http://speaklibertynow.com/2012/06/1...n-millionaire/
1.) The US seems to be quickly losing its status as world reserve currency.
For the past few decades, the global marketplace operated in mostly US dollars. But this
situation seems to be ending:
?The lack of other buyers forced the Federal Reserve to buy ?a stunning 61% of the total
net issuance of US gov?t debt??Last December, Japan and China agreed to trade in yen
and yuan?The 10 nations of the Association of Southeast Asian Nations finalized a non-
dollar credit agreement?the China Development Bank agreed with its counterparts in
Brazil, Russia, India and South Africa to eschew dollar lending? (1)
The dollar has been valued worldwide for years, and the Fed has taken advantage of
this position by printing new money to pay for the US federal government?s bills. Other
countries are starting to realize that the banker in this global Monopoly game has been
giving himself money to spend.
2.) There are More US Dollars Held Abroad than in America.
Since 1971, humanity has been carrying out a bold, unprecedented economic experiment:
a single worldwide currency is the cornerstone of the international global economy and it
is not backed by gold or silver.
?The Federal Reserve says that at any given time, between one-half and two-thirds of the
M0 money stock of U.S. dollars is held overseas.? (2)
People worldwide used the dollar to trade with people from other countries, but if that
stops, they won?t want US dollars. Additionally, dollars aren?t typically accepted at
storefronts worldwide, and people worldwide can?t pay taxes in dollars, so what happens
if (when) the dollar loses its status as world reserve currency and all those dollars come
back to America?
It?s not uncommon for a stock price to plunge 90% in a day because demand for the stock
dries up: if the dollar plunges 90% in a day, this would mean a sudden price inflation of
1,000%, something on the scale of what Zimbabwe, Germany, and many other countries
have had when they experienced hyperinflation. This is a a distinct possibility.
3.) The Federal Reserve has pledged to keep Treasury interest rates at 0% until
2014.
The Fed has pledged to keep Treasury interest rates at 0% until 2014 (3). This is
irresponsible.
Would you lend someone money at 0% interest until 2014? I wouldn?t. So who is lending
the federal government the billions in deficits it racks up every month? The Federal
Reserve.
If the Fed stopped buying Treasury bonds and let investors determine interest rates, they
would certainly want a higher rate of interest than 0%, especially since the dollar seems
to be losing its status as a reserve currency, and as this happens people around the world
won?t want to hold Treasury bonds that will be paid back in dollars. The Fed will have
to create money at a faster and faster pace to keep its promise, because as it creates more
money people worldwide become more skeptical of the dollar and demand higher rates.
In biology, one would call this a positive feedback mechanism, where a process
perpetuates itself and occurs at a faster and faster pace. The only non-central banks
who seem to be buying Treasuries are banks who are being pressured to do so: ?US and
European regulators are essentially forcing banks to buy up their own government?s
debt?. (4)
4.) The US cannot mathematically pay high interest rates.
In 1980, the rate on US Treasury bonds got up past 19%. (5) Let?s imagine that happened
again: the US federal debt is $15.7 trillion. (6) If there was a 19% interest rate on that,
the US would have to pay more than $3 trillion per year in interest. The total income in
taxes that the US takes in is less than that. Logic, economic principle and common sense
dictate that the federal government would have to stop spending any money and the Fed
would still have to print. Taxes would likely go up, but increasing taxes past a certain
point actually reduces tax revenue, as the British recently found out:
?The amount of income tax paid fell sharply last month in the first formal indication that
the new 50p higher rate is not raising the expected amount of revenue.?(7)
5.) The federal debt problem is rapidly getting worse.
The amount of federal spending is absolutely preposterous:
?The typical American household would have paid nearly all of its income in taxes last
year to balance the budget if the government used standard accounting rules to compute
the deficit.? (8)
Good thing all those ?Tea Party? fiscal conservatives were elected to the US House of
Representatives, right? After all, the House is the branch of the legislature wherein every
penny spent must be approved. As the Constitution says, ?All Bills for raising Revenue
shall originate in the House of Representatives.? So, what have they done in office?
?The Republican-controlled House of Representatives, which took office in January
2011, has enacted federal spending bills under which the national debt has increased
more in less than one term of Congress than in the first 97 Congresses combined.?(9)
So get a bigger wallet and buy a new wheelbarrow, because there?s a good chance we?re
all about to play a very successful game of ?Who Wants to be a Millionaire??