# Is the Dollar Dying? Why US Currency Is in Danger



## BillS (May 30, 2011)

http://www.cnbc.com/id/100461159

The U.S dollar is shrinking as a percentage of the world's currency supply, raising concerns that the greenback is about to see its long run as the world's premier denomination come to an end.

When compared to its peers, the dollar has drifted to a 15-year low, according to the International Monetary Fund, indicating that more countries are willing to use other currencies to do business.

While the American currency still reigns supreme -- it constitutes $3.72 trillion, or 62 percent, of the $6 trillion in allocated foreign exchange holdings by the world's central banks -- the Japanese yen, Swiss franc and what the IMF classifies as "other currencies" such as the Chinese yuan are gaining.

"Generally speaking, it is not believed by the vast majority that the American dollar will be overthrown," Dick Bove, vice president of equity research at Rafferty Capital Markets, said in a note. "But it will be, and this defrocking may occur in as short a period as five to 10 years."

Bove uses several metrics to make his point, focusing on the dollar as a percentage of total world money supply.That total has plunged from nearly 90 percent in 1952 to closer to 15 percent now. He also notes that the Chinese yuan, the yen and the euro each have a greater share of that total.

"To the degree that China succeeds in increasing its market share of the world's currency market, the United States is the loser," Bove said. "For years, I have been arguing that the move of the Chinese makes perfect sense from their point-of-view but no sense for the Americans."

For a country with a budget deficit in excess of $1 trillion a year, the consequences of losing standing as the world's reserve currency would be dire.

"If the dollar loses status as the world's most reliable currency the United States will lose the right to print money to pay its debt. It will be forced to pay this debt," Bove said. "The ratings agencies are already arguing that the government's debt may be too highly rated. Plus, the United States Congress, in both its houses, as well as the president are demonstrating a total lack of fiscal credibility."

Bove is not the only one sounding the reserve currency alarm, though the issue has fallen off the front pages as hopes for a sustained U.S. recovery have taken hold and the stock market has surged to near-record highs.

But the looming battle over budget sequestration in Washington could revive long-standing fears of fiscal stability.

"If (dollars) no longer offer the safety that investors have come to expect, they will not function as the stable collateral required by bank funding markets," Barry Eichengreen, a professor at the University of California, Berkley, warned in a Financial Times commentary late last year. "They will not be regarded as an attractive form in which to hold international reserves. And they will not be seen as a convenient vehicle for merchandise transactions."
To be sure, the markets at this point are not acting like the dollar is in severe trouble. The greenback has maintained its position as a general safe haven in times of trouble.

"Longer term, of course, countries are going to diversify away from the dollar if they can. There are more favorable investment opportunities out there if you can catch yield," said Christopher Vecchio, currency analyst at DailyFX, a trading firm. "Despite the increase in risk to the U.S. dollar and Treasury, investors still feel safest at home."

But the Federal Reserve's successive quantitative easing programs, which have created $3 trillion in new greenbacks, continue to spur worry over the dollar's status.

*"The No. 1 security issue we have as a nation is the preservation of the U.S. dollar as the world's reserve currency," said Michael Pento, president of Pento Portfolio Strategies.* "It's a thousand times more important than a nuclear bomb being tested by North Korea. It's a thousand times more important that we keep the dollar as the world's reserve currency, and yet we are doing everything to abuse that status."

The dollar's seemingly precarious status is why Pento remains bullish on gold and believes the dollar's demise as the premier reserve currency could end even sooner than Bove predicts -- perhaps by 2015.

"Five to 10 years -- that would be an outlier," he said. "I would say 2015, 2016, that would be the time when it becomes a particularly salient issue. When we're spending 30 to 50 percent of our revenue on debt service payments, we enter into a bond market crisis. The dollar starts to drop along with bond prices. That would set off the whole thing."

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I'm surprised to see an article like this in the mainstream press.


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## RevWC (Mar 28, 2011)

It is coming soon!

http://realcurrencies.wordpress.com/2013/04/07/the-dying-dollar/

The Dying Dollar and the Rise of a New Currency Order
by Anthony Migchels on April 7, 2013

For years now, the collapse of the dollar has been in the cards. Recent developments show mounting pressure on the dollar's reserve currency status. With a major international deflation going on, the threat of inflation through money printing is unreal. However, should the dollar's reserve currency status end, the repatriation of trillions of petro- and eurodollars could lead to a strongly inflationary scenario.

The roles of a reserve currency are to finance international trade and to function as a store of value for Governments. Until the second world war it used to be the British pound, but with the demise of the British Empire, the pound lost its international relevance and was overtaken by the dollar. This was formalized in the 1944 Bretton Woods system. All other currencies were fiat currencies, but pegged to the dollar, which in turn was pegged to Gold at 40 dollars an ounce and redeemable for international trading partners.

The Eurodollar
With the dollar as the reserve currency, the US had to export dollars. In the early years after the war especially for Europe, the famous Eurodollars. This sounds great: print money and buy whatever you like. But with the Gold window it was also risky: overprinting could mean excess dollars would be exchanged back to Gold, depleting US Gold reserves.

This was also a weakness that those annoyed with American Hegemony could exploit. In 1967 the leftist press mogul Jean-Jacques Servan-Schreiber penned a famous screed called 'le défi Américain' (the American challenge'), arguing Europe was being colonized economically by superior American competition.

France, at the time, was run by de Gaulle, who never was impressed with Anglo-American supremacy. He made a point of exchanging every dollar he could lay his hands on as a means to undermine it.

In the late sixties the situation got badly out of hand because of the Great Society and the Vietnam war, very costly projects that were deficit financed, leading to serious inflationary pressures. Inflation that the US tried to export, leading to an excess of dollars abroad. Especially the resurging Deutschmark's appreciation became untenable. The Europeans started pressuring the US to fix its deficits, provoking the US Treasury Secretary John Connally famous cry 'the dollar is our currency and your problem'.

But the situation had become unsustainable and Nixon was forced to close the Gold window to stop the depletion of US gold. This was the end of the Bretton Woods system and from then on the major currencies were floated freely in the international currency markets.

The Petrodollar
But it did not end the dollar reserve currency status, as the Empire had been found another basis for it: they reached an agreement with the House of Saud, to accept only dollars for its oil. The Sauds agreed to invest their dollar wealth on Wall Street, making the deal even more powerful for the Empire. Saudi Arabia controlled OPEC and the dollar was saved: international oil trading is financed with dollar only. Since then we have been on an informal Black Gold standard, known as the petrodollar.

This situation was better than before, because overprinting of the dollar for international trade or to finance all sorts Empire projects could no longer be punished by depleting Gold reserves and would result only in rising prices.

In the last decade the problem of over printing was solved by artificially raising oil prices through the Peak Oil hoax, and ending Iraqi oil production. It must be understood that the Empire is not looking for more oil production. There is so much oil in the world that should it be drilled for freely, it would end the Money Power's energy monopoly. The Iraq invasion and the quest for control of the Middle-East is to keep a lid on oil production. Saddam's suicidal decision to accept euro for his oil only hastened his demise.

Even today Iraqi oil production is not even half of what it was before 1991. With the Western Oil companies now in charge, it will most likely never fully recover.
By raising the price for oil, the oil market has mopped up excess dollar supplies, which are now needed for the oil trade. As a result, the dollar has remained relatively stable in its value. Of course, it fits well with the agenda of decapitating the middle classes and under this agreement higher oil prices also means ever more oil profits invested in Wall Street.

Of course, the great boon of this for the Empire is that it can pay with worthless paper for real goods. It can eternally finance a major trade deficit.

Trade deficits are incorrectly understood as problematic.
From a nation's point of view, the goal of trade is not to export, but to import. We export to give back for what we need from others. If you run the reserve currency, you don't need to export as much as you import, because you can partially finance your imports with money printing. For all other nations this is impossible and trade deficits are lethal in the long run, as it leads to net capital outflow.

But the US Empire is in trouble. Its infrastructure is crumbling, its manufacturing base gone, it's badly over extended. It needs ever more virulent threats to coerce the nations into dollar submission and just like Connally failed in 1971, the US is failing today. The Money Power is done with the Empire and the dollar and it is moving to the next phase. The dollar will have to step back and we are seeing a realignment.

The new currency order
China is moving towards a Gold backed yuan that will be very powerful in the international arena. Recently Australia, which is already completely dependent on China, with 30% of its exports going there, is preparing direct convertibility between the yuan and the Australian dollar, meaning they will no longer use US dollar to finance bilateral trade. This means less US dollars are needed in its reserve currency role.

In 2001 Goldman Sachs executive Jim O'Neill invented the BRIC's. South Africa was later added, representing Africa and emphasizing its globalist agenda. Russia and China, as two powerful neighbors, obviously have long standing and important bilateral relations. But equally obviously, have little in common with Brazil, India and South Africa. India and China are actually sworn enemies. However, in 2009 they organized a first summit. Just a week ago we all of the sudden hear the BRICS are planning to open up a competitor to the IMF. They're still working out the details and it's not a done deal yet, but the move looks very serious.

And there is of course the euro, which, make no mistake, is in great shape. True, Eurocrat legitimacy is suffering because of the euro crisis, even in Germany the currency is losing support. But the euro crisis is purely for internal consumption, to sucker the nations into surrendering budget responsibility to Brussels. This is the final frontier for a full blown EU federalist Super State. While the euro is deeply hated, this is not really a problem for the Money Power: it isn't in this business to make friends and it does not mind a big fight. It only fears real alternatives and these are nowhere to be seen. There is nobody proposing anything real, people are just letting off steam. Once they get their fiscal union, the crisis will quickly end. People have a short memory.

The euro was designed to be eventually backed by Gold and the ECB has enough of the stuff to be ready for the coming transition.

Conclusion
We are seeing the advent of the new currency order. There will be a number of more or less equal blocks: a dollar zone, a Yuan/BRICS zone and the euro, with the Yen and the Pound as lesser entities. These will later be able to converge to even more 'cooperation', in the Money Power's relentless march towards World Currency.

These units will be at least partially Gold backed, implying long term deflationary pressures. Central Banks are buying Gold in major quantities, creating the interesting question why Gold prices have not risen in the last 18 months.

The problem for the United States will be to manage the transition. Trillions of dollars that will no longer be needed will have to be repatriated and this will lead to very strong inflationary pressures at home. It is unclear how the Fed is going to deal with that. It probably can't. Furthermore, the US is probably in the worst of positions to deal with a new Gold standard. They claim to have 8,000 tonnes of Gold in Fort Knox, but nobody really believes that.

The hyperinflation scare that the Austrians have been promoting because of 'money printing' is ridiculous: we are in a stagflationary depression and prices are rising because of speculation, not because of excess money. But when the dollar loses its current status, long term price rises will become the norm.

The Greatest Depression has only just started.

Afterthought
Here's a highly recommended post by Roberts, the Assault on Gold. It makes a plausible case for massive Fed bullion busting. As discussed in 'why is Gold not Rising?', the ascent of Gold was a carefully orchestrated operation, but it probably got out of hand in 2011. Since then the Fed has been very active on COMEX again. With CB's and market players buying massive amounts, it's the only logical explanation for stalling bullion. The fall of COMEX and the fall of the Dollar are basically an evil twin, they will happen simultaneously and because of each other.


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## BillS (May 30, 2011)

I pretty much agree with that except for the part about the euro. The ECB is doing QE to infinity too. Just like the Bank of Japan. The major players are all destroying their currency at the same time.


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## goshengirl (Dec 18, 2010)

BillS said:


> The major players are all destroying their currency at the same time.


Yeah, I'm afraid it's going to be a major bonfire for everyone. Are we all stocked up on hot dogs and marshmallows?


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## partdeux (Aug 3, 2011)

I've said it several times before, there is no currency currently available that can be the world's reserve currency. I used to think the NWO was a bunch of hooey... I'm not so sure anymore.

Take down all the worlds financial systems, and replace it with a "new" metal backed currency.


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## RevWC (Mar 28, 2011)

partdeux said:


> I've said it several times before, there is no currency currently available that can be the world's reserve currency. I used to think the NWO was a bunch of hooey... I'm not so sure anymore.
> 
> Take down all the worlds financial systems, and replace it with a "new" metal backed currency.


Instead they will/have create a digital currency..another rube..


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## invision (Aug 14, 2012)

RevWC said:


> Instead they will/have create a digital currency..another rube..


I talked to a guy this last week about bitcoin... he was all over it, thinking it is the best thing since sliced bread... had an arguement that actually made sense over and over... although I didn't go into great details about how I think it is an unsafe investment...

I am only 41, but I like to see and feel my money - even if it is a fiat currency, I still like being able to touch it... am I just old fashioned??? :eyebulge:


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## partdeux (Aug 3, 2011)

invision said:


> I still like being able to touch it... am I just old fashioned??? :eyebulge:


just smart.

Kinda like digital voting, is it real, or is it made up?


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## BillS (May 30, 2011)

invision said:


> I talked to a guy this last week about bitcoin... he was all over it, thinking it is the best thing since sliced bread... had an arguement that actually made sense over and over... although I didn't go into great details about how I think it is an unsafe investment...
> 
> I am only 41, but I like to see and feel my money - even if it is a fiat currency, I still like being able to touch it... am I just old fashioned??? :eyebulge:


Bitcoin will be outlawed. It's started already.


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## mojo4 (Feb 19, 2012)

invision said:


> I talked to a guy this last week about bitcoin... he was all over it, thinking it is the best thing since sliced bread... had an arguement that actually made sense over and over... although I didn't go into great details about how I think it is an unsafe investment...
> 
> I am only 41, but I like to see and feel my money - even if it is a fiat currency, I still like being able to touch it... am I just old fashioned??? :eyebulge:


Nope, you aren't old fashioned. You just have come to the same discovery that I have. If you don't have it in hand you don't have it. And holding onto paper money isn't quite as good as PM's. Because the Fed can't print 85 billion a month in gold n silver out of thin air.


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## invision (Aug 14, 2012)

mojo4 said:


> Nope, you aren't old fashioned. You just have come to the same discovery that I have. If you don't have it in hand you don't have it. And holding onto paper money isn't quite as good as PM's. Because the Fed can't print 85 billion a month in gold n silver out of thin air.


That is so true... And in regards to having Gold and Silver on hand versus stored for you... No way in he!! there are to many cases of Ponzie type schemes in the equitites world, it would be to easy IMO for something like that to be pulled in the PM world were all you hold is paper saying you own X amount....


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## helicopter5472 (Feb 25, 2013)

I'm so poor I can't afford to have money on hand, oh wait just found my Monopoly money, I'm sure it's worth about as much as good old USA bucks.


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## invision (Aug 14, 2012)

Well - now that is funny... so I typed in vintage Monoply values into google to make some kind of smart arse come back... and what do I find...

A monopoly set costs $11.50 on Amazon. It comes with $15,140. So every dollar spent on a Monopoly game gets you $1316 in Monopoly money. 

So how many countries have a worse conversion rate??? 1 USD for $1316 Monopoly money - 1 USD for X foriegn currency...


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