Dollar in Danger- The Greatest Threat to America
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20 Responses to “Dollar in Danger- The Greatest Threat to America”
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There are many grave threats to this nation, and they are all hitting at once. Sort of a perfect storm. Here’s another one:
http://tinyurl.com/3xycev
Don’t dismiss this lightly. Dissenters to the “treason” we are witnessing by our own government (the enemy within)are being rounded up under the guise of “terrorism”!
Mr Konop,
I thought you wanted to restore 1950s style export competitiveness. I thought you were the one complaining about other countries “cheating” by keeping the values of their currencies low.
I guess I was wrong.
Happy New Year to all!
In the video was a key point.
It was the need to expand credit to keep spending going, that needs to be covered. The dollar may even rally when other currencies have problems in declining economies if they decline faster than ours and demand for their currency declines faster than demand for outs. We are still the currency oil is mostly priced in as well as other things.
But, it is our need to borrow to spend at the personal, corporate and government levels that are the real problem, more than the dollar.
We spend more than we make and that is the real reason for trade deficits. China, and other nations we have a deficit with are making more than they spend with us although some also make less than they spend overall.
Deficits with one nation or few, offset by surpluses with other nations is not a problem. It is when we spend more will all the nations combined than we make year after year, decade after decade.
Currently, the solution to our problem with credit (debt) is “more debt.” They are attempting make it easy and less risky for banks to lend us more. For example, we still have $10 trillion in home equity that governments around the world hope we will tap to keep spending.
Any cuts in consumer or corporate or government spending is risking a recession. Here is what Johne Browne points out in his video that came out today about “cash.”
NewsMax
When money is going into cash accounts, it isn’t being spent and that means fewer sales, fewer employees needed, until that cash is spent. Look at the charts he presents on how much is moving to cash instead of being spent. We not only may stop borrowing to spend but stop spending to prepare for hard times and thus, preparing for hard times may actually cause hard times.
That is why five central banks and foreign gov. sovereign wealth funds are trying to boost confidence of consumers that they can continue to borrow and there will be jobs and income to pay back the loans. They know any recession here will hit them too.
This is not a dollar problem as much as a problem with debt at the personal, corporate and government levels. Even muni-bonds are in danger of being downgraded due to this mess and that means they can’t borrow as much as they need now that tax revenues are dropping from the housing collapse and lost property taxes, lost impact fees, lost title fees, lost income taxes on sales of real estate by agents, etc.
That one chart of institutions and their moving of money to cash should warn us what the “big boys,” and “those in the know,” are doing with their money to protect it. No wonder Congress and the Fed is in a panic and cutting rates with a reported 4.9% growth in GDP.
Right now too, they are saying on todays news that the high oil prices are finally showing up in all things made from oil. Plastic in ink pens, computers, medical devices, plastic wrap for shipping, plastic in cars, fibers made from oil, etc. are starting to show up in higher prices. Too much we focus on just fuel when oil is what is used to make hundreds of thousands of products.
Inflation may rise and that would mean we need higher interest rates at the very time we are worried that lower interest rates are needed for the economy. This has become a catch 22 where either way, we cause problems.
In short, 3 decades or more of bad policy is coming back to haunt us and even if we dodge this with “more debt,” we sill face the day the “chickens come home to roost” and consumers can’t borrow enough to keep spending up or tax revenues up or the economy up.
I don’t like long posts, but this one hits the nail on the head!
“The Birdman asks: Can somebody explain this to me?
John: I will do my best to respond. But, I am hardly an expert in economics and finance.
That said, you have covered a lot of issues. First, the question of liquidity. Yes, the central banks of the world are supposedly pumping excess credit into the system. A lot of that liquidity is coming from the FRB through the purchase of U.S. Government debt. They are doing this to support the Dollar and the U.S. Bond market. The foreigners are no longer interested in holding our dollar denominated debt instruments. And they are no longer interested in financing our debt to the tune of 3 billion dollars a day. Why should they, the dollar is slowly but surely declining in value. And thus, all dollar denominated assets are declining in value. It is off the subject, but that is also why inflation is now running at the rate of 3% a month. Not my words. That came from Citigroup. But I digress. As economists like to say you can’t force credit. You can’t force people to borrow. (Every dollar in existence is based upon debt. Someone had to borrow into the system. That is why the monetary system that has been imposed upon us is ultimately self destructive.) Flooding the system with credit, has been likened to “pushing on a string.” And it will do no good until, and unless, people and companies decide to utilize that credit.
The liquidity issue has little to do with the credit crunch. Yes, I know, the semantics here can get confusing. It sounds like they are one in the same but they are not. The credit crunch refers to the fact that bankers are reluctant to loan, and commercial interests are reluctant to borrow. Many, if not all, of the major money center banks are probably insolvent, which is a very good reason why the banks want to try and preserve capital. More on that later. And borrowers are reluctant to load up on more debt because they see that the “credit crunch” could lead to a credit collapse (inevitable) and a serious recession. If you see economic storm clouds on the horizon, the first thing a prudent CFO will do is reduce debt—especially long term with variable rates of interest. You might say the fears of the major players create a self fulfilling prophecy. Hence, the wheels of commerce have locked up and are now coming off. As they must. The commercial system simply cannot function unless there is a flow of available CREDIT. With no credit system there is no economy. Bottom line? The banksters and those that feed at their trough have lost confidence in their own system. We can thank the banksters for that. And, again, it does not matter one wit, how much money and credit is in the system.
The biggest part of the problem started with the so-called sub prime mortgage market. As you know, the banksters created this mess by advancing mortgage financing to a lot people who could not balance a check book let alone maintain a checking account. These folks fell into the category of no money, no assets, no job, and,,,, well you get the picture. Why would anybody advance credit to someone who had no credit rating? Because the banksters never intended to hold the mortgages in the first place. It was always their intention to palm off this financial trash to the unsuspecting. (You can blame a lot of this behavior on the FRB. In recent years the FRB intentionally flooded the banking system with an abundance of very cheap credit. What was a bankster to do? The devil made them do it.) So, the money to be made from this garbage was not in holding the note, but in “securitizing” the mortgage loans by “bundling” them, and then selling them en mass as investment securities, aka, collateralized debt obligations. The sales were to foreigners and other fools like pension plan managers here in the U.S. So, If you bought a mortgage backed security collateralized with five hundred mortgages, how would you know that a third of them were worthless? You Would not. The only way the banksters were able to commit this fraud was with the willing assistance of the “rating agencies.” This trash was all stamped investment grade. Thus, the institutional investors, such as pension managers, were relieved of their obligation of a due diligence investigation to determine the investment quality of what they were purchasing. They also had a perfect CYA excuse, because, after all, what they bought was rated AAA by Moody’s. ( No doubt a lot of money changed hands under the table with the people at the rating agencies.) This is also another good reason for the “credit crunch.” Institutional investors, now realizing that the investment ratings are not worth toilet paper, have justifiably lost confidence in the system. They are not quite as anxious to invest pensioners money since they know that the ratings for the most part are worthless. Again, the wheels of commerce are seizing up.
A good analogy as to what occurred, would be the sale of a box of chocolate bonbons. Except, some of the bonbons were chocolate coated manure. Everything was just peachy with this gravy train until somebody bit into one of those chocolate coated turds and discovered that a big part of their bonbons were not the real chocolate they thought they were buying, but was in fact toxic waste. This would be amusing if it were not so tragic, since part of the problem now is determining who is holding the toxic waste. Or, in the vernacular, who are the suckers “holding the proverbial bag?” Nobody knows for sure. And, as you can imagine, this aspect of this financial mess has also put a serious “chill” on the commercial paper market. (Scully, the turds are out there.) As Tom Hanks said in the film “Forrest Gump” “Life is like a box of chocolates. You never know what you are going to get.” And, it gets better. In one recent Ohio case Deutsche Bank filed suit in foreclosure against fourteen properties. The defense filed a motion to dismiss on the grounds that Deutsche Bank lacked standing to foreclose. Now this is the good part. Apparently, Deutsche Bank could not produce the mortgage notes. They could not show the court that they were the real party in interest. WOoooooops!!!! No papers! Motion granted! Case dismissed. I would love to have been a fly on the board room wall when Deutsche Bank discussed that case with their lawyers. A Burns and Allen stand up comedy routine could not have topped that scene. So where are the mortgage notes? I can only assume that the mortgage documents were somehow “subsumed” somewhere in the “securitization process.” God only knows who the real party in interest is. This is just too funny for words.
Then there is the question of “insolvency.” It has been estimated that the amount of “bad paper” somewhere “out there” is about ten times the capital base of the American Banking system. Now that the caca has started to hit the oscillating device the banksters are scrambling. Nobody knows for sure how much bad paper is being held by the banks themselves. For obvious reasons, they have been reluctant to “mark to market” the real value of these securities. Hence, the suspect paper is carried on the books at par. But, once valued properly, i.e., mostly worthless, this will affect the banks capital base. Once that base is gone, they are insolvent. Another word for this term is “bankruptcy.” Also, the banks are justifiably worried that all these highly annoyed pension fund managers, and foreign investors are going to sue them on the grounds that there was “fraud” committed in the “origination process.” Gasp!!!! Yeah, those pension managers are just poor sports! Humorless people!!! Of course, we both know there was a lot of fraud. There had to be. And a lot of key people on Wall Street new exactly what was going on. For example, Goldman Sachs was selling their share of the sewage, but they simultaneously took a “short position” in the amount of two dollars for every dollars worth of securities they sold. Hmmmm… Do you think they were telling their clients that they were shorting the market? Bottom line? The lawsuits could fly like confetti and the banksters could get stuck buying it all back. Some have already done so, to the tune of many billions. And what is that paper worth? Well, it is probably not worth much. The legal exposure is so enormous that the very existence of the American Banking system is in question. That is why you see all this tip toeing around with the Congress and the current administration. All this heavy breathing coming from the politicians is because they are trying to find a way to bail out their criminal consorts in the banking industry. And right now, there appears to be no way out of this mess. Not even the FRB can monetize that much debt liability without destroying the credit system of the world. This, of course, would bring on a depression that would make the “thirties” look like a church picnic. (That will probably happen anyway, it is just a question of when. Probably right after the election in November.) So, it would seem, that the gangsters in Washington and New York have got their proverbial crank in a wringer, and there is no easy way to pull it out. There is only one thing I can be sure of. When this situation reaches critical mass, the banksters will be able to “duck and cover.” They will protect themselves from the blood spray. They always do. They run the casino. It is the little guy who will pay, and pay dearly, for all their crimes.
And finally, you raise the questions about the housing market. It is a disaster all by itself. And, why should anyone be surprised? People were encouraged to invest in properties they could neither occupy nor rent. The valley where I live is filled with “Trophy Homes” that are empty. Well, after all, they were a good investment—-if you can find a buyer. Yeah, it takes two to make a market. Hence, there exists a huge inventory of unsold homes. Then there was the “refi” craze. People were encouraged to use their homes as a giant ATM machine. Just refinance. Don’t worry, be happy!! Use the money for another SUV, boat, trip to Europe etc.etc. It never occurred to most of these nitwits that leverage is fine when the market is moving up, but is devastating when the market moves against you. Now they know. The housing bubble has burst. And the market is moving against them. Right now many properties are “under water,” and the number is growing. Now that the recession is setting in, even the prime mortgage loans are suspect. Prime loans? Those would be the people who actually have a checking account. Bottom line, I think when you get right down to the nitty gritty, the real estate market is pretty bad because people are just plain scared. They have lost confidence in the system. When people are frightened, they stop spending and they also stop borrowing. Again, the self fulfilling prophecy. If you think it is bad now, wait till the FED loses control of the interest rates. An 18% prime, ala Jimmy Carter, will destroy not just the real estate market, but the stockmarket and the bond market. That day will come, probably sooner than you think.
To answer your question, no I do not think this is being done so the bankers can seize control of more real estate. Who in their right mind would want to foreclose on property located in the middle of Detroit? Actually, I think the motive of the bankers is far more nefarious. What the international banking community wants is the North American Union. (It is far easier to control, pillage, and loot an entire continent when it is subject to only one monetary system and one central bank.) How are they going to get the NAU? My guess is that they intend to destroy the U.S. dollar through hyper inflation. I have always suspected that the “tech wreck” crash in the NASDAQ and the implosion of the “Dot.com” lunacy back in the year 2000 was the “setup.” It gave Commissar Greenspan and his European handlers the excuse to flood the U.S. economy with cheap and easy credit. “Well we had to do something to save the U.S. economy—-dontchaknow!!!!” Now that the system is running downhill and out of control, they are now in a position to say that the only way out of this mess is through inflation. We are forced to “inflate out.” “You understand this is for your own good.” For to do otherwise, i.e., restrict money and credit at this point in time, would collapse the U.S. capital markets and devastate the economic and financial system of the western world. Ain’t gonna happen!!!! Especially during an election year. When the dollar collapses, what then? The banksters will be ready and waiting in the wings to replace it with their own creation—-the Amero. The currency of the North American Union. And, all of this, of course, will be under the control of the FRB. This is just speculation on my part. Can’t be sure, but the banksters and the “New World Odor” crowd are pretty predictable as to where they want to go, and how they want to get there. They almost always publish their intentions in advance—-usually in the official journal of the Council on Foreign Relations. They have made it clear they are determined to destroy the national existence of the USA and Canada. By the way, this brings to mind a famous quote from Ludwig Von Mises, one the greatest economists ever produced by the “dismal science.” He stated: “There is no means of avoiding the final collapse of a boom brought on by credit expansion. The only question is whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” So, it is either the former or the latter. Neither scenario is very pretty, but as I noted above, my money is on the latter. Hyperinflation! The current expansion started in 1994 under the Clinton/Rubin regime. Thirteen years!! And the longer this irresponsible and insane process is allowed to continue the worse the ultimate outcome will be.
This deplorable situation is never going to change as long as power drunk greedy criminals are in control of our monetary system. It is inevitable that we will continuously lurch from one manufactured monetary crisis to another. And the bankers and Wall Street will always profit from these artificial crisis’. And, they will continue to get away with this system of organized theft until the people wake up and decide that the FRB has got to go. It must be brought under total control of the U.S. Congress. The Central Bank must be made to operate within carefully defined and legally mandated criteria. And there must be complete operational transparency. No more secrecy! I have often thought that the greatest mistake made by “the Founders” was not including a national central bank in the Constitution. The Central Bank is so important and wields so much power, that it should have been made a part of the U.S. Government right from the start. (This situation reminds me of a favorite saying of Lyndon Johnson. He liked to say: “I would rather have that skunk inside my tent pissing out, than outside my tent pissing in.” And Lyndon is one politician who should know.) If you read the Federalist Papers and the memoirs of Thomas Jefferson, it is not hard to understand why the founders would not do this. They had no stomach for it. To the man, they loathed and detested the European bankers, especially the Bank Of England, and the whole concept of a usury based central bank. Ironically, that is who runs our so-called Federal Reserve Bank today. Thomas Jefferson would climb out of his grave if he knew. Yet, few Americans really understand that our monetary system, and thus our very existence as a nation, is in the hands of this privately owned and privately operated banking cartel. But, near as I can tell, the banksters have nothing to fear. Most Americans are just too preoccupied either with their latest toy, or the size of their sex organs, to care about this institutional thievery. Perhaps soon, they will start asking questions.
I claim no rights of any kind in this commentary. Do with it what you will. Publish it on your website if you wish. But, leave my last name out of the mix. I am tired of being yelled at….. Tom “
That is the problem. Most voters have no idea of what is really going on or how dangerous this is to our standard of living, economy, jobs, ability to continue government services (esp. at the city and state levels), etc.
Any slip up by those trying to delay this credit collapse and we are in serious trouble as a nation in many ways.
The church that Mitt Romney belongs to, teaches their members to store one year of canned and preserved and dehydrated goods. They teach them to prepare for year of hard times with savings that can make payments if unemployed. Naturally, not all do that but, I was surprised at how many do.
That is just an interesting side note, but the point is, we need to prepare for the worst and if it doesn’t happen we will be even better prepared for the good times.
Jan Paul, excellent comment re this Morman practice. My wife has run into Morman women who’s families follow this teaching.
David
I am for free trade, I am gainst the salve trade! BTW Happy New Year!
John, you often bring up the name of Adam Smith. Here’s a little of what Buchanan says about Adam Smith in “Day of Reckoning”:
“From 1778 to his (Adam Smith) death in 1790, he served as commissioner of customs and enforced Britain’s protectionist policy. ‘To expect…that freedom of trade should ever be entirely restored in Great Britain,’ said Smith, ‘is as absurd as to expect that an Oceana or a Utopia should ever be established in it.’ Smith believed in the selective use of tariffs to defend national interests. He was a patriot first, a free trader second.”
“chocolate coated turds”
Mmmm… good! Should go well with my urine flavored champagne!
Happy New Year!
captain_menace,
Glad you read my posted commentary (post #4). Yes, the language had some colorful parts, but the message was quite heavy!
Any more comments?
ps. and to be clear, I only posted the comments in #4. The comments are not mine – I’m not as well versed on the subject as the author nor does my writing rise to the same quality.
Mr Konop,
Down with salve trade !
Down with salve trade !
Down with salve trade !
I’m with you all the way on that one!
Hugh, to quote a famous old wizard…
“even the very wise cannot see all ends”
There are so many potential threats out there that it’s hard to make sense of it all.
I do believe that you can change the players but you can’t change the game. We are wired to desire (greed)…
Buddha’s second noble truth: “Desire is the source of suffering.”
The American dream is a dream of desire. Unfortunately it’s not a sustainable dream.
David
We have to make SOMETHING here at home or else. We have to think about our salves once in a while.
http://www.beehivestuff.com/_borders/hand_salve_tin_small.jpg
Bill,
Define “here at home.”
Does a Toyota plant in Alabama count?
Define “make.” Does the banking or legal system count?
I prefer the GNP/capita (per AMERICAN)
Did you appreciate the humor or what? (our “salves”)
http://ucatlas.ucsc.edu/gnp/gnp.html
Finding your site was an accident thanks to google, but I like it
I couldn’t understand some parts of this article le + ‘ – ‘ + basename(imgurl) + ‘(’ + w + ‘x’ + h +’), but I guess I just need to check some more resources regarding this, because it sounds interesting.