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All those new dollars being created by an
apparently-still-panicked Fed are pushing up asset prices across the board
(with housing the only exception) and pushing the dollar down to near-record
lows versus other currencies. The charts look eerily like a replay of 2007,
which, of course, is exactly what policymakers want. Rising asset prices,
according to the prevailing logic, will get us spending and borrowing again
and return the economy to self-sustaining expansion. 2006 and 2007, for the
people running this show, were the good old days.
What they seem to be missing is that these trends contain
the seeds of their own destruction, just as they did four years ago. Oil, for
instance, is back above $100 a barrel, which translates into $4 a gallon gas,
which amounts to a sizable tax increase on the consumers who are supposed to
start spending again. CNBC just reported that gas sales have fallen for five
straight weeks.
Same thing for food. Ag commodity prices are through the
roof, which is gradually translating into higher prices at grocery stores and
restaurants. Consumers, as a result, will be eating out a lot less in the
year ahead -- and will still have fewer dollars to spend on other things.
In the financial markets, precious metals are blowing away
old records...
For policymakers, gold and silver occupy a kind of shadow
world. They're not "real" money like dollars and euros, but for
some inexplicable reason people still respect them. Central bankers worry
that they're being unreasonably blamed for their inability to keep their
currencies stable versus these atavistic lumps of metal. As masters of their
universe, they don't like being contradicted by the rabble in the
marketplace. And as managers of fictitious currencies they're terrified of an
"emperor's new clothes" scenario in which everyone suddenly sees
the con they're running. So they're watching gold in particular with rising
anxiety.
...and the dollar is approaching the low it hit just
before the world fell apart in 2008.
This too is a desired goal of US policy, because it makes
US exports more attractive for the rest of the world. But of course it also
makes imports more expensive, which raises the question of how much lower the
dollar can go before headline writers put currency depreciation and rising
food/energy prices together. A series of New York Times articles speculating
about the end of dollar hegemony (and explaining the nature of money) is the
Fed's nightmare because it will get people to thinking about what exactly a
paper currency is. Once that train leaves the station its inevitable
destination is the conclusion that a fiat currency isn't really anything.
It's just a consensual hallucination founded on our trust for the people
managing it. Which in turn leads newly-awakened citizens to check out those
YouTube videos of Bernanke and Greenspan
getting pretty much everything wrong, documentaries like Inside Job, and the ongoing hearings of Ron Paul's subcommittee, in which Fed and
Treasury officials are revealed to be mumbling incompetents and frauds.
As an understanding of the scam spreads, consumers and
investors start converting their dollars into other currencies and hard
assets and the game is over. A crisis of confidence sends the dollar into
free-fall.
This of course is to be avoided at all costs, which makes
the dollar's recent decline versus food, energy, and other currencies such a
dilemma. It can't keep falling indefinitely, so if it doesn't stabilize on
its own -- i.e., if gold, oil and food don't stop going up -- action will
have to be taken to stop it. With Europe and China now raising interest
rates, how long will it be before the Fed is forced to follow suit and start
sucking liquidity out of the system? And how long after that before
everything that's been going up in concert starts to fall together?
John Rubino
DollarCollapse.com
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