Secret moves launched by China, Russia, Japan, France, Arab States to end the Dollar

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China Signals That It May Allow Currency to Rise Against Dollar

Published: Wednesday, 11 Nov 2009 | 11:01 AM ET

By: Reuters

China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.In its third-quarter monetary policy report, the People's Bank of China departed from well-worn language on keeping the yuan "basically stable at a reasonable and balanced level." It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.

"Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism," the central bank said in a 46-page monetary policy report.

The comments, published just days before a visit to Shanghai and Beijing by U.S. President Barack Obama, set out the possibility of a return to exchange rate appreciation that began with a landmark July 2005 revaluation.

The yuan strengthened by nearly 20 percent against the dollar until concern over the impact of the global financial crisis prompted Beijing to hit the brakes in the middle of last year to protect exporters.

The yuan has been stuck at around 6.83 per dollar ever since, drawing increasing ire from other countries, especially as it has followed the dollar downwards against other currencies.

The dollar has dropped 13 percent against a basket of major currencies including the yen and euro since mid-February.

Back to a Basket?
Some analysts have called for the return to a genuine basket of currencies, which the central bank said in 2005 it would use as a reference for the yuan.

"I think the wording change ... shows that it is an irresistible trend for China to resume yuan appreciation," said Xing Ziqiang, an economist at China International Capital Corp (CICC) in Beijing.

"It is not sustainable for the yuan to always be pegged to the U.S. dollar; after all, the repegging since late 2008 was just part of China's measures to address the global financial crisis, and now the impact of the financial crisis is fading, so the yuan should resume appreciation sooner or later."

The central bank's report came just hours after data that showed the world's third-largest economy had firmly put the worst of the global financial crisis behind it. Factory output growth surged to a 19-month high of 16.2 percent in October.

While exports were still down in year-on-year terms, economists pointed to the likelihood that they would start growing again soon.

Some analysts said the statement could have been timed to send a signal ahead of Obama's Nov. 15-18 visit to China.

Obama told Reuters on Monday that he planned to raise the currency issue during his trip.

However, Beijing is increasingly facing complaints about its currency from other emerging economies, which see an undervalued yuan as undercutting them in global markets.

No Sudden Shift
Those concerns were evident in a draft statement from APEC finance ministers circulated on Wednesday, in which they call for flexible interest rates and exchange rates as a way of redressing economic balances.

"We agreed that flexible prices, including exchange rates and interest rates, play a critical role in allocating resources efficiently, and can facilitate the adjustments needed to support balanced and sustainable global growth," said the latest draft statement by the finance ministers dated Nov. 10.

While the statement could change in its final form, a deputy Chinese finance minister was present at discussions on it, suggesting some level of agreement by Beijing on the wording.

However, analysts were quick to caution against expecting any sudden shift in the yuan's actual value, given China's penchant for carrying out any reforms gradually.

"The central bank's worries about capital flows, liquidity, and inflation signal growing pressure for yuan appreciation," said Ben Simpfendorfer, strategist with the Royal Bank of Scotland in Hong Kong.

"But I'm not looking for gains in the currency until the second quarter as the export sector still faces large challenges and margin pressure."

Markets priced in a slightly greater appreciation over the coming year.

Offshore one-year dollar/yuan non-deliverable forwards (NDFs) fell to 6.6075 bid late on Wednesday compared with Tuesday's close of 6.6320.

Yuan appreciation implied by NDFs, which moves inversely with the forwards, was around 3.3 percent in a year compared with 3.06 percent before the announcement.

Xing with CICC said he was expecting even greater appreciation, of 3 to 5 percent next year, in the face of growing external and internal pressure.

"For China's own sake of balancing its economic growth and reducing its large surplus in the trade account, it is also necessary for the government to make the yuan more flexible."

• Slideshow: Central Banker Report Cards

Copyright 2009 Reuters. Click for restrictions.

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‘Collapse’ Cassandra Nails Cheney, Says End Is Nigh, Hoard Gold

Review by Andrew Dunn

Nov. 9 (Bloomberg) -- Cassandras must be three things: prophetic, pessimistic and ignored. Michael Ruppert, a Los Angeles policeman turned independent reporter, fits at least two of those categories.

Ruppert, the subject of director Chris Smith’s documentary “Collapse,” warns that industrial civilization is headed for cataclysm as a burgeoning population relies on a dwindling supply of oil and our leaders stand idly by or, worse, actively hasten the disaster.

“The only thing that amazes me is the speed with which things are falling apart,” he says over the course of what amounts to an 80-minute interview, conducted in the basement of an abandoned Los Angeles meat-packing plant.

The camera prowls around Ruppert, who smokes cigarette after cigarette and calmly indicts our thirst for oil, alleges Central Intelligence Agency plots to sell drugs and claims U.S. foreign policy is geared toward securing energy reserves.

Smith emulates the placid storytelling style of Errol Morris (“The Fog of War”). The chilly result differs in texture and pace from Smith’s best-known effort, the warm, chaotic and hilarious “American Movie.”

Even the score, by Didier Laplae and Joe Wong, has the minimalist feel of a soundtrack by Philip Glass, a Morris collaborator.

Editor Barry Poltermann punctuates the lecture with archival footage of farms and oil wells and passages from cheesy instructional films.

Smith was researching a film on C.I.A. involvement in drug smuggling when he met Ruppert and decided to do a picture about him. At times, Ruppert comes across as a mild-mannered crackpot, urging us to hoard gold, claiming credit for predicting the economic collapse, accusing Dick Cheney and Donald Rumsfeld of taking an “intense” interest in him, and dwelling on mysterious deaths he connects to U.S. covert operations.

Dire Hyperbole
A seasoned public speaker, Ruppert is as quick with dire hyperbole (“The whole economy is a pyramid scheme”) as with evocative images (“The soil has become a junkie”). But the picture’s measured pace and Ruppert’s grave, mournful delivery produce the opposite of the attention-grasping audiovisual circus of a Michael Moore polemic.

Smith seems less interested in argument than character. He seldom challenges Ruppert’s allegations and presents no alternative points of view.

Ruppert’s grand vision contrasts with his simple life: He lives with his dog in Culver City, California. His latest book has not sold well and he is facing eviction. He loses his composure once in the picture, a moment that succinctly conveys the burden of his life’s work.

“I have emotion about this. I’m losing it,” he says. “We have felt so angry.”

“Collapse” is showing in New York and opens in Los Angeles on 11/13. Rating: ***

(Andrew Dunn is an editor at Bloomberg News. The opinions expressed are his own.)
To contact the reporter on this story: Andrew Dunn in New York at adunn8@bloomberg.net

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November 12, 2009, 7:03 am
The Great Shrinking American Dollar

By PETER BOONE AND SIMON JOHNSON

European Pressphoto Agency An employee at Korea Exchange Bank stacks American dollars at the bank’s head office in Seoul.

Peter Boone is chairman of the charity Effective Intervention, a research associate at the London School of Economics’ Center for Economic Performance, and a principal in Salute Capital Management Ltd. Simon Johnson, a senior fellow at the Peterson Institute for International Economic, is the former chief economist at the International Monetary Fund.

The American dollar is in the midst of a large fall in its value, or depreciation, as measured against other major currencies. The decline has been steady since 2002 and our currency is down about 35 percent from that peak. After strengthening slightly more than 10 percent during the global financial crisis of the past 18 months, the dollar is again falling back toward its pre-crisis lows, representing its weakest international value since 1967.

But there is a definite possibility that the dollar could soon decline further or faster.

At the level of general economic strategy, the American government has responded to a financial sector crisis with an expansionary fiscal policy, and the Federal Reserve is implementing loose monetary policy. Andrew Haldane, responsible for financial stability at the Bank of England, puts it this way:

For the authorities, [excessive risk-taking by the financial sector] poses a dilemma. Ex-ante, they may well say “never again.” But the ex-post costs of crisis mean such a statement lacks credibility. Knowing this, the rational response by market participants is to double their bets. This adds to the cost of future crises. And the larger these costs, the lower the credibility of “never again” announcements. This is a doom loop.

In addition to a financial crisis, we also have a large current-account deficit, meaning that we buy more from the world than we sell. The deficit was $100 billion in the latest available (second quarter) data, which is around 3 percent of gross domestic product, and we finance that with capital inflows from abroad. (The current-account deficit is down from around 6 percent, but two-thirds of the decline is due to the lower price of oil).

In the past, many of those inflows have been private investments of various kinds, but as investors around the world question whether United States government debt, and its dollars, are really worth the paper, it is increasingly difficult for us to finance our deficit with the outside world.

What does this mean for the dollar?

Treasury Secretary Timothy F. Geithner continues to repeat that a strong dollar is “very important” for the American economy, but United States fiscal and monetary policy pushes toward depreciation. To bail out our banks, we need cheap money, and this implies some inflation.

To finance our current-account deficit, investors need to think they are buying inexpensive assets from us. Everything points to a cheaper dollar. (The same thing is happening in Britain, but the Bank of England is increasingly explicit about this point and the unsavory broader situation.)

A “hard landing” for the dollar could be painful.

The 1980s classic, Stephen Marris’s “Deficits and the Dollar: The World Economy at Risk,” stresses that a rapidly falling dollar would push up United States inflation, resulting in higher interest rates and a deep recession (pp. lx-lxi). Writing in the latest edition of Foreign Affairs, Fred Bergsten emphasizes that such outcomes are still possible today. A weakening dollar will cause inflation fears, so yields on long-term government bonds will rise to compensate investors for inflation, and we will need to pay more and more to finance our large debts.

The idea that the American dollar might follow emerging markets such as Russia in 1998 and Argentina in 2002, or Britain in the 1970s — and so depreciate by 50 percent or more in a relatively short time — is certainly implausible now. But such a “doom scenario” is not unrealistic in the future without change.

In this context, the American government needs to control its budget deficit to keep this adjustment on track, and to stop confidence in the dollar from falling further. Our government collects far too little in taxes for what it spends. There is no choice but to raise taxes soon and rein in spending.

Short-term rates (controlled by the Fed) will stay low, while long-term rates (market-determined and affected by trust in our Treasury and Fed to keep the value of dollar strong) will rise as people fear their dollar investments will be debased. There is no doubt that both the Fed and the Bank of England know what is happening. The spread between short- and long-term rates (known as the “yield curve”) will rise, and banks will benefit; would-be home buyers and people with overdrafts or outstanding credit card balances pay more, while savers get little.

This is how the public pays for the past losses of our financial system.

We don’t have to do this again and again. We could start by changing our financial system from the roots. We need to credibly remove the promise to bail out our large banks each time they fail. This means forcing them to hold more capital, dividing them up so they are smaller, and then letting them fail when they make poor gambles.

The Treasury’s past and current close connections to Goldman Sachs, Citigroup and other major investment banks illustrate how our own doom machine functions. We need to break up these “banks” so they are small enough to fail, and also ensure that no bank, regardless of its connections, is able to demand that the Fed and the Treasury support its solvency in the future to prevent financial collapse.

In this context, a weakening dollar helps the administration to put an unstable financial system back on its feet — and to crank up our “doom machine.”

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Gold Hits New High Above $1,130

By REUTERS

Filed at 3:34 a.m. ET

LONDON (Reuters) - Gold prices hit a fresh record high above $1,130 an ounce on Monday and traders reported fund buying, with a weak dollar offering additional support.

"Someone had an interest in making a new high," said Michael Kempinski, a trader at Commerzbank. "Technically it's looking quite good now ... quite bullish levels."

"There are no bullish news that can give a reason for the move, so maybe someone is playing games and trying to protect their position," he added. "$1,150 is the next level."

Kempinski added that gold, which touched a high of $1,132.95, was also buoyed by a weaker dollar and rising oil prices.

A weak U.S. currency makes metals priced in dollars less expensive for holders of other currencies.

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China-U.S. discord on currencies clouds Obama visit

Sun Nov 15, 2009 7:14pm EST

By Patricia Zengerle and Yoo Choonsik

SINGAPORE (Reuters) - The United States and China sparred over exchange rates at a meeting of Asia Pacific leaders on Sunday, pointing to tricky talks ahead for President Barack Obama when he flies to China to address economic tensions.

The discord surfaced at a summit of the Asia Pacific Economic Cooperation (APEC) forum in Singapore when a reference to "market-oriented exchange rates" was cut from a communique issued at the end of two days of talks. An APEC delegation official said Washington and Beijing could not agree on the wording.

That underscored strains likely to feature when Obama travels to Shanghai later on Sunday following moves by Washington to slap duties on various Chinese-made products and a growing drumbeat of pressure on Beijing to let its yuan currency strengthen.

It also suggested investors should be cautious about betting on a yuan appreciation after a central bank statement last week appeared to give the green light for strengthening.

"China has pledged to keep monetary policy moderately loose, and their concern is still the economic recovery," said currency strategist Enrico Tanu Widjaja at OCBC Bank in Singapore. "They will probably let the yuan strengthen when they start tightening policy."

Chinese officials have grown testy about the pressure over the yuan. Chinese banking regulator Liu Mingkang told a forum in Beijing on Sunday that ultra-low interest rates in the United States were fuelling speculation in overseas asset markets and threatened the global economic recovery. [ID:nPEK143256]

Obama pledged on Saturday to deepen dialogue with China rather than seek to contain the rising power, which is set to overtake Japan next year as the world's second-largest economy.

But issues ranging from the yuan and trade tensions to human rights could complicate what many regard as the most important relationship of the 21st century.

"With regards to trade, this is a difficult time for the U.S.-China relationship," said Derek Scissors, trade economist at the conservative Heritage Foundation in Washington.

"The signs are actually getting worse instead of better."

SPECULATION ON YUAN MOVE

Chinese President Hu Jintao ignored the yuan issue in several speeches at APEC and focused instead on what he called "unreasonable" trade restrictions on developing countries.

An earlier draft pledged APEC's 21 members to maintain "market-oriented exchange rates that reflect underlying economic fundamentals." That statement had been agreed at a meeting of APEC finance ministers on Thursday, including China, although it made no reference to the yuan.

A U.S. official sought to play down talk of discord over the removal of the reference to currencies, and said the actual discussions took place among aides, not leaders.

He also signaled Obama was prepared to discuss the yuan when he gets to China. In an interview with Reuters last week, Obama said he planned to raise the issue on his trip.

Washington says an undervalued yuan is contributing to imbalances between the United States and the world's third-biggest economy. China is pushing for U.S. recognition as a market economy and concessions on trade cases that would make it harder for Washington to take action against Chinese products.

The yuan has effectively been pegged against the dollar since mid-2008 to cushion its economy from the downturn.

China is coming under growing international pressure to let it rise because its manufacturers have gained market share at the expense of rivals in countries whose currencies have risen against the falling dollar.

China's central bank said last week it would consider major currencies in guiding the yuan, suggesting a departure from an unofficial peg.

However, Chinese Vice Commerce Minister Chen Jian on Sunday played down talk of a shift in policy as well as expectations of a rise in the yuan's exchange rate.

Beijing may have forced APEC to tone down its language on currencies to avoid encouraging bets on yuan appreciation that would suck speculative capital into China and fuel asset bubbles and inflation.

By Friday dollar/yuan volatilities were implying the strongest expectations the Chinese currency would appreciate since June, and the market for offshore non-deliverable forwards pointed to a 3.6 percent rise in 12 months.

GLOBAL IMBALANCE

Obama told APEC leaders the world economy was on a path to recovery but warned that a failure to rebalance the global economic system would lead to further crises.

He said the world could not return to the same cycles of boom and bust that sparked the global recession.

"We cannot follow the same policies that led to such imbalanced growth. If we do, we will continue to drift from crisis to crisis, a failed path that has already had devastating consequences for our citizens, our businesses, and our governments," Obama said.

Obama's strategy calls for America to save more, spend less, reform its financial system and cut its deficits and borrowing. Washington also wants key exporters such as China to boost domestic demand.

The APEC statement endorsed stimulus measures to keep the world from sliding back into recession and urged a successful conclusion to the Doha Round of trade talks in 2010.

APEC is the last major gathering of global decision-makers before a U.N. climate summit in Copenhagen in three weeks meant to ramp up efforts to fight climate change.

Those negotiations have largely stalled, but a U.S. official said Obama had backed a two-step plan by the Danish prime minister to aim for an operational agreement and to leave legally binding details until later.

The APEC statement dropped all references to emissions reductions that had been in earlier drafts.

(Additional reporting by Neil Chatterjee, Caren Bohan and Lucy Hornby and the Beijing bureaux and Paul Eckert in Washington; Writing by Dean Yates, Editing by John Chalmers and Bill Tarrant)

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Bernanke's rare intervention fails to calm fears over weak dollar

Federal Reserve chairman Ben Bernanke's attempt to shore up support for the US currency failed yesterday as the dollar fell to fresh 15-month lows.

By James Quinn, US Business Editor
Published: 6:31AM GMT 17 Nov 2009

In a rare moment of intervention into the currency markets from America's leading central banker, Mr Bernanke admitted the Fed is watching the dollar "closely" as part of its focus on employment growth and price stability.

Mr Bernanke stressed the dollar will remain "strong" and continue as a "source of global financial stability".

Related Articles

• Gold hits new record high on dollar weakness
• A still lower dollar could be good for the world

But his comments, part of a speech in New York, were not enough to stop the dollar's fall, easing 0.6pc against a basket of major currencies, allowing sterling to rise by more than a cent to $1.6830.

The Fed chairman went on to reiterate the central bank's earlier commitment to keeping US interest rates exceptionally low "for an extended period".

Barclays Capital's US economist Michelle Meyer interpreted Mr Bernanke's comments as "simply stating that the Fed will monitor the dollar…and…not suggesting that the Fed will try to target the dollar".

His comments came ahead of what could be a defining moment for the dollar, given President Barack Obama's visit to China this week where he has promised to discuss the artificial devaluation of the yuan with President Hu Jianto.

The comments did have a positive impact on US stock markets, however, pushing all three major indices to 13-month highs, with the Dow Jones Industrial Average closing up 136.49 at 10,406.96, thanks in part to better-than-expected US retail sales last month.

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The Day the Dollar Died

by John Galt

November 18, 2009

The following story in italics is a potential fictional time line for the day the dollar died. I hope not to instill fear or loathing but to give everyone some perspective on a POSSIBLE outcome which does not really take much of a reach to come to any conclusion. Despite popular belief and promises from those who wish to rob you of your savings and investments, the collapse of the dollar might just be an event measured in hours, not days as their control is not what it seems…..

Mike was less than an hour from home in Minnesota after dropping his load off in Fargo but knew he needed to top his tank off this Sunday evening to insure his rig would make it home. He pulled into the Petro Truck Stop just outside of Fargo and hopped out of the cab into the bitter twenty below temperatures which he could not believe had already hit at ten o’clock at night. He slid his fuel card into the pump waiting for the next prompt when the “SEE ATTENDANT” message flashed in the screen. He blustered, figured it was another card problem and whipped out his Master Card and slid it in after the pump reset and again the “SEE ATTENDANT” message flashed up. “What the hell is going on?” he thought to himself as he wandered into the long line of drivers boisterously yelling at managers and clerks alike.

Tom finished up his shift on the docks at the Nestle warehouse in Hampton, Georgia at exactly 11 o’clock at night and decided that because of the scuttlebutt he had been reading on the message boards, it may not be a bad idea to pick up a few cans of food and some toilet paper at the local WalMart Super center. Even though it was a Sunday night, they were always stocked and it was just five minutes out of the way to his home. As he walked inside the store, his mouth dropped. It looked like the day after Thanksgiving sale with every register open and ten plus people deep at 11:30 p.m. “Oh my God!” he gasped as he walked in grabbing the last shopping cart with the wheel that was half locked up. As he walked as fast as he could to the aisle with the paper goods, he looked at all the shelves then noticed the clerk who looked stunned himself. “How in the SAM HELL does WalMart sell out of Toilet Paper son?” he screamed at the eighteen year old kid. “Sir, I don’t know what is going on. Is the world ending? I’m a little freaked out!” the clerk stammered. Tom realized that he was not to blame and as he calmed down said to the kid “Son, I don’t know what is going on either. It must be an ice storm on the way. Are you folks getting another truck soon?” The clerk said in a very low voice “Sir, I think there are two coming at 2 a.m. I would wait here if I were you.” With that information Tom slinked outside to his car and called his wife at home just before midnight to tell her he would be staying to wait on the WalMart trucks.

1730 ET…February 21, 2010

It was a typical Sunday night in my household, a tremendous dinner, nice weather in Florida and of course a chance to chat with my friends online about the events of the world. The big news was that on Friday, February 19, 2010 the US Dollar Index closed at 69.07 far below any level in history and of course shattering all known technical support. As I grabbed a glass of Port and settled in front of my computer at 5 p.m. Eastern to watch the Asian fireworks and watch Bloomberg and CNBC-Asia on my computer, I noticed the Middle Eastern markets closed in horrid shape. The Israeli market closed three hours after the open and down 22% for the session. The Saudi markets closed after one hour and down 41%. Other regional markets did not open or were shut down due to national emergency declarations. As I tuned in expecting the usual repeat on Bloomberg, it was live with a somewhat excited news babe reading information from a blog reporting “rumors” that the CEO’s of Citigroup and Bank of America were in meetings since 11 a.m. with the New York Fed. At that point, it was time to put the port up and break out the hard stuff.

Gold had closed at a record high again, up some $37 to finish Friday’s session up at $1289 and change so I figured it would be jumping again with all of this worldly instability on display. I searched the boards and feeds like mad, looking for anything on an Iranian attack or outbreak of war elsewhere in the world but nothing was found at all. As 6 p.m. Eastern flipped up on my watch, CNBC interrupted their programming with a live update from New York instead of Australia or Tokyo about the meeting at the NY Fed. Bloomberg also broke from their Asian coverage with a brief story but no details as to why there was a meeting today or who else was there. As the New Zealand markets opened, the prices went nuts but shockingly to the upside. Their markets shot up 11% on the open to break over the 3900 price level but that was not the story. As the futures opened in Chicago for the evening session, no matter where you were in the world that day or night, you printed that screen at 6:04 p.m. Eastern time as the prints were staggering:

Gold UP $212.15 to $1501.15

Silver UP $39.13 to $81.06

US DOLLAR INDEX DOWN 9.5869 or just over 14% to 59.4830

US S&P FUTURES DOWN 49.13

US DOW FUTURES DOWN 472

NASDAQ FUTURES DOWN 135

Holy Smokes! This was an absurd way to start the night and my phone started ringing along with text messages and emails out my wazoo. The sense of panic was evident on Bernie Lo’s face as he came on to the air discussing what was happening in the futures market and fortunately he announced that Jim Rogers would be joining him after the next break. As the commercial started at 6:09 p.m. Eastern the scroll at the bottom of the screen was bright red with the headline:

ALL U.S. EQUITY FUTURES ARE LOCK LIMIT DOWN…..TRADING SUSPENDED UNTIL 0900 ET MONDAY FEB 22….US DOLLAR BEING SOLD ACROSS THE BOARD

By 6:15 the Euro was trading at $1.92, the Kiwi (New Zealand Dollar) at $1.26, the Aussie Dollar well beyond par at $1.39 and the Canadian Loonie rocketing past par to $1.33. The U.S. Dollar was in a full fledged collapse and the world was putting money anywhere they could to escape the carnage. As the New Zealand equity markets struggled to handle the order flow an announcement emerged at 6:27 p.m. Eastern time that they would no longer accept U.S. dollars within their nation for the next 72 hours until the United States Federal Reserve Bank introduced stability measures. That instantly turned a huge move to the upside to down 17% in less than three minutes and soon thereafter, trading was suspended by 7 p.m. Eastern time. Instead of waiting to see what was next, I left at 6:51 p.m. to run down the street and take $500 from the local grocery store ATM, returning just in time for the top of the hour news.

1900 ET

The Australian markets attempted to open but due to order imbalances they were delayed twenty-seven minutes. It was a buying frenzy in Australia also as the Aussie Dollar was skyrocketing higher and gold continued to gain, now up $273.20 per ounce in less than two hours of trading. The Chicago board was going to make a statement at 8 p.m. ET and the world was holding its collective breath because something bad was happening again in the United States and everyone wanted to buy into foreign markets to escape the American disaster on the horizon. After a brief opening, the Australian government followed suit with the New Zealand announcement and suspended acceptance of the U.S. Dollar for commerce until further notice. The Japanese were very quiet in the mean time as they announced at 7 p.m. they would keep their markets closed but the huge move in the Yen caused massive concerns as noted by the central bank. The yen appreciated from a close of 79.8213 on Friday the 19th to an opening of 48.7326 in less than an hour of trading. Nobody wanted dollars and even fewer people it was discovered wanted the British Pound. The Pound for the first time in its history was worth less than 100 yen and it was well on its way to joining the US Dollar in a death spiral.

2000 ET

The internet is crawling. Message boards were lit up with record numbers of participants. Rumors swirled about declarations of martial law, bank holidays, secret wars and other crazy things. Yet my phone messages, conversations, texts and emails told me there was something very very wrong. Two of my friends called me to tell me the consequences of the failed 30 year bond auction last Thursday came home to roost over the weekend. Citi and BoA were rumored to have a huge CDS obligation due to the interest rates being blown outside of the norm and the 6.05% yield from the auction cost the banks an estimated $400 billion each if they were forced to settle open swap contracts and derivative issues by Monday or the end of the month. The swaps and derivatives which were to prevent the collapse may actually have finally started it but nobody could verify anything that was happening as the NY Fed looked like a war zone with hundreds of cameras around the building and reporters speculating endlessly on every cable channel.

2100 ET

I did not know who to believe but when Bloomberg played the excerpt from Jim Rogers’ interview just after the top of the hour where he said “this is what a currency collapse looks like and if you were not prepared, you were wiped out” really resonated with everyone on the Bloomberg set and throughout the news worldwide. The Chicago Futures were closed by order of the CFTC and SEC and that was the big announcement but it was assumed anyways because there was no way the COMEX or anyone else could possibly have kept up with the demand for precious metals as the last print had gold over $1579 per ounce and worse, the base metals closing at obscene prices like $6.79 per lb. for copper! The Shanghai markets were ordered open for domestic participants only and no overseas selling was allowed nor trading in US Dollars thus allowing the communists to manage their banking situation without outside influence. Unfortunately a rumor was confirmed on FNC later in the hour that Chinese troops were deployed to all U.S. and British bank branches inside their nation. That only permeated the panic already felt on the internet and in the air. The news at the top of the hour was even more shocking.

2200 ET

CNN led the hour off with coverage of the “FINANCIAL CRISIS OF 2010″ with breaking news about two hedge fund managers committing suicide in their offices in New York. That did not help the confidence level nor did the statement from Treasury Secretary Timothy Geithner at 10:09 p.m. Eastern that the “government was in full control of the situation and that the panic world wide was unwarranted.” When he finished the statement assuring that the financial markets would probably open on time in the morning, the snicker from CNBC’s team of Gasparino and Griffith spoke volumes about what was really occurring.

2300 ET

Somehow a picture of Goldman Sachs CEO Blankfein and JP Morgan’s CEO Jamie Dimon entering the New York Federal Reserve building was leaked out and broadcast on cable news and financial news outlets causing more discussions and a genuine sense of panic to grip everyone. Reports about credit cards not working for the last two hours nationwide were swamping the newsrooms but no comments from VISA, Master Charge or anyone else was forthcoming.

0000 ET February 22, 2010

It was officially a panic. Reports on local news stations about grocery store shelves being cleaned out and ATM machines running out of money hours ago and not being refilled were broadcast nationwide. Even my local station had a story about accessing the reporter’s bank account online and all they got was a very scary message as they attempted to reach his bank’s web page:

404-NOT FOUND

0100 ET

WWOR and WCBS started reporting that gas stations in the New York City and northern New Jersey areas were running out of gas even though credit cards did not work. The cable news stations and financial news networks just recycled earlier news with updates at the top of the hour. The world markets were closed and everyone was holding their breath to see what happened the next morning.

0200 ET

As I struggled to stay awake, NY Federal Reserve President Denis Hughes came to the microphones with Dimon, Blankfein and shockingly Ben Bernanke. Hughes immediately deferred to Bernanke who said that the President would address the nation at 7 a.m. Eastern Time and that he felt the crisis was averted for the moment and that everyone should have faith in the United State’s policy of a strong currency and banking system. After that statement was concluded, Bloomberg switched to a banking analyst from Singapore who said that the U.S. was now a hulking smoking black hole in the ground and the only thing it was good for was to return those worthless dollars back to “THAT” nation so “THEY” could burn them to stay warm this winter.

0300 ET

Someone on the message board posted a story from WTOP that military police were seen setting up roadblocks throughout Washington, D.C. There was no video or other confirmation within that hour. I had to make double strength coffee at that point in time but instead set my alarm for 0500 to try to grab a nap. I was not about to miss what was going to be a day to remember in American history.

0509 ET

So sue me! I hit my snooze button then realized I fell asleep with the computer and television on and the news was flying. In big bold red at the top of CNBC’s screen was the announcement COUNTDOWN TO SPEECH and a counter moving towards 0700 Eastern. As I flipped the channels half awake, I noticed a BREAKING NEWS announcement on CNN and there was a feed from WSB in Atlanta, GA with their helicopter video of the Georgia State Patrol closing off all streets within three blocks of the Federal Reserve Bank in Atlanta and also around the Federal Home Loan Bank. That sent a chill down my spine as I flipped back on to the computer to see over two hundred unread emails and message upon message about shortages, internet outages, credit card problems and worst of all, gas stations running out of fuel. The other shocker was the suspension of international flights in many U.S. cities as the suppliers put every airline on C.O.D. effective immediately at 2:30 a.m. Eastern Time and that suspended a ton of flights inside the United States and worldwide. The cascading effects were stunning, even to those of us who were warning about it.

0530 ET

Several European markets attempted to open in coordination with Middle Eastern markets but the declines were so severe that within ten minutes of trading the authorities shut them all down within a half hour:

Russia -35%

Saudi Arabia -43%

Israel -22%

Switzerland -17%

Germany’s DAX -41%

CAC 40 – 29%

FTSE 100 – 32%

The Euro was up another 10% against the dollar and the Swiss Franc was now worth over $1.40 U.S. As the discussions about the problems with the U.S. dollar accelerated, banks were being shut down in Europe in nation after nation to prevent runs. Sadly for the Brits, the Sterling was now trading so poorly in Europe that it was worth just 1/3 of a Euro at some trading desks. By the top of the hour, video of riots in front of banks in Frankfurt and Glasgow were broadcast nationwide. At 5:55 a.m. Eastern the news took a dark turn with this BREAKING NEWS headline:

OBAMA AND BERNANKE TO SPEAK TO THE NATION AT 6 A.M. EST

0600 ET

The speech was low key, solemn and to the point. Obama announced a one week bank holiday. All credit card transactions and all collection actions of any sort were hereby suspended for seven days. All financial markets were closed until further notice. All mortgage and bill payment due dates were suspended for thirty days and no past due notices nor penalties were to be allowed by Federal Law. All schools were closed for seventy-two hours be they public or private. The city of Washington, D.C. was hereby declared to be under a state of martial law and all citizens were ordered to observe a curfew from 8 p.m. to 8 a.m. daily. Just as that sunk in, Ben Bernanke stepped up to the microphone to announce that President Obama, Treasury Secretary Geithner and all of the Federal Reserve Presidents along with himself were going to depart for Geneva for an emergency meeting of the G-20, IMF, World Bank and United Nations Financial Stability Working Group. Bernanke also announced that Citigroup, N.A. and Bank of America were hereby nationalized and placed under control of the United States Treasury under the auspices of the FDIC and that Sheila Barr would have an announcement at 8 a.m. Eastern. As he finished the announcement, an obviously exhausted Federal Reserve Chairman concluded by assuring the citizens of the nation that a stable currency was their only goal from this meeting of world financial leaders. I noted he did not say what currency though he was referring to.

0800 ET

By now, CNBC, Fox Business and Bloomberg were knee deep in wall to wall coverage but so were the broadcast and cable networks. America was on the brink was the preaching and screaming and the “bulls” were being gored by the permabears every time they uttered any statements about “how we’ve been through worse” etc., etc.

The announcement of the seizure by the FDIC of two of the largest banks in the world was pretty standard and short. The follow up statement by Ms. Barr though is what caused every newsroom to take pause when she stated that “further consolidations will be announced in the next seventy-two hours.”

The Bubblemedia was stunned and even shocked when Canada announced that they would attempt to open their financial markets for two hours of trading and that their banks would be open for normal domestic customers and business from 10 a.m. until noon Eastern time. Everyone on television looked at each other and just asked “How?”

0900 ET

I had forgotten to call in sick to work but then again the phone call from the company owner was pretty much a “well now what” as we laughed in a gallows humor discussion. He understood why I was home and he had already told the employees that he was closing at noon and would reopen when we could actually collect real money on what we sold and leased out. I told him I would call him at home later or meet him with a bottle on the golf course in the morning, weather permitting.

The chilling video of the Federal Reserve heads, Geithner and Obama boarding Air Force One to leave for Geneva from Washington, D.C. really had an impact on me.

1000 ET

The Canadian markets opened up 10% in ten minutes then rolled over down 31% by 10:30. The scary part was that the Canadian dollar kept on rising even though commodity trading was suspended and everyone was wondering just what gold would be priced at if the markets were allowed to trade.

As the day wore on, it was a blur of shocking story after shocking story. The President and his entourage arrived in Switzerland along with other world leaders but little was discussed or disclosed. The reports of banks being fire bombed by nuts throughout parts of the U.S. made the international news and caused all of us to feel somewhat uncomfortable as to what was next. The 8 p.m. interruption of normal prime time programming with a FEMA NEWS ALERT which lasted ten minutes and was repeated at the top of every hour with little if any information caused even more panic in the masses. Today I watched our dollar die in a matter of hours even though I knew how it was killed months if not years ago. I just wondered how bad the announcement out of Geneva was going to be as our bankers and politicians sold our souls out to save their rear ends.

I also wondered if I would ever sleep again.

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American Hangover (The Day the Dollar Died, Part II)

by John Galt

November 19, 2009

The following posting in ITALICS to represent the fictional perspective I see possible during a week long currency crisis created by the United States government and how it might well be viewed from the eyes of a blogger, a truck driver and a warehouse section manager. The premise might seem like a crisis that could not happen here, but does it really take much of a reach to come to these conclusions? Each individual might react differently, each aspect of the story questionable to some degree but the question has been asked of yours truly as to why and how the series of events could occur in such rapidity and without warning. For those that have been reading my pages and works since late 2005 when some friends in the real estate and financial industry made me aware and gave me the red pill so I could understand the depths of the financial fraud being perpetuated on our nation and much of the Western world married to our foolishness.

To provide an alternative to just the story telling aspects as how I envision such a time line let me start with another opening salvo and commentary on today’s markets to give you a perspective. The regular readers of these pages understand that I have been preaching the 1-3-6 Rule for some time and as such a quick rehash for my new guests is in order. During the peak of the financial and credit crisis in 2008 and 2009, the 1, 3 and 6 month United State Treasuries had their yields crater to 0.00% or into negative territory in some cases and just above that during other periods. Let us start this brief trip in time with a story from Reuters on April 20, 2009 titled:

US Treasury bill rates fall on bank concerns

Today those rates per CNBC are:

1 Month: 0.01%

3 Month: 0.01%

6 Month: 0.11%

Those are absurd yields by any stretch but when measured against the last “official” inflation report you are actually paying the government ten cents on the dollar to hold your money. To get a better perspective, here is the report from Bondsonline at 1626 ET on November 19, 2009:



Thus you do not have to take my word on it. We have billions of dollars pouring into short term Treasury Bills to essentially pay the government to “store” or hold their money for the next 30 days to 91 days and it begs the question as to why. The answers I propose are simple and have been stated many times before, that our financial system is no much more repaired or functional than an airplane is airworthy after it flies into the side of a mountain at 500 knots. Credit is limited if not totally frozen at many levels and the government’s role as banker of last resort is being tested by foreign powers sick and tired of funding America’s house party. And the timing of the sudden move in short term Treasury yields which began in August of this year and has been accelerating ties in nicely with the timing of the fictional death of our dollar I have been outlining. I shall continue to add to the story and highlight the news stories and related articles in a later thread with the appropriate links to give my readers some idea as to how these theoretical conclusions were reached.


The party is about to end. Let’s take another look to see what the hangover from the party might just look like……..

“Ah, Lincoln Avenue exit, Thank You Lord for getting me home!” an exhausted driver named Mike exhaled as he saw the ramp approach. Had had just over a half tank of fuel and could keep the rig running during the icy nights in Minnesota but was more aggravated after today’s events that no one in his office would answer the phone or the Qualcomm communications he had sent. Mike spent seven hours to get fuel in Fargo as the tanks were empty and the last tanker truck the Petro would send did not arrive until three hours ago. As a result, Mike sent a nasty message to his dispatcher about ice, cold and where it needed to be located up his dispatcher’s torso in Atlanta. Here it was six o’clock in the morning on I-94 and the roads were packed with truckers as usual but the CB radio screeching with chattering rumors about bank failures and economic collapse. “Good thing I have The Highway channel on my Sirius” he thought to himself as he cruised home to some classic Johnny Cash.

As he started down shifting on to the ramp he noticed that at just after 6 a.m. one of his neighbors, Deputy Monckton was at the bottom of the ramp with his lights flashing and flares across the bottom of the ramp. Mike rolled to a stop and cranked the window down and asked “Hi Jack! What the heck has you out here freezing your tail off this early in the morning?” The Deputy unsnapped the cover from his parka over his face, took a sip of coffee and then spit out some chew to reply, “Mike, you are not going to believe this, I’ve been ordered to close this exit. Locals are the only ones allowed in for the next ten days per the Sheriff and Mayor Hilldegest. We’re supposed to turn everyone away here and off the old Highway 52 and 210 exits. I hope you’re going home, there’s some wild stories circulating out there!” Mike grabbed a huge gulp of coffee and wiped the over flow off his now frozen beard in the negative 21 degree temps to tell the Deputy “I’m going home and locking and loading. I’ve got a about a third of a load of pork from IBP to deliver tomorrow in Duluth, but now, we might just need it here. Call me if you need my help on the patrols, I’m locking this sucker up.” The deputy said “thanks” gave a half-hearted salute and moved his car to let Mike through. Little did Mike know that the little town of Fergus Falls would get very, very busy before the week was over.

Meanwhile, back in Hampton, Georgia….

February 22, 2010 0315 A.M. ET

Tom finally had the joy of handing a clerk $72.00 to pay for 30 bucks worth of toilet paper and a bunch of canned goods. Amazingly when Tom arrived home a half hour later his wife greeted him at the door. “Well, was it worth it getting all that toilet paper?” Sandy asked. As Tom looked uncomfortably at his lovely wife of twenty years, he started to speak when she interrupted and said “uh, I don’t see any of this magic toilet paper? Where is it sparky?” Tom looked down as he set the first load of bags of canned food down and a full two cases of Saltine crackers and started the story, “Well, uh, honey, you see there was this guy in the parking lot and uh, well, you see, he uh, well, gave me $10 a package for toilet paper I paid $5.99 per package for! He’s such an idiot!!!!” Sandy was not impressed. She said in a stern and disgusted voice “And if we run out because the stores are closed, will you let me use all that money you just earned to wipe my butt?”

“Uh” was all Tom said as he looked down and meandered back to the car for another bag full of canned veggies and Ravioli in the middle of the night.

February 23, 2010 1:41 A.M.

Crap, I forgot to turn off the computer. Look at all the emails and nasty messages. Maybe it is just a bad dream or the bourbon but I swear that even at this time of night the “Day After” as the media was calling it seemed like it was prime time as thousands of people were on my favorite message boards, many pleading for help about their investments or what to do to survive. After finishing up my business in the bathroom, I figured I might as well turn on the idiot box and see if the mainstream had figured out just how severe this historical event was or if our morons who helped make this mess had the nerve to utter any statements from Geneva yet.

As I flipped through I wondered if slugs like Cramer and Kudlow would ever show their face on television again. I had managed to convince the wife that I needed at least three televisions but that didn’t fly so two would have to do along with a split screen on my monitor as I used when I formerly day traded. She was wonderfully tolerant but knew that I had a clue this might be happening so understood and enjoyed a bottle of wine with me as we talked on the patio before retiring for the evening. Unfortunately my office beckoned and when I saw the insanity on my screen my head almost exploded.

There it was, live at eight minutes until 2 a.m. a repeat of a special “Fast Money” segment on Bubblevision proclaiming and pushing the “Best Stocks to Buy” when the market re-opened next week. The best stocks to buy? These morons are acting as if this was just eating some bad undercooked chicken from a local Chinese choke and puke and once you purge it, you can chow down some more, just add more soy sauce! At 2 a.m. the mood returned to my more somber dark outlook as the Bloomberg network began live coverage from Switzerland and their attitude was 180 degrees from the propagandists on other channels.

The interview they had with the Swiss Finance Minister Merz was pretty much to the point. He looked into the camera and sternly proclaimed “We will not sacrifice Europe nor our economy to save America and their illogical banking structure. We will issue a statement tonight after President Obama speaks at 6 o’clock Geneva time.” I figured that might give me time to squeeze in eighteen holes and enhance my hangover if I could get back to sleep but that would mean convincing my boss to tee off at 7:30 a.m. instead of 9:30.

05:09 A.M. ET

The snooze button felt good but sleep was not an option. I left my wife’s warmth and comfort to sleep on the guest bed and kept the television volume on low just in case the EAS decided to activate because the ChiComs got sick and tired of the excuses from Obama and Bernanke in Geneva. Of course my paranoid self got the best of me and made me get up, shave, shower and listen intently to the local station which broadcasts the Bloomberg Radio Network exclusively in the early morning. What was unusual about this mornings program, as I smelled the coffee cranking up from my automatic Mr. Coffee (Dunkin Donuts, fresh ground if you’re curious) was the appearance of the morning team of Tom and Ken a full two hours plus before they normally come on the air. Bloomberg “Surveillance” was on at 5 a.m. and that meant either big news was breaking or there was some serious concern on the behalf of the big money crowd. The first interview they had was with a New York City Councilman who worriedly professed that the longer the markets were closed and the more dangerous the projected actions, the worse the city would be hit. I found that interesting because locally, nothing much of anything beyond the international fiasco was really going on. The bank closings and gas stations running out of gas was just taken in stride by the masses and that’s why I was hurriedly shaving and then putting toilet paper on the fresh cut when Tom Keene said that the projected Dow opening if it were to open today was down thirty percent if it were allowed to trade according to some experts.

06:00 A.M. ET

As I finished my shower the sounds of Bloomberg Radio faded as I turned it down to turn up Bloomberg television and hear the big announcement from the new President of the EU Van Rumpoy state the following:

“The United States Dollar in its current form is no longer an acceptable medium for a reserve currency or international trade with members of the European Union. We have expressed our policy on this matter to the other world leaders and President Obama at the morning meeting. The resolution of the matter will be completed soon and the announcement of our final policy decision will be enunciated at 6 o’clock European Central Time.”

Stunned, I reached for the half full glass of now somewhat warm wine and chugged it. While the sheeple as I affectionately nicknamed them might have slept through this announcement, it was Armageddon for our country. Screw it. I’m going to play golf one more time before it hits the fan. This is absurd.

06:25 A.M. ET

The ‘DING’ on my toaster oven went off faithfully with my last ‘Everything’ bagel and the cream cheese tasted extra rich this morning. It was almost if enjoying life without work was better but instead of retirement it was more of a resigned “now what” attitude. As I walked back into my home office with my bagel on my plate, the beautiful wife was awake and asking what my plan was. I reminded her that there was no work today so go back to bed but she insisted on going into her office, I guessed to answer phones that were not going to ring and hoping someone would help her figure out what was next for her state contracts. I told her that I’m playing golf with my boss so I have my excuse for playing hookie from reality. Just as she was going to reply in a rather rude outburst I asked her to be quiet as Prime Minister Brown from the UK began to speak:

“Fellow citizens of the world, America and the United Kingdom have long enjoyed a special relationship. The matters being discussed within the halls of this meeting in Geneva will not benefit the citizens of the crown nor the free world. The United Kingdom has elected to depart this meeting and recognize the United States Dollar as the primary reserve currency for trading purposes and we fully expect and accept that the Americans will make good on all debts past and present that are owed to our nation as we too shall be strong and persevere in the face of this unwarranted attack on our sovereignty. The crown and eagle shall stand together, alone if we must. We will not abandon the ally which helped us survive World War Two and the Cold War. Thus the meetings here in Geneva, from the perspective of the United Kingdom and our financial agencies, are now concluded. Effective at midnight tonight, the United Kingdom shall withdraw from our participation in and investments of the World Bank and International Monetary Fund. Good day and God Save the Queen.”

06:37 A.M. ET

I walked into my bathroom and got quite ill to my stomach.

07:00 A.M. ET

As I tossed my golf bag into the back of my pick up truck the cell phone rang and of course it was my boss. He said that he had lined us up at the country club but only for 9 holes because he wanted to see what President Obama and the rest of the G20 said at noon today. After signing in and the usual pleasantries, we headed out to the practice green to attempt to warm up a bit. Thankfully, it was a nice Florida morning where global warming had cooled the tee off temp to a robust 49 degrees and as I tried to find my stroke I muttered under my breath an obscenity (or four) about Al Gore’s family tree and dumped a little Irish Whiskey into my coffee to warm it up.

We walked to the first tee from our golf cart and the Marshal said cheerfully “Have a good time gentlemen, it may not matter tomorrow!” With that I figured it was time to fire up a Diamond Crown #7 and enjoy the scent of a Pyramid Maduro as my golf game was not going to be so hot today. My boss said jokingly “I’ll take one on the second hole if you have one, I’ll be out of business soon anyways” and as he chuckled proceeded to hit a nice drive about two hundred and seventy yards down the right side of the fairway. I reached into my bag and handed him my last cigar and told him to enjoy today because tomorrow was going to really suck. He replied, “Yup. As soon as the courts open, I’m filing Chapter Seven.”

That made for a nice shank about seventy yards behind his ball and in the tall grass leaving me a mountain to climb. But the best part was getting away from the Marshal who was acting as a starter today to work off tips (of course we gave him $10) as now we could talk and drink like Kamikazes on their final mission. The truth about our local situation was about to come out.

09:17 A.M. ET

The Par 5 sixth hole was a monster today with the tees set back in the dew laden grass some 547 yards from the pin. The inhalation of my cigar helped but adding a cocktail to the mix did not hurt. My boss, a normally reserved sixty three year old self-made millionaire was chugging drinks like a mad man and telling all. He told me how the local banks were all insolvent criminal enterprises, as if I did not know that already. He told me that fifty percent of the commercial real estate was already delinquent or ready to be foreclosed upon. He even told me that half of the private jets at our Sarasota airport would be repossessed if any damned fool would buy them for 30 cents on the dollar! As he hit his second shot off the fairway, I took a swig straight up. The hangover I had this morning was nothing compared to what was coming for America.

11:00 A.M. ET

The approach to the 9th hole was one of both a glazed over look of relief and horror as we knew that once were settled down to watch President Obama’s speech at noon, our lives and our nation would change forever. My boss laughed as I birdied the hole, giving me a scorching score of 49 on the front nine and he finished up to whip me by ten strokes yet again. Knowing full well that our relationship as employer and employee was practically over, I looked at him half serious and said “You know if you actually gave me a fair schedule for time off, I would hit the ball as well as you do.” He let out a huge belly laugh and said that he was buying the first round and not to worry, he was giving every employee one month’s salary on Thursday with the cash he had on hand and more when the banks opened to insure everyone survived before he filed for bankruptcy.

“Dear God” I thought to myself. He’s either fleeing the nation or ending it all. The local news was chocked full of reported and rumored suicides around our community as of yet the names were unconfirmed this morning. The blaring of sirens out to Longboat Key and helicopters flying to our local hospital disturbed the normally quiet winter evening, yet it seemed surreal to everyone who lived in our community. The bartender at the country club looked us in the eye and asked “Are you staying for the big one?” My boss, being the the guy with the attitude now of “whatever” replied, “You mean they are showing a repeat of the Bucs game today again?” The bartender laughed and replied, “No, you know, President Obama and the bankers are going to screw all of us retirees in forty-five minutes! We don’t matter any more, so we figure we’re toast.”

My boss, saddened, looked at him and handed him a $100 bill to my astonishment and said “Old man, this may not be worth anything today, tomorrow or ever again, but take it for what it is worth now. A thank you for helping our nation make it this far.”

I started to get a little misty eyed at that point.

11:55 A.M. ET

CNBC interrupted with news that a WalMart Super Center was in the midst of a riot as it was closed due to running out of stock on the north side of Lexington, KY. As footage rolled in, the scroll said “6 dead, 15 injured” and just as the reporter was getting ready to speak….

11:59 A.M. ET

Attention all broadcast, cable and satellite outlets, this special emergency broadcast from Geneva, Switzerland and the President of the United States begins in 10, 9, 8, 7, 6, 5………..

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“I Have Been to the Fields of Gettysburg” (The Day the Dollar Died Part III)

by John Galt

November 21, 2009

The following story in ITALICS is what some like to call speculative fiction, what I like to call a potential scenario for the culmination of thirty-six plus years of blunders by an incompetent group of bankers hell bent on completing their one hundred year plan of world financial domination. Of course their inability to grasp or destroy the concept of nationalism and individual identity will prove to be their ultimate undoing, but you can not tell them anything, so we all get to suffer while they learn.

“Citizens of the United States, citizens of the world, I wish to bring you a message tonight of hope and dreams and most of all assurance. Decades ago one of my heroes uttered those famous words of ‘the only thing we have to fear is fear itself’ and to that theme, I too, like Franklin Delano Roosevelt call now on the citizens not just of the United States but of the world to begin a move to restoration, beyond the call to change our ethics and to begin to undertake an immediate and drastic course of action to preserve and enhance the future for billions of people.

We have assembled in Geneva to initiate a practical and realistic course of action to correct the errors of previous administrations, of prior nationalist xenophobic ideals, and to end the cursed reality of a system of capitalism which has failed because the participants within the economy refused to shoulder the responsibilities inherent with the great power and wealth the people granted them. The expansion of our ideals was fruitful, beneficial and helpful to establishing a global expansion far greater than any in the history of mankind, yet my powers and those of our central banking system were immediately tested one year ago as this very expansion collapsed as the illusion of wealth isolated within the purview of the few deprived the necessary capital to continue economic growth. This shall no longer stand. The governments of the world can no longer stand idly by and allow the minority the great responsibility of the engine of growth to become restricted opportunities for their own benefit at the expense of the citizens of the free world. Tough decisions have been made in these meetings; decisions which will impact every man, woman and child for a generation forward and impose great stresses on those unwilling to make the necessary sacrifices to preserve our nation, our freedom, and our participation as the leading light of freedom in the governance of our planet.

There are those in my nation which will demand immediate redress and accuse my administration and the Federal Reserve of abandoning our principles, our ideals and our Constitution. The future for the United States demands that the decisions here to be implemented immediately and when I depart Switzerland today, the process of legal acceptance of the World Currency Treaty of Geneva will be immediately implemented via Executive Order and those aspects requiring the U.S. Senate’s approval sent immediately to Majority Leader Harry Reid. Failure to pass and execute every aspect of this treaty is not an option. The divisions our decisions will create will not receive an immediate embrace by the American business community but that is a price we must pay for the errors of our way. In my capacity as leader of the United States and free peoples of the world, I shall do what I must to preserve the Republic and to insure we survive as a nation united.

For I have been to the fields of Gettysburg and seen what division, distrust and dissolution can do to a nation, and I wish to be remembered as a modern day Lincoln, doing what must be done in the name of God, Country and the World to preserve our nation and insure that the intentional community is not shattered by our malfeasance. The American people and our economic might will make good on all of the debts owed to the world. The American people and our economic will shall control spending and abide by the demands of the international community. The American people and our corporate citizens will absorb the necessary oversight by all world bodies agreed to in this meeting and that of the November 2007 G20 Cape Town Accords and the November 2008 G20 Washington Financial Systems Accords. Charmain Bernanke will issue a paper on Wednesday, February 24th at precisely 6 p.m. Eastern Time to outline the changes to the domestic financial system and prepare for the re-opening of our financial markets at a later date.

In the interim, we will proceed with actions to preserve the health, safety and national welfare of our citizens while initiating the undertaking of these agreements. To quote another hero of mine, Martin Luther King Junior:

‘And another reason that I’m happy to live in this period is that we have been forced to a point where we are going to have to grapple with the problems that men have been trying to grapple with through history, but the demands didn’t force them to do it. Survival demands that we grapple with them.’

Under the leadership of our Legislative branches, our people and my administration, this time and once and for all I assure the people of the United States and the free world that we shall overcome.

Good night and God Bless America and the World.”

February 23, 2010 12:21 P.M. ET

As the bartender at the country club turned the television off then smashed the remote against the wall, his next words were not the revolutionary explosion in patriotism nor compliance President Obama probably would have expected:

“Free Drinks until we run dry!”

Alas, it was not Patrick Henry nor Ben Franklin but considering that everyone in the room, including some of Obama’s supporters, all felt like we were just sold out, it was only a matter of time until anarchy began to reign supreme. The club my boss was a member of was quite exclusive but not isolated from the reality of our community. The sirens were blaring constantly in the area towards I-75 and the helicopter that serviced Sarasota Memorial Hospital seemed extraordinarily busy the entire time we were playing but this brief vacation from reality ended with President Obama’s words.

“John”, my boss spoke softly, “here’s a toast to you and your family. May you survive this nightmare and thrive on the chaos which follows.” He raised his glass, drank a shot of bourbon, poured another one from the bottle the bartender dropped off at our table then handed me two one hundred dollar bills and left with the bottle in his hands. “Uh, I don’t think you should try to drive sir, I mean I appreciate all of this but…” and before I could finish he cut me off and yelled back into the silent room “Who cares? What are they going to do, FINE ME WITH THE DEAD MONEY? The hell with everyone and this government.”

He walked out the door and barked the tires on his Cadillac Escalade out of the parking lot and away forever.

I went back inside, gave the barkeep one of the Benjamins, thanked him and he handed me a bottle of wine saying “Your wife might need this.” I nodded, headed to my car and proceeded to look for a gas station that was open. I figured I had best top things off while I still had some cash on hand because who would know what was the consequence of today’s speech outside of D.C.


February 23, 2010 1:13 P.M. ET

The Sunoco station on U.S. 41 had all of the pumps covered with bags but the store, amazingly enough was open. I elected to go on inside, buy a six pack of misery juice and converse with the young man who I had come to know since he bought the station five years after emigrating from Pakistan. Tran, as he liked to be called was somewhat nervous but also enjoying a banner day of sales being one of the few stores to be open and gambling by making manual credit card slips and accepting cash of course. I noticed the empt shelves everywhere and asked him just how he made it. “Easy,” he said, “I held inventory off site a month ago waiting for a hurricane or a day like this.” I had to laugh but then it hit me to ask him, “Does that include gasoline?”

Tran nodded and said something fascinating, “John, for you I do this. It will cost you $5 per gallon which is the new minimum legal price but I can sell it to you. You have to accept this paper and keep it in your truck until you get home.” He scribbled my name on one line and checked a box titled “Civilian Emergency Services” and then shoved it over to me asking me to sign it. The FEMA moniker at the top of the page looked almost false but the date and title froze me in my tracks:

FEDERAL EMERGENCY MANAGEMENT AGENCY

FEBRUARY 22, 2010

EFFECTIVE FOR 14 DAYS FROM DATE OF ISSUE

PERMIT FOR EMERGENCY PURCHASE OF GASOLINE, DIESEL OR OTHER FUEL PRODUCTS FOR APPROVED DOMESTIC AVIATION, AGRICULTURAL, COMMERCIAL OR EMERGENCY CIVILIAN USAGE

Maximum Purchase Limit: 20 Gallons

CERTIFICATE NUMBER: 5FL399303134231

STATION ID: 1137756-34231

Without hesitation nor caring about the repercussions, I signed it with an illegible signature, handed him the other one hundred dollar bill that my now apparently former boss handed me and went to the pump he directed me to so I could get that 20 gallons in my pick up and go home. As I put the handle back on the pump and covered it back up with the bag as instructed, an ill feeling started to sink in to me; this document was issued on a Sunday and since when could they get this out to so many stations so fast unless this plan was already in place!

February 23, 2010 2:30 P.M. ET

I walked in the door of my home, dropped my golf clubs, found my wife and gave her a long tight hug with a tear in my eye. She asked me “What’s wrong honey?” and the story of this day was told. But this day was far from over.

Fort Fergus Falls

“Break 9, break 9, is there anyone out there. This is John Donaldson of Whittaker Trucking out of Des Moines, IA and my rig is being shot at by unknown attackers at mile marker 56 on I-94 southbound. Anyone in Fergus Falls out there? Help please, help, I am being attacked. For God Sakes is anyone out there?”

The citizens band radio rang out again with a call for help. Mike had only been home for what seemed like a few hours and his base station was ringing with calls for help. He bypassed calling 911 and called his old pal Deputy Monckton directly on his personal cell phone. “Jack, do you have your CB on?” Mike asked before the deputy could even say hello. The deputy politely replied that he did not and Mike got somewhat excited and told him what he had heard. “I’m on it” the deputy replied and as the deputy put the phone down he could hear him calling for backup before he hung up. Mike was exhausted but now was not the time to sleep in his mind. He put his winter gear on, grabbed some chains and locks, wrapped them around the doors on his trailer and then backed the truck up against the wall of his home so the doors could not be opened.

His wife, looking at him like he was insane heard Mike snap like the old Sarge he used to be in Vietnam “Sal, you start finding anything that can hold water and start filling it up. Use totes, buckets, I don’t care and I don’t care if we put it in the garage and it freezes up. We’re going to need it!” Mike then grabbed a pistol, loaded it, put it in his pocket and went out into his barn to start chopping wood.

He didn’t stop until six o’clock that night, tears streaming down this tough vet’s face as he finished tying off each bundle.

Take Your Pork and Beans and Stick it Mister

Tom sat in front of his television after the Obama speech from Geneva in stunned silence. Sandy looked at him and said “See, I told you they had a plan and we would be fine. Here you are buying all kinds of fatty crappy foods we’ll never need to eat and end up donating to some food bank and the President has it all under control. You’re an idiot honey and if you think I’m going to sit around drinking bottled water and pork n’ beans all night you can stick it mister!”

Tom was not exactly what many would call a “Type A” personality but he had hit his limit with the lack of sleep. “Woman,” Tom yelled, “I was just trying to take care of this family and protect you from the unknown. If you think this is over, then why in the Sam Hell is your beloved QVC and Oprah still off the air?” Sandy had heard enough, uttered some very terse curse words and went to the bedroom slamming the door and locking it while screaming all of the way. Tom slinked back to his chair after putting the cans up in the pantry in a somewhat organized manner and returned to the television to see what was new. By now it was 3 p.m. Eastern Time and that meant the start of the new hourly news and information reports from FEMA and the Voice of America Domestic Services. “It beats MSNBC” he thought to himself, as he drifted off to sleep to the melodic sounds of Yankee Doodle in the background.

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Arrogance of the Gods (The Day the Dollar Died Part IV)

05:23 by Administrator. Filed under: The Day The Dollar Died Series
by John Galt
November 25, 2009

“And Zeus gave ample plunder to their hand,
That they embark and get them to their land
With ships full-laden, even on them great fear
Falls of the Watchers in heaven who stand.”

-The Odyssey by Homer, Book Fourteenth, page 159, translated by J.W. Mackail 1905

Alas a quick note before I present the fourth entry. The proverbial “powers that be” are our collection of Gods in the minds of those married to a digital scroll of symbols and numbers flashing across their screens every day and to those unwilling to grasp the gravity of sacrificing freedom for financial security, liberty for laziness, and willing to adore false idols for the perception that these ‘men’ not deities will protect and enhance their freedoms. In this episode I shall attempt to bring thousands of years of human fascination with power into the grasp of how our willingness to sacrifice choice for security results in a situation not too much out of the reach with the actions of the elites within our financial, academic and political classes.

May you have a blessed Thanksgiving and understand that our time has been marked, our actions noted, the duty soon to be paid.
The presentation below in ITALICS is fiction……
Georgia on my Mind

February 23, 2010 6:30 P.M. ET
Tom stirred awake when the alarm on his wristwatch stirred him into a startled look around the room. “Sigh, thank God, I’m home” he said out loud then calling out to his wife “Honey, let’s talk sweetheart and I’m sorry I’ve upset you so much.” Sandy walked out of the bedroom smoking a cigarette, something she had not done since they both quit ten years ago and yelled at Tom in a drunken stupor “Okay you geek, what the hell do you want to talk about now? The end of the world? Obama having alien ears and a forked tail protruding from his butt? The local newsboy spying on us when he delivers the paper? I swear you’re a (burp) loser Tom, why the bleep am I married to you?”

Tom was stunned by this outburst then noticed she was taking another swig from a cheap bottle of wine they used to keep on the shelf for ‘those’ guests that they did not want to serve the good stuff to. “SANDY!” he exclaimed, “What in the heck is wrong with you? Why don’t you sit down and watch the national news with me tonight, let’s get close and see what is going on so we can decide what to do.” Sandy looked at him, her eyes totally glazed over mumbling “What to do? What to do? What to do? Hell boy, you ain’t got a clue as to what to take for lunch day to day and you are worried about some slicked up steaming pile on the TeeVee says about a situation that is so fake it isn’t even funny? You want me to follow you, Mr. Wimpy Boy? The Man with a plan from the internet because you read three articles on the 2012 movie? Just stay out of my way while I find another bottle, I’m going to drink until I pass out and you can eat your damned Spaghetti Freaking O’s by yourself mister.”

Tom sighed loudly and looked at her with those big puppy dog eyes and started to plead, “Baby, if I’m wrong about this, I’ll leave you alone. But if this situation is as bad as I saw at WalMart this morning, we should get ready for some bad times. Please, sit down beside me for just a half hour, we’ll watch whichever news show appeals to you.” Sandy put the empty bottle on the floor of the hallway, stumbled over to Tom’s lap and grabbed the remote control, switching around until she found Katie Couric on CBS news which was just starting. Sandy blurted out “This wench has it going on you know. She threw Tom Cruise off her sofa!” Tom sighed again, hugged her waist and watched with great interest as the news began.

CBS news sounded hauntingly like the FEMA updates, plain, bland and with repeats of information until about fifteen minutes into the show when Tom and his intoxicated wife noticed there were no commercials for Viagra, bladder issues or tingly leg syndrome. Sandy said “Okay know it all, what is this scroll at the bottom and top of the screen?” Tom looked and the top scroll was in Spanish much to his surprise and the bottom one in English stating that the broadcast was “cleared” by the Department of Homeland Security and the Bureau of Economic Oversight. “Honey, I have no idea, this is weird” he replied to her. Katie then read a story about the hardships of the inner city during this economic recession and how the government under Obama’s leadership was ending discrimination against the poor and other economic minorities. “SSDD I guess eh baby?” Sandy said in her stupor. Tom just nodded and started to worry as this was weird that all commercial television, no matter the channel he switched to, did not have any commercials. Perhaps things will be better in the morning, if he could just get Sandy to pass out he thought to himself.

Fergus Falls Down

February 23, 2010 5 P.M. CT
Mike’s shirt was soaked after several hours of chopping wood, fixing gaps in his barbed wire fence, checking locks and securing his semi. As he popped the cover off his face to drink some hot tea from his Thermos, a sound he was shocked to hear appeared in the bitter winter silence, that of his cell phone ringing as if never had owned one before. Hesitating slightly he opened the phone to check the number and sure enough it was his dispatcher finally calling him back. “Mike, are you home, I hope?” the voice on the other end sputtered out. “Larry, I’m good. The load is secured.

And if you’re asking me if I am delivering tomorrow, you’ll have to guarantee that I can turn around and come home” Mike replied. Larry hesitated and spoke slowly, as if not to upset his driver, “Mike, I was planning on reloading you at Hormel with an emergency shipment for Dallas in the evening. I really need this one.” Mike was stunned. He took a deep breath and told his dispatcher of three years in a very slow speaking Midwest intonation “Larry, I’ve known you for several years now. I can not use my credit cards, my fuel card and I don’t have the cash for the trip.

You’re asking me to leave my wife for a week or more by herself in a small town now surrounded by deputies guarding against God knows what AND you and the company have no damned idea on how or when you’ll pay me.

If you were in my shoes, just what the heck do you think the response would be? I’ve got about a third of a load of frozen pork and no guarantees I’ll get paid, protected or anything so if you think I am going to Duluth tomorrow without being paid, you are nuttier than that FEMA broad on the radio every hour!”

Larry was somewhat shocked at this tone of voice and even more so when Mike hung up. But the reason the phone was disconnected would not be known to Mike or Larry for weeks to come. A driver in a tanker truck was run off the road by a group of thugs and took out the cell phone tower about three miles north of Mike’s house. Little did anyone know that Fergus Falls Minnesota and many other small towns would soon fall prey to the scum of the earth as the weakest links would be picked off first.

For the first time in Mike’s life since Vietnam, he took the night shift for guard duty. He prayed hard for his son in Afghanistan and wished he was home. Mike knew their lives were changing but the consequences of years of living off of the fat of the land had distorted this small town’s perception of the big world that Mike knew all so well from his trips around the country. “Fergus will fall as America is falling” he thought to himself.

As darkness enveloped his town and the bitter cold set in, he longed for the days of old when neighbor could trust neighbor. That was the first victim of this week’s events and as the shortages began, the victims would multiply.

February 23, 2010 7:10 P.M. ET
Even my wife was impressed with dinner tonight. We had agreed after a long talk to relax, take in the information and just relax. I had cooked two of the steaks in our freezer that I had started marinating in Italian dressing the night before and the smell on the grill just had to make the neighbors envious as there were so many snowbirds down here already escaping the bitter cold of up north and not used to the smell of char grilled ribeyes in February unless they were regulars down here. We cracked open a bottle of wine we had been saving since our wedding day for a special occasion and we figured that with steaks, baked potatoes on the grill, vegetable kabobs and some fantastic garlic toast from our local bakery that the end of our nation as we knew it fit as a special occasion.

After all that and the last drop of wine was consumed, we needed to walk it off and despite a brisk sixty-one degree evening, we decided to head over to the Ringling Bridge.

February 23, 2010 8:00 P.M. ET


The new Ringling Bridge opened years ago lacked the character of the old draw bridge but for our little community, it was a fantastic and brisk walk up and down with the ‘largest hill’ in our area plus the traffic actually stopped backing up into downtown Sarasota once it opened. As my wife and I parked the care over by Marina Jack’s we walked down noticing the flashing lights of police cars at the base of the bridge and wondered if there was a bad accident or what could have happened now.

As my beautiful wife and I approached the southern sidewalk to the bridge a local officer approached my wife and I with his flashlight pointed in our faces and what appeared to be his other hand on his pistol. “What can I do for you two?” the officer asked. I replied we were just going for our nightly walk on the bridge like we have for years now and wanted some fresh air.

“Do you have some identification on you, both of you please?” he asked somewhat insistently. I handed my license over to him and explained my wife doesn’t carry her purse on her when she walks as he basically ignored my words and walked over to the squad car, now with another officer watching us closely.

“Sir, I notice on your records you have a firearm in your ownership and a CCW, are you carrying now?” he asked with the pistol now drawn but pointing down to his side. “No sir,” I replied, “I do not carry when I walk around here, I’ve never had to.” The officer seemed satisfied with my reply and then pointed us back towards the parking lot and stated firmly as he holstered his weapon “All of the barrier islands in Florida are now closed I am afraid. We are under strict orders to restrict access out here because of fears of retaliation.”

“Retaliation?” I thought to myself and apparently so did my wife as she looked at me somewhat worried. “No problem officer, we’ll just head back home” I said to the officer as I slowly turned my back and walked with my wife back to the car. Once we were pulling out of the parking lot and heading home we noticed the marina had private security guards setting up for the night, another new feature and that prompted her to ask “Retaliation against who or what?” I told her I did not know and we headed home as I just had to get on the message boards and find out what the heck was going on.

February 23, 2010 9:40 P.M. ET
The wife, normally whining about my time talking to my friends on the phone and online said she was doing the same to try to figure out what was happening. Her first inquiries yielded a response from her friend online from Australia of “sucks to be you” or worse words to that effect. The interesting responses I saw on the message boards I frequented ranged from the bizarre to the sheeple and really failed to shed any light except that some other members noticed an upgrade in the law enforcement protection around the affluent neighborhoods in their towns.

As the banter and speculation went back and forth via email and messages alike, I tuned into CNBC and Bloomberg to see what the various opinions of our financial markets just might be for the future. CNBC-Asia actually looked relatively normal except for the scrolls at the bottom with the “ALL FINANCIAL MARKETS CLOSED UNTIL FEBRUARY 25, 2010″ over and over again with some program announcements. Bernie Lo had Jim Rogers on tonight at 10 p.m. Eastern and I could not miss this interview as I figured it was the “see I told you so moment” of all time as Singapore looked like the new financial center of the world as New York just imploded. CNBC in the United States was a different story entirely. It appeared that Cramer was sweating more than Coach Andy Reid of the Philadelphia Eagles trying to choose toppings at a sub shop and Kudlow looked as if his dog had just been hit by a dump truck. They were both trying to justify a cause for hope by parsing a speech from President Obama and speculating on just what Ben Bernanke would be saying tomorrow. In the mean time Rick Santelli upset both of them by stating that the U.S. Dollar was the equivalent of burnt toast at the now bankrupt Waffle House in the Southeastern states. Rick was in rare form tonight as he then launched into an attack of the ‘God Complex’ the central banks seemed to exhibit thinking they could manage capitalism and investors instead of letting the market do it’s job. When Cramer tried to defend the G20 meeting, Santelli cut him off and said the following which stuck in my mind from that day on:

“These arrogant fools have been acting like Gods for years now and guess what James? They have destroyed the American model for capitalism.


You’ve made your money. I’ve made mine. But for the average slob on the street, they are now slaves to the dictates of these megalomaniacs who think that they are above every aspect of human society and our Constitution. You and your kind make me sick. It really doesn’t matter what you say now Jim, the markets are dead and you helped kill them.”

“Honey, are we out of port?” I yelled as she walked to the kitchen.

February 23, 2010 10:59 A.M. Hong Kong Time
Interview with a Vampire

Bernie Lo: “Jim it is good to have you back and I’m sure that with only the Chinese internal markets open, you have quite a bit you would like to discuss tonight.”

Jim Rogers: “Good morning Bernie. To say this was not going to be easy to see as a possibility of happening would be a lie.”

Bernie: “I must ask, do you think we will see the North American and European markets open again before March or April?”

Jim: “Absolutely no later than March. If they fail to open their equity markets by the middle of March you might as well just hold a massive liquidation sale. The United States has to absorb the pain they have postponed and insure that functioning capital markets are returned to operation soon or the rest of the world will just circumvent their currencies, debt and banking systems. It would be tantamount to the sinking the Titanic and selling more tickets to board it unless they open the markets up and allow capitalism to repair itself.”

Bernie: “So what happens to other equity markets as they re-open to international investment? Will they not have to impose limits or….?” (Interrupted)

Jim: “Centralized economies and banks will impose capital flow restrictions. I imagine the Asian governments will restrict the amount of withdrawals to insure their banking systems do not collapse but the silence has been deafening. I imagine everyone is going to follow the American lead but we have to wait for Bernanke and his merry band of idiots to speak tonight.”

Bernie: “I have to ask, what becomes of the dollar, a subject we have discussed many times and the price of gold?”

Jim: “That really depends on what you are pricing gold in. Gold in United States dollars will be unattainable at any price now inside of North America barring currency controls by Canada and Mexico and neither of those nations can afford the risk of alienating the Federal Reserve, especially Mexico. The price of gold in Euros should top out around one thousand to two thousand Euros only because of the exposure of ECB to dollar based debt and investments by the continent. The United Kingdom might as well join the European Union now because the Sterling is useless except for wadding. The Asian currencies, ags and precious metals are the place to be and if you really push me, the price of gold in U.S. dollars will open back up well over two thousand dollars per ounce if the markets are allowed to trade. The dollar itself though is no longer a functional measure of trade nor investment and can now be openly dismissed as a reserve currency.”

Bernie: “Then what exactly will function as the new reserve currency for world trade? I mean, uh, Jim, what you are saying is a total shock to the system and will change the nature of foreign investment activity for years to come.”

Jim: “We’ll know when Bernanke speaks. But if I am the ruler or President of a nation, the reserve currency of choice is the primary asset or commodity I have on hand. Many nations started to hoard precious metals, oil and base metals the past four years. I think they set the tone no matter the decisions of the G20 yesterday. As I told you a few years ago, farmland is investment number one if you live in the U.S. now and for the rest of the world the decoupling that many said would not happen will have to happen.”

Bernie: “With that, I must say good night Jim and thank you for another enlightening discussion.”

I did not notice it until my wife screamed at me. There was a glass tipped over with port wine soaking into our carpet. She must have been yelling at me for ten minutes.

“I’m sorry honey, I’m in a little bit of shock. Remember all those bad things I said that could happen? Well, they have. Let me find out what the plans are for the local governments online and statewide. We may have to hit the road on very short notice.”

February 24, 2010 12:21 A.M. ET
I’ll never forget the email I received in answer to my question about the bridge incident. It was from an old retired friend from the local police force and he said it best:

John,
Are you an idiot or something? What are you still doing in town? The reason they closed the barrier islands was to prevent attacks against the homes of the bankers and investment community who created this crap hole of a disaster! They are going to do all they can to protect those clowns even if it means half the damned town burns down. Do you honestly think they will let riff-raff like you get out there on the Key with the likes of Springer and King? Not to mention all the scammers who screwed us over out of our retirements and future?

Damn. It made perfect sense now. The police were following orders and I was willing to bet that other areas like that were well guarded. Which meant my home, my cars and my “stuff” was pretty much on my own. With that in mind, I muted the television, tucked my .45 into its holster and went outside to our driveway to move my pick up right up to the bumper of my wife’s car in the carport and to scout the yard. As I searched with a flashlight, I drew my pistol at the first noise, only to see a raccoon scurry into our neighbors back yard. With the deep exhale, I started to head inside when in the distance several loud cracks rang out.

It sounded like firecrackers but there was no way anyone beside those who held gold or Swiss francs would be celebrating.

I ran back inside, locked all the doors, put chairs from the dining rooms under the doorknobs and in front of the glass doors then checked all the windows. With that I went back to the computer to see what the Chinese markets were doing. I slid the holster off my side, put it up on my desk in my office and logged into my Bloomberg terminal, hoping for a news and market update. The scroll at the bottom of the screen told me that I would not get much sleep tonight:

BERNANKE AND FED TO ANNOUNCE BANK RE-OPENING PROCESS…….OBAMA TO SPEAK TO NATION AT 8 P.M. EASTERN……GENERAL ELECTRIC TO FILE FOR CHAPTER 11 BANKRUPTCY AT 8 A.M. EASTERN WITH FED PERMISSION FOR REORGANIZATION…..FEDERAL HOME LOAN BANKS TO BE NATIONALIZED…..CHINESE YUAN REVALUED AT 2:1 RATIO TO US DOLLAR FOR 30 DAYS….

Coffee or port were the only questions I had left now. The die has been cast…..

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Gold "Offers Buying Opportunity" as Monetary Debauchment & Peak Output Make $5000 "Possible" by End-2010

By: Adrian Ash, BullionVault

-- Posted Tuesday, 17 November 2009 | Digg This Article | Share this article | Source: GoldSeek.com

London Gold Market Report

THE PRICE OF GOLD retreated from its seventh new record high in 11 sessions early Tuesday, dipping 1.3% from Monday's late top as world stock markets also fell for only the fourth time in November so far.

Crude oil fell and the US Dollar bounced on the forex market after Federal Reserve chairman Ben Bernanke spoke of a "Strong Dollar" in his annual speech to the Economics Club of New York.

Citing 10% unemployment and weak GDP growth, however, he said the Fed "will calibrate the timing and pace of any future tightening [of interest rates from 0%] to best foster maximum employment and price stability."

Touching $1143.74 an ounce late Monday, gold this morning approached new 9-month highs vs. the Euro and Sterling, and reached its best level against the Japanese Yen since July 2008 at ¥3250 per gram.

"Gold is a more stable store of value, over a five-year view, than all paper currencies except the [Chinese] Renminbi," says Percival Stanion, head of asset allocation at Baring Asset Management, whose flagship product is the £1.5 billion ($2.5bn) Dynamic Asset Allocation fund.

"Sterling is still our least favored currency, even after significant falls in value," Stanion is quoted by FT Advisor.

"The multi-asset portfolios at Barings have recently benefited from the surge in gold prices and have now sold out of our exposure to gold mining and switched into gold bullion," he tells Dow Jones Newswire.

After India said it bought 200 tonnes of gold from the International Monetary Fund last month, the Reserve Bank of Mauritius today said it bought two tonnes from the IMF on Wednesday last week, costing $71.7 million.

"A bit of a pullback would not be particularly surprising," says one London dealer in a client note today.

"[But] over the past two-plus weeks it seems that any retracement in the price of gold has presented a buying opportunity for those who are out of the market and wish they were in, or those who are already in the market and wish they were longer."

Writing at Prudent Bear, "When investors lose trust in conventional currencies, because monetary policy appears set to debauch them, gold is the immediately available safe haven," said Martin Hutchinson late Monday.

"During such periods, gold's former importance as a store of value becomes uppermost in the public mind, and its price becomes a major economic indicator.

"We now appear to be at the beginning of another such period."

Forecasting a spike to $2000 per ounce within six months, "The supply of gold from new mining is around 1 million ounces per year LESS than in 1980 and the supply of speculative capital that could flow into gold is many times greater," Hutchinson notes.

"Hence a $5000 gold price is possible (though not certain) if present monetary policy is continued or only modestly modified – and that price could be reached by the end of 2010."

Here in London today, new data showed Consumer Price inflation rising sharply in October, pushing the cost of living higher for the first time in 8 months as strong energ prices fed through to the official measures.

"If we do not tighten policy to some degree [but] keep interest rates at their current low levels, inflation is in danger of moving above the [2.0%] target," said Bank of England policy-maker Andrew Sentance in a speech Monday night.

"Inflation is now expected to steadily rise," reports CityWire today, "not least because of the inflationary effects of the Bank of England's £200 billion quantitative easing program" – a program receiving unanimous support from BoE executives to date.

"We are going into a Weimar Republic-type of inflation – get used to it," says bond-fund manager Stewart Cowley at Old Mutual Asset Managers.

The Bank of England has now bought UK government bonds equal to 91% of new gilts issued in fiscal-year 2009 to date and more than one quarter of total government spending.

Germany's Weimar Republic monetized 50% of government expenditure between 1921 and 1923, leading to inflation rates above one million per cent per year.

On the gold supply-side, meantime, "The suggestion was made at last week's RBC Capital Markets annual Gold Conference that 'peak' production had been reached in the gold market," says Fast Markets' Bullion Weekly.

"More mature markets such as South Africa and Australia will continue to struggle against falling ore grades, rising costs and tighter safety legislation."

Formerly the world's No.1 gold producer, South Africa in fact has only 10% of the gold-in-the-ground officially cited, says Chris Hartnady, research and technical director of Umvoto Africa, an earth-sciences consultancy in Cape Town.

"[Hartnady] has found that South Africa's Witwatersrand goldfields are around 95% exhausted, and anticipates that production rates should fall permanently below 100 tonnes a year within the coming decade," reports Barry Sargeant at MineWeb.

"South African gold is dying – this is not new news," says RBC Capital Markets' Leon Esterhuizen in London, but "It may be dying faster than we currently believe."

Umvoto's Hartnady says South Africa's "residual gold reserves" after accounting for 2007 production fell to just 2948 tonnes – less than three times the all-time record output of 1970, and below 10% of official statistics.

Meantime in the professional market, gold dealing "loco London" – heart of the world's wholesale dealers – rose both by value and volume in October, new data from the London Bullion Market Association showed on Tuesday.

Averaging well over $65.4 billion per day after accounting for the netting effect of the LBMA's data, last month's wholesale gold volumes – predominantly dealt "unallocated", with a credit account taking the place of physical metal – rose above the 5-year average of $60bn per day.

The average size of each member-to-member deal also rose, but held 25% below the half-decade average at 10,900 ounces, worth some $11.4 million each.

Adrian Ash

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen's Award for Enterprise Innovation, 2009 – where you can Buy Gold Today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2009

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China quietly introduces new financial system

Posted By onlyonesecret 1 day, 17 hours ago in News

China has stealthily introduced a new financial system based on the renminbi which is well on its way to becoming fully convertible, according to a high-level Chinese source. In addition, China is purchasing 10,000 tons of gold to back up a new fund designed to develop and market heretofore forbidden and suppressed technologies.

The fund will be based outside of China and will be controlled by prominent members of the Chinese overseas community. The gold purchase will take some time because of the logistics of transporting it and the Chinese wish to test it thoroughly. Both the Chinese government and MI6 now confirm reports that much of the gold sold by the Federal Reserve Board over the past decade is in fact gold plated tungsten.

For its part, the renminbi is now convertible with South American currencies, the rouble, Middle-Eastern currencies, the yen, South East Asian currencies and African currencies. “We will slowly introduce our new financial system in parallel with the old one and hope that people steadily migrate towards it,” the Chinese official says.

Meanwhile, the latest G20 meeting ended in acrimony and chaos. The leadership of the West is in total disarray and will remain so until the Federal Reserve Board’s bankruptcy becomes visible even to brainwashed section of the Western public.

This is now expected by January or February. Both MI6 and a senior Chinese government source now predict the collapse of the Federal Reserve dollar by that time.

We are also hearing various reports that many Pentagon and other US alphabet suit agency figures with both US and Israeli citizenship have recently fled to Israel. Things are coming to a head.

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ATA Chairman Bill Murphy appeared on Bernie Lo's program Asia Confidential on Blommberg TV on November 19, 2009.

To understand the Gold market GATA and www.lemetropolecafe.com have exposed the manipulation of the gold markets by Central Banks and complicit bullion banks for a decade now.

Marginalized by the major media and even many gold 'experts' because they are revealing what is behind the curtain with price suppression schemes of gold by Central Banks to make their fiat currencies appear stronger.

Asia Confidential - Bernie Lo interviews Bill Murphy, Chairman of GATA November 2009 Part 1



Asia Confidential - Bernie Lo interviews Bill Murphy, Chairman of GATA November 2009 Part 2



Asia Confidential - Bernie Lo interviews Bill Murphy, Chairman of GATA November 2009 Part 3

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Is $6,300 fair value for gold?

By Ambrose Evans-Pritchard

The last parabolic spike in gold took off when central banks joined the fray in the 1970s, hoarding bullion with the same enthusiasm as gold bugs.

Dylan Grice from Société Générale says it smells much the same today.

He sees an eery similarity between the decision of India’s central bank to buy half the IMF’s entire sale of gold, and the move by France’s central bank to start converting dollars into gold in 1965 — which was, of course, the start of the slippery slope leading to the collapse of Bretton Woods and the closure of the US gold window under Nixon.

In the gold mania that followed, the price rose to levels that matched the US dollar monetary base (it reached 140pc at the peak). If that were to occur today after Ben Bernanke’s go at the printing press, gold would have to reach $6,300 an ounce. The US owns 263m ounces of gold while the Fed’s monetary base is $1.7 trillion. Simple equation.

Gold has had its ups and downs, of course. It is trading today at roughly the same real price as in the mid-13th Century — when an ounce bought a light suit of chain mail.

It doubled in the late Medieval bubble, before crashing 90pc over the next 500 years after the Spanish gold discoveries by Cortes and Pizarro in the New World, and then the finds in California, Australia, and South Africa — bottoming around 1930.

“Gold isn’t intrinsically safer than any other asset. There is nothing mystical about it either,” said Mr Grice.

However, precisely because gold is almost useless, it makes the perfect currency, and that is the role it is playing right now as flight from fiat paper leads to fresh records each day ($1150 yesterday).

Almost all western governments are insolvent. The total net liabilities of the US and France are both over 500pc of GDP. The UK and Germany are over 400pc.

We are bust. To make matters worse — says Mr Grice — central bank credibility has been “permanently ruptured” by their collective failure to see the 2008 crash coming. (He is too polite: they caused the crisis by holding real rates too low for a decade, creating a debt bubble).

Given that central bankers have been exposed as mortals/charlatans (ie pretending to command an exact science, when economics is merely a descriptive branch of anthropology), who can have much faith that they will manage the exit from emergency stimulus with skill?

Markets fear that central bankers will try to satisfy political masters by inflating away our debt. (Here too, I have my doubts: my concern is that they do not yet understand the deflationary dynamic underway, and will stay too tight, for too long, until we are in the Japanese abyss. Look at the 7pc annualized contraction of the M3 money supply {not the same thing as the monetary base, at all} in the US over the last three months, which Bernanke refuses to look at because he regards M3 as a barbarous Friedmanite relic.)

Mr Grice’s method is an odd way to calculate fair value of gold, but as good as any in a mania — and certainly no worse than ARPU ratios and “market cap to clicks” in the dotcom bubble. So perhaps gold is cheap.

Personally, I take no view on this. As a contrarian, I never like an asset that is in fashion. I loved gold at $252 eight years ago. The higher it goes, the less I love it.

Now, what asset today is as underpriced relative to the rest of the market as gold was in the depths of bear market in 2001?

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The Dollar Bubble

The Dollar Bubble starring Peter Schiff, Ron Paul, Marc Faber, Gerald Celente, Jim Rogers, and others.

Prepare now for the U.S. dollar collapse.

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A Mad Rush as Gold Bugs Get the Boot

NOVEMBER 24, 2009
WALL ST JOURNAL

By CAROLYN CUI

Fleets of armored trucks piled with gold bars and coins have been streaming out of midtown Manhattan in one unexpected consequence of the gold craze.

Amid gold's rise -- it has gained 32% this year and reached a record on Monday -- investors have been loading up on bullion and coins. One big problem now is where to store it. The solution from HSBC, owner of one of the biggest vaults in the U.S.: somewhere else.

HSBC has told retail clients to remove their small holdings from its fortress beneath its tower on New York City's Fifth Avenue. The bank has decided retail customers aren't profitable enough and is demanding those clients remove their gold to make room for more lucrative institutional customers.

An HSBC spokeswoman said the firm doesn't comment on its vault due to "security concerns."

HSBC's decision has created a logistical nightmare for both the investors and the security teams in charge of relocating the gold, silver and platinum to new vaults across the country. Many of those vaults are also feeling pressure from the surge in demand for space from clients that have stocked up on metal.

Investors have been loading up on gold this year amid worries about inflation and the stability of the U.S. dollar. The metal gained $17.90, or 1.6%, to $1164.30 an ounce on Monday. As gold has continued to set new records, other investors have flooded in. Many of them are taking possession of the metal, rather than just trading financial contracts linked to it.

Demand for physical gold, including bars and coins, is projected to rise 21% this year to 52.3 million troy ounces, the highest in history, according to CPM Group. Based on today's price, the total value would amount to about $61 billion.

The movement of gold from HSBC has created a stir not only among the bank's clients, but also among owners of warehouses and vaults around the country.

"I have never seen any relocation like this," says Jonathan Potts, managing director of FideliTrade, the parent company of the Delaware Depository Service Co., which has two warehouses in Wilmington. FideliTrade's two vaults have been filling up at an unprecedented pace, in part because it is taking in metal that has been ejected by HSBC.

Dealing with the fallout from HSBC's decision has become a full-time job for David Norris, executive vice president of GoldStar Trust Co., a Canyon, Texas-based retirement-account trustee, which organizes metal storage for its clients.

Mr. Norris says HSBC told GoldStar in July to immediately cease sending coins for storage. GoldStar, which had sent clients' holdings to HSBC for at least 15 years, is now figuring out how to get the coins out of the HSBC vault and down to the Delaware facility. "I can jump up and down and scream all day long about how much I don't like it. But it's their business decision," Mr. Norris says.

Moving the metal is like "a big military operation," he says. Precious metals are typically shipped by insured carrier services or armored trucking companies. Carriers sometimes ship the metals in plain boxes so as not to attract attention. Trucks are guarded by a team of two or three armed personnel.

Bradley Beyer, a GoldStar customer in Kewaunee, Wis., has 50 100-ounce silver bars stored with HSBC waiting to be moved. "My only concern is that the bars will be moved safely," he says.

HSBC is telling clients to either move their metal, or prepare for it to be delivered to their doorsteps. In a July letter, seen by The Wall Street Journal, HSBC said the precious metal "will be returned to the address of record... at your expense," unless instructed otherwise. HSBC recommended clients move their holdings to Brink's Global Services USA Inc., which has a vault in Brooklyn, N.Y. Brink's didn't return calls and emails seeking comments.



Like Mr. Beyer, many investors have recently added precious metals to their retirement accounts. At GoldStar, more than 1,000 new accounts are opened each month to purchase coins in retirement plans, compared to about 100 a month in 2006. Sales of American Eagle gold coins jumped 65% so far this year, according to the U.S. Mint.

"Many facilities are overloaded," says Bob Coleman, director of customer relations at Gold Silver Vault, a depository in Nampa, Idaho. Mr. Coleman says his vault has taken in several HSBC customers, contributing to the 500% growth in new metal coming in over the past quarter.

Vault and warehouse owners say retail customers tend to be more expensive in part because of their diverse holdings. They usually buy American Eagle or Canadian Maple Leaf coins, and bars of various weights and sizes, all of which need to be categorized and stored separately. In contrast, institutions typically buy standardized bars of 100 or 400 ounces, making them easier to store. Institutions also tend to hold the metal for long periods.

Precious-metal storage isn't as lucrative as it may sound. Many vaults are run on thin margins. The Delaware depository, one of the five major ones in the country, charges $6 each month for a 1,000-ounce silver bar and $12 for a 100-ounce gold bar.

HSBC's vaults contain $6 billion of large gold and silver bars, according to records held by Comex, the metals division of CME Group. There are no data for smaller coins and bars held by individuals.

First Eagle Funds, which runs a family of mutual funds, has 2.2 million ounces of gold stored at HSBC's vault, and hasn't been told to vacate the premises. Physical bullion represents "insurance and the safest asset out there," says Rachel Benepe, who runs the First Eagle Gold Fund.

Typically, a vault is protected with a 27-inch thick steel reinforced wall, surrounded with a "man-trap" -- a series of doors, each of which opens only after the previous door is locked, Mr. Coleman says.

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Iran gains $5b on dollar to euro shift

24 November 2009

TEHRAN - Iran has gained $5 billion through its policy of shifting away from the U.S. currency in favor of the euro, Central Bank Governor Mahmoud Bahmani was quoted as saying on Monday.

"Iran has considerably reduced the amount of U.S. dollars in its currency basket," said Mahmoud Bahmani in Tehran at the 3rd Seminar on Banking Services and Export, Press TV reported.

Since October 2007, Iran has received 85 percent of its oil revenues in currencies other than the U.S. dollar, and "the country expresses determination to substitute the greenback for the remaining 15 percent of its oil revenues."

The Iranian government began preparing the ground for the dollar's replacement by the euro and other foreign exchanges in 2005.

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Gold Krugerrands Run Out

By Patrick A. Heller November 23, 2009

Other News & Articles

• Shortage of Eagles Occurs Again
• Theft Ruled Out at Royal Canadian Mint
• Venerable Firm's Library Goes on Auction Block in January

For some time, I have been warning that apparently plentiful supplies of gold and silver bullion-priced coins and ingots could quickly evaporate. Last Thursday we saw the first signs of a looming shortage of physical metals when just about all U.S. bullion wholesalers were unable to accept orders for the South Africa Krugerrand. One primary distributor said they expected coins in a few weeks, which I think means that they are waiting for a shipment of freshly minted coins from the South Africa Mint. My own company had to discontinue accepting new orders until we could lock in a supply.

Tens of millions of Krugerrands have been struck since they were introduced in 1967. They are not rare. If demand for physical gold is so strong (and the World Gold Council last week reported that global third quarter demand was 15 percent higher than the second quarter) that they are no longer available, we could quickly see a domino effect where other gold and silver bullion-priced products also become sold out.

We may see some temporary price dips this week as the gold and silver options expire. However, I fear that there is little time to lock in physical precious metals at reasonable premiums for quick delivery.

But this is short-term news. There is also a longer term view to consider.

Periodically, I have discussed reasons for owning gold that have nothing to do with direct consideration of whether prices are likely to rise in the future.

This week at Thanksgiving I will include owning gold and silver as one of my blessings. After I bought both metals in the 1970s, it then enabled me to purchase a home in 1980 for a much lower cost than if I had not owned them.

In more recent years, owning precious metals has helped me survive some of the ravages of the falling values of paper assets like stocks and bonds and the U.S. dollar.

As I reflected on the blessing of owning gold and silver, it occurred to me that it has also better enabled me to protect and care for my children.

Twelve years ago, the financial calamities in the Far East were so devastating in Indonesia that those who did not own gold were wiped out financially. Those who owned gold saw little impact on their standard of living.

There are hundreds of thousands of Southeast Asian refugees in the United States today who survived because they owned gold to get them away from the governments that killed so many of their compatriots. Owning gold definitely helped them provide a better life for their children.

After all the economic trials and tribulations of the past 30 months, it is not too difficult to imagine a world where U.S. dollars finally fall to the intrinsic value of the paper and ink used to produce them. In such a circumstance, all the dollars in your wallet, your bank accounts, your credit and debit card limits, and the like could become useless in providing for your children.

There are a large number of potential gold buyers who have not yet felt the urgency to make their first purchase. Maybe it just doesn’t seem that important to you. If it isn’t, then think about any children or grandchildren you may have. Would you buy gold if it had the potential to someday improve your ability to care for their health and welfare?

If you don’t yet own gold (or silver), then do it now. If not for you, then do it for the children.

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Gold Moves Toward 1500.00/oz

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Gold hits US$1,190 as more central banks buy

Frank Tang and Jan Harvey, Reuters Published: Wednesday, November 25, 2009

More On This Story

• Loonie boosted by Russia and firm commodities
• TSX climbs higher on oil, gold
• Gold isn't the only metal
• Traders dump the U.S. dollar
• Gold prices hit record highs
• Stampede to safety drives bond bubble

Related Topics

• Central Banking
• International Monetary Fund

Story Tools



Getty Images Gold hit a record high at just over $1,190 an ounce on Wednesday due to a broadly lower dollar and renewed interest from central banks.

NEW YORK/LONDON -- Gold prices hit record highs above US$1,190 an ounce Wednesday as the dollar fell sharply and the market expected central banks from emerging economies to keep buying bullion from the International Monetary Fund.

Gold prices have risen nearly 15% since the beginning of November, on a combination of central bank interest to diversify into the metal, a steadily falling U.S. dollar and inflation worries.

Late on Wednesday, the IMF said it had sold 10 tons of gold to the Central Bank of Sri Lanka.

"We have had relatively supportive news from the central banks, particularly in Asia, confirming that there is demand for gold as a means of diversifying their large foreign exchange reserves," RBS Global Banking & Markets analyst Daniel Major said.

"There is plenty more potential for central banks to buy either IMF gold or other gold in the market to try and boost their reserves," he added.

Investor sentiment was bullish, highlighted by the news that the U.S. Mint said it was suspending sales of the popular American Eagle one-ounce gold bullion coins due to strong demand.

Spot gold hit a high of US$1,190.20 an ounce and was at US$1,189.65 an ounce at 3:39 p.m. EST, against US$1,168.90 late in New York on Tuesday.
U.S. December gold settled up US$21.20, or 1.8%, at US$1,187 an ounce on the COMEX division of the New York Mercantile Exchange.

India's Financial Chronicle newspaper said India is open to buying more gold from the International Monetary Fund, which has around another 200 tonnes to sell. The IMF had no comment on the report.

The market is sensitive to speculation of further official sector buying after news in early November, that India's central bank had bought 200 tonnes of gold from the IMF, sparked a rally.

Russia, Sri Lanka and Mauritius have also previously announced gold acquisitions, and traders speculate that more central banks, particularly in Asia, could be open to gold acquisitions to diversify their foreign exchange reserves.

Expectations for further reserve diversification, as well as prospects for further dollar weakness and fears over inflation in 2010 have all fuelled investment demand for the precious metal, and could lead to further sharp prices gains.

Gold received a boost as the dollar fell to a 15-month low against the euro due to views that U.S. rates would stay low and as Russia said it would diversify currency reserves.

Dollar weakness helped lift other commodities. Oil prices rallied US$2 and industrial metals prices climbed.

Silver was at US$18.79 an ounce versus US$18.49. Holdings of the world's main silver ETF rose 136 tonnes to a record 9,252 tonnes on Tuesday, while ETF Securities' silver exchange-traded product also hit record levels.

Platinum was at US$1,473.50 an ounce against US$1,444.50, while palladium was at US$371.30 against US$366.35.

© Thomson Reuters 2009

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Dubai is just a harbinger of things to come for sovereign debt

By Jeremy Warner Economics Last updated: November 27th, 2009
19 Comments Comment on this article

Watch out. This may be just the beginning. In the scale of things, the debt problems of Dubai are little more than a flea bite. Dubai’s sovereign debts total “just” $80bn, which counts for nothing against the trillions being raised by advanced economies to plug fiscal deficits.


Dubai has been a one-way ticket of economic expansion until recently

Small wonder, though, that this minor tremor has sent such shock waves around the wider capital markets. The fear is that threatened default in this tiny desert kingdom is just a harginger of things to come for government debt markets as a whole. According to new estimates by Moody’s, the credit rating agency, the total stock of sovereign debt worldwide will have risen by nearly 50 per cent between 2007 and 2010 to $15.3 trillion. The great bulk of this increase comes not from irrelevant little states like Dubai, but from the big advanced economies – America, Europe, and Japan.

Perversely, they are for the time being beneficiaries of the “flight to safety” that trouble in Dubai has sparked. Government bond yields in the major advanced economies have fallen in response to the crisis in the Gulf. If experience of the banking crisis, when investors removed their money from one bank only to find that the one they had put it into looked just as dodgy, is anything to go by, this effect will not last.

Up until now, markets have assumed that the ruinous fiscal cost of addressing the financial and economic crisis was probably just about affordable to the major economies. That view may be about to be challenged.

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Will US Dollar Be Replaced As The Global Reserve Currency?

Dubai World, the country's largest conglomerate, wants to suspend payment on its 60 Billion dollar debts until May 2010 at the earliest. RT's financial contributor Max Keiser says the World is entering the Phase Two of the global economic crisis, and suggests it is likely that the US Dollar will be replaced as the Global Reserve Currency.

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Another Dot that this is a coordinated effort as the Axis strengthens foreign currencies to isolate and continue weakening global confidence in the dollar



Russia to add loonie to reserves: report

Wed Nov 25, 4:59 PM

The Canadian dollar rallied by more than a cent against the U.S. currency Wednesday after a report that the Russian central bank is preparing to buy loonies to include in its official reserves.

There was no word on how much Canadian currency the Russian central bank intends to hold in its reserves, which are used to defend the ruble.
But Bloomberg quoted Sergei Shvetsov, the banks financial operations head, as telling lawmakers in Moscow that technical preparations for transactions in Canadian dollars are underway.

The Canadian currency closed at 95.65 cents US, up 1.13 cents on the day.

David Gilmore, a currency strategist with Foreign Exchange Analytics in Essex, Conn., told CBC News many central banks, particularly in emerging economies such as Russia, China and Brazil, have been diversifying after amassing American dollars in their reserves for years.

"Russia has over 200 billion in reserves so it makes some sense to add Aussie, Canada, and British pounds to its reserve mix," Gilmore said.
It's also a vote in favour of Canada's economic prospects, he suggested.

"It offers exposure to North America without any of the downside currency risks that owning U.S. dollars carries with it," he said. "Canada's banking system doesn't have anywhere near the problems the U.S. banking system has. Households in Canada are not nearly as indebted, overextended,
leveraged and spent out the way American households tend to be, and so I think it makes some sense."

But Gilmore doubts that Russian central bank purchases will be enough to affect Canadian exchange rates for long.

Gold also rose on signs central banks will continue buying it to use in their reserves and to move away from the U.S. dollar. The gold sector on the Toronto Stock Exchange was up more than one per cent as the December bullion contract on the Nymex continued to head higher into record territory, closing up $21.40 at $1,186.90 an ounce US.

The Financial Chronicle newspaper reported India might buy more bullion from the International Monetary Fund for its central bank reserves. India announced Nov. 3 it bought 200 metric tons.