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The Dollar's Full System Meltdown
By Mike Whitney (about the author) Page 1 of 3 page(s)
For OpEdNews: Mike Whitney - Writer
A report in The Sydney Morning Herald stated, "Australia's Treasurer Peter Costello has called on East Asia's central bankers to 'telegraph' their intentions to diversify out of American investments and ensure an 'orderly adjustment'....Central banks in China, Japan, Taiwan, South Korea, and Hong Kong have channeled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down interest rates,' said Costello, but 'the strategy has changed.'"
Indeed, the strategy has changed. The world has come to its senses and is moving away from the green slip of paper that is currently mired in $8.3 trillion of debt.
The central banks now want to reduce their USD reserves while trying to do as little damage to their own economies as possible. That'll be difficult. If a sell-off ensues, it will start a stampede for the exits.
There's little hope of an "orderly adjustment" as Costello opines; that's just false optimism. When the greenback begins listing; things will turn helter-skelter quickly.
In September, we saw early signs that the dollar was in trouble. The trade deficit registered at $70 billion but the Net Foreign Security Purchases (NFSP) came in at a paltry $33 billion. That means that our main trading partners are no longer buying back our debt which puts downward pressure on the greenback. The Fed had two choices; either raise interest rates substantially or let the currency fall. Given the tenuous condition of the housing bubble and the proximity of the midterm elections, the Fed did neither.
A month later, in October, the trade deficit hit $69.9 billion but, then, without warning, a miracle occurred. The Net Foreign Security Purchases skyrocketed to a "historic high" of $116.8 billion; covering both months' shortfalls almost to the penny.
Coincidence?
Not likely. Either the skittish central banks decided to "stock up" on their dollar-denominated investments or the Federal Reserve (and their banking-buddies) is buying back its own debt to float us through the elections.
This is exactly the kind of hanky-panky that people expected when Greenspan stopped publishing the M-3 last March keeping the rest of us in the dark about what was really going on with the money supply.
Are we supposed to believe that the skeptical central banks suddenly doubled up on their T-Bills while they're (publicly) moaning about the dollar's weakness and threatening to diversify?
That's a stretch.
According to the Wall Street Journal the Chinese Central-bank governor Zhou Xiaochuan stated unequivocally that "We think we've got enough." The Chinese presently have nearly $1 trillion in USD and US Treasuries.
"Enough"?
The United States runs a $200 billion per year trade deficit with China. If they've "got enough" we're dead-ducks. After all, it doesn't take a sell-off to kill the dollar, just unwillingness on the part of the main players to stop purchasing at the same rate.
Of course, everyone in Washington already knew that doomsday was approaching. That's the way the system was designed from the very beginning. It's all part of the madcap scheme to "starve the beast" and transfer the nation's wealth to a handful of western plutocrats. That's explains why the Fed and the White House whirred along like two spokes on the same wheel; every policy calculated to thrust the country headlong toward disaster.
The views expressed in this article are the sole responsibility of the author
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