Dollar crisis : Meltup

In the midst of a European sovereign debt crisis analysts stateside are worried about their future. Produced by the National Inflation Association the video splices contributions from Marc Faber, Jim Rogers, Ron Paul, Peter Schiff and others to make the case that the United States is staring into the face of a future currency crisis and hyperinflation.

Hat tip to Gerard O’Neill for this particular horror movie

He also linked to an interesting presentation with Niall Ferguson

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  • Anon

    You lost me at Ron Paul.

    US inflation: http://www.wolframalpha.com/input/?i=us+inflation+2000-2010

    Ten year treasuries: http://www.wolframalpha.com/input/?i=us+treasuries+1980-2010

    Thirty Year Treasuries: http://www.wolframalpha.com/input/?i=us+30-year+treasuries+1980-2010

    Don’t let the facts get in the way, like. And any problems with the Euro will likely lead to a flight to safety.

  • copenhagentheory

    There’s a guy called Chris Martenson preaching a similar message online. His “Crash Course” is over 3 hours long in total, but well worth watching from start to finish, it’s pretty scary stuff.

  • Mack

    Missed that comment – was marked as spam for some reason. How come you are posting as Anon ?

    But anyway, past performance is no guarantee of future performance, the value of your currency may go up as well as down, etc..

  • Greenflag

    ‘any problems with the Euro will likely lead to a flight to safety.’

    In the above case i.e dollar v euro – investors can enjoy the temporary relief of leaping from the Lusitania on to the Titanic in the hope of avoiding disaster . From frying pan to fire .

  • Greenflag

    Not much time today but what a respectable sounding name that eh ? National Inflation Association . And yes scary stuff and much of the content undeniably true . But caveat emptor is always wise especially when the purveyors are selling ‘doom’ now and ‘apocalypse ‘ later .

    From the NIA homepage we read this little disclaimer which might cause some to have slight doubts as to the high falutin altruistic non selfish motivations of those dedicated to theoretical fiscal rectitude ‘

    I quote

    ‘ Our (NIA) goal is to help as many Americans as possible become aware of the disaster we are rapidly approaching. In our opinion, the wealth of most Americans could get wiped out during the next decade, but it will be an opportunity for a small percentage of Americans to become wealthy by investing into companies that historically have prospered in an inflationary environment, such as Gold and Silver miners and Agriculture producers. ‘

    The mark of the gold buggers is clearly seen as is the obvious short term memory forgetfulness of the authors . The comment that ‘during the next decade the wealth of most Americans could get wiped out ‘ is hilarious -I’ll repeat that yes hilarious as this has already happened in the past 3 to 4 years with the stock market collapse , property bubble burst , and mass unemployment .

    Do not be surprised if your free e-mail newsletter has you slavering at the gills to invest in gold / silver futures before it’s too late . Just remember timing is of the essence and pulling a Ponzi is not for amateurs .

    This is not to state that having some gold or silver in your portfolio is unwise but investing all in the hope of recovering previous property or equity losses would be a high wire act of both incredible stupidity and reckless investment .

    Ferguson’s piece was much more down to earth and informative with less of the hype . At about 41 mins into the piece he answers or at least attempts to answer the question for government policy makers and politicians

    ‘What do we do ‘

    The 6 options are
    1) Raise growth rates
    2) Lower interest rates
    3) Get bailed out
    4) Fiscal pain (large cuts to public expenditure )
    5) Print paper money ( Inflation escape route )
    6) Default .

    Whereas the Greeks have opted for 3) that route is not available for either the UK or USA . No 2 is a non starter as rates are already at all time lows . No 1 is not a quick fix and in any event the current signs of economic recovery are still fragile and unconvincing.

    So for the UK and USA it’s numbers 4 or 5 . Option 6 is not an option for the USA or the UK as either country going into default would wipe out the world economy and lead to a geopolitical collapse probably ending in the war of all against all or those with scarce resources versus those without any .

    Interestingly Ferguson points to both the USA and UK as outpigging the so called piigs but so far being able to disguise or hide that fact by dint of their imagined ‘currency ‘ independence and perception as ‘giant ‘ economies .

    For me the most interesting Ferguson ‘revelation’ was the example he shows of how the UK is the only state in history that reduced it’s debt through economic growth rates in the 19th century . That reduction was of course all the easier given Britain’s imperial status of the time and more tellingly for today’s Britons the fact that Britons did not ‘enjoy’ universal sufferage until the early 20th century meant that those who ‘ruled ‘ could inflict whatever pain was needed to repay government debt on the British people . Interestingly it was during the pay back period that both the Irish and Indian famines took place . Presumably having to borrow to keep their imperial subjects alive was simply inconceivable to the fiscal conservatives such as Trevelyan and his ilk of the time ?

    For the USA and UK the exit path will have to be a mix of Fiscal pain , Printing money , and raising growth rates . According to Ferguson and others consumer price inflation is already warming up . We await Osborne’s axe for part two.

    Ferguson also makes a point worth repeating that of the 6 tools mentioned above the UK in the post WWI and WW2 periods relied almost entirely on the ‘inflationary ‘ method i.e currency devaluation as the means of escape from it’s fiscal trap . Thus despite the Tories promises of the big society and removing the shackles of bureaucracy and high taxes from the UK’s private sector to enable the growth which would reduce public expenditure as a % of GDP it’s probable that given the political and practical realities of the UK’s actual here and now services economy that printing more pounds will end up as the prime debt reduction agent than fiscal pain .

    Ireland being in the Eurozone doesn’t have that luxury which is perhaps just as well .

  • Anon

    I incurred the wrath of the overlord and am keeping a low low profile.

    Anyhoo, that’s true, but if you were worried about the US becoming Greece you might want to look for some evidence that it is likely or imminent. As yet there is none, not even inclings of interest on debt heading towards more normal levels. A lot of the reproting is confirmation bias city — interest rates have went up 0.1%!!!!! Then no corresponding report when they dip back down.

    A lot on the Right in the US have suddenly got religion now the Democrats are in power and are having to spend. But the defixcit is a long term problem and even the Stimulus is minimal on long term US deficit. It is almost entirely down to Medicare/Medicaid, with a wee bit of Social Security on the side.

    The test for me is if the US puts it’s house in order when things are a bit more stable. Probably starting to tighten 2011/2, actually fixing the hole post 2012

  • Mack

    UK inflation has been continously creeping up, approaching 4% at the moment. Did someone say ‘soft default’?

  • Greenflag

    The UK has not the same endemic fear of inflation as the Germans have . Understandable given the history . In the world of currency ups and downs a new irony is that devaluation of the Euro should be good news for German exporters and the temporary relative strengthening of the US Dollars will keep Chinese holders of USA Treasury Bills somewhat comforted but will not help American exporters .

  • I find the UK economists and central bankers blasé response to inflation that we’ve just marked the high point a bit baffling to be honest.

    Inflation, the same thing we’ve spent the greater part of the past 20 years attempting to 2nd guess and control at every opportunity?

    Scanning the house price tabloids headlines on the subject I doubt people have suddenly found a sense of canniness.

  • Greenflag

    st etienne

    ‘I find the UK economists and central bankers blasé response to inflation that we’ve just marked the high point a bit baffling to be honest.’

    Maybe they believe that under the Tories the UK pound sterling will appreciate against the euro and the dollar and thus import prices in terms of pounds will reduce thus dampening inflation .

    Of course you can believe that scenario if you have a mind to . I would’nt .

  • Mack

    The Ferguson video – I’ve only just seen the whole thing – is by far the best analysis of the sovereign debt crisis I’ve come across this far. Almost regret not leading with it (although I didn’t want to copy Gerard’s blog – he did lead with it – just provide a flashy counter-point to the current Euro crisis…)

  • I think it likely that sterling will do well relative to the euro.

    I don’t think enough attention is being paid (or maybe we just have no choice?) to the natural run up in prices that will/is occuring from the prolonged maintenance of historically low rates. The elasticity of inflation is a perilous thing to ignore for too long

  • Mack

    I think it likely that sterling will do well relative to the euro

    Watch the Ferguson video – that’s highly unlikely.

  • Greenflag

    That it was and a belated thanks to Gerard O’Neill for spreading the light 🙂

    Niall Ferguson’s books are all worth a read .

  • Did he make a comparison?

    Likely the Pound will stay as strong as it has done for the rest of the Euros lifespan to be frank

  • Greenflag

    ‘I think it likely that sterling will do well relative to the euro.’

    Nothing wrong with thinking but I would’nt bet on it . The UK currency outlook should be more visible after Mr Cameron completes his much awaited axe swinging routine .

  • Mack

    Greenflag summarises the 6 options available above. But he demonstrated that the countries in deepest debt trouble (ignoring Japan) were

    UK
    Greece
    Ireland
    Spain
    USA
    Portugal

    In that order, if I remember correctly. The PIGS are only part of the Eurozone, there’s a good chance some, or all, will leave. The UK with it’s own currency has more options available to it, including debasing the currency.

    The Euro might implode spectacularly, but I’m not sure taken as a whole – the Eurozone economy has the same debt problems or the same incentive to print as the UK..

  • Ultimately that’s wishful thinking on your part Mack.

    I’ve read the quotes and while it sets out in no uncertain terms the stark choices facing every government I don’t see any hint of comparison between the UK as it stands and the current assembly of random economies known collectively as the eurozone.

    I’m not attempting to down play the plight of entitlement that the UK finds itself waddling in but neither am I about to equate it to the serious structural imbalances present elsewhere. To do so would be what some may like to call financial engineering, and look were that got us