Will The Dollar’s Value Ever Reach Zero?

Mark, who frequently reads and comments, recently wrote:

On Christmas day I would have agreed with your assessment and conclusions for the most part. But, by the very next day I had been exposed to an opposing view, which leads to a very different scenario.
Somehow in my Internet quest to learn more and more about the crisis we face I discovered Andrew Gause (www.andygause.com) who is described as a monetary historian and contemporary expert on American and international banking systems. I began listening to archives of his weekly radio shows at http://www.oneradionetwork.com starting with the most recent 12/24 broadcast:http://www.oneradionetwork.com/content/view/689/136/ (you’ll have to sign up for his free newletter to listen) and continued backward week by week.
It is clear to me that this guy understands money, the Federal Reserve, US monetary history, and the current crisis far better than anybody I’ve followed to date. Like Peter Schiff and a few select others he was able to predict the mess we’re in which he documented in his interviews and in the two books he published, The Secret World of Money and Uncle Sam Cooks the Books. His predictions for the future, however, are far different than Schiff’s (and yours.)
I can’t recommend too highly that you take the time to listen to his archived broadcasts.
You’ll recall that I recently suggested that a “one world currency” was coming our way. Gause chuckles at that by saying “you’re predicting the past”. He says we already have it, the US dollar. He feels the Fed and the International banking cartel that owns them (including Citigroup, JPMorgan Chase, and Goldman Sachs being the top 3) are already in control of the world’s banking systems and can keep the dollar going forever by simply adding zero’s (i.e. inflation).
He explains that the current deflation (or disinflation) caused by the 1 trillion dollars recently sucked up by the treasury and deposited into the (NY) Fed will end with the big banks and their corporate buddies buying up recently devalued assets (like GM) for pennies on the dollar as the tsunami of liquidity is suddenly pumped into the market leading to a 70’s style inflation (but short of collapse) over the next several years.
Fascinating stuff!! 3 thumbs up…

I haven’t yet had time to digest the digital media. My girlfriend Auby, my mother, and family friend Pam, were watching the entire Californication – Season One tonight. I liked it. It’s good to see David Duchovny in a high-profile series again. I enjoyed him in The X-Files, and even in that movie he did, Playing God. I remember this one piece of dialogue from that movie where he’s confronted with a thug:

DUCHOVNY: Are you going to hit me?

THUG: Why are you afraid?

DUCHOVNY: I’m just trying to plan my day.

The stoic sarcasm that Duchovny brings to his characters reminds me a lot of myself. Which is to say, I enjoy his work.

At any rate, the gist of Mark’s point is the idea that the central bankers of the world have realized their ultimate goal of one world currency in the US Dollar, and are not going to let that default. While I’m sure that the person Mark is citing, Andrew Gause, has done his homework and knows what he’s talking about, I’m going to have to stick to my guns on this one: The dollar is going to default in the not-too-distant future. But, before I really tackle this question, I think it’s important to review a bit of history.

Bankers have always jealously guarded the power to create money; such power is as much a part of banking as the force is to George Lucas’s Jedi Knights: it is the source of all their power, and thus zealously defended by them. Remove from a banker his ability to create money, and all you’re left with is someone in formal clothes. Of course, money-creation creates problems of its own as well-documented by economists like Murray Rothbard in his book, The Case Against the Fed, as the blog readers who’ve been with me for a while are no doubt aware. It creates a devaluation of the currency as new money enters the system and, as the process continues, will prompt investors to put their money in another currency.

Hence, alternative investment options always create problems for the bankers. If they get too carried away and create too much money, they run the risk of people feeling the currency and eventually having it lose relevance altogether in a hyper-inflationary scenario. That’s why John Maynard Keynes proposed a currency that would circulate universally world over, which he named the “Bancor.” Now, in such a scenario, there is no alternative currency to run to, because this one would have legal tender power all over the world. Think of it as Keynes’s interpretation of Tolkien’s “One ring to rule them all.”

The argument has been put forward that the US Dollar is the de facto universal currency, and therefore, we are living in Keynes’ dreams today. The problems with this argument, is that it’s missing the whole point. The US Dollar does not have legal tender power everywhere, it simply has legal tender power for the world’s most dominant power. Now, yes, that may be good enough for most purposes — but there are competing factions that will not accept US Dollars; some powers, like Iran — who are politically motivated to see the US fall from grace, consequentially pricing their dollars in Euros or Yen instead of dollars. Others simply see the US Dollar as having lost much of its buying power, and therefore prefer to deal in local currencies — as we saw in the news this year where they stopped taking US Dollars at the Taj Mahal.

You see, this is all just a replay of the classic story: The Federal Reserve has created so much money to fund so much debt that the entire edifice of debt now towers over our entire economy and threatens to bring it down, which has lead people to start quietly moving towards the exits. The whole idea of a currency such as the Keynesian Bancor is that there is no exit: the world banking system would oversee the currency, inflating it a bit in each country — which is a far cry from one part of the world inflating the living hell out of its currency and expecting the rest of the globe to play along.

Think of it this way: governments all over the world are envious of the US Government’s ability to simply turn to the Fed in order to run perpetual deficits. These governments would like to do this themselves, but, to do that, they would need to displace the US Dollar as the world’s reserve currency. Thus, we are not in a situation where we could really have one-world currency. Furthermore, this argument supposes that: all the bankers of the world value this idea of one universally accepted inflationary currency, and that they would gladly watch their own people suffer the effects of perpetual inflation brought by a foreign power, rather than take moves to stop it.

I feel that that thinking is too conspiratorial for my taste. Central bankers have always fawned over the governments that oversee them since it could take away their money-creation abilities at any time. Governments allow the mischief of money creation on behalf of their banks because it has always made it easier for said government to run a large debt.

I just don’t think that that nation state-centered thinking is going to change anytime soon.

Honestly, can we really expect the central banks of countries such as China to just keep on honoring devaluing their own currency so they can keep honoring the dollar on, and on, and on, with no expectation that the Chinese themselves might want to become the ones issuing the world’s reserve currency?

It’s human nature.

Someday, someone somewhere is going to decide that they want their power to become the next global empire, and you’d better believe that on that day, they’ll tell the US Federal Reserve just where they can deposit all of the dollars it’s flooded the world with.

When that day comes, do you really think the dollar will be left with any value at all?

2 thoughts on “Will The Dollar’s Value Ever Reach Zero?”

  1. Preston,
    When you tire watching David Duchovny getting more sex than David Duchovny (art imitates life) be sure to schedule some time to listen to Andrew Gause. He’ll be on live tonight at 7PM Texas time. I’d be interested see if any of your opinions were altered after you have a few hours of Gause under your belt. I think he would agree in the total collapse of the dollar but differ as to the timeline you suggest. As far as the conspiracy stuff is concerned Gause presents ‘coincidence’ after ‘coincidence’ each ending with more and more power and money in the hands of the ‘big boys’. This crisis should have been the end of them, but, somehow, they are the ones who will profit from it the most (as always.) One reason some of the governments go along, aside from the obvious financial incentives, might be that they remember what happened to JFK shortly after he issued Executive Order No. 11110.

    “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered….” Thomas Jefferson

  2. No kidding about Californiaction. We started on Season 2 and it’s almost becoming annoying how women practically tackle Duchovny’s character. I don’t think it’s in the nature of that many women to make themselves that available that aggressively. I preparing for the Series 7 Exam right now, but should have some time available this weekend to listen to your guy.

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