in the old days. Since there are
> already so many comments I rest my case.
I kinda like USL, IOC, PCX, RJA, UNG (maybe). TRP New Era also claims to be set up for incoming inflation.
On May 01 07:59 PM Economic Lens wrote:
> Just listened to a few videos by some guy named Salbuchi on Youtube.
> He is an Argentinian International Economist living in Buenos Aires.
> He says that his country has gone through what we are experiencing
> financially three times in his lifetime. What he has to say is very
> insightful for us in America and how it relates to your money. I
> recommend listening to him. What he says is very similar to what
> Jim Rogers is saying but from another angle.
>
> Basically Salbuchi is saying to get your money out of the bank and
> buy tangible assets like houses, cars, etc. and Jim Rogers is saying
> to put your money into commodities. Both predict the dollar collapsing
> and rampant inflation but Salbuchi goes a step further. He is looking
> for our dollar to be replaced with some other type American currency
> which will cause our old currency to be obsolete. Thus he says buy
> stuff. I am taking a slightly less drastic approach and say.....put
> your money into commodities fast.
>
> I believe the time is historic on making lots of money with your
> investments if they are in the right place. Will you get rich this
> year or next. I just don't know. When will be the next collapse,
> war, 9/11 event, etc. That is when commodities will skyrocket.<br/>
>
> My recommendations: DXO - EFT double bull oil futures, DBA - ETF
> agriculture commodities, UNG - tracks Natural Gas prices which are
> at historic lows and finally SLV - based on silver future contracts.
> Why silver instead of gold, I personally believe it has more upside
> potential. However any precious metal would be good except perhaps
> copper. Chinese seem to be creating a small bubble in the metal right
> now and no one is quite sure why.
> That gives you oil, natural gas, agriculture and silver for investment
> vehicles. When the dollar collapses it won't take your investment
> down the drain with it if in these commodities.
The US treasury and bond market has long been the fort able to weather the financial storms of the world. But how sturdy the fort was in the past, does us little good in the present. As the structure is growing ever weaker with the roar of the printing press, wealth destruction from taxes, and the intrusion of government. The fort used to be strong, but the cracks are becoming more and more apparent.
This is being been realized. And people are reevaluating their flight into dollars. Just notice how the foreign markets, whose fundamentals were never in question, have outperformed the US over the past 8 weeks.
>It pisses me off when people write stuff like "America does not
>make things".
>
>What the US does not make is cheap consumer goods like DVD
>players. It does make jet engines, tractors, construction
>equipment and food.
bricki is right on the money (no pun intended)! And I would add to the list medical devices, pharmaceuticals, commercial airplanes and weapons.
There really isn't a credible alternative.
On May 02 12:05 AM inflate me wrote:
> The dollar's strength throughout the collapse defies most logic.
> It is easy to understand the perceived safety of the US. Yet, the
> crisis culminated with the United States as its epicenter. Liken
> the situation to people running towards a fire, instead of away from
> it.
> The US treasury and bond market has long been the fort able to weather
> the financial storms of the world. But how sturdy the fort was in
> the past, does us little good in the present. As the structure is
> growing ever weaker with the roar of the printing press, wealth destruction
> from taxes, and the intrusion of government. The fort used to be
> strong, but the cracks are becoming more and more apparent.
>
> This is being been realized. And people are reevaluating their flight
> into dollars. Just notice how the foreign markets, whose fundamentals
> were never in question, have outperformed the US over the past 8
> weeks.
On Apr 30 03:08 AM Dave Wrixon wrote:
> Shows how much you know about the competition. You cannot even spell
> the name of your major rival.
As far as an alternative goes, looking into the future, an alternative isn't as dependant on its size, as much as its fundamentals. Size is a non issue, unless interested in duplicating the dollar as the worldwide reserve currency. You make it seem as if there is a shortage of currency in any particular country, but in a market there is no such thing as a shortage, prices simply adjust as a function of supply and demand.
However, like the $ and euro, all existing monetary systems are compromised from the onset, running the risk of governmental devaluation as fiat. But in moving assets into foreign denominations, by engaging in that currency, you are 'buying' that country almost as you would buy a foreign index. Countries such as Australia, China, Hong kong dollar, Norway and New Zealand are not tied down by huge deficits and many actually maintain surplus, minimizing any risk from printing or 'quantitative easing.' It’s a prudent option to trust the creditor more so than the debtor, especially with the potential growth such countries offer.
On May 02 12:45 PM bricki wrote:
> The Euro doesn't have a sovereign guarantee. Nobody else is big enough.
> Despite the changes that have been happening, US taxes and government
> intrusion are far lower than anywhere else.
>
> There really isn't a credible alternative.
>
> On May 02 12:05 AM inflate me wrote:
Be careful of extrapolation. Most models are linear for short periods of time, but that linearity becomes a trap when extended beyond those periods. Trees do not grow to the sky no matter how promising they look in the beginning.
On May 02 01:01 PM mgcolin wrote:
> This may be true today, but unfortunately Asia will dominate EVERY
> industry 20 years from now unless US employment cost decline significantly
> and the educational system in the US improves dramatically - and
> I just don't see it happening. Most likely it's the end of the world
> for western standards of living.
I think you should examine some of the proposals that you are making more carefully. Norway, for example obtains most of its surplus from oil exports. These exports started to decline in 2001 making the future outlook of the prosperity of that country less attractive going forward.
New Zealand is subject to significant foreign account deficits of 7-9% of GDP.
China has huge transparency issues.
And so on.
Personally I am picking other ways to invest than alternative currencies in order to protect from inflation risk. Commodities in particular.
On May 02 01:51 PM inflate me wrote:
> Bricki. You are right about the Euro, and I believe the Euro is bound
> to suffer a similar fate as the US dollar.
>
> As far as an alternative goes, looking into the future, an alternative
> isn't as dependant on its size, as much as its fundamentals. Size
> is a non issue, unless interested in duplicating the dollar as the
> worldwide reserve currency. You make it seem as if there is a shortage
> of currency in any particular country, but in a market there is no
> such thing as a shortage, prices simply adjust as a function of
> supply and demand.
>
> However, like the $ and euro, all existing monetary systems are compromised
> from the onset, running the risk of governmental devaluation as fiat.
> But in moving assets into foreign denominations, by engaging in that
> currency, you are 'buying' that country almost as you would buy a
> foreign index. Countries such as Australia, China, Hong kong dollar,
> Norway and New Zealand are not tied down by huge deficits and many
> actually maintain surplus, minimizing any risk from printing or 'quantitative
> easing.' It’s a prudent option to trust the creditor more so than
> the debtor, especially with the potential growth such countries offer.
>
>
> On May 02 12:45 PM bricki wrote:
On May 02 03:58 PM bricki wrote:
> I've been hearing that for at least 30 years now, starting back when
> Japan was in it's glory. The problem is that the mercantile growth
> model does not scale beyond the point where a certain level of affluence
> is reached. After that internal demand must dominate. Nobody has
> made that transition successfully yet.
>
> Be careful of extrapolation. Most models are linear for short periods
> of time, but that linearity becomes a trap when extended beyond those
> periods. Trees do not grow to the sky no matter how promising they
> look in the beginning.
>
> On May 02 01:01 PM mgcolin wrote:
But I agree with the angle on HKD and NOK, , they have sufficient reserves to honour their local ccy obligations.
On May 02 01:51 PM inflate me wrote:
> Bricki. You are right about the Euro, and I believe the Euro is bound
> to suffer a similar fate as the US dollar.
>
> As far as an alternative goes, looking into the future, an alternative
> isn't as dependant on its size, as much as its fundamentals. Size
> is a non issue, unless interested in duplicating the dollar as the
> worldwide reserve currency. You make it seem as if there is a shortage
> of currency in any particular country, but in a market there is no
> such thing as a shortage, prices simply adjust as a function of
> supply and demand.
>
> However, like the $ and euro, all existing monetary systems are compromised
> from the onset, running the risk of governmental devaluation as fiat.
> But in moving assets into foreign denominations, by engaging in that
> currency, you are 'buying' that country almost as you would buy a
> foreign index. Countries such as Australia, China, Hong kong dollar,
> Norway and New Zealand are not tied down by huge deficits and many
> actually maintain surplus, minimizing any risk from printing or 'quantitative
> easing.' It’s a prudent option to trust the creditor more so than
> the debtor, especially with the potential growth such countries offer.
>
>
> On May 02 12:45 PM bricki wrote:
Pull up a weekly chart of UUP, there is nothing bearish about it.
the DOLLAR is in a strong uptrend, and it's headed to 90.02 (the 38.2% retracement from it's high....THEN it will have a decision point at that juncture, either stalling OR breaking to 95 (the 50% retracement)
Inflation is going to wait for a while......
The latest events in Iraq and Afghanistan exposed deep flaws in this model.
The USA military is severely overextended worldwide. Somalia is just a case and point. On American money, a few years ago, Ethiopia invaded and overthrew Somalia Muslim government in Mogadishu. However, Ethiopia could not stay in Somalia long since it was under constant attacks from Somalia Muslim fighters. They had to withdrew from Somalia. Now, Somalia pirates created major navigation problems in one of the most important world waterways. Presently, neither the USA nor NATO are ready to re-invade Somalia clearly showing major weaknesses and limitations of the America military capabilities.
The situations in Afghanistan and Pakistan are close to be out of control as well. The USA will have to undertake enormous efforts to just stabilize the situation in the Afghanistan & Pakistan region.
Consequently, China, Russia and other countries will gain huge opportunities to enhance their geopolitical standing forcing a major worldwide geopolitical realignment detrimental to the USA major international interests. This will put enormous pressure on the USA and US$ gravely endangering its world reserve currency status.
The Bottom Line: a continuos downfall of the USA economic & military superpower status will lead to substantial devaluation/fall of US$.
On Apr 29 01:09 PM Bull Run wrote:
> I agree; but I would not short the US dollar, but take another stance,
> going long in CDN dollars. As the US dollar weakens , the treasuries
> yield will go higher. The 30 yr. note is now pushing very close to
> 4%, which is more like the historic levels for the 10 yr. note> The
> Feds are buying their own debt to maintain their low rate policy,
> but will this continue? Printing US dollars, buying treasuries. The
> US continues to have an unmanageable monetary policy...Issuing record
> amounts of debt to pay for banking, state, unemployment benefit,
> muni bond, and auto, bailouts, and at the same time their buying
> thier own debt back by printing dollars to keep rates low..Only in
> America..My concern is that while M2 , money supply numbers are way
> up, the real dragon in the smoke is about to appear. The Feds have
> lent about $15 trillion to banks, (investment-financial) and corp.
> paper, but this printed dollars does NOT show up in M2,(all chequeing
> and saving and currency in cirrculation) because it has not entered
> the economy. So far the banks have NOT lent this money out, and when
> it does, that's when we'll see a fall in the US dollar..BIG time.
> because though banks do not print money they do create money, with
> the mutiplying effect, which normally is in excess of 8 1/2 times,
> so $15 trill, becomes $120 trill of extra M2, that is hyperinflation
> and that will KILL the US dollar. my thoughts
Meanwhile, we are weakening our capitalist institutions, which has been one reason our country with 4% of world population has generated 25% of world GDP. The debate is between those with a scarcity model who can't see substitutionary technology obviating commodity constraints and pro-growth forces who want to spread prosperity (and make a buck doing it). If the US turns its focus inwards as many want, we only yield the future to those pro-growth forces outside the US that will ultimately win this debate. And that will weaken the dollar.