Will The US Dollar Collapse?
Broadcast 04/06/2011 on WILS-1320 AM
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Welcome to another edition of Things You “Know” That Just Aren’t So, And Important News You Need To Know presented by Patrick A. Heller, owner of Liberty Coin Service and Premier Coins & Collectibles in Lansing and Delta Township. Take it away Pat.
Good morning. US government actions to reduce or destroy the value of the US dollar are starting to get mainstream coverage. It is not yet so widely covered that the public is rushing to bail out of the dollar. But, I’m afraid that day is coming. It may be here a lot sooner than almost anyone expects.
Eight days ago, the Conference Board released its monthly report of the Consumer Confidence Index. It fell from 72 in February to just over 63 in March.
The Board noted that the most important reason given by consumers for their reduced confidence was higher inflation expectations, meaning higher consumer prices. The Board also reported that the increase in oil prices, by itself, more than offset the minor increase in personal income in February.
Last Wednesday, Bill Simon, the CEO of Wal-Mart, admitted that in the months ahead the rate of consumer price increases is “going to be serious.” He also said, “We’re seeing cost increases starting to come through at a pretty rapid rate.”
This contradicts reports from the US Bureau of Labor Statistics. The Bureau’s most recent report claims that consumer prices were rising just over 2% per year. Is your cost for a gallon of gasoline only 2% higher than it was a year ago?
Wouldn’t you be interested to know what the US government reports would be today if they used their same methodology from years past? Analyst John Williams, using the Bureau of Labor Statistics’ 1980s methodology for consumer price changes, calculated that consumer prices today are about 10% higher than a year earlier.
The US government’s inflation of the money supply, disguised by calling it “quantitative easing,” is destroying the value of the US dollar.
Foreign and domestic buyers of US Treasury debt are fearful that quantitative easing will hurt the future value of the dollar and that the US government will be forced to announce a third program of inflating the money supply after the current program ends on June 30. I am convinced that the next round of QE is already locked into place.
As a result, investor demand for Treasury debt is falling. The only way to recapture foreign and domestic investor demand would be to offer far higher interest rates. Unfortunately, that step would accelerate the decline in the value of the dollar, would again clobber the American real estate market, and push up consumer prices even faster than today.
The Federal Reserve is now purchasing 70% of all new Treasury debt. In the process, the US government has become the largest creditor of the US government! This pattern cannot continue indefinitely.
Perhaps the greatest fear of the US government is that the average American will realize how fast the value of the US dollar is falling. The Conference Board report shows that the public is starting to catch on. Now that the CEO of Wal-Mart found it necessary to go public about the imminent decline in the US dollar, even more people will realize that it is in their interest to get out of the dollar and their dollar-denominated assets such as stocks and bonds.
During the Far East Asian financial crisis in 1997, Indonesia suffered the most. Indonesian citizens who owned gold saw their personal standard of living little changed. Indonesians whose wealth was tied up in paper currency were wiped out. It would take a huge change of political will in the US to avoid a similar currency collapse here.
Will the US dollar collapse? I think it may already be too late to avoid this fate.
I urge you to seek independent corroboration of my points. I am confident that you will conclude that you need to protect your wealth by owning some gold and silver.
A small but growing percentage of Americans have started to protect themselves and their families. For everyone else, today you have received your wake-up call.
That’s it for now. Tune in again next week for more “Things you ‘know’ that just aren’t so, and important news you need to know.” I’m Patrick A. Heller, owner of Liberty Coin Service in Lansing and Premier Coins & Collectibles in Delta Township. Thank you for listening.