Nov 21, 2008

Christopher Laird has written a very insightful article, "How To Survive the Coming Dollar Collapse."

http://www.marketoracle.co.uk/Article7171.html

The problem has arisen largely because the US consumer is "tapped out." Laird writes:

The primary reason the USD has held up so well in the last decades, in spite of ever worsening US trade and budget deficits that add to over $1 trillion a year combined, is that the US was an export economy's dream customer. Because the US was such a good customer to the world, they bought our US Treasury bonds, and lent trillions in other ways to the US consumer. As long as the US consumer could carry that process out, our trade partners could make bank on the US and USD.

However, once the US consumer is tapped out, and cannot effectively make a return on investment of our trade partners, the rationale for the continuation of the USD goes away.

He goes on to say that Americans are simply too far into debt to continue their spending spree to buy the foreign goods--and domestic goods as well. He has put his finger on the real problem, and a mere $700 billion in NEW DEBT taken on by the government is not going to solve the problem. The problem is DEBT, and we cannot create new debt to replace old debt and still believe that the problem will go away. Laird continues:

Why did that happen? Quite simply, the Western consumers got tapped out. They borrowed more than they can sustain a return on. So, for example, we see the housing bubble collapse and then all the mortgage bonds collapse, and then all the banks collapse – get the idea? Then all the credit disappears everywhere and we get an assured economic depression. And that will lead to 20% unemployment or worse in the entire world – mark my words.

The overall picture is that the world economic/credit bubble since 1945 has just burst before our eyes since August 07. That is one huge bubble.

Note that this occurred "since August 07." It was within a year after the 7th bowl of wine poured out in Babylon, NY. Secondly, he says, "They borrowed more than they can sustain a return on." What does this mean?

When the Fed took over from the government and usurped the power to create money, the Fed began to LOAN the money to the government at interest. The government should have simply created it as REAL money so that it did not have to pay it back with interest to the bankers who had created the stuff out of nothing. But bankers bribed and blackmailed and duped politicians into signing away the right to create wealth, and soon we had no real money at all in circulation. All that circulated were DEBT NOTES, called Federal Reserve Notes. Each represented an obligation to repay with interest.

Because more money always had to be repaid than what was originally borrowed, this meant that either the government or the public would have to continue borrowing more and more to cover the previous debts without running out of money. This worked as long as the economy continued to expand rapidly, because when the value of property increases, people are able to BORROW MORE on credit and thus cover the previous debts being repaid.

But this could not last forever. Eventually, it had to catch up to us. In 2007 it did just that--right on schedule, I might add.

The ponzi scheme is over. Americans are no longer in a position to go further into debt to cover the interest payments on the previous debts. Even the government cannot make up the difference any more. Not even with a $700 billion "rescue" package. That won't nearly cover the interest payment for a year on public and private debt.

The problem is not the government printing presses. The problem is that they are printing debt notes, rather than actual money. The faster the presses run, the higher the debt.

Laird goes on to mention the possibility of a repudiation of debt, which he correctly identifies as a JUBILEE. He just makes a silly error thinking it comes every 70 years, instead of after 49 years. But that is only a symptom of the near total ignorance of this biblical principle among those who know today's monetary system inside and out. I'm not going to quibble with someone who actually has the courage to mention the Jubilee as a solution to the current problem.

First, if the US abrogated the $60 trillion of promises to Social Security and Medicare, maybe that would save the USD. But that won't happen. Probably, what the US will do is just pay it all, but with worthless dollars.

The second thing that might get the world out of this impending economic depression and a collapse of the USD later would be to forgive all debts. Possibly that would wipe out the USD too anyway. But that would set the stage for a huge world economic recovery.

The trouble with debt forgiveness is it never seems to happen. Believe me, I am not talking hogwash about debt forgiveness. The Bible, for example, talks about how every 7 years and every 70 years there is to be total debt forgiveness. It's called the Jubilee. The idea is a legitimate concept that can work and has worked.

You don't think that's viable? Well it can work because all that happens is that the lenders who offer credit have to factor in either payment in full or forgiveness over a 7 year period. This can be done and would actually result in the biggest sustained world economic boom ever imagined. 
The thing that causes world economic depressions are debt and financial bubbles. The two go together.

But, getting back to the fate of the USD. . . .

Yes, debt forgiveness would be a good idea, but the bank czars aren't about to let that happen. At least not without a struggle. But Mr. Laird is probably unaware of the God Factor that is in operation here. In my view, such debt forgiveness is God's goal. Yes, it will wipe out the USD, but more importantly, it will wipe out the Federal Reserve and its DEBT NOTES.

Probably most important right now is the drop in oil prices. This sounds good, but it has other consequences. Those oil-producing countries buy up a lot of our debt and prop up the value of the US Dollar. If their income goes down the toilet, they will have no choice but to stop buying our debts. In fact, they will soon find that they have to SELL dollars in order to pay their own obligations to meet their budget requirements.

In recent months the values of European currencies have gone down, making the USD go up (relatively speaking). But now it appears we are about to enter the next phase of the economic collapse. The dollar is about to be trashed once again. And then this will set up the next phase of the collapse. One thing always leads to another. Laird thinks this will happen in 2-4 years. I don't know, but I suspect it will happen sooner, like in the year 2009. And this will set us up for whatever God has in store for us in 2010.