The Asian Pivot Already Happened

November 30, 2012

The “Asian Pivot” in the title is a recently-invented phrase which describes world nations pivoting away from American allegiance and pivoting toward Asia and specifically China.

Spengler is a link to an outstanding article by “Spengler” at The Asian Times. You MUST read this. The American Main Stream Media will not report this, yet this meeting that happened November 16th – 20th, was the single most important market shift in the last 100 years.

Here are a few excerpts:

“It is symptomatic of the national condition of the United States that the worst humiliation ever suffered by it as a nation, and by a US president personally, passed almost without comment last week.

Does the United States have a competitive advantage? Apart from commercial aircraft, power-generating equipment, and agriculture, it has few areas of real industrial pre-eminence. Cheap natural gas helps low-value-added industries such as fertilizer, but the US is lagging in the industrial space.

…The US still dominated the nuclear power plant industry. With the sale of the Westinghouse nuclear power business to Toshiba, and Toshiba’s joint ventures with China to build (thorium) power plants locally, that advantage has evaporated.

The problem is that Americans have stopped investing in the sort of high-tech, high-value-added industries that produce the manufactures that Asia requires.”

CLICK HERE FOR THE ARTICLE: The Asian Pivot


How Will The American Economy Die?

February 2, 2012

by Russell D. Longcore

I have been writing about secession now since May of 2009. One of the constant themes of my writings is that secession is not going to happen in America until and unless the economy collapses. AFTER it collapses. A lot of what I’ve written has been perception, conjecture and prediction based in reason. But much of that conjecture and many of those predictions are now coming true. Tick. Tock. It’s not a case of “If,” like there was a possibility that America could avoid collapse. Now, it’s simply a countdown to inevitability.

The following is a plausible and likely scenario of the death of the American economy.

First, the money goes.

The world economic system is built upon two things: (1) fractional reserve banking and (2) fiat money. There is not one nation on earth that has a commodity-based money and currency. Keynesian economics, taught in nearly every college Econ curriculum, is so ubiquitous…so ingrained…that it is like the dye colors in your shirt. No amount of washing gets the dye out.

Is there a banker on earth that does not use fractional reserve banking? Money is created out of thin air and pumped into the world economy. It would be impossible without fiat currency…the currency considered to be money because some government says that it is. When your currency is backed by “the full faith and credit of” your government, and nothing else, and your government goes broke…your currency is not far behind. In the regular world, issuing paper money with nothing behind it is called “Counterfeiting.”

The power in Washington is built on those two things above and add a third: the US Dollar is the world reserve currency. Being the world reserve currency was brought about back in the early 1970s when Nixon negotiated a deal with the House of Saud, in which Nixon guaranteed the Saudis that he would protect their kingdom from their neighbors if they agreed to (a) use only the US Dollar to settle oil payments, and (b) use their surpluses to buy US Treasury debt instruments. Over time, the Dollar became the currency all nations used to settle all kinds of commercial transactions. This reserve status gave the USA a tremendous advantage over all other nations. The blowback of unintended consequences is that many foreign nations own trillions of US Debt, and that gives those nations leverage over Washington. For a good look at who owns US Debt, CLICK HERE.

Right now, in real time, Washington is making plans to make war upon the nation of Iran. They are using the excuse that they must keep Iran from possessing nuclear weapons. The reality behind the scenes is that Iran started an oil bourse (a commodity exchange) on Kish Island in 2008, specifically to begin trading their own oil in currencies other than the US Dollar. That is a grave threat to the reserve currency status of the Dollar. Previously, Iraqi President Saddam Hussein announced that Iraq was going to begin accepting payments for oil in Euros, not Dollars. What happened to him? Muamar Gaddafi of Libya was buying enormous quantities of gold bullion with the intention of creating an African dinar, a gold-backed money for all of the African nations to use. Where is Gaddafi now?

“But so what?” you may ask.

The only thing that maintains the purchasing power of the Dollar is its world reserve status. You already know that the Dollar has no precious metals backing it. The Dollar only has the “full faith and credit of the United States” behind it. But Washington is many dozens of trillion dollars in debt. Some estimate that the US has over $100 Trillion of debt. Just a week ago, the United States current Federal budget debt limit reached $15 Trillion, and that is equal to the Gross Domestic Product (GDP) of the entire nation. So we owe more now than we take in annually.

Any action by any other nation that threatens the world reserve currency status of the US Dollar panics Washington. They must snuff it out by whatever means necessary. Even war.

But they cannot.

Iran has powerful friends around the globe. Just last week, Iran inked a deal with India to sell them oil for gold. Iran will do the same with China. Russia will pay with gold and rubles. And, because Iran sits on an ocean of oil, and many nations rely upon its oil for survival, Iran will defeat Washington and its allies who have set up embargoes against Iran.

The whole world does not have to forsake the Dollar all at once to send shock waves through Washington. But more and more nations are rejecting the terms of the DC/European embargo against Iran. On Thursday, Turkey announced that they would not participate in the embargo. Turkey is a very crucial ally to DC. One at a time, nations will find that they can do business around the world in their own currencies or in gold.

But here’s another unintended consequence, and a potential trigger for the collapse of the Dollar. As nation after nation decide they do not need the Dollar, they will do what they can to rid themselves of American currency and American debt. Nations around the globe have purchased US Treasuries. Now they will have no need for the bonds, and will want to sell them. Questions come up: Who will buy them? And what are they worth?

What happens when you offer bonds for sale and no one buys them? You have very expensive wallpaper or toilet paper. What happens when you CAN sell them, but at pennies on the Dollar? You take staggering losses.

One other problem is timing. In order to reclaim some value for US Treasuries, your nation’s bond traders must have perfect timing to offer enough bonds for sale but not so many that it triggers a bond market collapse. Then to find buyers at acceptable prices? It is not reasonable to believe that every nation will find buyers at all, at good prices and not create a bond market crash.

So, built into the global process of forsaking the US Dollar as the world reserve currency are the seeds of the Dollar’s collapse. Either the bond market collapses as nations get out of the Dollar, or getting out of the Dollar causes the value of the Dollar to collapse. Keep in mind that if the Dollar were as “good as gold,” no nation would want to jettison the Dollar.

Dear Readers, there is no third choice that prevents the collapse of the Dollar.

What Does Collapse Mean?

There can only be one meaning for the word “collapse.” Hyperinflation is that collapse. Think about it. Inflation is the loss of purchasing power. Inflation that occurs over decades is like death by a thousand cuts. Americans for the last 80-plus years are used to inflation and the loss of their purchasing power. In hyperinflation, what took perhaps 40 years to lose a certain amount of purchasing power can easily happen in 40 days…or even 40 hours. There will come a day soon here in America when the Dollar will not be accepted between buyers and sellers for even the simplest transactions. It happened in Zimbabwe. I presently own 160 Trillion in Reserve Bank of Zimbabwe currency, and I paid six dollars for it.

The American Dollar has purchasing power…value…now because the world uses it. And the nation with world reserve currency status that is inflating its money will continue to pay its debts with fiat currency, which is losing more and more value. Once an unknown number of nations stop…or even just slow down…using the Dollar for international trade, the value of the Dollar will evaporate. I say “unknown” because it’s not just the number of nations that is important. It is the economic might of the nations that stop using the Dollar. If the BRIC nations…Brazil, Russia, India and China…arguably the four strongest non-USA world economies…continue the process of weaning themselves off the Dollar, it will have drastic and sudden repercussions for the Dollar.

Also remember how this world turns. The business day in Berlin, Rome or Athens is six hours ahead of the American East Coast. A bond market collapse could start in a European bond market at 9:00 am in Berlin while it’s 3:00 am in New York. The Dollar could get hammered on foreign markets for six hours before the banks open in New York, or the New York Stock Exchange opens for business at 9:30 am. Americans will be completely defenseless against the collapse.

Washington’s Response

The politicians in DC will be powerless to stop the financial carnage because they cannot control the value of a currency that others refuse to use. The Federal Reserve may pump additional trillions of greenbacks into the American economy, but at some point, wheelbarrow loads of paper money won’t buy you a loaf of bread. This will cause the Federal bureaucracy to grind to a halt as Federal union employees refuse to work for worthless money. And how will Washington pay its military personnel? How will state governments pay their law enforcement officers and prison guards? Society will collapse at that time. It will be The End Of The World As We Know It.

You see, when the VALUE of the American Dollar ceases to exist, our bubble society will also cease to exist. This is why I hold the position that once the economic system in America fails, Washington will be entirely unable to stop secession. And that only the collapse of the Dollar will trigger the desire for secession.

Here is the mental picture I want you to form when thinking about the world economic system. Blowing soap bubbles. You dip a drinking straw into the bubble liquid and begin blowing on the dry end of the straw. Hundreds of bubbles of many sizes will form, expand and then pop. For a hundred years the world has experienced economic bubble after bubble…boom, bust, recession, depression, real estate, housing, tech stocks, mortgages but to name a few. But don’t miss this! When fractional reserve banking and fiat money run the world, ALL ECONOMIC ACTIVITY IS A BUBBLE that must eventually burst.

This has been a hard article to write. The subject is one of life or death for billions around the world, and millions on our own continent. I take no joy or satisfaction in this article, save the satisfaction of knowing that some of you will read this and act to save yourself and your family.

Think. Use your brain. Do not let anyone tell you how to think or do your thinking for you. Question ALL authority. Free Your Mind.

Secession is the only hope for humanity. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2011, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


Look Behind The Curtain

January 3, 2012

Russ Longcore here, thanking you very much for visiting us here at DumpDC.com. I thought you might like to look behind the curtain and see the annual report on our visitors. It give a global view of who visits and why. Maybe I’m the only one who cares. But it’s gratifying to know that the world is coming to DumpDC to learn about secession.

Go to: DumpDC Annual Report

Thanks again, my friends. Keep preparing for TEOTWAWKI. Get your money out of paper investments and into precious metals. Buy lots of ammo, make sure you have at least six months of food and home needs in storage. Read. Research. Don’t believe anyone…even me…without doing your own research.

Resist.


The Fiat Dollar & Debt Democracy Experiments Have Failed

August 4, 2011

by Ron Holland

Washington claims the federal debt limit extension and the threat of default is postponed. This is just more political theatre as the Treasury debt downgrade will happen and eventually a bankrupt America will attempt to inflate the debt away and default. It is the same across the Atlantic where the sovereign debt crisis still stalks the politicians in the EU.

The political and economic reality of the sordid situation cannot be covered up by the establishment news hacks or by more lies or the blame game by either party. The Washington experiment of borrowing trillions to buy elections today to be paid for by future generations has failed in the US and across Europe.

America’s Ability To Service Our Sovereign Debt Is Ending

The real dollar and debt crisis is being obscured here in the US by the political theatre in Washington. Of course the debt limit increase was passed yesterday by a vote of 269-161 and now we can look forward to the first of many downgrades and any purported balanced budget amendment will not be worth the paper it is printed on.

All the false conventional media propaganda and Congressional actions were designed only to help the politicians and institutions responsible for the coming debt debacle avoid the blame. They are now attempting to transfer their responsibility to the only innocent Washington politicians, the Tea Party caucus. They will succeed and at the same time build the case for dramatic future revenue (tax increases).

The Dollar Death Throes Are Hidden From Most Americans

The fiat dollar is collapsing and as a writer and editor paid monthly in Swiss francs, looking at the last year of exchange rates will show the real situation not apparent to Americans living inside the Washington dollar iron curtain.

About 12 months ago, a thousand Swiss francs equaled about USD$870.00. Today, the same CHF 1,000 equals USD$1,270.00. This means the dollar has fallen nearly 46% compared to the rising value of the Swiss franc and conversely my monthly retainer has increased almost 50 percent in dollars per thousand of CHF. Unless you are being paid in dollars and reside outside the US or are paid in a foreign currency and live in America, the bloodbath in the dollar is not apparent in the near term – but it is real and ongoing.

Yes, to my knowledge, the Swiss franc is the best example of the performance of a major currency versus the United States dollar but many other currencies have done very well when compared to the dying dollar as well. Going back to 2001, CHF 1,000 equaled USD$550.00 so here you can see the short and long-term trend of the Swiss franc versus the dollar.

Debt Democracy Has Also Failed!

Today, on the democracy front, Greece, the historic birthplace of democracy around 508 BC and America – the witch’s caldron which spawned the failed debt-financed regulatory democracy experiment – are now competing to see whether it’ll be Athens’ or Washington’s politicians who will be more despised. I believe the US will win the race to the bottom only because Greek politicians have only subjected Greece and several wealthy EU countries like Germany to their wealth thievery, while the failed American example of democracy financed by sovereign debt is bankrupting the US and all of EU Europe.

My Bet & Ten Year Dollar Forecast

The goal of Washington and the FED is to create high inflation and eventually default during a future foreign policy or financial crisis so the blame for the dollar’s demise and debt problems can be transferred elsewhere. Although I doubt they can pull off this PONZI scheme, the only real solutions to the American debt crisis are either repudiation, which would benefit the people, or hyperinflation designed to benefit the bankers and political class.

Thanks to the fake debt deal, in the meantime the government will pass legislation and end deductions in order to increase government revenue. Americans will certainly lose beneficial capital gains treatment and any tax benefits on home profits. The coming hyperinflation will likely cause real estate values in depreciating dollars to go up. We could see housing prices rebound and maybe double back to 2007 pre-bubble levels, which will be touted by the political establishment as good economic news at last. The problem will be the inflated dollars will have lost substantial purchasing power.

You’ll be taxed at high rates on the false inflationary gains of your home, as the accompanying salary increases – due to inflation – will force you into the highest income tax levels with no deductions. The average American will finally realize how badly they will have been scammed when they decide to sell their real estate and – after paying taxes with inflated dollars – decide to purchase the least expensive new Kia or Corolla and the import car is priced at $120,000. This is an example of how countries subjected to hyperinflation are eventually priced out of buying most foreign imports from cars, electronics and beer to name just a few important products of interest to me.

The Fiat Dollar Problem Will Eventually Be Solved By Currency Competition

The profit opportunities for smart international investors from a dollar collapse will likely be enormous due to a paradigm shift in political, economic and monetary theory away from sovereign debt-financed democracy and fiat currency. The monetary elites will attempt to create a fake gold and commodity resource standard to back formerly fiat currencies in order to build “currency confidence” in the US and Europe.

Initially, this may well translate into gold and resource backed currencies and, after the fake elite money standard fails, maybe to the Austrian economc ideal of public and private currency competition. Gold and silver, as well as mining and natural resource equities in certain mineral and oil rich countries, will benefit from the fake gold and resource standard as well as the future ultimate solution of currency competition.

I will have more on this in a future report and in a new editorial on “The Failure of Greece.” We live in an interesting time of transition from debt-democracy and fiat-currency. Take action to avoid the downside in dollars and benefit from rising gold and natural resource prices.

$50.00 Imported Beer?

In the meantime, I hope I’m wrong regarding my expectations for the dollar and debt democracy. But if I’m right, sometime over the next ten years, I’ll buy the first 10 of you who remind me of this editorial and my dollar forecast the foreign beer of your choice at my expense. After all, what is $50 per beer among friends?

© Copyright 2008 – 2011 The Daily Bell. All Rights Reserved.


TEOTWAWKI Realities

July 18, 2011

By Russell D. Longcore

In this article, I’d like to present you with some cause-and-effect scenarios about The End Of The World As We Know It (TEOTWAWKI) and When The Shyt Hits The Fan (WTSHTF). You see, I could just smack you in the face with a bunch of potential scenarios like they are a fait accompli (pretty fancy talk for a tinfoil-hat guy). But you’ll likely be more convinced if you see what will happen and convince yourself of the outcomes.

So here goes.

1. The Global Economic Collapse: It’s ALL about the money. Washington DC has led the entire planet in monetary policy since WWII. American gold-backed dollars became the world reserve currency and continue in that role to this day. But during that same time period, the gold was disconnected from the dollar, and the dollar became only paper currency. Couple that with fractional reserve banking, in which banks can create money from thin air. Now you have a world reserve currency that has no limit. Consequently, as the criminals in DC ran monetary policy, there were able to defraud every nation on earth with currency that has continued to lose value over time. DC, the International Monetary Fund and the global bankers have loaned trillions of dollars to nations all over the planet. Now the nations are defaulting on their sovereign debts, and America is in line to do the same. And, none of the nations have the political will to stop.

This system is grinding to an end. So, here are four likely outcomes:

a. Hyperinflation – just like in Weimar Germany, Argentina and Zimbabwe, hyperinflation will destroy the money, eventually making paper money worthless. That’s because the government printed up too much paper money. For those of us 70 years old and younger, we have had inflation all our lives. We have never known money that doesn’t lose value. It’s like if you just paid all your bills by writing checks to everyone when there’s no money in your account. Eventually, people will stop accepting your checks (your dollars)…and then it’s all over.
b. DC default and bank failure – When DC cannot guarantee banks, like through the FDIC, banks will have no protection against bank runs. The banks will close. ATMs and credit cards will cease to work. You’ll be lucky if you can get ANY of your money out.
c. Eventually, the nations of the world that presently buy US Treasury bonds will refuse to buy more, knowing that they will be paid back with dollars that continue to lose value. Once DC cannot borrow anymore, DC defaults.
d. Somewhere on the planet, an entity that holds US Treasury bonds will try to sell their Treasuries, and dump too many bonds onto the Bond Market in too short a time. Think about crowd mentality…if you see everybody around you selling off something you own, won’t you also try to sell so you don’t end up with worthless paper? So, the bond market could easily crash, creating a ripple effect throughout the world economy that topples many nations’ economies at once.

So, in light of ANY of these events, what will happen around America?

Regular people keep very little money stashed at home. Most people will have less than $500 cash on hand in any given week. I don’t mean $500 in their bank accounts. I mean $500 at home. And I’m being generous. The number is probably more like $150. And when filling your tank can cost $100, that doesn’t leave much money for groceries, does it?

If the banks close, and ATMs and credit cards stop working, what will you do for cash THAT DAY? Merchants will accept only cash when the cards stop working.

If you still have a job, what will your employer use to pay you? Cash? A check that no bank will accept? Gold? Silver?

And what will happen to prices for everything when demand spikes? Prices will spiral upward. So, if you could find a loaf of bread it will cost many multiples of its original price. Guaranteed. So much for your cash stash.

Do you have a pantry or stash of food that could feed your family for a few months? Most people these days let the grocer be their inventory, and the people keep little at home. So what will happen if the credit cards/ATMs don’t work and you…and thousands of other people just like you…show up at your local grocer? Food riots will occur. Flash mobs will just carry off whatever they want. The stores, which only carry three days’ inventory at best, will be empty quickly.

What will you and your family do if you run out of food and other supplies? Will you resort to theft, burglary and armed robbery, like some of your neighbors will do?

You could live for a few weeks without food before starving to death. But what if your city water department shuts off the water supply? Where will you get potable water? There won’t be any of that on the store shelves either. You could die in just a few days without water. And how about the water needed for washing food, or flushing toilets? You could quickly have a toxic mess on your hands at home.

Now, consider what happens to the hundreds of millions of people that are on maintenance prescriptions for medical conditions, like heart, cancer, diabetes, etc. What will happen to them if they cannot buy their drugs anymore? What happens to all the people who are on drugs to control mental conditions, like psychosis, depression or schizophrenia?

Next – when money loses its value, or the banks do not work, desperate people will do desperate things. So crime will soar, and violent crime will skyrocket as hungry people steal anything to get a meal. The people that do NOT carry a firearm AT ALL TIMES will have a new name…victim…maybe dead victim.

Next – if you found that you had cash that no merchant would accept because of hyperinflation…how would you buy anything? You would either barter, or you would use an alternative money that merchants would accept. Gold and silver have been money for 6,000 years. In a post-apocalyptic America, gold and silver will be the new money. Everybody will accept gold and silver. And because of the existence of the new money, a thriving black market will instantly spring up. With gold and silver, you’ll be able to buy most anything you need or want. You will stop thinking about money in dollars, and you will start thinking about money as ounces of gold or silver…as it has ALWAYS BEEN back into antiquity.

The Founders invented the “dollar” in 1792, from the German word “thaler,” as a round coin containing 371 ¼ grains of pure silver. Money is supposed to be weight, not value against another currency.

In a related subject, desperate people will sell their stuff for pennies on the dollar for gold or silver. So you’ll be able to buy things you could not have afforded in pre-crash America…that is, if you have gold and silver.

OK- I’ve given some outlines for an economic crash scenario. Is there anyone out there that believes that ANY of these examples COULD NOT occur? WILL not occur?

This first part brings us to make some logical conclusions about who will survive and who will not.

Phase I: The First 90 Days After The Collapse

In the first 90 days, there will be a massive die-off of the elderly, the sick, children and adults that die from lack of food, water, medicine/medical care and murder. And many deaths will be attributable to suicide, as people decide it’s better to end it quickly than to starve to death. This huge number of corpses will overload the capacity of funeral homes and cemeteries. Think about it…who is going to pay for the interment when the money’s no good? This will rapidly become a public health issue, as thousands…perhaps millions of corpses lie undiscovered in homes and apartments, and remain unburied. Disease epidemics like cholera will spring up from people eating and drinking contaminated food and water.

In that first 90 days, those that survive will have prepared with food and water storage, as well as other stored goods for functional living. The survivors will also have armed themselves adequately to fend off looters and gangs. WSHTF, you will carry firearms everywhere you go, no matter if it’s into town or into your back yard.

Before you enter this phase with the rest of us, there are a couple philosophical issues you will HAVE to deal with:

1. Let’s say you’ve prepared for your family’s survival with 6-8 months of supplies. But friends, neighbors, and family…who HAVEN’T prepared…show up at your home and want shelter and food. What will you do? If you’ve prepared to take care of a family of four for 6-8 months, and you accept another four people…now your stores will only last 3-6 months. Who will you turn away to protect your own survival? Decide now. Better yet, contact your friends, neighbors and family and make a plan to join for survival. But then inform the scoffers that they will not be included in your survival plans, and will be turned away if they show up at your door.

2. You’ve armed yourself with firearms and ammo, and practiced shooting until you’re proficient and can hit targets. But paper targets don’t shoot back, and targets don’t try to loot your property and kill you. In a survival scenario, the regular laws don’t apply. Are you willing to suspend your perceived decency to protect your loved ones and your property? Remember the cannibal paradox. Taking too long in overcoming a taboo could mean your life. You waited too long to make the decision. Bang…you’re dead…and the looters have their way with your stuff and your family.

Phase II: Reforming a Society

One of the stranger outcomes of the economic collapse is that the political class will not be insulated from the fallout, death, starvation and chaos. Most of the politicians, both at state and federal levels, will be no more prepared for survival than the general populace. So, the chances are overwhelming that many of the criminal political class will be dead after the first six months of the economic collapse. Couple that with the very high likelihood that the populace may blame politicians for the disaster. I would not be surprised to see politicians murdered for their culpability in the crash of our American economy. I certainly don’t advocate that. I would rather see them tried, found guilty, sentenced and then put to death. But starving, angry gangs will not opt for due process. They want revenge.

Consequently, it may be much easier for secessionists to rise to prominence in the post-apocalyptic states. We may not have to defeat the statists…we may simply have to outlive the bastards!

Isn’t it entirely possible that the survivalists, who are traditionally far more liberty-minded than the rest of the population, will comprise a large percentage of the people that could form new polities…new governments…new nations, in the Post-Apocalypse?

And speaking of apocalypse…doesn’t this remind you of the Four Horsemen of the Apocalypse…Conquest, War, Famine and Death?

I hope this article has made you think, but more importantly, I hope it will make you ACT. To learn more, go to: http://www.survivalblog.com/

Secession is the Hope for Mankind.

DumpDC. Six Letters That Can Change History.

© Copyright 2011, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


A Run on the United States Government

July 16, 2011

by Michael S. Rozeff

A “run” is a mass withdrawal of cash funds from a borrower. We are in the midst of a continuing worldwide credit crisis, punctuated by “runs” of varying prominence and publicity.

These runs are rational, not panics and not due to quirks of psychology. They occur when investors realize that their funds are endangered in an institution. They try to get them out before they lose them.

The danger comes when the institution no longer is getting cash inflows in sufficient amounts to pay off all its obligations. In businesses, this comes about through sour investments. In governments, it comes about through wasteful spending that fails to be recovered in tax revenues.

In the year 2008, we saw runs on major Wall Street investment banks, money market mutual funds, domestic banks and foreign banks. Now we are seeing runs on governments in Europe such as Greece and Portugal. Sovereign debts are being sold down hard as investors flee from them, converting their bonds into currency.

Three years from the 2008 credit crisis, the Federal Reserve is still providing massive credit to U.S. banks. This props them up against bank runs. Every so often, the FED extends credit to foreign central banks to prop them up so that they can prop up their financial institutions. These are stopgaps. All of this propping up depends on faith in one currency: the U.S. dollar.

Runs on various institutions often show up as a flight into short-term U.S. treasuries, i.e, the dollar. This is because the treasury market is deep.

Since the dollar is also a credit instrument, it is subject to credit risk. What happens when trust in the dollar drops sharply? What happens to all these financial institutions being propped up by creating dollars when trust in the dollar fails? That is when the financial system cracks wide open. That is when governments will be tempted to freeze funds in banks and prevent withdrawals the way that Argentina did. That is when the FED will be tempted to guarantee almost any institution against cash withdrawals, but when such a guarantee will be ignored. That is when gold will soar in price against the dollar and all other fiat currencies.

I am describing a run on the United States government. This will be a withdrawal of cash financing from the U.S. government. This is the ultimate credit crisis upheaval. This will be accompanied by mass social unrest and political reorganization. Stock and bond prices will fall sharply. The S & P 500 will lose at least 60 percent. Government bonds will yield at least 10 percent. This event is foreseeable. It is also avoidable, but not without much pain and travail. Hence, although foreseeable and avoidable, it may still occur.

Whether we like it or not, we are all currency speculators now. This is hardly a burden we can relish.

Whether or not a run on the United States government occurs is in the hands of its creditors. It depends on their trust in the dollar. Their trust depends on their understanding of America’s political economy.

Anyone who looks objectively at actions being taken by the U.S. government to bolster its credit or cause its credit to deteriorate has to reach a very negative conclusion. Why? Simply because the country’s leadership has been taking it downhill for decades on end. America is like a bright and fresh red apple in which rotting has been proceeding inexorably. The apple still has some edible portions but large parts of it are gone. The seeds need to be planted and a new tree grown.

Dagong Global Credit Ratings Co. Has 15 categories of ratings of sovereign debt (AAA, AA+, AA, AA-, A+, A, A-, BBB, BB+, BB, BB-, B+, B, B-, CCC.) The U.S. has a rating of A+. Dagong lowered it from AA- to A+ in November 2010 after the FED announced a new QE program.

In a remarkable statement made in mid-June 2011, Dagong’s president said “In our opinion, the United States has already been defaulting.” Dagong has spent $1 million to enter the U.S. market, but the SEC has so far turned it down.

The debate over the debt ceiling, like all Washington debates, is throwing off negative signals about U.S. credit. Obama is the key person. He is airing various proposals in public in press conferences. If he were serious about any of them, he’d be working closely with key Congressmen in private behind closed doors. He would not be trying to box in Republicans or embarrass them in public or score political points. He would have been working on controlling the budget long before this. He would have shown leadership on this long ago. One does not place multi-trillion dollar proposals on the table and expect them to be taken seriously, debated and acted upon within 2 or 3 weeks. Obama’s credibility on serious budget control is nil. The Republicans and even members of his own party have little reason to trust him when he paints himself as on a high road and willing to compromise. Any compromise will be on his terms to further his agenda. The debate, such as it is, can’t be taken seriously.

Did the near-miss of the 2008 credit crisis prod the U.S. government into corrective action? Sure, bailouts and wars and deficits and the absorption of Fannie Mae. The U.S. government has had three years to enact measures to revive the economy, clean out the bad debts in the banking system, and get the U.S. budget under control. Make that thirty years or more. At this moment, I can’t think of one good step it has taken. Look for yourself. Do I see healthcare in there as the centerpiece along with Wall Street reform? Don’t make me laugh.

The U.S. government has no credibility in terms of restoring America. The government is living off its past reputation, like a once great entertainer grown tired and going through the motions.

Under these conditions, trust in the dollar and all the other fiat currencies that are linked to the dollar will continue downwards.

Unless there is a change in these conditions, someday there will be a run on the United States government. I see nothing that suggests a change in these conditions.

Michael S. Rozeff is a retired Professor of Finance living in East Amherst, New York. He is the author of the free e-book Essays on American Empire: Liberty vs. Domination and the free e-book The U.S. Constitution and Money: Corruption and Decline.

Copyright © 2011 by LewRockwell.com.


Where Will You Go?

July 7, 2011

When the Sovereign Debt Volcano Blows?

by Ron Holland

(Editor’s Note: To quote Davy Crockett…”you may all go to hell and I will go to Texas.”)

“People never believe in volcanoes until the lava actually overtakes them.” ~ George Santayana

Last fall, while on an investment cruise, I had the opportunity to visit a “dormant” volcano in Chile. There was even a ski area with lift, restaurants etc. near the top on the lava and cinders. I thought at the time how I would ski the volcano but never risk my funds on a real estate investment there for obvious reasons.

Today we find the United States and most of Europe in a similar situation. We risk an eruption and collapse of the mountain of unsustainable sovereign debt built up over the last two decades. Frankly, the US dollar and national debt situation is so dire and our means to contain a sovereign debt crisis so limited by multiple wars, Washington’s debt and political incompetence at home, that anything could happen – almost overnight. Even a minor foreign policy or economic event like a Greek default or Middle East crisis could reap havoc with the precarious interlocking sovereign debt pyramid in the West.

Of course, no nation wants a collapse – especially China – because a western debt collapse and write down is certainly uncharted financial waters and the contagion risks are global. Still, America and most European governments and the central banking elites, which created the criminal sovereign debt fiasco, are only trying to buy more time and delay the inevitable. This inaction means the threat of an immediate US debt and dollar collapse cannot be ruled out. Therefore, readers who have not protected themselves certainly have cause to worry because now could be too late.

It Is Exit Time For Your Gold, Wealth & Family

Although you may have some time, nothing else has to happen before a big collapse could take place, even within days. Consequently, after 30 years of watching, writing and creating protective retirement planning and financial strategies, today I’m finally going to yell “FIRE” inside the closed ‘financial iron curtain” which is America.

If you have failed to store your precious metals outside the US, diversify out of the dollar or reduce or terminate your private retirement plan, there is now a clear danger of a Washington dollar and sovereign debt crisis which could sweep away most of your remaining wealth and financial security.

I do not have a crystal ball or inside political information on a specific imminent threat, only the observation that the sovereign debt crisis from Europe, a debt ceiling misstep from the clowns in Washington or a Middle East event could suddenly trigger the collapse. Actually any major political or economic shock could bring the Madoff style Ponzi scheme, which Greenspan and Bernanke have created, down almost overnight on top of us.

This will likely happen over a weekend and the following Monday morning you could wake up to Presidential Executive Orders “means testing” you out of Social Security benefits if you still have substantial retirement benefits or personal savings. You’ll likely discover an end to your home interest deductions, new confiscatory taxes and restrictions on US gold and silver, controls on moving private wealth and funds to safety offshore and dramatic hikes in taxes and cuts in government programs. In addition, spiking inflation rates, violence and massive protests will immediately follow these confiscatory actions and cutbacks. You can also expect severe banking and stock market liquidity restrictions, or closures, and this will only be the beginning. In short your wealth will be trapped in dollars and locked up for the duration of the emergency inside the American jurisdiction.

Therefore if you haven’t already prepared for this type of crisis contingency ahead of time, I’m telling you there will be little you can do after the fact. Washington will simply take and throw your wealth and promised benefits at the problem thus buying them more time with your wealth.

The Central Banks, City of London & Wall Street Have Looted America and the World

Back in 2007, did the Federal Reserve or your politicians or financial experts predict a collapse in housing prices of 30 to 50 percent? Remember, Bernanke, George Bush and Barack Obama all promised this was a temporary blip in the long-term upward trend in housing values. All advised you to “stay the course.”

Today, Tim Geithner claims we have a “strong dollar policy” but have you observed the 35% plus appreciation in the currencies of Brazil and Switzerland to the dollar in the last year? The EU establishment has repeatedly claimed over the last few months that the Greek problems are solved but these fake solutions usually only last a few days at best.

Back here in the US, there is talk about deficit reduction, cutting programs and tax increases but nothing really happens because solving the problem is political suicide. The American and European elites are buying time knowing that only a crash or war will give them the opportunity to act as they did in the 2008 meltdown. They only wait for a cataclysmic event to provide the fear, excuse and public support for government action needed to grab our private wealth and to delay their problems.

The mainstream American press doesn’t cover it, however the rest of the world knows that Wall Street banks and their central banking buddies in London and New York created the sovereign debt crisis. They then sold their profitable template, or imposed it on the end of a gun, for debt democracy to politicians around the world as a means to buy votes and maintain political control. The scam is now over and no one has a solution to the tens of trillions in debt already spent.

While many millions of poor people overseas are going hungry because of our exported inflation on food costs, now the foreign middle classes are being impoverished just to pay interest on the sovereign debts to our banking elites. Although, much of the world correctly blames their thieving politicians who’ve been bought off by our banking elites as the problem, our nation is also a target for their outrage.

Foreign politicians will attempt to shift the blame to America and this will speed the end of our American free ride from the fiat dollar and our reserve currency status. The world is just waiting for the spark to start the run out of the dollar and our Treasury debt. No nation will really help us when the collapse comes.

What If You Have More Time?

Maybe we have months instead of weeks – or at most a couple of years before the event takes place. Allow our politicians “buying time” to work for your benefit instead of theirs:

1. Educate Yourself With Free Subscriptions: First, to protect yourself, you must assume the balance of establishment news coverage and opinion is all disinformation designed to delay panic and create actions which will benefit the establishment probably to the detriment of your best interests. Therefore I suggest you subscribe to the following free e-mail publications:

* Follow what the elites are planning ahead of time with The Daily Bell.
* Keep up with the real freedom news and philosophy by going to LewRockwell.com
* Get an Austrian economics view on the markets and gold with Mountain Vision – Subscribe.

2. Maintain Liquidity & Reduce Political Risk: Legally and following all reporting requirements, move your private wealth outside the US into safe secure investments which will remain liquid and trading should US markets close as they did following 9/11.

3. Create A Domestic Safe-Haven Location: The potential for violence, theft and property destruction in the US dwarfs what could happen in Greece. If you can afford a safe-haven second home away from major cities and high crime locations, then do so. Consider taking advantage of the real estate collapse and buying something you can enjoy in good times and have as insurance for bad times.

4. You Will Likely Be Safer Outside the US: In a serious crisis, most of the criminals out to steal your property and do harm to you will come with official government sanction and not from traditional criminal elements. Consider a more secure safe-haven jurisdiction where the rule of law might still prevail with a condo, second citizenship or residency in a nation outside the United States for the duration of the domestic disorder and economic collapse. Remember, currency and government debt collapse is common throughout the world and history shows the difficulties don’t last forever. My fear is we haven’t seen a world reserve currency collapse before and the aftermath is uncharted waters. I would expect a scenario several magnitudes worse than the 1991 Russian collapse.

5. Secure Your Gold: Finally move most of your gold or silver offshore where it will remain secure rather than become a tempting target for confiscation from parasitical groups and individuals. Washington will need your gold as I doubt there has been substantial gold at Fort Knox since Nixon closed the gold window. The eventual outcome of the crisis may well be some fake gold backing for the dollar. Why else would anyone use a collapsed currency?

6. Don’t Trust Washington With Your Retirement Benefits: Consider closing and taking a withdrawal from your retirement plans to avoid new taxes and penalties at withdrawal, the means testing and loss of your Social Security benefits or the forced investment into collapsing Treasury obligations.

You can read all about the gold and retirement threats in my Lew Rockwell archive. Pay specific attention to the following essays:

* The Greek Tragedy
* There’s Gold In Fort Knox?
* Retire In Poverty-Retirement Plan Nationalization
* The Obama Retirement Trap

The debt crisis is here and I promise you only that you will not hear the truth on cable financial news or from your establishment investment firm or professional. To avoid a panic, neither the government, the Federal Reserve or Wall Street will be honest with you about the risks we face, just like they all lied and covered-up before the market meltdown in 2008.

If you are an American, the last place you should keep most of your wealth now is in the dollar or your home country. You might personally get out but your wealth will be trapped for the duration and probably lost during the disruption.

Reprinted with permission from The Daily Bell.

Ron Holland is a contributing editor to the Swiss Mountain Vision Newsletter and Chairman of the Advisory Board of the Foundation for the Advancement of Free-Market Thinking (FAFMT) in Vaduz, Liechtenstein.

Copyright © 2011 The Daily Bell


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