Monday, July 18, 2005

America and the US Dollar

If you lose the ability to use money (something that is nobody's liability like gold and silver) and an honest reliable currency (a financial contract like a note that is redemable in gold or silver upon demand) you will lose your freedom. If you lose your freedom you will lose your economy. It might take decades but if that trend stays in place it will happen.

After 1971 and the Brenton Woods Agreement, the world's financial system changed to something like it was never before in say the last several thousand years. Americans and people in many other countries mostly lost the ability to use real money and honest reliable currencies. They were mostly forced by governments to use tokens like the US Dollar. Pieces of paper that are redeemable in nothing. Since they are redeemable in nothing, there is no limit to how many can be created. The supply of money is limited by how much can be had from the ground in the case of gold and silver. The supply of a currency is limited by the supply of what the currency is redeemable in, usually gold and silver. With tokens there is nothing that a token is redeemable in so there is no restraint on how many can be created. The word "Note" in the title of an American "Federal Reserve Note" is fraud.

So, since 1971 the supply of the US dollar has been increasing at a rate that if plotted on a graph is a compound curve heading to the sky. The rate of increase in the supply is increasing.

The rate of the increase in just the reserves of central banks around the world is a compound curve heading for the sky.

The US government's budget deficit, the one everybody hears about, was for 2004 about $US 413 Billion. The official US government's budget deficit using GAAP (Generally Accepted Accounting Principles), the one almost nobody hears about, was about $US 11.2 trillion dollars. That's right. Trillion.

The US government has unfunded liabilities of $US 47.3 TRILLION. The US has a total government, corporate and household debt of $US 38 TRILLION. That adds up to $US 85.3 trillion. An absurd, can not be kept, world record breaking amount, whether you want to measure it in nominal or relative ways.

There are going to be a lot of broke debtors as well as creditors since the Piper always gets paid and does not care who does the paying.

Governments only have 3 ways of getting revenue now a days to meet these promises whether debt or unfunded liabilities.
1.) They can steal it through taxation.
2.) They can borrow it.
3.) They can create more tokens out of thin air which is theft of value stored in the tokens

The US government can not increase taxes without crashing the economy and therefore it's revenue.

The US government can not borrow more at some point. It's interest costs on debt would get too big taking up too much of its revenue going to interest on debt therefore crashing the part of the economy that is government spending that some huge number of people and corporations depend on. That crashing part of the economy would take the rest of the economy with it.

The US government can create tokens out of thin air (Ben Bernanke's helicopter "money") to pay their obligations thus devaluing existing tokens. They are already doing this but they would radically need to increase the rate at which they are doing this. This radical devaluation of the "money" as people call it (remember "money" is now simply tokens) will crash the US economy. That is what **hyper inflation** does.

America is simply screwed. Since Americans now a days are mostly child like and clueless/ignorant of the situation they are in, (they have already given up almost all of their individual rights to their government.), I expect a great depression in America. Their only protection from their government and themselves is mostly the ownership of gold and silver. But they would need to educate themselves first before they made any moves in that direction. I can not possibly see this happening since government schools have dumbed down Americans so much over the generations. So I have to expect a great depression in America.

Unfortunately I do not see Americans knowing what to do about a great depression after they are in it. They have lost too much knowledge to do anything about it. They will just continue to look to their government to "do something" and never know that their government is the entity that caused their great depression in the first place.

Yes, this will affect other economies in the world. So, flee the US Dollar while you still have a chance. The financial/economic scene in America should be ugly about 5 years from now, I figure.

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