Bubble

Popping News

DYI:  I don’t see a flat out route for the American dollar but a never ending grinding down such as what happened to the British Pound Sterling.  Their demise started around the turn of the 20^th century and was replaced as the world’s currency after the completion of World War II.  Around 45 years in the making before recognized completely that the almighty American dollar as the new reserve currency.  If the SDR’s are put into place and especially used for world wide financing with a functioning bond market then yes this will be the beginning of the end for the dollar as a reserve currency.  With decade after decade of grinding down devaluations until all will be seen as a secondary currency exampled by the Canadian dollar or the British Pound.     

Till Next Time    

DYI

Get Ready for World Money

Since Federal Reserve resources were barely able to prevent complete collapse in 2008, it should be expected that an even larger collapse will overwhelm the Fed’s balance sheet.

The task of re-liquefying the world will fall to the IMF because the IMF will have the only clean balance sheet left among official institutions. 

The IMF will rise to the occasion with a towering issuance of special drawing rights (SDRs), and this monetary operation will effectively end the dollar’s role as the leading reserve currency.

There’s a formula for determining that, and as of today there are five currencies in the formula: dollars, sterling, yen, euros and yuan. Those are the five currencies that comprise in the SDR calculation.

On Jan. 7, 2011, the IMF issued a master plan for replacing the dollar with SDRs. This included the creation of an SDR bond market, SDR dealers, and ancillary facilities such as repos, derivatives, settlement and clearance channels, and the entire apparatus of a liquid bond market. A liquid bond market is critical.

The SDR can be issued in abundance to IMF members and can also be used in the future for a select list of the most important transactions in the world, including balance-of-payments settlements, oil pricing and the financial accounts of the world’s largest corporations, such as Exxon Mobil, Toyota and Royal Dutch Shell.

 You’ll still have dollars, but they’ll be local currency like the Mexican peso, for example. But its global dominance will end. 

Based on past practice, we can expect that the dollar will be devalued by 50–80% in the coming years. 

A devaluation of this magnitude will wipe out the value of your life’s savings. You’ll still have just as many dollars, but they won’t be worth nearly as much. 

Individuals will not be allowed to own SDRs, but you can still protect your wealth by buying gold — if you can find any. 

Regards,
Jim Rickards

Physical silver supply squeeze about to get worse 

warns Keith Neumeyer

Unprecedented Demand For Silver Bullion Will Push Prices Higher

The collapse in the U.S. economy and financial markets have brought about a record buy spree in physical silver bullion never witnessed before.  In the past few weeks, precious metals dealers have totally wiped through the available stock.  Now, these dealers have to resort to pre-selling future supply with the understanding that metal purchased today will not be delivered for weeks, a month, or several months.

"It's Selling Like Toilet Paper": If You Haven't Bought Physical Gold Yet, It's Probably Too Late

As gold became increasingly financialized in recent years - through futures, ETFs, derivatives and so on - and as the impact of "financialized" gold became the dominant price-setting factor in a world where the nominal volume of "paper gold" traded is now orders of magnitude greater than "physical", a bizarre decoupling emerges every time there is a major market stress event. 

A pattern that has emerged is that during periods of "bathwater" liquidation, when levered asset managers are forced to dump paper gold to cover margin calls in different parts of their book, sending the price of gold sharply lower also happens to be when physical gold buyers step up amid concerns over the viability of either the financial system and/or the reserve currency.

 One thing the FT [Financial Times] does get right is that "retail investors in Europe and the US have bought up gold and silver bars and coins over the past two weeks in an effort to protect their money from the collapse in global stock prices and many currencies." 

And with the Fed now set to unleash unprecedented dollar destruction by injecting over $625 billion in freshly printed fiat into the system this week alone...

 DYI