Wednesday, January 12, 2011

2011: The Year the U.S. Dollar Dies (Keys to financial survival before and after the dollar crashes)

2011: The Year the U.S. Dollar Dies

In 2011 America's debt surged above $14 Trillion, nearly the same amount as our country's entire annual Gross Domestic Product.

Government debt grew by $1 Trillion in just the past seven months, and by nearly $3.4 Trillion during the less than two years since President Barack Obama's inauguration in January 2009. 

The new Republican House of Representatives must soon vote whether to raise the "debt ceiling" to authorize yet more runaway deficit-spending and runaway borrowing from nations such as China. 

Throughout history, according to Harvard University economist Kenneth Rogoff, when a nation's debt exceeds 90 percent of its GDP, its currency is almost always doomed and collapses. We have rocketed through this STOP sign at many times the speed of sound money. 

1. CHINA: The U.S. now depends on Communist China to lend endless hundreds of billions to cover our spendaholic debts. China, however, is now facing its own economic problems with inflation and wealth misallocated into excessive building projects. 

China in recent days indicated that it might likewise cover the debts of Spain and Greece, nations in the Euro community. But the Euro zone, warns former chief economist of the International Monetary Fund Simon Johnson, faces "another serious crisis in early 2011," as its weakest member nations must roll over their huge short-term debts and likely will require new bailouts. Collapses here could set dominoes toppling in economies around the world. 

2. INFLATION: The Federal Reserve Board, having failed in its earlier attempts to stimulate the U.S. economy, has initiated Quantitative Easing 2 (QE2), in effect printing $600 billion or more in an effort to stimulate deliberate inflation and encourage hiring. 

Fed Chair Ben Bernanke has had better luck conjuring up the monster of inflation, which according to well-regarded independent economist of John Williams may – contrary to official U.S. Government claims – already be at 8.5 percent and rising. 

3. UNEMPLOYMENT: U.S. unemployment remains stuck at 9.8 percent, and combined unemployment, underemployment and discouraged job seekers are not far below a depression-level 20 percent. 

4. HOUSING: The average price of homes, where millions of Americans invested their life savings, continues to sink. Credit for both homebuyers and business investors remains tight. 

5. BANKRUPT GOV'T: State and local governments were among the biggest beneficiaries – along with European banks – of Federal stimulus money in 2009 and 2010. With at least 15 states on the brink of bankruptcy, it remains to be seen whether these profligate governments will become wards of the Federal state. 

Will "too-big-to-fail" welfare states such as California, Illinois and New York State be bailed out by dollars squeezed from taxpayers in more frugal states – thereby driving the final nail in the coffin of Federalism as envisioned by America's Founders? 

6. OIL/GAS: Oil is rapidly pushing towards $100 per barrel. The Fed's QE2 is deliberately weakening the dollar to make American goods cheaper in world trade, and to allow the U.S. to repay debts with a larger supply of cheaper dollars. The dollar is the world's "reserve currency" in which oil is priced, bought and sold. 

With the U.S. currently "monetizing" its debt by printing more dollars, oil-producing nations are trying to offset this loss in dollar value by increasing the number of dollars needed to buy each barrel. This passes on the cost of inflated dollars to Americans when they face higher prices for gasoline and heating oil this winter. 

A surge in oil prices could destroy whatever prospects for recovery are trying to take root in the current economy. 

7. DOLLAR DUMPING: China and Russia, meanwhile, announced during Thanksgiving week that they would no longer use U.S. dollars when trading with each other. Both countries have urged an end to the U.S. Dollar as the world's reserve currency, an end that appears to be rapidly approaching as the dollar sinks and crashes. 

And, of course, in 2011 as in 2010, 2009, 2008, etc., the U.S. Dollar will continue to sink relative to what has been global money for the past 5,000 years: Gold. In the single year 2010 gold rose in dollar value by 30 percent. 

2011 could be this "tipping point of No Return" for the United States Dollar, warns monetary expert Craig R. Smith in his new book Crashing the Dollar: How to Survive a Global Currency Collapse; in the new 2011 edition ofReal Money Perspectives; and in a new 2011 Economic Solutions audio CD of his 2011 forecasts. 

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