For well over 2 years, I have been reading article, listening to financial experts, watching the systematic devaluing of the American Dollar, watching commodity prices sky rocketing, seeing energy prices increasing and watching our Federal Reserve providing bailout after bailout. In my opinion, you add up all of these factors and you get a situation where the US Dollar becomes so weak that it can’t not trade against foreign currencies, ie….the Chinese Yuan.
It has been my stance, during this time, that eventually the US Dollar is going to see competition in the foreign currency market place that it ultimately can’t win and the real possibility of being replaced as the World’s reserve currency was a real, substantial and an economy destroying, national security issue.
Of course, many readers called me a doomsday conspiracy theorist or just lived in complete and utter denial that this could never happen because, the outcome would be so severe to the US economy, it would be kin to dropping a Nuclear weapon on New York. I get it, people don’t want to look at what is really going on in the Country and see things for what they really are because the outcome is too scary for most of us. Yet, denial doesn’t stop the wheels of change.
For those of you who don’t watch the news or can’t pin point China on a map….or better yet, don’t know the Chinese President’s name, let me just say, you most likely will in 2011. Of course, I am sure many of you can tell me the name of The Prince of Wales soon to be brides name….right? Anyways, President Hu Jintao (the Chinese President) is coming to America soon and before he takes off, he goes on Chinese State run television that the U.S. dollar-dominated currency system a “product of the past”. Well, that’s not all the story because he then turned around and started highlighting the way the world can begin moving towards a Yuan global currency.
Now, if this had come out of the mouth of some Chinese Communist insider who was like the aid of a Communist politician I and the world wouldn’t have given it much thought and yes, I would still most likely be spewing my “conspiracy theory” that China wanted to destroy the US Dollar and yes, many of you would be like, “Noooo, that’s crazy talk” but, when the President of China comes out, on International Television and starts talking about how we would like to see the Dollar replaced by the Yuan…..well, we just moved from Conspiracy Theory to OH MY GOD!
For more of the Article, visit http://online.wsj.com/article/SB10001424052748703551604576085803801776090.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsTop
Now, that we can all agree, China isn’t our friend and is ready to destroy our economy in such a way that it would make The Great Depression look like a cake walk, let me shed some light on exactly what can be expected if the World decided to give up Dollars and move towards Yuans.
- Hyperinflation: Essentially, this is just when inflation gets completely and utterly out of control. To make this point clear, I don’t mean out of control like a couple points a month, I mean out of control as in a couple of points an hour.
Hyperinflation is caused when large amounts of money, not supported by actual growth in an economy through GDP output (Gross Domestic Product) is put into circulation. This doesn’t have to be where the Government prints too much money, it can happen when the World decides forgo a Dollar and get a Yuan because essentially, the same thing is happening. All of those Dollars people were holding onto because they had really good purchasing power get dumped into currency exchanges as people move to the Yuan. Keep in mind, hyperinflation isn’t caused when the Government prints too much money, it’s caused when large amounts of money hit the market and, the economy that printed the money doesn’t have the necessary growth to support all that currency.
If you haven’t gotten my point yet, let me just spell it out. If the world was to transition from the American Dollar reserve currency to the Chinese Yuan, we would have so many dollars out their floating around that the dollar here at home would become worthless. A great example of this is Germany, more specifically the Weimar Republic. If you haven’t already, you need to look this up. Go and at least Google it for goodness sakes. Weimar Republic.
Ok, because I am a Realtor and work in the Default Industry, let’s talk about just exactly how this will effect the housing industry.
Do I really need to say anything more. Could you imagine what would happen if in the course of a month, interest rates went from 4.8% (about where they are at now) to, 24.8%.
I don’t want to try to convince you, if I haven’t by now….then, let me give you some resources so you can go read for yourself.
For those of you who won’t go get a book, let me give you a Google search you can perform. Type the work “Hyperinflation” and then the following countries, one at a time. Angola, Argentina, Austria, Belarus, Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria, Chile, China (Yes, it happened to them too and may actually be happening again), Free City of Danzig, Georgia, Germany, Hungary, Israel, Japan (Some say is still suffering from hyperinflation), Krajina, Madagascar, Mozambique, Peru, Philippines, Poland, Republika Srpska, Romania (I have an investor from Romania who lived through this, it’s why he came to America, he had to escape his Country, he can tell you some stories you wouldn’t, couldn’t believe), Russian Federation, Taiwan, Turkey, Ukraine, UNITED STATES OF AMERICA (Yes, some people are already writing about our hyperinflation because, they see it as inevitable, that should scare the hell out of you by the way), Yugoslavia, Zaire aka Republic of the Congo, Zimbabwe.
My point by writing all those countries down is to highlight the fact the world has gone down this path enough times that we know what it looks like, we know what the warning signs are, we know what can happen and in fact, some countries will use economic war fare as a way to destroy another country without ever having to drop a single bomb. Does that sound familiar?
Ok, yes…..I can hear many of you now….this Jesse dude is crazy…..he is like really out there, the boy has lost his mind, DON’T TAKE MY WORD FOR IT. You go figure this stuff on your own. If I am wrong….hell yeah, let’s party on how insane I was but, what if….what if I am right? Let me just say, I am not alone in my beliefs, it’s not like I am in some fringe society creeping around dark allies, hell, I do that anyways….no, just kiddin. It was a joke for goodness sake, get over it already.
The reality is, things aren’t good, things don’t appear to be getting better and our enemies, both foreign and domestic see we are weak and are ready to strike. If we don’t prepare for the worse, where will your family, business, lives be if the worse comes?
I do have hope, it may not have sounded like it in this article but, hope is still alive. Within each of us, we have the ability to change, we have the ability to self evaluate and take stock in who we are. We are Americans, we are a melting pot more diverse than anywhere else on this planet. We can put aside our differences and works towards a common good. Let us remember what it means to be the shining city on a hill, let us forge forward and make hard decisions embraced in each others charity, good works and grace. We have done it in the past, nothing stops us from doing it now.
Step # 1, stop the spending. The best thing we can do for our economy and potentially save it from total collapse or attacks from foreign Governments is to balance this budge in the next 5 years or less.
Step # 2, balance the unfunded liabilities, ie…Social Security. I had heard once that we have over 50 Trillion in unfunded liabilities. That number seemed high to me but, I may not be remembering it correctly so, if anyone knows what the Countries unfunded liabilities are, I would love to hear it. None the less, this needs to come down…preferably to zero.
Step # 3, increase innovation. We as a country have lost our edge, we have lost what made us so special. Our innovators are gone. Why, you might ask…well, we can write another whole blog on that so, let’s just leave this one to, we need to be more innovative.
Step # 4, ground sweeping education reforms. Our education system is broken, it’s been broken for a long time. We need to make changes that way increase transparency, accountability and reward those who exceed objectives.
Step # 5, law enforcement. We need to start enforcing the laws we have. The AZ shootings the past week are a gleaming example of a State’s failure to enforce the law. You see, what you aren’t hearing in the headlines is that Mr. Laughner (the shooter, whatever his name is) would have never been able to buy the guns in the first place if he had been put on the State’s “Mental” list (those who are suffering from mental disorders) and submitted to the Federal Government background check list. In fact, it came out that over 50,000 people in AZ who are supposed to be on that list, aren’t because AZ hasn’t sent the list into the Federal Government for years. WHY NOT?
Now that I have completely ruined your day…..lol, I really hope I was able to leave you with some hope. Ghandi said (paraphrasing) To evoke change in the world, you must first be that change. Really great words to live by in these times, don’t you think?