The Dollar Under Siege

The US survives now only with the Petro dollar. With declining world GDP share, and countries setting up alternative currencies and blocking USD dependency, the story is a growing horror story. No one wants to hold US debt or Treasuries.

The world is tired of being suppressed and threatened by this warmongering and drug trafficking, criminal banking nation with its mega corrupt Leaders. The world is walking away from it. How long can the Ponzi Fed lie continue before it collapses?

The tragedy is the poor American people who will suffer for the crimes of these cheap crooks.

Casey Research
The Room with Dan Steinhart
Managing Editor
25 April 2014

Dear Reader,

Our main feature today is by Casey Research Chief Economist Bud Conrad, who explores the most urgent narrative in finance that hardly anyone is talking about: the decline of the US dollar.

I don’t mean the dollar’s long, slow slide to zero that began on December 23, 1913 when the Federal Reserve was born. Everyone paying attention knows that the Fed has sapped the dollar of 98% of its purchasing power since then. Criminal? Yes. But not urgent.

I’m talking about Vladimir Putin’s plans to circumvent the dollar in global trade. He, together with China, is making alarming progress toward undermining the dollar’s hegemony and all of the vast advantages the US Empire enjoys because of it.

The US government, of course, has a long history of protecting the dollar’s dominance and won’t let its special privileges go easily. Just for fun, before I pass the baton to Bud, let’s take a peek at the fate of three other prominent figures who dared to challenge king dollar:

  • September 2000—Saddam Hussein proclaims that he will sell Iraq’s oil for euros instead of dollars.
  • March 2003—The United States invades Iraq. Nine months later, US forces find Hussein hiding in a spider hole.
  • December 2006—Hussein is hanged.
  • Late 2010—Muammar Gaddafi calls on African and Muslim nations to create a new gold-backed currency called the dinar to challenge the dollar.
  • March 2011—A coalition of Western countries attacks Libya.
  • October 2011—Gaddafi is either beaten or shot to death, depending on which report you believe.
  • February 2011—Dominique Strauss-Kahn, managing director of the International Monetary Fund, calls for a new world currency to challenge the dominance of the US dollar.
  • May 2011—A maid at the Sofitel Hotel in New York accuses Strauss Kahn of sexually assaulting her. Strauss-Kahn loses his position at the IMF. He is subsequently cleared of any wrongdoing.

Russia and China, of course, are no Iraq and Libya. With that backdrop, I pass it to Bud to analyze this latest assault on the dollar, and what it means for your portfolio.

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The Dollar Under Siege

Casey Research
By Bud Conrad,
Chief Economist

After World War II, the dollar became the world’s preeminent currency. Convertible to gold at $35 an ounce, it was the backbone of international trade. Foreign central banks used it to back their own currencies.

Nixon removed the dollar’s convertibility to gold in 1971, rendering its value dependent on prudent management by its issuer. That issuer, of course, is the Federal Reserve—which conjures dollars into existence to support the US government’s spending habit.

The Fed has issued a lot of dollars since 1971, and even more since the financial crisis of 2008—thanks to Washington’s exploding debt levels. And it’s only going to get worse, as even the Congressional Budget Office (CBO) admits in its own forecasts.

What’s more, CBO debt estimates are notoriously overoptimistic; so while they are daunting, reality will likely be worse. To paint a realistic picture of future US debt levels, I added 20% to the CBO’s forecast, illustrated here:

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