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Severe Economic Crisis Began
On September 20
Posted September 21, 2007 Since 1944, that is, for sixty-three years, our country has enjoyed an awesome economic advantage that no other country has enjoyed. Our dollar is the world reserve currency. There is a very high demand for dollars around the globe; everyone needs dollars for all manner of international financial transactions. Other countries must earn their reserve of dollars through the manufacture of goods or delivery of services. Our country need not work as hard. Indeed it has the option to print more dollars—something that happens most of the time when we borrow--to increase its reserve of dollars, and, with the freshly printed dollars, it can purchase additional goods and services from abroad. Our possession of the world reserve currency has become vital to the maintenance of our wealth. Although our industrial production and farming are in serious decline, and while our government and private sector debts are ballooning, we remain wealthy. No other country could behave as we behave now and remain wealthy. For many years, the United States has exploited and abused the unique advantage that possession of the world reserve currency confers, and irresponsibly failed to backstop the dollar with sufficient intrinsic wealth, whether with gold or production or both. But we cannot exploit the world reserve currency indefinitely. The circulation of more and more dollars not sufficiently underwritten by actual wealth diminishes the value of dollars that foreigners hold. There comes a point when foreigners will rebel against our abuse of the great role of the dollar, and rid themselves of dollars, lest their own wealth melt away. Two and a half years ago, I warned the public, in the pages of my Maryland newspaper The Citizens’ Monitor, that the great role the dollar has played in the world might be at risk, that, in other words, the dollar might soon lose its role as the world reserve currency, which, in turn, would be devastating for our economy and liberty itself. Back then, I feared that foreigners would soon dump their dollars, delivering a crushing blow to us. I repeated the warning in my new book and at the very onset of my campaign for Congress. On September 20, the rebellion against the dollar may have began in earnest and thresholds were crossed indicating that foreigners were evidently preparing to quit the dollar for good and end the dollar’s reign as the world reserve currency. On Monday, September 17, the Former Chairman of the Federal Reserve System Mr Alan Greenspan said, while being interviewed in Germany, that the days of the great role of the dollar may be numbered, and that the rising euro might soon replace the dollar as the world reserve currency. The very next day, the Federal Reserve cut the interest rate by half a point, triggering the crisis. It thus became even easier for banks to create new dollars and for Americans to borrow. Our borrowing binge, which Congress and the private sector alike partake in, thus worsened. The preexisting value of dollars will be diluted even further. A great many holders of dollars, especially foreigners, were consequentially unnerved and looking to get out of dollars and into safer havens, such as gold. Although the stock market felt immediate relief, the upshot of the cut in interest rates was the fatal combination—the value of the dollar fell gravely, breaking through a fundamental threshold and the value of gold rose dramatically, breaking though a different fundamental threshold. The twin developments regarding the dollar and gold could be signaling the onset of the devaluation of the dollar, which, if not checked, will result in the end of the dollar as the world reserve currency. On the morning of September 20, the value of the dollar on the US Dollar Index—a measurement of our currency relative to several other major currencies, including the euro--fell a good distance below long term, healthy support of $80. On the morning of September 21, it fell as low as $78.34. In the nearly 40 year history of the index, the dollar has never fallen below $78.33. Also, on the 20th, gold broke above its long term high of $735 an once. These twin signals of the index and gold tell us that the world is exceedingly anxious about the health of the dollar and could be preparing for a massive dumping of dollars. The dumping of dollars would be devastating for our economy. If the dollar is not fortified in short order, if the government does not corral, at long last, national borrowing and does not institute incentives to boost production, then America would quite possibly find itself in depression. A depression today would presumably be even deeper than that of 1929, because the debt bubble today is much larger than the debt bubble that brought on the prior crash. Worse, the onset of depression would render us highly susceptible to an evil change in our form of government. It turns out there are those who would shut down the Republic and impose a North American Union of the United States, Mexico and Canada. Merger proponents would presumably find a deep economic collapse useful, insofar as the American people would more readily accept a false solution to depression.
The falling below of long term support on the US Dollar Index is of very grim significance. When a stock or commodity falls below long term support, a free fall typically begins, and it is a commonplace that a collapsing stock or commodity will fall about half of its value until new support is achieved. Expect, then, that the dollar could lose one half or more of its purchasing power! At the same time, the government cannot possibly look upon the dollar, as if it were no more important than a company’s stock or a commodity like corn. If the government is indeed resigned to the collapse of the dollar, it would presumably strive for a controlled descent of the dollar, stretching over several years. The window in which we must act to save the dollar is not large and shrinking by the day.
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