Sunday, November 7, 2010

Game Over America

**Blogger’s Note: Exploring this topic has been difficult for me. My family has always been the defenders and the backbone of this country. I come from 10 generations of military as well as middle class business-people. While one side of my family was helping to create a strong economy, another part was fighting for the freedoms and rights that our country needed and deserved. Doing this research has made me feel that we’ve been fighting and growing for nothing. All of the effort put into this country seems to have been disregarded and unappreciated. All it took was a handful of people to get into power and decide they wanted to destroy our country as we know and love it. I’d like to ask you to do your own research on this subject. If your research contradicts mine, I would love to see it. I think everyone needs to research these topics for themselves and find the information. If you love your country as much as I do, it may be a pretty painful experience, but I guarantee you, it is necessary. My sources at the bottom will be a great starting point for your own personal research.**

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.

Scenario 1:

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.

Scenario 2:

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.

Scenario 3:

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.

Scenario 4:

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.



Sources:

http://www.businessinsider.com/henry-blodget-china-terrified-us-will-default-on-debt-2009-3
http://www.nakedcapitalism.com/2009/01/ny-times-china-cooling-on-us-debt.html
http://www.guardian.co.uk/business/2010/may/27/stock-markets-buoyed-china-eurozone-debt

http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=7081
http://www.bcheights.com/marketplace/china-refuses-to-revalue-currency-despite-intense-u-s-pressure-1.1124754
http://wpblog.ohpinion.com/2010/09/25/u-s-going-beyond-polite-requests-to-get-action-on-yuan-revaluation/
http://www.brookings.edu/opinions/2010/0222_china_debt_burtless.aspx
http://www.cbsnews.com/8301-503983_162-4864398-503983.html
http://hubpages.com/hub/Why-is-China-so-Important-to-the-US-Economy
http://www.marketoracle.co.uk/Article21510.html

http://mpettis.com/2010/05/don%E2%80%99t-misread-the-trade-implications-of-the-euro-crisis-for-china/
http://mpettis.com/2010/05/don%E2%80%99t-misread-the-trade-implications-of-the-euro-crisis-for-china/
http://www.marketoracle.co.uk/Article21058.html
http://www.wsws.org/articles/2010/nov2010/pers-n05.shtml
http://weakonomics.com/2010/02/01/what-happens-if-congress-doesn%E2%80%99t-raise-the-debt-ceiling/
http://patriotsforamerica.ning.com/forum/topics/what-happens-if-the-gop
http://www.tradingonlinemarkets.com/Articles/Economics/debt_to_gdp_ratio.htm
http://www.nuwireinvestor.com/articles/what-happens-if-the-yuan-replaces-the-dollar-as-the-53636.aspx
http://economics.about.com/od/foreigntrade/a/trade_deficit_h.htm
http://epi.3cdn.net/28e51781e452fee9d9_3um6ii54c.pdf
http://mediamatters.org/print/research/201010190002
http://www.wnd.com/?pageId=114759
http://www.naturalnews.com/030309_food_inflation.html
http://www.naturalnews.com/food.html
http://inflation.us/foodpriceprojections.pdf
http://www.independentlivingnews.com/pdf/Final_days_of_dollar.pdf?utm_source=Publicaster&utm_medium=email&utm_campaign=1008%20-%20Initial%20Welcome%20Email%20-%20FDoF%20Survey&utm_term=The+Final+Days+of+the+Dollar%3a+10+Last-Minute+Preparations+You+Need+to+Make+Now&AID=2334
http://www.youtube.com/watch?v=4ljqUXVbZR0
http://www.doughroller.net/news-analysis/food-prices-are-soaring-everywhere/
http://online.wsj.com/article/SB20001424052748704506404575592313664715360.html

4 comments:

dennis hodgson said...
Sunday, 07 November, 2010

You've provided a very detailed analysis here, although it is from a US perspective, and it underplays the role of China in future global developments. Whatever happens to the USA, China will be only minimally affected, although it won't be happy if the US dollar is devalued, which is an automatic process given that the Fed has been printing more money lately.

A more detailed analysis of China's prospects and intentions can be found here.

Anonymous said...
Monday, 08 November, 2010

Scenario 3 is correct and exactly what is planned. Every central bank of the world is now buying gold, that will be the price for entry into the global currency. Global Currency, Global Governance, that is the plan and has been since long before any of us was born. We are screwed and most do not even know it yet. When milk is $50.00/gallon then people will beg to be saved. Fiat money systems always end poorly with people begging to be saved and a dictator always answers the call. Their is no hope for humanity as a whole. The plan is laid out, they even put it in writing, ever see the Georgia Guide Stones?

Anonymous said...
Thursday, 11 November, 2010

I can only suggest that you find a nearby college and enroll in an introductory course in macroeconomics, rather than trying to understand it by reading web pages and pop journal articles. It should help you to see why a lot of what you wrote is misinformed or wrong.

The most egregios error you've made is in misunderstanding the Federal Reserve System. That the FRS is not comprised of elected officials is one of its great strengths. Instead its comprised of some of the top economists in our nation, and many others are brought in for consultation. That is to say, our economic system is run by the best people for the job, rather than by politicians. And since the Fed works toward keeping inflation at a relatively low and stable level (a little inflation is a good thing!), you may rest assured that they will not let hyperinflation occur.

By comparison, take a look at every instance of hyperinflation that has ever occured. You will see that it happened because a government, run by politicians, demanded that more money be printed. Since the US Fed doesn't have to answer to politicians, it can make intellegent choices to maintain a (relatively) stable economic course. Just take a look at http://en.wikipedia.org/wiki/File:US_Historical_Inflation_Ancient.svg . Since about 1975, the Fed has done an amazing job of maintaining good levels of inflation, particularly when compared to the out-of-control swings in inflation experienced prior to it's establishment in 1913.

Hegrins said...
Thursday, 11 November, 2010

This is the writer of Let's Think. I must respond to the last comment because he seems to have faith that our FRS is acting in our best interest. I would recommend that you read my latest post "Shot never heard 'round the world". Although US investors hold 62% of US bonds, we are asking more and more of China to buy US Bonds. China's credit rating agency Dagong is has lowered our credit rating each time we do a Quantatative easing. Although the FRS seems to have our best interest in mind I would also recommend reading the WSJ where Alan Greenspan tells the Fed that devaluing our currency to increase imports is a bad move. I think that this is what will ultimately cause the destruction of the US dollar. If you subscribe to investor newsletter's they are saying that the US dollar will be phased out of global currency exchange by 2015 at the earliest. Could the FRS along with other scholors realize that having the US as the global exchange currency be bad for business?

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