The Beginning Of The End
The Beginning Of The End By Michael T. Snyder - Kindle Version

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The Giant Currency Superstorm That Is Coming To The Shores Of America When The Dollar Dies

By recklessly printing, borrowing and spending money, our authorities are absolutely shredding confidence in the U.S. dollar.  The rest of the world is watching this nonsense, and at some point they are going to give up on the U.S. dollar and throw their hands up in the air.  When that happens, it is going to be absolutely catastrophic for the U.S. economy.  Right now, we export a lot of our inflation.  Each year, we buy far more from the rest of the world than they buy from us, and so the rest of the world ends up with giant piles of U.S. dollars.  This works out pretty well for them, because the U.S. dollar is the primary reserve currency of the world and is used in international trade far more than any other currency is.  Back in 1999, the percentage of foreign exchange reserves in U.S. dollars peaked at 71 percent, and since then it has slid back to 62.2 percent.  But that is still an overwhelming amount.  We can print, borrow and spend like crazy because the rest of the world is there to soak up our excess dollars because they need them to trade with one another.  But what will happen someday if the rest of the world decides to reject the U.S. dollar?  At that point we would see a tsunami of U.S. dollars come flooding back to this country.  Just take a moment and think of the worst superstorm that you can possibly imagine, and then replace every drop of rain with a dollar bill.  The giant currency superstorm that will eventually hit this nation will be far worse than that.

Most Americans don't realize that there are far more dollars in use in the rest of the world than in the United States itself.  The following is from a scholarly article by Linda Goldberg...

The dollar is a major form of cash currency around the world. The majority of dollar banknotes are estimated to be held outside the US. More than 70% of hundred-dollar notes and nearly 60% of twenty- and fifty-dollar notes are held abroad, while two-thirds of all US banknotes have been in circulation outside the country since 1990

For decades we have been exporting gigantic quantities of our currency.

So what would happen if that process suddenly reversed and massive piles of dollars started coming back into the country?

It is frightening to think about.

Well, I guess the key is to get the rest of the world to continue to have confidence in the U.S. dollar so that will never happen, right?

Unfortunately, there are lots of signs that the rest of the world is accelerating their move away from the U.S. dollar.

For example, it was recently announced that the BRICS countries are developing their own version of the World Bank...

The BRICS (Brazil, Russia, India, China and South Africa) bloc has begun planning its own development bank and a new bailout fund which would be created by pooling together an estimated $240 billion in foreign exchange reserves, according to diplomatic sources. To get a sense of how significant the proposed fund would be, the fund would be larger than the combined Gross Domestic Product (GDP) of about 150 countries, according to Russia and India Report.

And as I noted in a previous article, over the past few years there have been a whole host of new international currency agreements that encourage the use of national currencies over the U.S. dollar.  The following are just a few examples...

1. China and Germany (See Here)

2. China and Russia (See Here)

3. China and Brazil (See Here)

4. China and Australia (See Here)

5. China and Japan (See Here)

6. India and Japan (See Here)

7. Iran and Russia (See Here)

8. China and Chile (See Here)

9. China and the United Arab Emirates (See Here)

10. China, Brazil, Russia, India and South Africa (See Here)

Will this movement soon become a stampede away from the U.S. dollar?

That is a very important question.

But you don't hear anything about this in the U.S. media and our politicians are not talking about this at all.

Meanwhile, our "leaders" seem to be doing everything that they can to destroy confidence in the U.S. dollar.  The Federal Reserve is printing money like there is no tomorrow, and the federal government continues to run up trillion dollar deficits year after year.

They do not seem to understand that they are systematically destroying the U.S. financial system.

Other world leaders get it.  For example, Russian President Vladimir Putin once said the following...

"Unreasonable expansion of the budget deficit, accumulation of the national debt – are as destructive as an adventurous stock market game.
During the time of the Soviet Union the role of the state in economy was made absolute, which eventually lead to the total non-competitiveness of the economy. That lesson cost us very dearly. I am sure no one would want history to repeat itself.”

Wow.

Why can't most of our politicians see how destructive debt is?

What the federal government continues to do is absolutely insane.  The national debt increased by more than 24 billion dollars on the day after Thanksgiving this year.  But utter disaster has not struck yet, and most Americans are not really that concerned about the debt.  So things just keep rolling along.

And of course our national debt of $16,309,738,056,362.44 is nothing when compared to the future liabilities that our federal government is facing.  Just check out what a recent article in the Wall Street Journal had to say about all this...

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

Other economists paint an even gloomier picture.  According to economist Niall Ferguson, the U.S. government is facing future unfunded liabilities of 238 trillion dollars.

So where are we going to get all that money?

Well, why don't we just print more money than ever before so that the U.S. government can borrow and spend more money than ever before?

Don't laugh.  That is actually what some of the top economists in the country are actually recommending.

The most famous economic journalist in the entire country, Paul Krugman of the New York Times, is boldly proclaiming that the solution to all of our problems is to print, borrow and spend a lot more money.  He insists that there is no reason to fear that the giant mountain of debt that we are accumulating will someday collapse the system...

For we have our own currency — and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can’t run out of money. After all, it can print the stuff. So there’s almost no risk that America will default on its debt — I’d say no risk at all if it weren’t for the possibility that Republicans would once again try to hold the nation hostage over the debt ceiling.

But if the U.S. government prints money to pay its bills, won’t that lead to inflation? No, not if the economy is still depressed.

Now, it’s true that investors might start to expect higher inflation some years down the road. They might also push down the value of the dollar. Both of these things, however, would actually help rather than hurt the U.S. economy right now: expected inflation would discourage corporations and families from sitting on cash, while a weaker dollar would make our exports more competitive.

Of course what he is prescribing is complete and utter madness.

At some point this con game is going to collapse and the rest of the world is going to say a big, fat, resounding "NO" to the U.S. dollar.

Why should they continue to use a currency that is becoming extremely unstable and that is constantly being manipulated?

And when the rest of the world rejects the U.S. dollar, the value of the dollar will drop like a rock because there will be far less global demand for it.

In addition, if the rest of the world is not using the U.S. dollar for trade any longer, other nations will cease to soak up our excess currency and huge mountains of our currency that are floating around out there will start flooding back to our shores.

At that point we will be looking at inflation unlike anything we have ever seen before.  The era of cheap imports will be over and we will pay far more for everything from oil to the foreign-made plastic trinkets that we buy at Wal-Mart.

Most Americans don't even know what a "reserve currency" is, but when the U.S. dollar loses reserve currency status it is going to unleash a nightmare that most economists cannot even imagine.

So enjoy this holiday season while you can.  There are still lots and lots of cheap imports filling the shelves of our stores.

Once the coming giant currency superstorm strikes, we will dearly wish for the good old days of 2012.

Yes, the U.S. dollar is alive and ticking for now.  But at the pace that our authorities are abusing it, I would not say that things are looking good for a long and healthy lifespan.

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  • http://www.facebook.com/douglas.m.green.1 Douglas M. Green

    Don’t forget about the rating agencies downgrading the US again, which is a psychological catalyst to the dollar decline. Krugman doesn’t understand this either.

  • MeMadMax

    Krugman is like an economic suicide bomber… People actually take his “advice” seriously… Or, maybe he’s just a messenger… a person saying what is already happening… oh well, either way, it’s insanity and eventually it will come to a resounding thud eventually… Sooner the better. That way, I might be still alive when the recovery begins…

    • http://www.facebook.com/people/Clinton-Potocki/1428355211 Clinton Potocki

      I hope you are a senior citizen, lol :-)

  • mainstreeteconomist

    The rest of the world is watching this nonsense, and at some point they are going to give up on the U.S. dollar and throw their hands up in the air.

    But what will happen someday if the rest of the world decides to reject the U.S. dollar?

    They (our leaders) do not seem to understand that they are systematically destroying the U.S. financial system. Why can’t most of our politicians see how destructive debt is?

    So where are we going to get all that money?

    Michael

    All fiat currencies are falling relative to real money (gold and silver).

    The biggest risk is that all fiat currencies will fail at the same time. Global central banks will be have new rules relative to gold in 2013 so a return to the gold standard may be sooner rather than later.

    Two thirds of the farms, factories, and natural resources in America are owned by foreign corporations. Dumping US dollars would be self defeating behavior. It would make more sense to buy what is left of America by using surplus US dollars.

    Our leaders know exactly what they are doing. After the US government is bailed out and taken over by multinational corporations, debt will be managed as follows:

    (1) Martial law will be implemented.

    (2) The US government will become much smaller.

    (3) All entitlements (food stamps, medicare, social security, etc.) will end.

    (4) Debt owed to most Americans will not be honored.

    (5) The US population will become much smaller.

    • ohcomeon

      *Failure of all fiat currencies is more probable and a greater threat than a falling US dollar.*

      You do realize the US dollar IS a fiat currency don’t you?

    • planckbrandt

      The Donors will profit from this collapse. They already have. Their FCCY income and holdings will translate back at multiples after the collapse. Their debts will disappear. The Donors do understand. And, if the Pols do understand, they are paid to keep their mouths shut. This is what happens in an oligarchy. We cannot let oligarchs have these inordinate rights over everybody else and expect otherwise.

  • chilller

    One forgets the US is the biggest, baddest bully on the global block. And when the bully doesn’t get his own way, he beats the crap out of everyone. We saw what happens to countries who attempt to move away from petro dollars. China is behind most of the new currency trades and will be in the bully’s cross hairs. Crossing the bully means certain death for your country, one way or the other…if not financially…through physical contact. So don’t fool yourselves thinking the US would stand idle while all those dollars came back home. The bully would shove them right back down their throats at any cost.

    • MeMadMax

      lol, whatever dude… lemmy guess all of our “wars” were fought over “money” right? North Vietnam wouldn’t pay its “protection” dues so therefore was invaded right? Nevermind that it was in fact a civil war in which the south asked for our help right? Oh, and Iraq and afghanistan is over oil too right? Even thou we lost all oil contracts in Iraq to russia and china because we were nice enough to let them have it right? And in afghanistan it was all over the poppy fields right? Go smoke some more…

      • Nexusfast123

        You are a fool. The US projects it’s military power to maintain the hegemony of the US Dollar. Saddam wanted trade oil and gas, Gaddafi wanted to create a North African trading zone that excluded the US Dollar and Iran wants to trade Oil and Gas in currencies other than the dollar.

        Currently the ONLY value the Dollar has is in the fact that other countries have to hold them to trade commodities and that is not other Oil and Gas. The US extracts payments from having other countries holding Dollars. Oil and Gas contracts in Iraq have not been lost and Oil and Gas extraction in Libya is under Western control and in the new Western styled bank. America runs an empire and anyone that gets in the way suffers.

    • Mark

      Exactly,

      The US dollar is only backed up by the US military.

    • El Pollo de Oro

      Chiller: The Banana Republic of America (formerly the USA) is both an imperialist, warmongering bully and a country with very deep economic problems. That is a deadly, toxic combination, especially in light of the fact that the imperialist neocon empire-building doctrine is embraced both major parties. And when a rat is cornered, that rat is more dangerous than ever. The BRA, in its present imperialist/corporatist/fascist condition, is both a threat to Americans and a threat to the rest of the world.

    • http://www.facebook.com/people/Clinton-Potocki/1428355211 Clinton Potocki

      From what I have seen, China and Russia are only 5 years away from building their own military strong enough to challenge the USA. Of course, nukes are the ultimate stalemate/checkmate, which would be the only quick way to cripple the USA.

  • http://profile.yahoo.com/5TSL5BSRU7YYSFDDDADBJNN65Q THE BLINDLEADING THE BLIND

    the question is not when but how have they kept it all going this long.

  • http://www.facebook.com/mykel.scott.77 Mykel Scott

    Right and when the dollar collapses.
    global unemployment goes up 19 % everywhere.
    the price of oil goes bang and drops to 65 a barrel
    we produce 30 % of the world exports in food , how much is that going to cost the hungry useless breeder countries ? Specially with a export tax of one ounce of gold per ton )
    Oh and we will take euroville down with us making a second jump in global unemployment of 19 %
    this will occur in a matter of weeks , global unemployment up 38 %
    Should be a good show , got popcorn ?

  • Syrin

    Good, America needs to feel the pain of their voting decisions. Those who know better are far better equipped to weather the storm than those waiting for their Obamaphones.

  • arizonadiane

    “They do not seem to understand that they are systematically destroying the U.S. financial system.”

    Michael – do you really think they don’t understand or see what is happening, or is this what they really want. I have read to many things lately, that this is the plan.

  • cherylmeril

    Note they totally ignore America’s shale oil production windfall that changes everything. All gloom and doom ignoring significant changes. They’ve been fully informed of the windfall and still harp on this stuff. America’s the #1 producer of oil now.

  • Mark

    It will be interesting and frightening to see were we end up after a fiat money collapse. I can’t do anything to stop it, so all I can do is try to prepare for it the best that we can. A farm well off the beaten track paid in full for starters. The farm should have water on site. The water needs to be able to be used without the use of electricity. Firewood so that you can heat and cook. Good neighbors are a must as you can’t do it alone .Good soil and a long growing season. Good heirloom seeds in stock as you will need to grow your own food. The cost of food will be very high to buy it. Some live stock of your choice. A well balanced farm needs manure for your garden soil. Lot’s of diesel fuel and propane gas in stock. Forget lots gasoline as it spoils to quickly. Many years supply of clothing and boots in stock. Buy this when on sale while it is still cheap. Have cast iron cookware so that you could cook over a fire if needed. A dutch oven would be wonderful. Gravity fed spring water to you house and a septic system that needs no power. You might laugh, but a bidet works great when the toilet paper is gone. This system sure beats an outhouse with a catalog hanging on a nail. Convert a gas rototiller to propane would be a good project. The propane stores for a very long time. Have a great food storage with the foods that you like to eat. Hand tools of all sorts and the tools to protect your selves. The list can go on but you get the picture. Just get started and do it now. Your life might depend on it. If you can’t afford this do what you can afford to do as it will only cost more in the future and I do not see our wages going up any time soon.

  • http://www.facebook.com/people/Clinton-Potocki/1428355211 Clinton Potocki

    Two things I would add to this article – 1. The USA has already lost its status as the world reserve currency if BRICS countries are not using the dollar for trade anymore. 2. I’m not sure how the US opening up its energy reserves and selling that to other countries will help rebalance our economy. I suppose the corporation run gov’t will squeeze as many rights away from the citizens using the poor economy as an excuse, before they open up our energy reserves to the profit of the fat cats once labor costs have been systematically destroyed.

  • DaytoDay

    “foreign-made plastic trinkets that we buy at Wal-Mart.”

    Case in point, I bought the most expensive corded headset from Wal-Mart (For work) A few months back, and within two months, I was hearing static and losing sound in my earphones.

    A couple of days ago, we were cleaning out the garage to give stuff to GoodWill and I came across a pair of headphones that have to be 10 years or older and so, I cleaned them up and tested them to see if they work, and let me tell you… The 10 year old headphones that have been sitting in storage for years… Look, feel, and work 10 TIMES better than the high-priced, ultra cheap garbage I got from Wal-Mart…

    So, which one do you think went in the GoodWill box?

  • JustanOguy

    Same here…

  • Tosheba

    Every politician that does not do what is best for America, from the top down, should be immediately impeached for dereliction of duty.

  • MichaelfromTheEconomicCollapse

    You should be able to, but I am not an expert on this new system yet. :)

    Michael

  • Guest

    Paul Krugman has proposed that if
    Owebama* got in front of the American people and warned that there
    was an alien invasion from the planet Xorath** and were to invade
    planet Earth two years in the future and that we have to spend
    trillions of dollars in developing and building alien blasting
    equipment. Two years later we founds out there was no alien invasion
    Paul Krugman would argue that the trillions dollars was well spent
    because we have stimulated the economy. Obviously, I disagree
    because we are trillion further in debt and left us with a bunch of
    worthless alien blasting equipment to show for.

    What Krugman falls for is the broken
    window fallacy in which money has to be spent to stimulate the
    economy. What he doesn’t realize is that if the window wasn’t broken
    the baker would have spent the money else were and will still have
    that window. It is fantasy to suggest that a person is better off
    because superstorm Sandy has destroyed their house and the economy is
    better off because the home constructor has a job rebuilding there
    house. That person will have to pay for the home owners insurance
    deductible instead of buying gifts for Christmas.

    The true measure on the health of the
    economy is the amount of “stuff” ie. Goods and services that
    economy produces to fits the needs of society. Measuring economic
    output in fiat base monetary units is erroneous at best. Even though
    were growing in dollar terms, it actual terms we are producing and
    consuming less. Over the past few years fuel and food prices has
    increased and for a lot of people they have to consume less elsewhere
    or make a decision on consuming less food and fuel. I would argue
    that we are in a recession. The Fed action of increasing the money
    supply while simultaneously understating inflation has given the
    illusion of economic recovery and growth.

    The best thing to do is to prepare
    because the worse is yet to come and don’t believe those crack pot
    economist.

    * I didn’t make up this name, but it
    does fit the bill.

    ** I made up the alien plant’s name to
    sound cool, I didn’t make the stuff up about Paul Krugman proposing a
    hypothetical space alien invasion.

    • 2Gary2

      Dude–I thought you were referring to the magical planet kolob that bishop mittens wants to go to.

  • Mark

    Paul Krugman has proposed that if Owebama* got in front of the American people and warned that there was an alien invasion from the planet Xorath** and were to invade planet Earth two years in the future and that we have to spend trillions of dollars in developing and building alien blasting equipment. Two years later we founds out there was no alien invasion Paul Krugman would argue that the trillions dollars was well spent because we have stimulated the economy. Obviously, I disagree because we are trillion further in debt and left us with a bunch of worthless alien blasting equipment to show for.

    What Krugman falls for is the broken window fallacy in which money has to be spent to stimulate the economy. What he doesn’t realize is that if the window wasn’t broken the baker would have spent the money else were and will still have that window. It is fantasy to suggest that a person is better off because superstorm Sandy has destroyed their house and the economy is better off because the home constructor has a job rebuilding there house. That person will have to pay for the home owners insurance deductible instead of buying gifts for Christmas.

    The true measure on the health of the economy is the amount of “stuff” ie. Goods and services that economy produces to fits the needs of society. Measuring economic output in fiat base monetary units is erroneous at best. Even though were growing in dollar terms, it actual terms we are producing and consuming less. Over the past few years fuel and food prices has increased and for a lot of people they have to consume less elsewhere or make a decision on consuming less food and fuel. I would argue that we are in a recession. The Fed action of increasing the money supply while simultaneously understating inflation has given the illusion of economic recovery and growth.

    The best thing to do is to prepare because the worse is yet to come and don’t believe those crack pot economist.

    * I didn’t make up this name, but it does fit the bill.
    ** I made up the alien plant’s name to sound cool, I didn’t make the stuff up about Paul Krugman proposing a hypothetical space alien invasion.

  • 2Gary2

    Hey Pollo–Do not take this the wrong way as I love your insight, however, I would much more enjoy your insight as opposed to quotes from others. I really mean this as a compliment.

  • http://profiles.google.com/stephanluclarose Stephan Larose

    These debts are all virtual, denominated in fractional reserve generated notes. Just everyone default at the same time. A few hedge funds may suffer, but on the whole, society will be much better off not having to pay interest and debts on money that was created by legalized fraud in the first place. All this will simply lead to currency reboots, but the public should demand debt free money and an end to fractional reserve lending.

  • Washington76

    Absolute monarchies are those in which all power is given to or, as is more often the case, taken by, the monarch. Examples of absolute power corrupting are Roman emperors (who declared themselves gods) and Napoleon Bonaparte (who declared himself an emperor).

    “Absolute power corrupts absolutely” arose as part of a quotation by the expansively named and impressively hirsute John Emerich Edward Dalberg Acton, first Baron Acton (1834–1902). The historian and moralist, who was otherwise known simply as Lord Acton, expressed this opinion in a letter to Bishop Mandell Creighton in 1887:

    “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.”

  • MnkyLv

    It wasn’t just the authorities but everyone who was “recklessly…borrowing and spending” heavily from 1981 onward.

  • Joseph

    I am not the least bit surprised by this utter idicoy Michael, liberalism and Keynesian economics are the straws that stirred the drink here. Without central banks, central economic planning, and wild printing/debts of fiat currency, this is simply impossible to create. I keep telling my friends “you cannot spend your way to prosperity” as well as reminding myself that this would not occur if people simply understood that the USD says “Federal Reserve Note”. Why the general public does not comprehend this simple fact, well that is far beyond me.

  • planckbrandt

    It is not the authorities who are shredding confidence in the USD. It is the Donors who own the Pols who are forcing them to keep taxes low on the very same Donors who have multiplied their wealth by 400% since 1982. The entire money supply comes from debt in this country. And, since corporations sit on record profits and don’t borrow here anymore, it is the government that has to provide that debt. Debt-money systems like ours are all doomed to failure if the public debts are not serviced through adequate taxes. The S&P downgrade was about politics not spending. It is the Donors who are setting this up and they will profit from it.

  • rich3800

    “Why can’t most of our politicians see how destructive debt is?” They have a larger income than many of us and they’re voting themselves raises. They think all that money will protect from inflation. It does now. But not when hyperinflation sets in.

  • rich3800

    I’ve done some research on hyperinflation and how it hit other countries. I’ve heard of large dollar denominations but never seen them. I’m sure those million dollar bills will come in handy to buy bread.

  • jhunted7667

    What will happen when the banks push the panic button is ,other countries will continue to do business among themselves with there local currencies and we will be broke , with all of our agriculture sold abroad with ETF ‘;s and the dollar worthless , we won’t be able to buy food from south America anymore we will starve till we realize we can eat each other like the new Zombie apocalypse film depicts and the society will self destruct, this is what we get for turning away from God

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