Tuesday, October 27, 2009

The Dollar Is Falling!

And our leaders are encouraging it because it preserves their power momentarily. Just look at the chart above left. We've already heard about this year's new trillion dollar plus deficit; it's 3.5 times the unconscionable debt we had under Bush in 2008. And which debt Obama strongly attacked when he was just a candidate; however, when he gained power, he suddenly forgot the danger. When added to recent deficits, the sum totals $11.8 trillion.

Because nothing drastic has happened yet, and because the Obama administration has been so terribly busy trying to change our country, most Americans have become numb to the implication of the facts before them.

However, other countries have not been so complacent. They are shifting out of dollar denominated investments and debts because they clearly see the (almost) inevitable decline in the dollar's value.

Perhaps they are paying attention to our unfunded debt such as Social Security, Medicare, Medicaid, Veteran's Benefits, and government pensions. These are not even listed on the balance sheet, but they amount to almost $104,000,000,000,000 in the foreseeable future.

If Obama passes a Health Care Reform bill, inevitably more will be added to the deficit.

And yet our leaders loudly whistle past the graveyard while they busily print more money to pay back our debts with less valuable dollars. No wonder there is a growing demand for a new international currency.

Ancient Rome, the Byzantine Empire, and Post WWI Germany all tried to use the same method when national obligations became too great to ever pay back.* After all inflation is a silent tax and many hardly even notice when politicians do it. But inevitably, it leads to the ruin of the country. In the fourth century AD, the Roman denarius fell to 1/50 of its value in a mere 13 years. The Bezant took longer, but by the 14th century it had virtually ceased to exist despite the fact it had once been the international currency. The Reich mark plunged from 4.2 to the dollar before WWI to 1,000,000 to the dollar by August 1923.

The chart below illustrates the dollar's loss of value in recent years -- 36% when compared to other currencies and a whopping 75% compared to gold. Without a drastic change in Washington, the dollar will decline even more precipitously.

*One economic writer, Larry Edelson, believes that if the US government started paying off its debts at the rate of $100,000,000 every single day, it would take 3,446 years before the debt is paid off. The statistics above came from the Uncommon Wisdom website.

No comments: