Helicopter Ben to Continue Trashing the US Dollar

Admin — Sat, 31 Oct 2009 04:09:21 +0000

Helicopter Ben has been steadily hovering over the United States throwing hoards of dollars at the so called credit crisis. We have all heard about the need for added liquidity into our financial system. However, few people realize the repercussions of cheap money and easy credit. What started as a deficit and spending crisis has potentially turned into a currency crisis. Instead of taking the punch bowl away Federal Reserve Chairman, Ben Bernanke has upped the stakes, pumping massive amounts of funny money into the US economy. Ben chooses to inform the American people of the benefits of cheap money, but blatantly neglects to explain the consequences.

Dollar Devaluation and Inflation

Although prices haven’t immediately risen, inflation is alive and well. By nature inflation is caused by an increase of the money supply or a large change in supply and demand for goods. Simply stated, increasing money supply always causes inflation because the underlying currency is devalued. Currency devaluation is very negative, despite what you might have been told. Devaluation through inflation steals from people who save their money. At the same time debtors are rewarded since the debt owed is devalued. Worse yet, inflation and devaluation discourage savings and encourage spending. Hence the reason, both tactics are used during weak economic periods of time. This key point also explains why Ben Bernanke has chosen to trash the dollar – the average US consumer is heavily saturated in debt.

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US Dollar Carry Trade Beginning

Up until recent months the Japanese Yen was the currency of choice for the Carry Trade. For those who don’t already know, a carry trade exists when one country has much lower interest rates than other countries. The country with low interest rates buys up currency and assets of other countries with higher interest rates in order to achieve a better return. With the recent decrease in US interest rates the Yen Carry Trade is unwinding and the new US Carry Trade is starting. Now countries like Japan are selling the US dollar and buying back stronger currencies and assets. This unwinding process will put even more pressure on the US Dollar.

Trapped Inside a Box

Nothing has changed from a fiscal perspective in relation to the federal reserve. While the Obama administration boasts a policy of change, nothing has changed for the federal reserve. Ben Bernanke is well on his way to an unprecedented dollar destruction with Alan Greenspan at a distant second. Current policies could easily result in the most sever dollar destruction in history. With the economy still being fragile despite massive stimulus and spending, further dollar dilution will surely be on the way. After all, the federal reserve is trapped inside a box. If they let interest rates linger this low for long periods of time hyper-inflation will occur. If the fed tightens monetary policy to defend the dollar, the economy will go into a deflationary recession. We know this scenario won’t occur since Bernanke once stated that he would rather drop money from helicopters than suffer another deflationary depression. In either scenario bad consequences exist for the economy.

Consequences of Inflation

Increased money supply is always inflationary
Inflation steals value from existing currency
Inflation helps debtors – hurts savers
Commodity prices increase
Middle Class and Poor Lose
Upper Class Wins

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Stock Market Valuation in Ounces of Gold

Admin — Wed, 23 Sep 2009 03:09:15 +0000

The recent 6-month run in the stock market has baby boomers and the collective investing community jumping for joy. Double digit gains approaching 50% for some investors and retirees have eased the pain temporarily. However, few people realize how obscure market gains can be – especially when priced in terms of precious metals like gold. Everyone wants to talk about the economy being back on track, but few people discuss our weakening currency. Is it possible that we have borrowed and stimulated our economy to the point of no return? While the stock market is currently hitting yearly highs, the value of the dollar is near all time lows. A unique look at stock market prices in terms of gold tells a chilling story.

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Dow Jones Industrial Average by the Price of Gold

It is quite shocking to see the Dow Jones Industrial Average fall in relation to the price of gold. For the last 10 years massive wealth destruction has carried out, behind a curtain of bullish propaganda. While your portfolio may be rising to higher levels, it has done so at the expense of the US dollar and massive inflation. Now you might be wondering why you should care. First, the value of currency is relative to what it can purchase. When government dilutes currency purchasing power is lost. Secondly, dilution is a hidden form of tax or even “theft” since the Federal Reserve has no authority to print money. Newly issued currency steals value from existing currency. A lot of currency theft has already taken place and more will come as seen by the value of the US Dollar.

Click Here: Get a FREE US Dollar Report Today!

The last point that should be discussed in this article is the topic of diversification. Most of us understand the concept of diversification after the Dot Com bubble and Worldcom and Enron scandals. However one place almost all Americans fail to achieve diversification is in their currency. Most Americans are 100% invested with the United States Dollar. Retirement plans, stock portfolios and bank accounts are 100% anchored with the US Dollar. This is alarming since our current monetary policy is set on trashing the value of the dollar. Additionally, no fiat currency has ever lasted more than than the human lifespan. You have already diversified in financial instruments like equities. Now take the final step and consider diversifying out of the US dollar. How can you do that?

- Buy Precious Metals (gold & silver)
- Buy Foreign Stocks
- Buy Foreign Currency
- Sell US Government Bonds and CDs

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