February 18, 2013 by Liberty
With the recent reduction in the price of gold many US commentators are getting a bit cocky. I find it particularly amusing that the same people that claim gold isn’t a good measure against the US dollar claim the US dollar is getting stronger at the first sign of golds decline.
The first thing that needs to be considered is the fact that they are partially right when they claim that the price of gold isn’t everything. The price of gold is only a small part of the picture. Millions of factors go into the value of the US dollar and gold is only as much of a hedge as any other commodity is.
The collapse of the US dollar has been building for half a century. It’s been built on a combination of complete irresponsibility and possibly downright idiocy. Basic economics can show the horrible position that the US government has built itself into and the people holding the US dollar will be the ones to pay. History has shown us too many examples of governments drowning themselves in printed money in hopes to make magical fairy money but it just doesn’t work. There are 4 specific reasons that the collapse of the US dollar is inevitable.
#1 Commodity Prices
Across the board people are willing to pay more for hard goods. People look into precious metals and other commodities when they don’t have faith in the currency. If you think about it, faith is all that currency runs on. When people stop trusting the people printing the money the money becomes as valuable as a sheet of paper with ink on it. No one wants to be involved.
Commodities are not running out. They’re not in any limited supply compared to ten years ago. The only reason people want it is because they can make more of a profit holding against the US dollar. Short term trading cannot affect a market as much as this market has been damaged. This comes down to a complete lack of faith in the people with their hands in everyone pockets.
Every American owes more than $52,000 from the day that they’re born. The debt has grown more in the last 10 years than it has in the history of the United States. We no longer build savings, we build debt. You cannot base an economy on taking money that doesn’t exist.
The more this debt grows, the more the collapse of the US dollar becomes inevitable. There is no practical reason to believe that this could possibly get better. Even if the United States skinned the richest people in the country and stole all of their assets it wouldn’t pay off the money that it owes. This is not a practical monetary policy.
The only way to pay down that kind of debt is by deflating the US dollar. It’s already happening.
#3 Keynesian Pseudo-Blather
Despite the inefficiencies seen year after year people still argue in favor of Keynesian economics. It makes no sense. I can understand the basic concept of testing theories but lets get this clear. At no point has this been able to work consistently. It’s flopped around uselessly dragging money out of the productive economy. Too bad. Failure. Let’s move on and do what we know works.
But… of course… when the alcoholic says they need a drink to sober up the only logical thing is to give them another drink. When you dig yourself into a hole the only way to get out is by digging all the way through until you hit the other side of the planet… right? God forbid we stop digging ourselves deeper.
But… with the free market, government doesn’t have a job so there is no reasonable reason to believe government is willing to shrink. Government profits off Keynesian “economics” and the people will need to suffer the consequences as long as they let it happen.
#4 Government is Deadlocked
All these problems could be solved if the government worked efficiently and effectively. Call me hopeless but there hasn’t been a single politician that’s stuck to their guns enough to solve any of the problems. I have a fantasy that someday one will come out of the woodwork…
He’ll ride into congress on a horse and say, “It’s time we stop spending”
The democrats will say, “Yes. Stop spending money on all these tax cuts…”
The republican politicians will say, “Yes. We’ll raise entitlements by only x% instead of x+1%”
The politician will say “NO! We must really cut entitlements and tax inequality.”
At that point the other politicians will sling the noose and the media will stand by and point the cameras at Paris Hilton.
But as with all good fantasies, they must be treated as such.
Politicians have promised to cut government for 30 years. Now a cut means a reduction in increases. Cutting doesn’t happen for government. Too many people depend on the money immorally obtained through government taxation. Almost half the work force in this country doesn’t even have to work. You can’t expect them to fight for changes now.
This isn’t a time to be angry it’s a time to be ready. The collapse of the US dollar is going to happen whether we’re ready for it or not. Get ready for it now. This is the time to prepare your wallet for the hit. Gain some practical skills and hope for the best boys and girls because this is going to be a bumpy ride.