Everyone knows the story of Chicken Little and how he thought the sky was falling, his companions Henny Penny and the sort, and how they almost fell prey to Foxy Woxy. A children’s fable that illustrates how one should establish facts before running ones mouth.
It’s always been a children’s fable.
There seems to be a drumbeat coming out of a few select “research” firms about the impeding “…collapse of the US Dollar”. Now before I tear into these dolts, understand I recognize full well what the 111th Congress and Obama have done to this great nation. The spending has to be cut, we have to pay off our debt, and we have a generation of work ahead of us. I know this. Had it not been for the resurrection of the Conservative Movement in this nation and the culmination of the elected results on 11-2-2010, there is a good chance I might have been right out there in desperation.
But the Movement has started, we have had the first round of election results, and I have great faith in this nation. While we have suffered and suffer still under Obama, great times are ahead of this country.
I believe that with all my heart and the day I quit believing in it will be the day I leave America. The same for the Dollar – the day we all quit believing in it will be the day of its demise. Period. Does that mean fluctuations will not occur? Hell no! Currency availability, supply & demand of US goods, debt, interest, war. etc – all of them have an impact on the value of the Dollar.
Last week, GOPUSA.com sent me an email promoting research firm Stansberry & Associates link : http://www.stansberryresearch.com/pro/1011PSIENDVD/PPSILCCR/PR. I put it on the site for reference, but I would save you the 15 minutes of fear mongering this message brings. The author provides no reference points for his theories for you to research, but an assumption of blind faith. I waded through about 90% f the crap he prophesied and I finally turned it off. You must remember that these people make money by you subscribing to their service. They are not investment advisors who actually get paid to manage your money. I thought about blasting on GOPUSA, but it did not seem to garner any traction anywhere so I left it alone. Today, a good friend of mine who chairs a very conservative group here in Texas forwarded this message and I realized a counter message has to be put out.
So, here is a summary of the points this “message” and the realities behind them:
Theory – The US has way too much debt and will not be able to make the payments.
Fact – We know we have too much debt, thus the reason for the election results of 11-2-2010. America is still conservative and will not stand for this. Will the debt be corrected overnight – no. Can we make our payments – yes, but we must make cuts now. Reference initial actions of the 112nd Congress.
Theory – The Dollar is no longer being accepted in places in the US and around the world.
Fact – What a bunch of horse manure. I just got back from the Middle East in November. Went to Dubai, Abu Dhabi, and Saudi Arabia. All of them love Dollars. The energy systems company I am a part of also does business in Canada, South Africa and New Zealand and they all deal in Dollars. We have material supply chains and research facilities we communicate with in the UK, Holland, and Germany and they all deal in Dollars. Matter of fact is that they know the Dollar is stable because of our country’s ability to make political and economic change to keep the currency the most stable in the world. Don’t believe me? Watch the currency exchange reports when political tensions rise in areas of the world that have money and they dump their currency for the Dollar for value and liquidity. The reason the Dollar is the World Reserve Currency is because the Brits screwed up with the Pound after WWII and became socialists. The US emerged from WWII as the world superpower with freedom and economic prosperity. The economic landscape changed after WWII and the Dollar was established as the World Reserve Currency. A whole lot has to happen before that is changed. While there was some whispers that the Euro might have that possibility, the Euro is now very unstable due to the bailouts it has engaged in. It won’t be the Yen or the Won – Japan and S Korea had that chance and lost it. While China has the best chance with the Yuan, they have massive valuation issues on their own. See http://www.google.com/hostednews/afp/article/ALeqM5iOQ6DdQl_7knQdoP7HJ5t2JuAhaQ?docId=CNG.4f8b988b9ebd1a5c9a9eba1574013bc8.1e1.
Theory – there are places in America accepting currencies other than the Dollar
Fact – This is nothing new. There is no law that you have to accept the Dollar, but it sure makes good cents (pardon the pun). Most of the areas that accept other currencies usually have a high immigrant population that are very transient and do not take the time to convert to the Dollar. If you serve a segment of the population that comes from Europe and goes back and forth on a regular basis, why not take the Euro? This does not mean the Dollar has been supplanted.
Theory – The US is headed to “Yugoslavia style hyper inflation and collapse”
Fact – More horse manure. This guy should be selling subscriptions to farmers, not investors. There are loads of reasons Yugoslavia went under, most of them related to going socialist after their break off from the former Soviet Union in 1948. Wikipedia actually has a great summary at http://en.wikipedia.org/wiki/Economy_of_the_Socialist_Federal_Republic_of_Yugoslavia. If you can read that and still believe the US is headed in the same direction, even with Obama, then you need professional help.
Theory: The major oil-producing nations are getting ready to “dump” the Dollar for another currency
Fact – Data from October 2009 is not the same when published in January 2011. The reference is from the following article that came out October 6, 2009 : http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html. Hmm, let’s see, was America in the midst of a pure fit with passage of Cap & Trade in the House, Obamacare being floated around, massive budgets requiring borrowing out the wazoo, and a general feeling that maybe the sky was falling in the US? You bet your Aunt Susie’s fanny! The international community, socialist & commies alike, know that the US has been the beacon for economic stability of the last 60 years. Obama and the 111th Congress flat scared the hell out of everyone and nations had to start looking at back up plans. Now, are nations considering other currencies in direct transactions – yes. China and Russia started this year as a reflection of having each others currencies traded on their respective markets and due to a huge Chinese contract to import Russian oil. http://www.helpmefinancial.com/blog/china-russia-dollar-connection-concludes-cross-border-trade?page=1. However, the buzz in the energy markets is that China’s issue with the valuation of the Yuan (see reference in this article) may make this a short-lived strategy. However, any nation that wants to export to the largest economy in the world (ie the US) will deal in Dollars.
In my opinion, here is what will influence the Dollars role in the world:
- Political stability under capitalism. To remain the World Currency Reserve requires democracy and the ability to make money. Barry O will find this out when he is booted in 2012. Show me another country other than England (and that is a stretch) that can do this. Not Canada, France, Spain, Japan, S Korea, Australia, or any nation from the Middle East. Not the Chinese either. They have issues with pollution, horrendous human rights issues, limited natural energy resources, and are still commies. Name one commie regime that has been the world economic powerhouse. While they have an impact? Sure, they could even pass the US for import supremacy in time. In the end, the world banking community will never fully embrace a nation that can nationalized every asset in the blink of an eye. Now if they become a true democracy, that could be another story.
- US Exports. There is a serious threat here as we continue to ignore the reasons companies are moving labor across US borders. Hint – it’s not the hourly wage but all the anti-business regulations adding cost, heinous insurance burdens, and taxes.
- US Imports. As long as we are the worlds largest importer, the Dollar will still be king. However, we have to improve our education system, reduce taxes, and have opportunity for business and commerce here in the US for all those consumers to have jobs making all that money to spend.
- Energy. This is the one that can upset the apple cart. Oil and Gas have been the dominant form of energy this past century, but their role will change this century. Are there lots of reserves? Yes. Are they all ready for processing and refinement? No. While liberals refuse to classify oil as “renewable”, the fact is oil is generated from the earth and continues to do so as I write. Problem is that oil has to be at a certain stage to be refined. That can take millions of years. Additionally, people forget how much oil is used in non-petroleum based areas such as plastics and chemicals. As the usable reserves begin to dwindle, and they will, producers are going to look to more profitable ways to sell a barrel. Now before you go jumping off a cliff, we have loads of alternatives for fossil based oil. Natural gas ( and we have tons) will play a more prominent role through pure gas and liquified natural gas applications (LNG). There are also emerging bio based oils that can be processed and refined for jet fuels and for fueling cars. Pure bio fuels are bio diesel and will help the demand of diesel engines. Other sources such as wind and solar will continue to improve in efficiency, production, and cost. However, challenges remain in delivery of the energy produced. The electric car front is about to announce a breakthrough in battery life that will allow these cars to go 1500 miles between charges. The good news is that the US is right there at the head of the pack in research and development of these technologies. The bad news is that the US is way behind in consumer applications for these alternative energy forms. That keeps us oil dependent and pay higher prices as the supply dwindles and producers demand more.
So what are some realities here? Is the basis of the article to have good financial planning ? Maybe buying some gold or silver to hedge against inflation? Yes. Is the method used in this article atrocious – yes. If you still have doubt that this new Chicken Little ( or he is Foxy Woxy?) was trying to scare the crud out of people to sell their service check out these google references:
Remember this – our nation’s currency will weather all of the issues of the times as long as we continue to believe in the principle of democracy, the policies of capitalism and limited government, and we remember to get off our collective rear ends to enforce what the Founding Fathers through the grace of God instilled in the foundation of this great country.