The Demise Of The Dollar Accelerates

By Michael Pennington © Copyright 2010 Pennco Coins

Several years ago the global elitists wanted to end the US reign as the only global power. They have been very successful at their attempts to ruin what has made this nation great. Part of the plan was the destruction of the dollar and its removal as the world’s reserve currency. They felt the world was a much safer place when there were two world powers instead of one.

With Fed Chairman Bernanke’s announcement this past week that QE II will be part of the Fed’s strategy to accelerate inflation, the demise of the dollar is assured. Their plan is almost complete.

As the above chart indicates, the big picture technically for the USD is very, very, very negative. The fundamental picture is much, much worse. There are hundreds of trillions in worthless OTC derivatives still on the books that need to be flushed. We have a spend-a-holic & constitution-bashing government who believe handing the banksters trillions while crippling small business with higher taxes and more regulations is the way to cure the economy.

The Fed Chairman has told us he will inflate, inflate, and inflate some more. You must believe him and prepare for a coming hyperinflation. Look at the prices of soft commodities: wheat, corn, cotton and coffee are at multi year highs. They will continue to go higher. There is one thing that the Fed knows how to do and quite well: destroy the purchasing power of the dollar in the course of their financial engineering. They obviously have the tools as they have explained in detail, and from Bernanke’s statement and their recent actions it is clear that they stand willing and ready to use those tools again

I’ve said repeatedly that the Fed is in a bind, and the only way out is through dollar devaluation. Deflationists continue to argue this point, but you are starting to see they are dead wrong.

While commodities have been rising since June 4th, the Dollar Index has been falling. It is down 7.9% over this period, a 27.6% annualized rate of decline. Given that people are opting to hold other currencies in preference to the dollar, as evidenced by the dollar’s falling exchange rate, it is clear that the demand for the dollar is falling.

Thus, the dollar is being hit by both rising supply and falling demand. We know from Economics 101 that this condition results in falling prices, which when applied to money means declining purchasing power, or what today is usually called “inflation.” If monetary policy is not corrected and inflation is not reversed, in time hyperinflation will be the inevitable result.

I have been warning about hyperinflation for several years. I noted that “the federal government has embarked on a course of runaway spending, and it is runaway government spending that causes runaway inflation”, which if left uncontrolled leads to hyperinflation. The trend has not changed for the better.

From February 28, 2009 to August 31, 2010, runaway federal government spending has resulted in a $2.57 trillion increase in the national debt. But over this period GDP increased by about $0.5 trillion, and the increase in economic activity is even less after adjusting for inflation. So clearly we need to ask ourselves, what have the bailouts and stimulus programs really accomplished?

The answer is very little in terms of economic activity, but there is an ominous consequence from this foolish binge by policymakers of soaring debt and reckless money creation. Given that these dollars are not being used to generate economic activity, they are now sloshing around the globe looking for a safe home. Gold and Silver are the safest places to be to protect your wealth from a currency whose purchasing power is eroding.
Without an abrupt about-face to end the wrongheaded policies being followed by policymakers, there can be only one conclusion. The dollar is headed toward hyperinflation. The new record highs in gold and silver, an across-the-board rise in commodity prices and the renewed downtrend in the dollar’s rate of exchange are the “writing on the wall. Your only protection is Gold and Silver!


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