UNKNOW COUNTRY NEWS
Dollar on the Edge
Thu Jun 15, 2006 23:17
Dollar on the Edge
http://www.unknowncountry.com/news/?id=5349
12-Jun-2006
Over the past two months a strange and disturbing thing happened to the dollar: China and Japan began to shift away from buying US Treasury debt (dollars) and into the Euro market and other curriencies. Across April and May, the Euro began to rise, moving from about $1.20 to the area of $1.30.
This has happened despite the fact that the US Treasury has been signaling more and more aggressively that US interest rates will continue to rise, making the dollar theoretically more appealing to foreign purchasers. There is an extraordinary economic danger associated with this: if the dollar collapses, the US economy is going to suffer a catastrophic blow that could double gas prices and send inflation soaring beyond anything Americans have ever known.
The weaker the dollar becomes, the higher US interest rates must go, and the more pressure Americans will be under, at every level. The Organization for Economic Cooperation and some elements of the International Monetary Fund are predicting that the dollar will fall from 35% to 50% to account for the gigantic debt that the Bush Administration has created by the combination of tax cuts and spending on the war in Iraq.
This will result in an increase in gasoline prices from the region of $3.00 to the region of $6.00, and will cause all imports to roughly double in price. This will mean that everything from clothing to cars to many grocery items will shoot up in price. At this point, the housing market will collapse, and there will be a wave of bankruptcies. But the new bankruptcy act, forced through congress by Tom DeLay last year after he received a half million dollar contribution from the credit card industry, will insure that debtors can never liquidate their indebtedness, meaning that they can never re-enter the economy, and therefore that recovery, if it occurs, will take at least a generation. This legislation had languished for years, because it is so economically dangerous.
A 'run' on the dollar, caused by panicking foreign holders attempting to sell into non-existent buying, could cause the dollar to collapse very suddenly, even over a matter of days.
There is evidence that the US is attempting to manage the decline by purchasing its own debt. As Asian purchasing of US paper declined last month, the slack was taken up by Caribbean and UK banks that would not normally have the liquidity to make such purchases. Therefore, they are acting for a third party, and the only party that would buy dollars when a loss in value is inevitable is the US Treasury.
By doing this, the US is hoping to prevent a sudden collapse of the dollar and the subsequent unwinding of the US and world economies in a fiscal disaster so profound that it will eclipse the Great Depression. It can work for a while, but inevitably if the US becomes the only major customer for its own currency, the dollar will go into freefall. Where it will stop, and what will happen to the world economy then, are the looming unknowns that have made world equity markets so uneasy over the past thirty days, and promise to bring more trouble in the future.
Art credit: freeimages.co.UK
It takes courage to face a situation like this without flinching. For us, the really courageous people are the people like YOU who have come forward about their visitor experiences. At unknowncountry.Com, we look at all the information that’s available to us every day and sift out the TRUTH. Where else will you find insight like this? Not on Fox News or CNN. Why can we do it? We're not part of the mainstream, because the only boss we have is you. KEEP us independent: subscribe today.
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http://www.unknowncountry.com/news/?id=5349
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24-Aug-2004: Money Really Doesn't Buy Happiness
24-May-2004: The Satisfaction of Making Money
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====================
THE REAL REASON WE ARE AT WAR!
Alexander's Gas & Oil Connections - UN agrees to Iraq euro account
MORE:>>
http://www.unknowncountry.com/news/?id=5349
12-Jun-2006
Over the past two months a strange and disturbing thing happened to the dollar: China and Japan began to shift away from buying US Treasury debt (dollars) and into the Euro market and other curriencies. Across April and May, the Euro began to rise, moving from about $1.20 to the area of $1.30.
This has happened despite the fact that the US Treasury has been signaling more and more aggressively that US interest rates will continue to rise, making the dollar theoretically more appealing to foreign purchasers. There is an extraordinary economic danger associated with this: if the dollar collapses, the US economy is going to suffer a catastrophic blow that could double gas prices and send inflation soaring beyond anything Americans have ever known.
The weaker the dollar becomes, the higher US interest rates must go, and the more pressure Americans will be under, at every level. The Organization for Economic Cooperation and some elements of the International Monetary Fund are predicting that the dollar will fall from 35% to 50% to account for the gigantic debt that the Bush Administration has created by the combination of tax cuts and spending on the war in Iraq.
This will result in an increase in gasoline prices from the region of $3.00 to the region of $6.00, and will cause all imports to roughly double in price. This will mean that everything from clothing to cars to many grocery items will shoot up in price. At this point, the housing market will collapse, and there will be a wave of bankruptcies. But the new bankruptcy act, forced through congress by Tom DeLay last year after he received a half million dollar contribution from the credit card industry, will insure that debtors can never liquidate their indebtedness, meaning that they can never re-enter the economy, and therefore that recovery, if it occurs, will take at least a generation. This legislation had languished for years, because it is so economically dangerous.
A 'run' on the dollar, caused by panicking foreign holders attempting to sell into non-existent buying, could cause the dollar to collapse very suddenly, even over a matter of days.
There is evidence that the US is attempting to manage the decline by purchasing its own debt. As Asian purchasing of US paper declined last month, the slack was taken up by Caribbean and UK banks that would not normally have the liquidity to make such purchases. Therefore, they are acting for a third party, and the only party that would buy dollars when a loss in value is inevitable is the US Treasury.
By doing this, the US is hoping to prevent a sudden collapse of the dollar and the subsequent unwinding of the US and world economies in a fiscal disaster so profound that it will eclipse the Great Depression. It can work for a while, but inevitably if the US becomes the only major customer for its own currency, the dollar will go into freefall. Where it will stop, and what will happen to the world economy then, are the looming unknowns that have made world equity markets so uneasy over the past thirty days, and promise to bring more trouble in the future.
Art credit: freeimages.co.UK
It takes courage to face a situation like this without flinching. For us, the really courageous people are the people like YOU who have come forward about their visitor experiences. At unknowncountry.Com, we look at all the information that’s available to us every day and sift out the TRUTH. Where else will you find insight like this? Not on Fox News or CNN. Why can we do it? We're not part of the mainstream, because the only boss we have is you. KEEP us independent: subscribe today.
Related Stories:
http://www.unknowncountry.com/news/?id=5349
19-May-2006: The New Superpowers--UPDATE
04-Nov-2005: Is Wal-Mart Evil?
29-Sep-2005: Economy Can Only Get Worse
16-Aug-2005: Can Money Buy Happiness? Yes, But…
24-Aug-2004: Money Really Doesn't Buy Happiness
24-May-2004: The Satisfaction of Making Money
30-Sep-2003: The Bank Mafia
30-Jul-2002: CEOs Still Living High
====================
THE REAL REASON WE ARE AT WAR!
Alexander's Gas & Oil Connections - UN agrees to Iraq euro account
MORE:>>
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