JohnAl

What's Going to Replace the Dollar?

"It's IDIOTIC to think WAMPUM (gold, silver etc.) will replace any currency."

Is it really? PMs have been used as money by many cultures throughout much of human history, and as the author points out, a modern PM backed money wouldn't necessitate carrying around metal. The conveniences of modern banking would still exist.

I do think it's likely that before we arrive at this juncture, though, there will be attempts to replace the dollar with other fiat currencies. Governments don't give up easily, and they need the fiat currency to maintain their power and their growth.

My guess is that the next step, which will come only after things get worse in the US and the government gets increasingly desperate, is that there will be an attempt at a world currency. This would necessitate the US giving up much of it's advantage though, which is why I don't see it happening until things are much worse here. They may even make a show at tying this new currency to PMs in some way. But it will be a sham. They will want to maintain their ability to create money out of thin air.

Evidence That Big Inflation Is Coming

Excellent article and commentary!

I'm starting to feel comfortable in the "(general price) inflation will return later rather than sooner" camp. I don't see how "big" inflation can return until "big" borrowing does. Desire to borrow is the main missing ingredient in the credit bubble reflation formula. Desire to lend is missing right now too, but I'm guessing that banks will get cleaned up and will be ready to lend again before people and businesses are ready to borrow big again.

Many individuals with big debt got crushed last fall and others had the crap scared out of them. And most everybody is looking over their shoulder and hoping the boss doesn't show up with a pink slip. People are doing the right thing now, the rational thing - saving - and aren't likely to want to get in over their heads borrowing again any time soon, if ever.

And what business is interested in borrowing for expansion right now, with unemployment rising and the general economy looking like it's on life support?

Yes Bernanke and the gubmint are doing everything they can to reflate the credit bubble, and we can all see the enormous base money increase, but it can't do much harm just sitting there in the banks.

It's like Bernanke is furiously trying to light a bonfire but the wood is soaking wet. It's gotta dry out. It's gonna take a while to light.