Recently Glenn Beck did a segment on the 15 day path to the New World Order. Either he didn’t paint a big enough picture, or he’s just plain wrong. I decided to look for the answers myself and what I found was kind of scary. I’m waiting for the Wallstreet Journal to finally publish this so that we can start rebuilding because right now, we’ve reached the end of our rope about $600 billion ago (http://www.usdebtclock.org/). First let’s answer the question that Glenn Beck stated may be the downfall of the Republic, which is will China stop buying US Bonds.
The simple answer is that China won’t stop buying US Bonds unless a couple of things happen. First of which would be that the US Dollar is no longer the global exchange currency. Secondly, China would have to be the global exchange currency which would mean that the Euro and US Dollar have collapsed. Lastly, America would have to collapse internally from such an overwhelming debt that the inflation over values the Chinese RMB. These are possibilities, but I doubt that this will happen in these ways from the research I’ve done.
Recently America has been accused of implementing the same currency warfare towards the rest of the world like when the stock market crashed in 1929. The world relies on the dollar being the global currency and is a very delicate system of checks and balances. With the US being the current exchange currency this gives us a lot of clout, but the policies of the Pelosi Congress and Obama Presidency have put the whole country at risk, even Hillary Clinton has admitted this.
The way this works is that the US dollar is the bench mark currency. The countries who have lower value currencies tend to have a trade surplus like China, Japan, and Germany. Those countries with higher currency values tend to have a trade deficit like the US and Greece. Currently the US makes up 40% of the world’s total trade deficit with China leading the way with the largest trade surplus at 23% and Japan runs somewhere around 21% and Germany around 19%. These nations in order to keep their trade surplus. which means jobs and development, keep their currency lower than the dollar because it makes their products cheaper to buy. As the US waters down its dollar by borrowing and doing things like QE2 this lowers the value of the dollar making purchases from China, Japan, and Germany more expensive. This in turn sends them into a recession because they rely on the US to be large importers of goods. If the US were to devalue its currency so low that it would match the Chinese RMB this would come close to collapsing the global economy.
There’s a few scenarios that are more realistic that could happen before Glenn Beck’s China refusing to purchase US Bonds scenario works.
With the US debt to GDP level reaching 100% by the end of 2010 we could see a new policy. The fed has already started to implement this by doing QE2. Congress could or could not raise the debt ceiling, but this really doesn’t matter at this point. Fed Chairman Bernanke has publicly stated that he’s not subject to the Congressional debt ceiling nor does he have to worry about having to be an elected official. This makes the Federal Reserve a rogue and destructive element in every scenario. The Federal Reserve can print money devaluing our currency as it pleasse because it has no real oversight. This would cause massive inflation and devaluing of our currency. No one in their right mind would want to invest in the US Dollar because it’s worthless. Our economy collapses, the rest of the world’s economy collapses, and a new global currency emerges.
China is currently trying to head off the currency wars by maneuvering to become the new world currency or global exchange currency. I have read an article that stated that China is giving discounts to nations that are willing to use the RMB instead of the US Dollar. They would still have to get the US to accept this, but since they own so much of our foreign debt and we’ve made promises, China could very easily twist our arm very hard in a post Obama Presidency or just politely ask the current Obama Presidency to get this done. The downfall of this would be that with China having such a large trade surplus and the US having such a large trade deficit that this would collapse the world economy. The upside to this is we might get bailed out like Greece, but be prepared for riots in the streets by union members because they lost their pensions.
With the value of the dollar dropping so rapidly and the inflation causing the cost of comodoties to go up this could give us a double dip recession that we may not be able to dig ourselves out of. If the US dollar collapses and the Euro being so weak and the US being 40% of the worlds trade deficits this could still lead us into a global catastrophy. This would open the door to a global currency and even possibly a global government because the general public of the world would sacrifice liberty in exchange for security like the US has currently shown it is willing to do just like after 9/11.
People like Glenn Beck and ultra conservatives could force the Federal Reserve to show them their books. By showing their books there is a possibility that the Federal Reserve could show at minimum double the amount that they have printed. This would cause such a major amount of hyperinflation that the American economy could collapse, the Euro could collapse, and then the Chinese could have a total collapse of their economy and create such a global catastrophy that would put us in the “Dark Ages”.
The bottom line with all these scenarios is that the US is devaluing its dollar so much that it is risking the collapse of the US economy which in turn will create a domino effect for the rest of the world because we are so intertwined. We will recover in due time, but we might see the dawning of another “Dark Age” for the world. Will this be equivalent to the world rebuilding itself from the ashes?
I watched a documentary on the History Channel about the “Dark Ages”. I was so upset by it I had a hard time finishing it. Once barbarians conquered the capital city of Rome’s Western half the world was sent into the “Dark Ages”. Barbarians in all corners of the old western empire were jockeying for domination. The world only knew one world power, Rome, and so they figured they would conquer as much as they could to create their vision of world domination. Unfortunately the “common man” was stuck in the middle of this. Technology, arts, and many other vital civilization evolutions were put on hold just to be able to whether the turbulent times. Once there was order, a new barbarian leader rose to conquer the stabilized society. This could very well be what happens here in the US and worldwide if we keep going in the direction that we’re going in.
In conclusion, the US Dollar is so devalued that over the next several months inflation will set in. Companies like General Meals and McDonalds are already stating that the commodities that they use to make their products are more expensive than what they are charging in the market causing them to raise prices. Once inflation sets in we should expect to see the double dip recession that some people have talked about. Once in the double dip recession we’ll continue to borrow because the Federal Government will want to give some sort of stability. One of two things could happen. We could have another civil war because of the imminent collapse of the dollar or we finally wake up and dig ourselves out of this problem. I think civil war will end up being the way we go because American’s have shown they just don’t care anymore. As my wife says “American’s just don’t stick to things and see them through anymore”, so the easy way out would be civil war. We have the potential to really send civilization back as much as a 100 years if any one of the 4 scenarios play out. The question is starting to become not “if” but “when” our economy collapses because Pelosi and Obama have singlehandeldly spent up to $6 trillion over 4 years which is almost a 50% drop in the value of our currency in just a short period of time.