Quote:
Originally Posted by Mike_M  So, tell me if I've got this right..... our currency is worthless because it isn't backed by any hard asset such as gold or silver. Once other countries no longer want to invest or trade with us because our currency has been significantly devalued, $100 ipods could cost $10,000 as well as any other goods made from components with overseas origin.
We're screwed. |
We're screwed? I would hate to be one of those people who sat back and watched this whole thing happen without saying anything. There are alot of politicians and Fed law enforcement that are plenty worried at the moment.
Precious metal is what pins it down. People determine the value of the currency. Either they want it or they don't. When it is worth less and less all the time, then nobady wants to keep it, which drives inflation. If it is backed by something that everybody values, like gold, then it is very hard to inflate it (inflation is a hidden tax). The Fed Resereve knows this and that is why they worked to remove the gold standard and quietly replaced our money with paper. It only has value now IF people value it. With the foreign governments so angry about it losing value, they are dumping dollars as fast as possible (they don't value it any more). This drives up the price of commodities (more dollars for the same amount of goods and everybody wants something of value at the same time) thus driving inflation. This is why everyone is buying gold and countries are starting to trade a basket of currencies.
The FedReserve is sinister in that it has the ability to expand (through loans) or contract (through interest) the supply of money. Had the government bailed out the people directly, they bankers would have lost the right to the collateral that all the loans were against. That is a big no no for the people in control. The problem was that the ponzi scheme collapsed and the loan payments started to default. This reduced the incoming cash, and thus the ability to extend credit by a factor of 10. People got scared, and started paying off credit cards. This further reduced the cash inflow and subsequently the credit. Now, the banks sit there with non-performing loans. This turns the cash faucet to 'off'. Since October 2008, 70% of the investment dollars world wide evaporated from the derivative market, which is beyond repair. Some estimate the value of derivatives world wide to be 4 quadrillion dollars, and I am not sure that is high enough. The world GDP is 60 Trillion..... ooops..
No matter what any politician says, the ecomomy cannot return until the fundamentals are restored. Cash flow must be available, but the credit dam is locked up tight and is getting tighter. That is why Obama is begging loans from other countries... The Fed is bankrupt with a capitial "B" and is going to pull alot of leaders down with it very soon.
You are going to see some crazy news shortly in the next few days and weeks. The infighting which we don't hear about, is escalating between the power brokers. Watch carefully for indicators next week.
11-13-2009
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