When A Dollar Is Only Worth A Nickle You Better Run
What will the dollar be like in 10 years? Will the dollar have finally fallen off the precipice of sound economic policy?
Will one stimulus package lead to another stimulus package? Will the real crisis break out before 10 years? As the fiscal deficit goes up the interest payments on government debt goes up. This leads to the government trying to inflate its way out of an economic cycle. This has created a rise in the price of precious metals. Simultaneously, this has caused a reduction in the purchasing power of the dollar bill.
The longer the Federal Reserve maintains a low interest rate, the greater the amount of money in circulation will be devalued.
The US national debt currently exceeds 12 trillion dollars. If the US economy was a publicly traded company its stock value would be zero. The US government is estimating a nine trillion dollar debt over the next 10 years. So, what is the real intention of policy makers to stabilize the dollar?
Economists have long stated that inflation is not caused by the agreed upon price increases of manufacturers, but simply by an oversupply supply of dollars. At what point will the government determine that the decline of the dollar becomes a rout and the dollar returns to its intrinsic value? So what are the contingency plans for the government if the dollar collapses? If the dollar collapses, it will be too late. Actions are due now to restore confidence in the dollar. It is easier to correctly manage an escalating crises than repair deep damage.
So who currently controls the currency of America? In a CSPAN broadcast the Federal Reserve Chairman, Ben Bernanke was questioned regarding monetary policy. Chairman Bernanke stated that the US should cut down on its budget deficit in order to reduce global imbalances. The problem is that our budget deficits have developed because the government has monetized our government spending. It is not unforeseeable that in 10 years times up to 50 percent of tax revenues will go toward resolving the interest payment on government debt.
The US currently controls the status as the world's currency. However the world is increasingly looking away from the dollar as the world's currency. Our biggest current import is inflation as the government continues to print more and more dollars.. Recent reports indicate that foreign central banks are putting more than have their new cash purchases in euros and yen. As more central banks diversify out of dollars into gold our economy continues to weaken under the surface.
The government's mandated cash for clunkers program caused a rise in the gross domestic product. After the stock market collapse, American savings rate were at a high of 6.2 percent.. After the government's artificial stimulus took effect, savings dropped by half. The economic gains from the cash for clunkers program were short and have also added to the cycle of debt and long term interest payments. This program looked good as a quick fix, but has long term ramifications.
The national debt is growing three times faster than it did decades ago. So should we expect as a minimum inflation that is three times faster than decades ago? As banks begin to loan out their reserves that exceed 860 million in excess reserves, price inflation will increase to levels that are higher than the interest collected by banks. The trend of accelerating debt growth is likely to continue and the next doubling of our debt could occur within the next five years. Be aware. Live long and prosper.
The above is from an article I originally published in Ezine Articles.
Never despise a humble beginning. Live long and prosper.
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