Massive US Dollar Devaluation Against Gold During 2009
- John Browne writes in : Massive US Dollar Devaluation Against Gold During 2009 ,
” The Federal Reserve estimates that in the past year losses in real estate, stocks and mortgages have sucked out some $7.2 trillion of wealth from the U.S. economy. Some are now putting the figure at $20 trillion.Investors should also especially be concerned as to who will repay these massive debts. The conventional answer of politicians is “taxpayers”. But this is a serious understatement. Any depreciation of the U.S. dollar means that every American citizen and every single holder of U.S. dollars throughout the world will suffer from monetary loss and a severely reduced standard of living. “
- As mentioned in my previous blogs, the solution undertaken by FDR in the 1st Great Depression was :
” In 1934, facing a depression President Roosevelt first confiscated gold from every American. Then, he unilaterally devalued the U.S. dollar by 75 percent against gold.At a stroke, FDR wiped out 75 percent of the dollar denominated debt of the U.S. Treasury.As both President-Elect Obama and Fed chairman Bernanke are students of FDR, we face the real possibility of a massive devaluation of the U.S. dollar against gold in 2009. “
- America is Bankrupt ! There is no way the debts can be repaid. Here is how bad it is : America’s liabilities equal assets, …the report showed “an estimated $56.4 trillion in debts, liabilities and promises for Medicare and Social Security versus a total household net worth of $56.5 trillion.”
- Some kind of financial engineering sleight of hand will have to be used to pay off the debts.
– America owes something like US$15T (not including Social
Security and Medicare)
– America has 8100 tonnes of Gold. At current prices worth about
US$250B based on US$800/ounce.
– So what kind of Black Magic is the government going to use to pay
the debts off ?
– How about simply declaring that the 8100 tonnes of Gold is now
worth US$15 T ?? This means that gold prices have to rise ie
revaluation of Gold, devaluation of USD .
– Voila ! Problem solved !
- When the USD is devalued, foreign countries have to decide : devalue their own currencies or they will not be competitive against America. Imagine if USD is devalued 75% against gold, it means that cost in USD will be a lot cheaper by up to 75%. Countries will embark on competitive devaluation or they will be priced out of economic competitiveness.
- With developed countries basically bankrupt or close to it, these countries IMO will opt to devalue all their currencies against gold to pay off their debts. Why not? It is the least costly solution!
- Such an act worldwide will be reflationary. It will fight deflation. So why not ? The only problem is that, it may stir the hyper-inflation pot too much. After FDR’s act of devaluing against gold, the US economy was re-inflated but went into another downturn until WW2 started in 1939. ie Devaluation against Gold will not solve all problems. There is still a major rebuilding of the economy needed and a fight against inflation.
- Just what amount of price rise are we talking about for Gold? Possibly 10x – 20x to be effective in reducing the national debt. Many analyst are conservatively targeting $2000-5000/ounce.
- Adrian Ash says in Gold Stock Vs Paper Fiat Asset Valuations :
” In short, the mass people choosing to Buy Gold today remains tiny compared to the value which the world still puts on paper. And it’s only when paper collapses in value – an event you might expect during the worst post-WWII crisis – that gold is likely to hit its true peak for this investment cycle. “
- That is : Buy Gold ! See also :
Gold About to SkyRocket ! China Worries about Treasuries and Diversify into Gold !
Gold Price Set to Soar !
Dollar Devaluation, Debt Default & Gold
Great Gold Rush of 21st Century
Economic Depression and Gold
Global Monetary Meltdown in 2009 ?
What’s not to Like about Gold ?
Obama, Roosevelt, Gold Confiscation and Dollar Devaluation
Gold Rush Worldwide!
Disclaimer : This is not an advice to Buy or Sell or Hold . I have been wrong before so what do I know.
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