Switch away from dollar could bankrupt US economy – Celente
Published: 11 July, 2009, 03:51
Most international trade is done in dollars, but if it is abandoned for another currency, China and other suppliers may no longer want to buy worthless U.S. debt, argues Trend Research Institute founder Gerald Celente.
The US economy is built on a thirst for debt, its whole plan going forward is to spend wildly, based on increasing debt. This is all well and good, providing people will loan the money.However, what we are likely to see is less acceptance to take this debt, as people want to reduce their hoding in dollar denominated debt. Investors have two positions, a current position in dollar denominated debt and investments and a future position in those instruments. The big holders, like China are not going to collapse their held portfolio, by a massive market making action. So what we will see is not the catastrophic correction of the dollar, but an ongoing switch away from it. This switch will take the form of buying just enough new debt to keep stability and the selling of old instruments at fair value, to switch away from dollars. This will have a throttling effect on the US economy, and will change the US position in the world financially forever. The US will be adjusted to be an economy, like others in the world, they will lose their ability, just to issue continual debt, they will be forced to align their spending with real value in the economy. So it is doubtful if there will be a collapse, the most likely scenario, is a US being throttled and struggling to obtain new credit, which will force a continual painful correction in the economy. There is one danger however, and that is if the US, with new loan funds drying up, decides efectively to just print the money, not backed by true finacial exchange. This could well be the thing that bankrupts the US economy. Because such actions, prevent corrective market pressure and reduce the value of the US dollar, putting more pressure on the need to reduce the dollar positions of the existing investors. So the biggest danger, to the US economy, actually comes from the US financial actors themselves. You have external actors trying to get out of dollars, and internal actors, reducing the value of dollars, so the only way is down.
It would bankrupt the government, not the economy.
Many have missed the hint--increased interest rates. That is the only tool USA has. Example of fraud in Canada--All 5 banks are giving depositors .014%--just to get Canadians to spend,instead of save. America has 8500 banks.With $51 million,anyone can open a bank in USA--not in Canada--5 banks rule. For every$1 deposit, can loan out $352, and other foreign banks can't--ZERO Time factor, however in USA banks--for every $1 can loan $10.Problem is that most of the capital held is ficticious- I know of one Bank-$4.2 Million is loaned to relative and comes back as capital-next day--Bank now can loan-$42 million--China is starting to buy,with the US dollar
It has already begun, Detroit looks like a ghost town. American companies cannot compete anymore because whatever they sell, China sells at a much cheaper price. They might have to adjust wages and be more socialist, otherwise their companies will collapse one after the other. And printing more money is not helping, they are still shedding roughly 500,000 jobs every month.
After World War I and II US economy was catapulted sky high. The Marschal Plan took advantage of the fact that Europeans had no confidance in their currencies and their production abilities were diminished. US spent big amounts of paper and ink {dollars} in order to make Europeans depended. The dollar was also imposed through IMF, World Bank, other forms of aid, manipulation of oil producing countries, the credit cards and other pimp business. Sadam and later Ahma Din Nedga must vanish, because they have discredited the dollar. Don't use dollars. Soon the dollar will be devaluated, but even with lower prices the american products will not be competitivу.
The real problem in the USA is that we have a consumer based economy and our government is controlled by large corporations. These corporations are dependent on the consumers they have exerted their corrupt control over. The vast majority of the consumers are now financially destitute and not consuming. The corporations seem very slow, or unwilling, to accept this fact. The corporations have basically destroyed us, the consumers, and hence themselves by pursuing a path of unbridled greed, also known as capitalism. The lack of any real reform in the wake of the recent financial crisis and it's aftermath has shown that this situation is very unlikely to change without drastic action on the part of an entity or entities external to the government and corporations. In other words, a revolution. This revolution could be of the peaceful and bloodless sort, but probably not.
The bankruptcy has already started. The front of the USA car has already started to crumple against the brick wall, but the economists and punditocracy are sitting in the back seat and still sounding mildly hopeful. We still have the second wave of home mortgage defaults to work through, then the commercial mortgage defaults, then the credit card defaults. The derivative instruments on all of those assets will need to be repriced (downward by about 90-95 percent). Meanwhile the US Treasury is bailing out everybody who still has enough cash to hire a lobbyist. Where are we getting the money? Easy, just add 6 or 9 zeroes to the right of the balance on our last month's bank statement. We aren't even bothering to print anymore. It's all just electrons. When the Federal Reserve refused to be audited, that was a "clue".