Larry Edelson, "U.S. Dollar Doomsday Crash 2010"
"U.S. Dollar Doomsday Crash 2010"By Larry Edelson
"If you think that what’s happening to the bankrupt economies of Greece, Portugal, and Spain are merely a sideshow in this great financial crisis, it’s only fair to warn you: The facts I reveal in this bulletin are shocking… shameful… and, to anyone who cares as much about this nation as I do, deeply disturbing. If these facts upset you, I apologize — but for the past 32 years, my mission has been to help investors protect themselves and profit in every imaginable investment environment. I am not about to stop now — because in investing as in life, only the truth will set you free. Yes, I’m well aware that the revelations I make in this bulletin are almost certain to make me some extremely powerful enemies in Washington. And in China, too! But for that, I am NOT sorry.
Frankly, I’m mad as hell about the shellacking our government has planned for you… for me… and for millions of other honest, hard-working Americans… I absolutely refuse to stay silent while good people are stripped of their life savings, investments and even the retirement funds that are due to them — and by our own leaders!
The simple truth is: The next phase of Bernanke’s Debt Solution is already under way, jointly engineered in Washington and Beijing. Now, if it’s hard for you to believe that our own leaders have turned on us… that they are intentionally attacking your wealth and financial independence… and that they have already begun executing their plan… I certainly understand. But please; for your own sake and for your family’s safety… hear me out.
Washington’s Guiltiest Secret: Ask anybody about how much Washington owes and they’re likely to say the national debt is somewhere around $12.8 trillion. But as shocking as it is, that massive number is just a fantasy — a tiny fraction of the gargantuan amount our government really owes. In fact, our real national debt is nearly TEN TIMES GREATER! In addition to that official $12.8 trillion national debt, Washington has written $108 trillion in off-budget, unfunded IOUs on Social Security, Medicare, Medicaid, its prescription drug program, its veterans benefits programs and its Federal pension programs that must also be paid. That’s more than $120 trillion — and that’s not even counting the $1 trillion the new health care bill will cost us… or the trillions in NEW deficits projected over the next 10 years.
The plain truth: Altogether, our leaders have obligated us… our children… and our children’s children… to pay off an utterly unpayable $127.8 trillion in debt.
Global Investors in U.S. Treasuries Are Recoiling in Horror: Until recently, we could count on overseas investors to buy our treasuries — effectively loan Washington the money it needs to pay its bills. In fact, foreigners fully fund over HALF of our borrowing addiction, holding $9.7 trillion in U.S. securities — including almost $4.6 trillion in bonds. Meanwhile, the foreign investors who purchase treasuries — who have loaned Washington the money it needs to stay in business — are horrified at our leaders’ inability to manage the nation’s finances… wondering if we’ll be able to make good on our obligations to them… and starting to snap their wallets shut.
In November 2009, for instance, China — the world’s largest investor in U.S. government debt — became a net SELLER of treasuries. The very next month — in December 2009 — China sold a whopping $34 billion worth of U.S. government bonds. Others followed suit: Net overseas holdings of short-term treasuries fell by $53 billion. And in January 2010, foreign net purchases of U.S. Treasury securities plunged a shocking 69.8%. Japan, the second-largest foreign holder of U.S. debt, was also a net seller in January. In February 2010, Beijing sold yet ANOTHER $11.5 billion of U.S. Treasuries, making that four consecutive months of dumping U.S. bonds.
Why? Because… Washington’s debts have finally reached the point of no return: They are absolutely, positively UNPAYABLE! We have reached the point of no return. The simple truth, of course, is that Washington will never repay the full $127.8 trillion it owes. Think through the alternatives …
1. CAN WE BORROW OUR WAY OUT OF DEBT? Virtually impossible. As we’ve seen, foreign investors who have loaned us the money that Washington needs to stay in business are already fed up. They’re worried that we’ll never be able to repay what we owe them. They’re now becoming net SELLERS of treasuries. So it’s nearly impossible that they’ll be willing to throw trillions more of their money our way. Plus, even the mere hint that Washington was trying to borrow trillions more would crush bond prices and light the fuse on an interest rate explosion that would kill the economy.
2. HOW ABOUT MASSIVE SPENDING CUTS? A snowball’s chance in hell! The White House and Congress will continue doing what they’ve always done and what they’re doing right now: Finding dozens of outrageous new ways to waste your money and plunge us even deeper in debt. Meanwhile, Washington WILL make a show of addressing the crisis by delaying the retirement age for Social Security from age 65 to 68 and by reducing benefits. But how does that help you? It doesn’t. It just dilutes down what you’re already owed even more! So if you’re looking for any meaningful cuts in wasteful spending in Washington, forget about it. Any real cuts needed to make any noticeable dent in the government’s $127.8 trillion debt would probably cause riots in the streets and guarantee a quick end to the career of every politician who voted for them.
3. COLOSSAL TAX INCREASES: Sure — the Obama administration will raise your taxes. But even the White House says that the most startling proposals would only generate an additional $43 billion in revenue. But $43 billion is only 3% of our $1.6 trillion annual deficit… And it’s only about one-third of one percent of the total $127.8 trillion Washington owes. At that rate, it would take 300 years to repay our government’s debt with new taxes! In fact, it would take new taxes of $1.1 million for every U.S. household to pay off this debt. Of course almost nobody has that kind of money — and besides: Taxes representing just a fraction of that amount would surely kill this feeble recovery, drive unemployment into the stratosphere and light the fuse on a Great Depression that makes the last one pale by comparison. And that leaves Obama and Bernanke with one and ONLY one alternative…
Converting YOUR Wealth into “Collateral Damage:” When war strategies to vanquish enemies wind up killing innocent civilians, it’s called “collateral damage.” Similarly, when political strategies to vanquish debt wipe out your wealth, the same term applies. And right now, President Obama and Fed Chief Bernanke know that there is one way — and ONLY one way they can ever hope to make good on their massive debt obligations: They must devalue the U.S. dollar! Only then can they hope to repay Washington’s debts — by doing it with cheaper dollars.
Sure — Obama and Bernanke also know that by doing so, they’re also gutting the value of every dollar you earn, spend, save, invest and plan to use in retirement. But they think they have no choice. To allow Washington to default on its debts and obligations would almost surely cause the entire U.S. economic house of cards to collapse — and the blame would land squarely on the Obama administration’s shoulders.
You? You’re little more than collateral damage. If the only way to delay default is to rob you of everything you’ve worked for and everything you’re counting on to see you through retirement — that’s evidentially just fine with them. And this is precisely what our government has been doing — by intentionally debasing our own currency in two, distinct phases …
DOLLAR DOOMSDAY 2010 — PHASE ONE: Flood the World with Unbacked Paper Dollars! Money is subject to the laws of supply and demand just like any commodity. If you want to lower the price, simply increase the supply. Just do that and the buying power of the greenback will plunge. Sure — your bank statement may still say you still have $25,000… but in truth, when you go to spend that money, it only buys as much as $18,000… or $15,000… or $12,000 used to. Because the value of your money has been stolen from you. And this is precisely what the Fed has been doing in Phase One of this great dollar disaster …
• Just in the last two months alone, the Fed has agreed to create $1.25 trillion out of thin air to buy mortgage-backed securities… including another $300 billion to buy U.S. Treasuries alone.
• The liabilities on the Fed’s balance sheet have roughly DOUBLED — from $1.2 trillion a year ago to more than $2 trillion today …
• The actions announced by the Fed in March are most likely to expand that to well over $3 trillion over the next year …
• And from September 10, 2008 to March 10 of this year, Bernanke has increased the nation’s monetary base from $850 billion to $2.1 trillion.
That’s an irresponsible, irrational and insane increase of 2.5 times in just 18 months — and you must not underestimate its sweeping historical significance: Nearly 218 years ago, Treasury Secretary Alexander Hamilton established the dollar as America’s national currency when Congress passed the Coinage Act of 1792. Since that memorable date, the United States has suffered through one pandemic, two great depressions, 11 major wars, and 44 recessions. Four U.S. presidents have been assassinated while in office. Hundreds of thousands of businesses have gone bankrupt; tens of millions of Americans have lost their jobs. But not once has the U.S. government ever resorted to the kind of extreme abuses of its money-borrowing and money-printing power we’re seeing today!
DOLLAR DOOMSDAY 2010 — PHASE TWO: Default by Devaluation: You’ve probably been hearing a lot lately about how overvalued the Chinese yuan is and how that gives the Chinese an unfair trade advantage… how hard the Obama administration has been working to convince Beijing to raise the yuan’s value against the dollar in order to level the playing field. The only problem is, it’s all a lie. The truth is, the average Chinese worker earns a tiny fraction as much as American workers do. Even if the yuan DOUBLED or TRIPLED in value against the dollar, Chinese products would still be far cheaper on world markets than U.S.-made products.
So what’s the real reason why Washington is so desperate to have China INcrease the value of the yuan? Simple: By doing so, they will be automatically DEcreasing the relative value of the dollar — and they’ll be able to repay China, and everyone else who owns treasuries or is owed money by Uncle Sam using CHEAPER dollars! Don’t think it’s going to happen? Well, let me tell you something: For the last nine years I’ve been warning that China would keep the value of its yuan extremely low — so it could keep its exports cheap, build up a massive trade surplus with the U.S. and a huge pile of cash. But I also warned that, as soon as it had a big cash hoard and a strong enough domestic consumption to sustain its economy WITHOUT such massive growth in its exports to the U.S., it would let the yuan get stronger, driving DOWN the value of the U.S. dollar.
Now that day has come. Indeed, China has no choice but to go ahead with a yuan revaluation — and dollar devaluation. And today, it won’t negatively impact China nearly as much. Reason: Beijing has been preparing for this the entire time — by gobbling up natural resources left and right, not only for strategic supply needs, but also to hedge against the inevitable dollar devaluation. So the steps are now in motion and we’ve already seen the first warning signs. On April 14, when Singapore, for the first time in its history, pushed the value of its currency higher. Next, look for the Korean won, Malaysian ringgit, Indian rupee and Taiwan dollar to begin rising rapidly against the dollar.
Soon, you can expect the biggest shoe to fall on the U.S. dollar when China ends the yuan’s peg to the greenback and allows its currency to move higher. And with each and every revaluation, YOUR dollar is worth LESS! Make no mistake: This is nothing more and nothing less than highway robbery and YOU are the intended victim! The greenback has already plunged as much as 33% in real, trade-weighted terms since its 2002 high. By that measure, every dollar in your wallet… in your savings account… in your brokerage account… and in your retirement account is worth only 67 cents. Since November 2008, the U.S. Dollar Index has dropped more than 10%. And since just the first of this year it’s even shed almost 5% against our northern neighbor the Canadian dollar.
The handwriting is on the wall: This great dollar disaster is only just beginning. Obama and Bernanke have no choice. Either they dramatically devalue the dollar over the next three years, or they go down in history as the first administration to default — to welch on the government’s debt obligations. Still, as serious as this administration is about gutting the value of your money, the dollar has two ADDITIONAL strikes against it that virtually guarantee it will soon be little more than a hazy memory …
The U.S. dollar: Not Worth the Paper it’s Printed On: My forecast: This great dollar disaster will continue — with minor short-term pauses and corrections in the decline — for at least the next two to three years. At the very least, the dollar will sink so low and inflation will soar so high that you will eventually need at least TWICE the income you have now just to survive. A lifestyle that costs you $100,000 per year today will be $200,000 or more. And, as the dollar dives, if global confidence is totally shattered, it’s likely to get much worse: In 1923 Germany, inflation was so rampant some people fed marks into their stoves, because they burned longer than the amount of wood they could purchase with the worthless paper. In 1970s Brazil, inflation was so rapid that merchants had to close their stores at mid-day to mark up prices on merchandise. Whether inflation becomes this severe in the U.S. or not, I am certain it will NOT be limited to our inflation experiences of years past. Those were caused strictly by higher energy prices, soaring wages or shortages in select commodities.
The coming hyperinflation will be triggered by many of those forces PLUS the death of the dollar as the world’s reserve currency… a collapse in confidence in the U.S. government… and the ensuing stampede of global investors out of the dollar — into things that protect them as the dollar careens into the abyss. That will affect you in ways most people haven’t even begun to fathom. It will mean:
• The purchasing power of your money will collapse like a house of cards.
• The prices of the most basic goods and services will soar.
• Savers will be left in the dust as the value of their cash implodes."
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