Wednesday, September 30, 2009

Watch This!

This might be the best six minute video I've seen on the future of the dollar and gold. Jim Rickards gets it, and explains our situation remarkably well.

Around 2:24 in the video, he explains that our $60 trillion worth of liabilities must be cut in half in the next fourteen years. He says, "...there is no combination of growth and taxes that can fund that liability." A 4% rate of inflation for seventeen years will cut the value of the dollar in half will make that payment possible.

But it gets worse: he explains that if the market gets wind of this, which they probably will, we may see a rapid collapse of the dollar.

He goes on to explain something called Triffin's dilemma at 4:05. "In order to stimulate world trade and the world economy, some hard currency country has to run persistent large deficits. But if you run persistent large deficits eventually you go broke." It is called Triffen's dilemma, because while he saw this happening, he had no solution to the problem of keeping the hard currency country from going broke. Great, right?

So as Rickards says, we're going to "Kick the problem upstairs." He says we'll depreciate our dollar while the rest of the world uses a new reserve currency called SDRs, (International Monetary Fund Special Drawing Rights) to fuel the world's economy. If the market gets ahead of us, we'll drive up interest rates.

We're in serious trouble, and if you recognize that now, you're better positioned to retain your wealth than those that do not recognize it. But beware! Social Security and other liabilities are adjusted for inflation using the CPI (Consumer Price Index). If we inflate our currency, the liabilities such as Social Security will increase with inflation, so the government has the incentive to downplay inflation figures via the CPI. This means that inflation will have to be higher than stated for this to actually work. This of course means that the purchasing power of your money will be considerably less in twenty years than it is now.

This is scandalous, and this is why we need to unyoke ourselves from our tyrannical government. These people, as Rickards stated, are intent on protecting the bankers and powerful interests in Washington, not the average American. I say, throw the bums out!

P.S. This is the Op-Ed referred to in the video.
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