by Brandon Smith
17 May 2012
After being immersed in the world of alternative economic analysis for
several years, it sometimes becomes easy to forget that most people do not
track forex markets, or debt to GDP ratio, or true unemployment, or hunch
over IMF white-papers highlighting subsections which expose the trappings of
the globalist ideology.
Sometimes, you just assume the average person
knows what the heck you are talking about.
This is, of course, a mistake. However, it is a
mistake that is borne from the inadequacy of our age and our culture, and is
not necessarily a product of weak character, either of the analyst, or the
The great frustration of being actively involved in the Liberty Movement is
the fact that many people are rarely on the same page (or even the same
book) during political and economic discussion. Where we see the nature of
the false left/right paradigm, they see “free democracy”.
Where we see a tidal wave of destructive debt,
they see a “responsible government” printing and spending in order to
protect our “best interests”. Where we see totalitarianism, they see
“safety”. Where we see dollar devaluation, they see dollar strength and
Ultimately, because the average unaware citizen
is stricken by the disease of normalcy bias and living within the doldrums
of a statistical fantasy world, they simply have no point of reference by
which to grasp the truth when exposed to it. It’s like trying to explain the
concept of ‘color’ to a man who has been blind since birth.
Americans in particular are prone to reactionary dismissal when exposed to
facts that disrupt their misconceptions. Our culture has experienced a
particularly prosperous age, not necessarily free from all trouble, but
generally spared from widespread mass tragedy for a generous length of time.
This tends to breed within societies an overt
and unreasonable expectation of ease. It generates apathy, and laziness. A
crushing blubberous slothful cynicism subservient to the establishment and
the status quo. Even the most striking of truths struggle to penetrate this
smoky forcefield of duplicitous funk.
In recent articles, I have outlined the very immediate dangers of several
potential economic events that are likely to take place this year, including
the exit of peripheral countries from the European Union, the conflict
between austerity and socialist spending in France and Germany, the
developing bilateral trade agreements between China and numerous other
countries which cut out their reliance on the U.S. dollar, and the
the Federal Reserve will
announce QE3 before the end of
All of these elements are leading in one very
particular direction: the end of the Greenback as the world reserve
In response to these assertions I have received letters from some people
(some of them indignant) questioning how it would be even remotely possible
that the dollar could be replaced at all. The concept is so outside their
narrow world view that many cannot fathom it.
To be sure, the question is a viable one. How could the dollar be unseated?
That said, a few hours of light research would easily produce the answer,
but this tends to be too much work for the fly-by-night financial skeptic.
Sometimes, the job of the alternative analyst is to make the obvious even
So, let’s begin…
The Dollar A Safe
This ongoing lunacy is based on multiple biases.
For some, the dollar represents America, and a
collapse of the currency would suggest a failure of the republic, and thus,
a failure by them as individual Americans who live vicariously through the
exploits of their government.
By extension, it becomes “patriotic” to defend
the dollar’s honor and deny any information that might suggest it is on a
Others see how the investment world clings to the dollar as a kind of panic
room; a protected place where one’s saving will be insulated from crisis.
However, just because a majority of day trading investors are gullible
enough to overlook the Greenback’s pitfalls does not mean those dangerous
There is only one factor that shields the dollar from implosion, and that is
its position as the world reserve currency. Without this exalted status, the
currency’s value vanishes. Backed by nothing but massive and unpayable debt,
it sits frighteningly idle, like a time bomb, waiting for the moment of
The horrifying nature of the dollar is that it is only valuable so long as
foreign investors believe that we will pay back the considerable debts that
we (the American taxpayer at the behest of our criminally run Treasury) owe,
and that we will not hyperinflate in the process. If they EVER begin to see
their purchases of dollars and treasuries as a gamble instead of an
investment, the façade falls away.
Yet again this year Congress and the Executive
Branch are “at odds” over the expansion of the debt ceiling, which has been
raised to levels beyond the 100% of GDP mark.
Obama has made claims that increases in the debt ceiling are
“normal”, and that most presidents are prone to hiking the barrier every
once in a while.
Yet, back in 2006, when
George W. Bush increased debt limits, Obama had this to say:
"The fact that we are here today to debate
raising America's debt limit is a sign of leadership failure.
It is a sign that the U.S. Government can't
pay its own bills…Instead of reducing the deficit, as some people
claimed, the fiscal policies of this administration and its allies in
Congress will add more than $600 million in debt for each of the next
Increasing America's debt weakens us
domestically and internationally. Leadership means that 'the buck stops
here.' Instead, Washington is shifting the burden of bad choices today
onto the backs of our children and grandchildren.
America has a debt problem and a failure of
leadership. Americans deserve better."
For once, Barack and I agree on something. Too
bad the man changes his rhetoric whenever it’s to his advantage.
Today, Obama now asserts that raising the debt ceiling is not an opening for
more government spending, but an allowance for the government to pay bills
it has already accrued. This is disingenuous and hypocritical prattle.
Obama is well aware as are many in Congress that
as long as the Federal Government is able to raise the debt ceiling whenever
it suits them, they can increase spending with wild abandon. It’s like
handing someone a credit card with no maximum limit. For most men, the
temptation would be irresistible.
Therefore, one can predict with 100% certainty
that U.S. spending will never truly be reduced, and that our national debt
will mount in tandem until we self destruct.
How has this trend been able to continue for so long? Our private central
bank has created the fiat machine by which all economic depravity is
possible. Currently, the Federal Reserve is the number one holder of U.S.
debt. The Federal Reserve creates its own capital. It prints its wealth from
thin air. The dollar, thus, has become its own lynchpin.
The secretive institution which has never been
subject to a full audit is now monetizing endless debt mechanisms with paper
promises. What value would any intelligent investor put on such a fraudulent
The epic dysfunction of the dollar is rooted in its reliance on perception
rather than tangible wealth or strong fundamentals. It is, indeed, like any
other fiat unit, with all the inevitable pitfalls built into its structure.
Ironically, the value of the Dollar Index is measured not by its intrinsic
buying power, or its historical buying power, but its arbitrary buying power
in comparison with other collapsing fiat currencies.
The argument I hear most often when pointing out the calamitous path of the
dollar is that it is the go-to safe haven in response to the crisis in
Europe. What the financially inept don’t seem to grasp is that the shifting
of savings back and forth between the Euro and the Dollar is just as
irrelevant to our currency’s survival as it is to Europe’s.
BOTH currencies are in decline,
and this is evident by the growing inflationary pressures on both sides of
Ask any consumer in Greece, Spain, France, or
the UK how shelf prices have changed in the past four years, and they will
say the exact same thing as any consumer in the U.S.; costs have gone way
Therefore, it makes sense to compare the
dollar’s value not to the euro, or to the Yen, but something more practical,
like the dollar of the past….
In 1972, just as Nixon was removing the dollar from the last vestiges of the
gold standard, a new car cost an average of $4500. A home cost around
$40,000. A gallon of gas was .36 cents. A loaf of bread was .25 cents. A
visit to the doctor’s office was $25. Wages were certainly lower, but they
kept much better pace with the prices of the era. Today, the gap between
wages and inflation is insurmountable.
The average family is unable to keep up with the
flashflood of rising prices.
According to the historic buying power of the dollar, the currency is a poor
safe haven investment. With the advent of bailout efforts and debt
monetization through quantitative easing, its devaluation has been expedited
FED has left the door open for what I
believe will be a final destructive round of publicly announced QE,
weakening the dollar to near death.
The question then arises; why do foreign countries continue to buy in on the
The Dollar Dump Has
One of my favorite arguments by those defending the dollar is the assertion
that no foreign country would dare to dump the currency because they are all
too dependent on U.S. trade.
To answer the question above, the reality is
that foreign countries ARE already calmly and quietly dumping the dollar as
a global trade instrument.
To those people who consistently claim that the dollar will never be
dropped, my response is, it already has been dropped! China, in tandem with
other BRIC nations, has been covertly removing the greenback as the primary
trade unit through bilateral deals since 2010.
First with Russia, and now with the whole of the
ASEAN trading bloc and numerous other markets, including Japan. China in
particular has been preparing for this eventuality since 2005, when they
introduced the first Yuan denominated bonds. The bonds were considered a
strange novelty back then, especially because China had so much surplus
savings that it seemed outlandish for them to take on treasury debt.
Today, the move makes a whole lot more sense.
China and the BRIC nations today openly call for
a worldwide shift away from the dollar.
With the global proliferation of the Yuan, and the conversion of the Chinese
economy away from dependence on exports (especially to the West) towards a
more consumer based system, the Chinese have effectively decoupled from
their reliance on U.S. markets.
Would a collapse in the U.S. hurt China’s
economy? Yes. Would they still survive? Oh yes. Far better than America
would, at least…
In 2008, I warned of this development and was attacked on all sides by more
mainstream economists and Keynesian proponents who stated that such a
development was impossible. Today, it’s common knowledge that our primary
creditors are “diversifying” away from the dollar, though MSM talking heads
and those who parrot them still claim that this is not a threat to our
To be clear, the true threat to the dollar’s supremacy is not only due to
the constant printing by
the private Federal Reserve (though that is
a nightmare in the making), but the loss of faith in our currency as a
whole. The FED does not need to throw dollars from helicopters to annihilate
our currency; all they have to do is create doubt in its viability.
The bottom line? A dollar collapse is not “theory” but undeniable fact in
motion at this moment, driven by concrete actions on the part of the very
nations that have until recently propped up our debt obligations. It is only
a matter of time before the dollar diminishes and fades away.
All signs point to a loss of reserve status in
the near term.
What Will Replace The
My next favorite argument in defense of the Greenback is the assertion that
“no currency in a position to take the
dollar’s place if it falls”.
First of all, this is based on a very naïve
assumption that the dollar will not fall unless there is another currency to
I’m not sure who made that rule up, but the
dollar is perfectly able to be flushed without a replacement in the wings.
Economic collapse does not follow logical guidelines or the personal pet
peeves of random man-child economists.
Though, to be fair, and to educate those unaware, there IS a replacement
already conveniently ready to roll forward.
The IMF has for a couple of years now
openly called for the retirement of the dollar
as the world reserve currency, to be supplanted by the elitist
organization’s very own “Special Drawing Rights” (SDR’s).
The SDR is a paper mechanism created in the early 1970’s to replace gold as
the primary means of international trade between foreign governments.
Today, it has morphed into a basket of
currencies which is recognized by almost every country in the world and is
in a prime position to take the dollar’s place in the event that it loses
reserve status. This is not theory. This is cold hard reality.
For those who claim that the SDR is not
considered a “real currency”, they should probably
warn the U.S. Post Office, which now uses
conversion tables that denominate costs in SDR’s.
So, now that we know a replacement for the dollar is ready to go, the next
obvious question would be:
Why would global elites destroy a useful
monetary tool like the dollar? Why kill the goose that "lays the golden
People who ask this question are simply unable
to see outside the fiscal box they have been placed in.
For global bankers, a paper currency is not
important. It is expendable. Like a layer of snake skin; as the snake grows,
it sheds the old and dawns the new.
At bottom, men who promote the philosophies of globalization greatly desire
the exaltation of a global currency. The dollar, though a creation of a
central bank, is still a semi-sovereign monetary unit. It is an element that
is getting in the way of the application of the global currency dynamic.
I find it rather convenient (at least for those
who subscribe to globalism) that the dollar is now in the midst of a perfect
storm of decline just as the IMF is ready to introduce its latest fiat
concoction in the form of the SDR. I find the blind faith in the dollar’s
lifespan to be rife with delusion.
It is not a matter of opinion or desire, but a
matter of fact that currencies in such tenuous positions fall, and are in
the end replaced. I believe that the evidence shows that this is not random
chance, but a deliberate process, leading towards the globalist ideal; total
centralization of the world under an unaccountable governing body which
operates a global monetary system utterly devoid of transparency and
The dollar was a median step towards a newer and more corrupt ideal. Its
time is nearly over.
This is open, it is admitted, and it is being
activated as you read this. The speed at which this disaster occurs is
really dependent on the speed at which our government along with our central
bank decides to expedite doubt.
Doubt in a currency is a furious omen, costing
not just investors, but an entire society.
America is at the very edge of such a moment.
The naysayers can scratch and bark all they like, but the financial life of
a country serves no person’s emphatic hope. It burns like a fire.
Left unwatched and unchecked, it grows
uncontrollable and wild, until finally, there is nothing left to fuel its
hunger, and it finally chokes in a haze of confusion and dread…