Well, well, well, it has finally arrived! The New York Times printed an Op-Ed piece by Jared Bernstein, former economic advisor to Joe Biden and part of the economic team for the White House from 2009-2011. In it Mr. Bernstein floats the trial balloon filled with highly flammable gas which suggests the U.S. should “voluntarily” give up the throne of issuing the world’s reserve currency.
You had to know sooner or later something like this would come out. Clearly China, followed by the rest of the world and including most all of our allies already know the dollar will be replaced …but, someone had to “warm up” the U.S. population for the inevitable. Before going any further, please understand that the average American has not one clue about currency fluctuations, cross rates, or what a strong or weak currency even means to trade, trade deficits, purchasing power or anything else. The only thing the average American knows is how much more a trip to the store or anywhere else costs now versus last week or last year …but, someone (in this instance Mr. Bernstein) has to put the story out there so no one can say “but they gave us no warning.”
The word I would use to describe his use of “voluntarily giving up as issuer of the reserve currency” is “cute,” very cute. Actually the word should be “disingenuous” because the privilege and power that goes hand in hand is enormous and any nation would love to have this ability. (And please don’t tell me China doesn’t want this privilege, they just don’t want it now or right away but they are certainly posturing to assume this role). Issuing the reserve currency means many things. It means you do not need to accumulate foreign reserves for trade because your currency IS the reserve. It means you don’t have to (but certainly should) work to produce goods for trade because you can simply print some money for settlement. It means your interest rates are lower and currency values are higher than they otherwise would be if you didn’t issue the reserve currency. It means you can wage war without paying for it by simply printing up more money. It means your standard of living is far higher than it otherwise would be based on your domestic production and trade.
No country in all of history ever “gave up” reserve currency status willingly. It either waned away and or was taken away. In this instance Mr. Bernstein says it will be “relatively easy” and the only pain may be just 1% more inflation than we already have. Really? He says instead of the 1-2% inflation we currently have, it might go to 2-3%, I can only laugh at this! First off, inflation is not 1-2%.
First, if inflation was still being calculated the way it was 30 years ago, it would be reported very close to 10%. Second, giving up the privilege to issue the reserve currency would immediately devalue the dollar. My guess is the dollar would devalue 25-35% in value for trade terms. This would immediately make foreign produced goods cost 1/3rd to 50% more overnight …THEN his definition of inflation would set in. You see, if the dollar is replaced, foreign central banks will immediately sell dollars to purchase whatever the new reserve currency is (even if it’s a basket) …”selling” dollars will push the “price” (purchasing power) of the dollar down, this is simple economics. Dollars will also come rushing back to the U.S. since they will have a hard time “spending” outside of our borders. Can you imagine what trillions of dollars crashing our shores will do to the prices of goods?
Before going any further, let me explain “inflation” to you …and I assure you Mr. Bernstein knows this all too well. “Inflation” is defined as the growth rate of money supply. The BLS has bastardized the definition to mean “CPI” which they can and do change, massage or outright lie to come up with an inflation rate …to their liking. The “inflation” has already happened as the money supply has exploded in recent years, giving up the reserve currency status will only expose the reality. Foreign goods will explode in price (and so will domestic goods as producers will be able to raise prices) in literally an overnight experience. I will call this “pent up inflation” if you will for a lack of a better term.
This is simple to explain, the dollar has been the reserve currency. It also has been THE ONLY currency that oil could be traded in. Both the reserve status and “petro” status have worked to support the “price” of dollars. If/when both of these props are pulled, WHOOSH! …the dollar will trade lower to a price on its own merits rather than those which include artificial demand. This is your “inflation” that can be felt and quantified, this is your immediate and overnight drop in the standard of living.
As I’ve said, “they” know this but they also know the world is moving away from the dollar so “face” must be saved. It’s a nice plan with a few exceptions. One exception is the fact we will no longer be able to stick our noses in everyone’s business all over the world, our military will have to shrink by necessity. Another factor that’s not so “nice” is along with a lower living standard …we will have to get back to work producing the things which have now become unaffordable to buy from foreigners (this is actually a good thing). Thirdly, if the dollar continues to exist, it will mathematically need to be “killed off.” I say this because “we” collectively owe too many of them to ever be paid off. The only way to pay them off is to devalue even further or outright kill it in lieu of a new currency.
I will say in a nutshell, we have overspent, over borrowed and “over abused” our privilege as reserve currency custodian so badly that the most likely fate to “giving up” our privilege will result in banana republic status. Think about it if you will, what does a banana republic produce? Bananas right? What does the U.S. produce? Dollars …and here’s the catch, what use will our biggest “product” be worth when it is no longer sought after?
It does not have to be this way forever, in 10 to 20 years the U.S. can rebuild, retool and restructure but it will be painful and the standard of living will have a MAJOR setback. The “mindset” of the nation must change from one of entitlement to one of self-sufficiency. “Entitlement” has been “learned” (taught) for 50 years or more now, this will take a long time to “un learn.” Unfortunately, part of the unlearning process in my opinion will include mass riots, unrest, violence and part of the herd being culled either through cold, heat or lack of food. Don’t like what I am saying here if you don’t want to but it is the truth, the writing is on the wall and now even Washington is spelling it out for you.
Do you think all of the angencies will have to be reduced in size? I mean how can they afford this huge homeland security, cia running all over the world and mega billions for the nsa spying on everyone if they can’t print dollars?
who says they can’t print?
True that’s what a banana republic does I guess.
Mr. Holter,
Many thanks for your many astute observations. As we celebrate the 11th. Anniversary of 9/11 it is a good opportunity to check in and see who is in control. As I scan futures price on my computer and see all 25 commodities I follow hammered into oblivion it is quite obvious it is not free markets at work.
That being said I see that the powers to be are making a strong push to decimate the spirit of man by hammering grain prices into oblivion. Really a good way to break the spirit of the working man and effecting the psyches of millions of Americans and setting it up for a nuclear winter on many fronts. Yes, the plan is being put into it’s final stages going on 100 years to break the mind, spirit and soul of man as the evil powers will stop at nothing to have complete control of one’s mind.
Us precious metals investors just a small blip on the radar screen, as we continue to lick our wounds. I for one have been humbled beyond words; being custodian of the family trust and having gone all in a few years back, trying to explain to my aging mother in ill health and my fellow siblings that their inheritance priced in dollars has been decimated. As their perception of reality is based on liquidation value in dollars and not a insurance policy. Quite a wake up call at this stage of the game. Goes to show, that timing is everything, one may be right; but, as it is seen in the moment, the few families that control most all of it are still firmly in control. It is unfortunate that one’s
insurance is priced by the enemy and only when the enemy has all he can possibly get will price improve.
Reminds me of Chapter 69 of the Tao Teh Ching, “There is no greater mistake than to underestimate the power of an opponent.” A good lesson for us all.
Bill, that documentary put out a couple of years back pretty much sums up the current state of affairs .http://www.thrivemovement.com/
Keep up the great work! The journey continues from the remote solitude of northern Mn. Daniel Bednark
Daniel, the end game will be about counting ounces and weights, not dollars. You know this to be correct and your family will thank you for being the only one with a functioning brain when it was needed! Hang in there, the end game when it comes will be a very VERY fast and violent event.
Bill,
Having the world’s reserve currency was a nice ride while it lasted. The USA went all over the world and bought up real assets like copper, iron, rubber, rare eatrh minerals, etc. and then paid for them in fiat ponzi dollars (after Nixon took the USA off the gold standard in 1971). We could buy all the raw materials we need from other countries and build our wonderful standard of living with monopoly money. As I said it sure was great while it lasted!
However, the rest of the world has finally figured out our ponzi scheme and doesn’t want to play any more. If you figure out there is a cheater at the poker table do you want to play any more?
The next world currency (or basket of currencies) will be no better unless backed by gold, which I feel that it will be, thus $10,000 an ounce of gold.
China isn’t dumb and they are buying raw materials and business’ up all over the world dumping that monopoly money we suckered them with. They can’t move too fast or they will eat more US dollars than they want to.
China’s gold accumulation and paying for it in USA monopoly money is very smart.
American’s should be buying gold and silver also with USA monopoly money, but 90+ percent will miss the boat and have nothing to show for the fruits of their labor.
Well, it was nice while it lasted, but the party is over and time to get to reality !!!
“it was a nice ride”…
Good to see The Bright Minds at work again. Last two lines in the article says it all. Sad that is. But I prefer to live in a world of reality and I urge other people to do the same. I guess that’s why we’re here right. But let’s stick to the fun-facts. Early May at the doctor’s office, the blood pressure was 18/9. Early September the blood pressure was 16/9. That’s a declining rate, which I observe as be GOOD thing. cough. lol. Bastards will pay for this. Thanks again for this very good article Bill. It’s almost a copy of “The Message In The Bottle” that I sent to whoever got it.
ur message will one day be received.
Bill, I could not agree more. Notice the Timing of this statement by Mr. Bernstein. The 13th anniversary of 9-11. The number 13 has very Evil connotations to Occultist. Do you think that TPTB are in any way Occultist? Nah. Just because everything They do coincides with Occultist numerology is merely coincidence. Anyway, as I stated yesterday and you have stated above today, when they pull the plug on the $ – It ain’t going to be pretty here in what once was “the good ‘ol USA”.
and it will be very fast when it happens.
You can say it Bill. Many of those culls will be through violence as the free $hit army demands free $hit from savers. I hope to be on the giving end of those culls, thank you very much!
there will be a culling one way or the other, Mother Nature will demand it.
Bill, I’d like to add something. People just need to see, read, understand and they learn. Flemish Minister-President recently stated that Autumn was about to become a HOT Autumn. OK, I note that. He also stated “be prepared for strikes”. OK, I note that. Then on Federal level – as in “Belgian” – socialists are done, and liberals are quietly put into place. OK, I note that. Politicians are rather vocal in describing “the change of leadership” as “a very emotional night”. OK, I note that.
Many sheeple are asleep and they fail to detect the signs. Call me crazy, but some politicians somehow end up in hospital because of stomach problems/bronchitis. Really? My good guess: they saw “the mess” and they prefer not to be part of it. Maybe, just remain major, right (?). But hey, I’m just a crazy KID.. Also, people need to understand the build up of Belgium. I know FOR A FACT that if they screw China/Russia/Germany.. trade will seize to exist in our Good Flemish Port. If this happens GDP will plunge by x-percentage. If this escalates, the entire European/Asian/South American trade is finito. I hear stories about “logistical issues” for gold shipment. I laugh at these stories. “Per vessel call” we ship 40.000 tons within a timespan of finishing ops within +/- 48 hours MAX. I understand the AIR vs WATER aspect. But still.. You want a fine position in the ship’s cargo hold? No problem AT ALL.
it’s called “conscience”.
How did this happen?
Slowly at first, then all of a sudden!
Stack it like you stole it!!
why not wait until $16?
Hey Bill..I just ride a Silver Surfboard, I definitely do not stack the stuff.
Ag has made 100% retracement since I said it was going lower back in July.
A bit more weakness here and it will go to $16…something.
I won’t be a buyer there because 1) I do not try to pick bottoms and 2) not a big fan of silver anyway.
Gold, thats a different matter.
Bill: I agree with your points, but the reset will be much more than just painful. Many thousands, maybe millions will suffer from riots, home invasions, and starvation. Food prices will go through the roof. A jar of peanut butter may be worth a week’s wage. Your immediate neighbors might be the best friends you’ll ever have. Those who cannot move better learn defensive skills and have a few pump shotguns on hand. The local LEO’s (who are not gov’t psychos)will be more interested in saving their own. You and your neighbors will be on your own.
you are exactly right Andy, it will be a massive cull of the herd.
Bill,
As to the title of your article “Washington Finally Telling The Truth?”, the answer is not until we replace the whole lot of these lieing criminal bastards!
true that.
Hi Bill, just came across this very well written article. I recommend reading it. The author chooses excellent words. 1 in 10000 is a ratio I haven’t seen too many people use. For those in need of courage, here you go: http://www.silverdoctors.com/reason-4-the-silver-noose-is-tightening-on-the-banksters/
1 in 10,000, that is truly scary!
Hi Bill, great article. Can you tell me what you think may happen to the NZ dollar? Will this also go down in parallel to USD?
thank you Angela, it is a Western currency and as such will definitely be affected by the dollar’s demise.
Hi Bill,
I read your arrivals daily from Silver Market News on Line, but there has been no access since September 12. Has there been a change of web address or some other explaination as I am suffering from withdrawal symptions. Thank you. Phillip from Melbourne Australia.
thank you Phillip, not sure what site you are talking about, ask them to carry our work daily or contact us for a link.