|
HYPERINFLATION: Is America on the Verge of a Weimar-like Currency Collapse?
In the early 1920s in Germany, hyperinflation got so bad that you needed a wheel barrel full of money to buy a cup of coffee.
Or, you could pull out a one BILLION Mark bill to see if you could buy a loaf of bread, but you’d better shop early in the day before the bill in your pocket dropped ten-fold again--by the end of the day!
Swiss America CEO Craig R. Smith is conducting talk show interviews to alert Americans to the fact that the current decline of the US Dollar shows eerily similar warning signs to the old German Mark of the Weimar Republic. Think it’s impossible? Think again. This was Germany, not some Banana Republic, and it happened less than one century ago. But if there is one think we learn from history, it is that we don’t learn from history.
During your interview, Craig gives the formula for hyperinflation: Sky rocketing oil prices, the dollar in the beginning stages of a free fall, foreign nations beginning to drop the dollar as their currency of choice, record high deficit, record high debt, banking and mortgage credit crises, and the list goes on.
What is the solution? It’s complicated but it begins with DIVERSIFICATION. As Craig Smith puts it, “Don’t put all your dollars in one wheel barrel,” or better still, “Be sure your life savings is not being ‘saved’ in mere paper US dollars.”
Craig compares the current dollar prices with the Euro, Canadian Loon and Japanese Yen, while discussing China’s latest partial divesture from US dollars. As author of the book “Black Gold Stranglehold,” Craig predicted much of what has now come to pass.
Craig elaborates as to just how volatile the oil market is today. If you think $100 a barrel oil is high in the current relative time of peace, imagine how high oil prices could get if some nation were to mine the Straits of Hormuz or if a hurricane or other disaster were to knock out the Gulf oil rigs or if terrorists were to take out even a handful of strategic pipelines.
“The days of buying three pair of white socks for a dollar is over,” says Craig Smith. “The U.S. dollar has now lost over 40% of its buying power and is losing more daily. But scarier still is that the day may very well be coming soon when Chinese-make cotton socks cost a wheel barrel full of dollars and America becomes the big exporter of cheap goods to China, Japan and the rest of the ‘developed’ world!” But look at the bright side: At least American would be a manufacturing nation again, making and exporting such things as—wheel barrels!
Smith reminds your audience that the current dollar woes are under a ‘strong dollar’ policy from the White House! Craig shutters to think of how low the dollar would be today if this ‘strong dollar’ policy was not in place.
Smith does admit, however, that a lower dollar has some benefits, such as lowering the trade deficit and increasing U.S. manufacturing competitiveness abroad. Smith says it wouldn’t be hard to eliminate the trade deficit if we paid it off with dollars that were inflated 1000-fold. At that rate every million dollars in debt could be paid off with a token thousand dollar bill!
“Investors are voting with their feet, moving in droves out of U.S. dollars and into foreign currencies and gold. And the $64,000 question is, “What will happen if the enormous world oil market shifts from the dollar to the euro? The Middle East oil barons no longer accepting U.S. dollars for oil? Unthinkable!? Think again,” warns Smith.
And if oil shifts away from the dollar, the dollar soon may no longer be the world reserve currency. Craig gives the following eye-opening statement:
“Weimar Germany was a disaster and the citizens could have avoided a lot of pain if the leaders had prepared them.
This could, and I say again, COULD get really ugly. I see no way for the FED to do anything other than more damage. GM just announced a $39 Billion loss. Wall Street is saying, ‘That is not that bad.’ Are they nuts?
The dollar has dropped 10 % against the Euro and that may be positive for exports. Really? Using that logic maybe we should devalue the dollar by 50-60% and really capture the world's business? Only one problem.
Americans who hold dollars will see 50-60% of their life savings evaporate in the process. I have never seen this type of nonsensical logic being embraced in all the years I have followed the markets. It is insane.”
During your interview, Craig gives a rapid first report of key economic indicators, including:
*Oil prices are at record high
*On Oct. 31 The Federal Reserve cut interest rates a quarter percentage point, down to 4.5%.. *Gold is fast approaching $1000 an ounce. Why?
*Sobering financial news just reported by Financial Times: "According to a Merrill Lynch note to clients, we're in the beginnings of a global readjustment that will end the dollar's dominance as the 'gold standard' currency for the world's economies. The dollar is likely entering a long, slow decline - followed by a crash."
A crash? Our precious ‘rock solid’ US Dollar is going to crash? Smith cautions listeners not to be lulled to sleep by the Fed’s ‘quick fix’ of driving the dollar down to save the housing market. Furthermore, Smith points out that the true U.S. inflation rate is probably about 7 percent, several times higher than the fake figure now dished up to us by our government.
Craig points out that gold has surged over 20% and oil over 30% since mid-August. And that’s not inflation??? Why are the Feds trying to fool? The Fed interest rate cut in September spurred central banks to pump billions of dollars into financial markets to ease a liquidity crisis, yet we’re still on the brink of a freefall in the economy.
Mr. Smith has been warning investors since 2001 that all is not what it appears to be on Wall Street. Stocks are supposed to represent a store of value, like our currency that grows in value over time. But today holding exclusively overvalued stocks and currencies is just a crap shoot.
"Gold prices have risen to a 28-year nominal high, but prices must top $2,100 an ounce to exceed the previous 1980 high of $850, after adjusting for nearly three decades of inflation," says Mr. Smith.
"$775 gold is just one third of the way up toward reaching a true new high," says Smith. "So it's still cheap compared to $93 oil, which is already near its inflation-adjusted price peak of $38 a barrel in 1980."
Gold is entering a new investment-driven phase as gold market drivers "tend to oscillate between bouts of eastern physical/fabrication demand and western investment demand," according to Citigroup's research.
"Woe betide Wall Street if the Fed fails to slash rates starting on October 31. Woe betide the dollar if it does," reports the London Telegraph.
"Americans will soon begin feeling the impact of the rising cost of living that reflects a dollar that is slowly but surely becoming an 'I-O-U Nothing'," says Mr. Smith.
ABOUT CRAIG SMITH…
Craig R. Smith is the president and CEO of Swiss America Trading Corporation, one of the largest and most respected investment-grade U.S. gold and silver coin firms in the nation since 1982. He’s been featured frequently on Fox News Channel, CNBC, MSNBC and CNN.
THE FOLLOWING ARTICLES MAY BE HELPFUL WITH SHOW PREP:
Dollar freefalls toward hard landing
CraigRsmith.com
Nov. 8, 2007
The U.S. dollar tumbled to new lows on Wednesday after a top Chinese official called for the country to shift more of its huge foreign exchange stockpiles out of the greenback.
Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, was quoted by wire services as saying China should shift more of its $1.43 trillion of currency reserves into "stronger currencies," such as the euro, to offset "weak" currencies like the dollar.
"These comments were made by a man of great stature in China, a nation which now has vast dollar holdings, giving this statement powerful impact worldwide," says author and Swiss America CEO Craig R. Smith.
On this news; the euro rose to a historic high of $1.47, the Canadian dollar rose to $1.10, oil prices spiked to $98.50 and gold hit $840 an ounce.
"Our biggest concern now is if China and other trading partners abandon the dollar, who will loan the U.S. the $2.6 billion a day we need to float our national debt and deficits? The only other alternative is for the Treasury to print money like crazy!" says Mr. Smith.
"Helicopter Ben may yet live up to his name as the Fed is now caught in an extreme Catch-22; if they cut rates the dollar collapses, if they raise rates the U.S. economy collapses under the weight of either $900B in bad mortgage debt or $900B in consumer credit card debt. This means we may be in for either a debt-induced depression (that makes 1929 look like child's play) or Wiemar Republic-style hyper-inflation," says Mr. Smith.
Wall Street pundits are proclaiming all the benefits of a falling dollar, such as increasing U.S. exports and reducing imports, but what a weak dollar really means is that America is having a fire sale and almost every asset Americans own is denominated in a currency that is becoming worth-less on a daily basis.
“So forget the all the 'feel good' dollar talk on TV," says Smith.
"This is a time to be fully diversified. At SwissAmerica.com have been saying for years the printing of money, deficit spending and loose monetary policy would ultimately catch up with us. That day may well have arrived," says Smith.
FORBES.COM/ October 17, 2007
A Weak Dollar Is Bad For America
Carl Delfeld, Chartwell Advisor
Martin Feldstein, the chairman of the Council of Economic Advisors under President Reagan, wrote an article for the Financial Times this week, which outlines why he believes that a more "competitive" or weaker U.S. dollar is good for America.
Even though I am a rock-ribbed Reagan Republican, I cannot overstate how strongly I believe that this opinion is incorrect. "Strong Dollar, Strong Currency" is more than a mantra for me since economic history indicates that no country has ever achieved greatness nor maintained it by debasing its currency.
Here is my case for why a weaker dollar hurts America.
First, a weaker dollar translates into a cut in the real spending power of American consumers--in effect, a reduction in real income.
Second, a weaker dollar weakens the role of the U.S. dollar as the world's reserve currency. Why should investors and central banks around the world invest in US assets when their value is steadily declining?
Third, the chances of a weaker dollar leading to a sharp reduction in America's trade deficit is highly unlikely since 40% of the current balance is due to oil imports that are denominated in U.S. dollars. An additional 20% is due to trade with China, which is, of course, controlling the value of its own currency.
Fourth, a weaker dollar is inflationary since it increases the cost of imports.
Fifth, business leaders know that discounting prices may bump near-term revenue and profits but at a real cost to long-term profitability, not to mention inflicting damage to the brand name. This is what we are doing to the brand of America by trying to increase exports by lowering their price in the global marketplace. Better to stand firm on price and sell into global markets on the basis of what is great about American products: superior quality, innovation and service.
What a weaker dollar really does is to encourage American and international investors to invest in non-American markets. The more the dollar drops, the more global equities rise. Many Asian currencies are hitting record highs against the U.S. dollar.
The Australian dollar has climbed to a 25-year highs, while the Singapore dollar has touched 10-year highs. The Brazilian real, which has jumped 18% in value against the U.S. dollar this year, and the Indian rupee's sharp appreciation against the U.S. dollar during the past year, have supercharged U.S. dollar investors' returns in those markets.
According to EPFR Global, investors are pouring money into global funds--with net inflows of $96.94 billion into world equity funds so far in 2007, while taking out $9.6 billion out of U.S. equity funds. Brazil's local stock exchange, the Bovespa, reported that investors have injected $1.2 billion into the market in September alone.
Foreign investors slashed their holdings of U.S. securities by a record amount as the credit squeeze intensified, according to the U.S. Treasury Department. The Treasury said net sales of U.S. market assets--including bonds, notes and equities--were $69.3 billion in August after a revised inflow of $19.5 billion during July. The August outflow exceeded the previous record decline of $21.2 billion in March 1990.
Last and perhaps most importantly, I view a policy of weakening the U.S. dollar to improve America's competitive position as the path of least resistance.
Let's not roll up our sleeves and cut federal spending, greatly simplify our tax code to encourage productivity and achievement or reduce corporate tax rates and excessive regulation. Let's just wink and weaken and let our nation's currency drift lower on automatic pilot.
My view is that the value of a nation's currency reflects the perceived value of country in the global marketplace. Maintaining and strengthening the value of our nation's currency is in the best interest of American consumers, businesses and investors.
© 2008 Forbes
|
