23 May 2011

Signs of the Times

When a middle of the road (theologically-speaking) Catholic publication like Crisis Magazine picks up on this story, it ought to be a heads-up for you.  Religion and politics are two different things entirely, and Catholics resist easy political classification.  But Crisis does tend to garner many neo-conservative (politically) and conservative novus ordo (liturgically) Catholics as readers.  So, when Crisis publishes an article that favorably cites Ron Paul and Gerald Celente, predicts a currency collapse and urges ownership of commodities and land, I thought it was noteworthy.

From the full article:

The Late Great American Dollar

by Alex Newman

The economic crisis that hit the developed world a few years ago was devastating. Millions lost their jobs, their homes, an their retirements. But the next catastrophe — which could be coming soon — will make the recent recession feel like a boom time.

Imagine gasoline prices really skyrocketing and the cost of food and other essentials going through the roof — when they can be acquired at all. Think Social Security checks that don’t buy much of anything, and life savings wiped out in days. It has happened before in other countries, at other times — the Weimar Republic, the former Yugoslavia, and Zimbabwe, to name a few. Nations have risen and fallen throughout history, and there’s no reason to believe that couldn’t happen with the United States.

[...]

Financial analyst and former Wall Street currency trader John Rubino has also been ahead of the curve. In 2003, he wrote How to Profit from the Coming Real Estate Bust. Four years later, he came out with The Collapse of the Dollar and How to Profit From It.

In an interview with Crisis, Rubino said America is past the point of no return — there is “absolutely nothing” that can be done to prevent a collapse of the dollar. “We’ve already borrowed enough money to destroy the U.S. financial system, so a crisis of some sort is baked in the cake.” The debate over cutting “miniscule bits” from the government budget is a “wasted effort.”

“Historians will date the beginning of the dollar’s death spiral at 1971, when Richard Nixon closed the gold window. Since then the dollar has been gradually losing purchasing power. But the ‘crisis’ phase is just beginning,” he explained. “Now that we’re running trillion dollar deficits and basically printing the money to cover our debts, it won’t be long before the world figures out that the dollar is being inflated away and acts accordingly.”

He sees two possible outcomes. One would be a depression resulting from an economic collapse under all of the debt. The other: inflation and a currency collapse, caused by policymakers’ attempts to inflate the debt away. “We’ve never been here before, with this much debt on one hand and central banks with printing presses on the other,” he said. “Historic, but not fun, times!”

[...]

Editor Bob Chapman of The International Forecaster, a former stock broker who has been in economics and finance for more than 50 years, is likewise pessimistic. “The dollar-based international monetary system is being deliberately destroyed to bring in a global fiat currency and to bring the U.S. and Europe financially and economically to their knees,” he told Crisis. He predicts “inflation and hyperinflation, which will be followed by deflationary depression.”

[...]

While a money meltdown might be inevitable, we have no way of knowing what will initiate it. It could be a spike in interest rates, a total withdrawal of foreign creditors from the bond market, or an increase in the velocity of the newly created money, causing massive and sudden price increases. A global sell-off of U.S. Treasury securities or American dollars could do the trick as well — as could a rapid increase in the value of China’s currency.

Prudent Americans should start preparing now. Schiff offered his own recommendation: “Don’t own dollars!” He suggested foreign currencies and commodities as two potential assets worth considering. Schiff believes much of the rest of the world will probably benefit once American consumers and the U.S. government are no longer able to borrow and print money to consume so many of the world’s goods and services.

John Rubino, who authored the book about the looming dollar crisis and how to profit from it, had different advice. “Shift out of dollars — and other fiat currencies like euros and yen — and into hard assets like gold, silver, oil, and agricultural commodities,” he suggested. “Avoid debt unless you’re guaranteed to be able to pay it off even if you lose your job. Diversify geographically by owning assets in several different countries.”

Gloomier advisors suggest people invest in rural property, non-perishable food, and ammunition.

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