The Coming Pandemic of Debt Based Paper Money

May 22, 2009 by · 1 Comment
Filed under: Opinion 

Editor’s Note: This was emailed to me from a very good commercial mortgage lender friend of mine.   I am not sure of who the original author is, so if you do know, please email me so I can give him credit and a link.  This article is spot on and now we are seeing gold react during the traditional slow season when you see gold prices drop, they are instead approaching the $1,000.00/oz. USD mark.

It is short-sighted to think we can bailout all these bad actors, run trillion dollar deficits and think that it will not have serious issues coming down the road in the form of price inflation and possibly a collapse of the U.S. dollar.  One thing I do think we will see is the end of debt-based fiat currencies issued by private central banks, it really makes no sense to borrow from yourself at interest just to issue your currency.  Is the Greenback going to make a comeback?

Article (Author Unknown):

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With quantitative easing under way, where is M3?

December 1, 2008 by · 1 Comment
Filed under: Opinion 

Well it would be nice to see what this number would be at if they still published it?  Many other people has reconstructed data sets that try and emulate the old statistic.  From all they I have read, the M3 measure of the money supply would be in double digits.  That does not say much for inflation when the business cycle picks up again.  At the time of this writing, the Dow Jones Industrial Index lost 7.7% today alone.  

I believe people are losing confidence in the system and the information they keep being told.  We are bailing out bad institutions with good money and in turn, reducing the confidence in our currency with their bad assets which should of never been made whole.  Why do I have to accept $24,000+ in debt to people who got greedy and wanted to raise their relative advantage higher?  

Why are we saving a system that has created more wealth disparity than wealth itself?  I thought we are suppose to have life, liberty and the pursuit of happiness protected and not oppressed?  You can see it in all the currently writings by our press and government.  It is all about getting the credit (debt) flowing and not actually address the problem of deficit spending, incentification of profit over job creation & raising of living standard which is what drives consumption in the first place.  We actually encourage companies to send job overseas to make products for consumption in the U.S.  

Who are we actually benefiting in that situation, I would say the shareholders to the determent of our people.  I am not advocating stepping away from free markets with prudent regulation at all, but I am saying that we should take into effect what the costs and benefits are by focusing on consumption and not production.  We need to address the real problems and make a system that give equal opportunity to all its people.  From their a person can and will choose their path in life.

News:

With quantitative easing under way, money supply is going to become an increasingly important gauge.

Morgan Stanley notes the measure will be a key indicator of when ‘QE’ actually starts to kick in. Before adopting QE, all excess reserves created by the Fed were being hoarded by banks. Rather than increasing, the so-called money multiplier (the link between the Fed’s balance sheet and the money supply) had actually plummeted. The only other time this has happened is during the Great Depression, say Morgan Stanley. But there is reason to be optimistic.

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The World Tires of U.S. Dollar Hegemony

November 6, 2008 by · Leave a Comment
Filed under: Opinion 

Here is a nice article that explains the dramatic rise in the U.S. Dollar and the USDX currency basket.  The yen has been quite strong in the last few weeks while the carry-trade unwinds.  At the time of this writing, the USDX was at 85.88.  This is a decline from 86.32, which was the top of this last rally.  Now that presidential elections are done and we have had a 900 point drop in the DJIA, this is not a good sign but fits my prediction of the calm until the elections.  We will see more declines and that will mount more pressure on congress to do more bailouts.  The Big 3 automakers were meeting with Nancy Pelosi to beg for $50-100 billion more in emergency loans or they will go bust.   Be safe.

Commentary:

What explains the paradox of the dollar’s sharp rise in value against other currencies (except the Japanese yen) despite disproportionate U.S. exposure to the worst financial crisis since the Great Depression?

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U.S. Dollar drops most since 1985 before Fed’s decision on rates

October 29, 2008 by · Leave a Comment
Filed under: Currency News 

You should not be surprised at this action in the currency markets.  With the 50-75 basis points cut coming later this afternoon, logically it should be dollar negative with the easing of credit.   We have also had some serious money printing to bailout almost every type of institution under the sun.  

Long-term, we have two distinct paths that will be taken.  We will raise interest rates and protect the dollar and suck the major excess of liquidity from the economy.  Or, we will continue easing and keeping interest rates at this historically low levels, that will lead to massive inflation down the road when the economy picks up.

News:

The dollar fell the most since 1985 against the currencies of six major U.S. trading partners as economists forecast that the Federal Reserve will cut the target lending rate by a half-percentage point today.

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Dollar is Getting `Crushed’ as Traders Weigh Up Bailout

September 22, 2008 by · Leave a Comment
Filed under: Economic News 

The dollar is sinking like a fishing line. At the time of this writing the USDX which is a weighted basket of currencies against the U.S. dollar has dropped to 76.006 losing 2.23%. I believe we are at a time where people are seeing the writing on the wall and Wall Street, Federal Reserve, U.S. Treasury and our elected officials have sacrificed our dollar with these interventions in the market and we are literally watching the dollar come apart before our eyes. This is so sad that I am just hanging my head in disgust.

Bloomberg Article:

Treasury Secretary Henry Paulson’s plan to end the rout in U.S. financial markets may derail the dollar’s three-month rally as investors weigh the costs of the rescue.

The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.

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