2012 Prediction: U.S. Dollar Debasment Leads to Collapse of Currency
The U.S. Dollar horoscope is based on the Coinage Act, passed by the United States Congress on April 2, 1792, time unknown – set for 12:00 pm, in Philidelphia, PA which established the United States Mint and regulated the coinage of the United States. This act also established the dollar as the unit of money in the United States, declared it to be lawful tender, and created a decimal system for U.S. currency.
Because the United States doesn’t bring in enough revenue to pay all of its bills — with monthly deficits averaging $125 billion, the impact of the S&P downgrade of the U.S. credit rating had a negative impact on US investment and investor confidence in the ability of the Federal government to fulfill its basic finanical responsibilities. In response, China has been diversifying its foreign cash reserves away from the dollar and even US Treasury bonds, and buying Euros. Russia, Brazil, and India who hold 95% of U.S. dollar positons have begun to reduce their positions to 60% position or even lower, causing demand for the Greenback to sink. Since there is no other currency to take its place in terms of trade between nations, global inflation will accelerate as important commodities like food, oil and precious metals metals continue to will rise substantially to compensate.
Based on the graph above, it is apparent that dollar crash has already occured. According to investopedia.com, a 20% drop in the value of either a stock or financial holding over a period of time is considered a crash. The U.S. dollar already crashed from 120 on the USDX down to its’ current level of 75. This 45 point drop, or roughly 33% drop over several years, meets the definition of a crash.
With the Federal Reserve no longer reporting the M3 money supply, the broadest measure of money supply currently reported by the Fed is M2. The M2 money supply has risen $228.5 billion over the past four weeks to $9.5218 trillion, a very alarming rise. On an annualized basis, this equals a 32% increase in M2. Much of this gain can be attributed to people moving funds from institutional money funds and large time deposits into checking and savings accounts, indicating the investors are nervous about the state of the U.S. economy. As soon as the investment community begins to realize that the next economic crisis will be a currency crisis, not a liquidity crisis, we will see the world lose confidence in the U.S. dollar causing a massive rush out of U.S. Treasuries and into gold, silver, and other real assets.
Economist John Williams from Shadowstats.com said in his latest post, the downfall of the European Union is not near as troublesome to the world as a collapse of the U.S. dollar. Williams said, “In contrast, the deliberate debasement of the U.S. dollar, and the unwillingness or inability of the U.S. government to address its long-range insolvency, promise an ultimate collapse of the U.S. currency that will leave the U.S. dollar absolutely worthless to its holders. The hoopla out of the major central banks, on November 30th, over renewed coordinated global efforts at maintaining banking-system liquidity, suggested a rapidly deteriorating circumstance. Further, the continued lack of meaningful growth in either the U.S. broad money supply measure, or in domestic bank lending, remains suggestive of deteriorating banking stability in the United States.”
Predicton: The coming U.S. dollar collapse will cause a major revision in the the global monetary system, where the Greenback is no longer the world’s RESERVE currency.