Tuesday, March 18, 2008

Prediction five getting closer

Richard Duncan's excellent 2005 book, The Dollar Crisis, makes the prediction that if any one of five conditions should come to pass, that the dollar will be finished. Duncan is particularly scathing about his fifth prediction:
Any one of the first four scenarios could undermine the dollar standard, but the final scenario, where interest rates fall very near 0%, would certainly deal it [the dollar] a fatal blow.
It would appear that Chopper Man has been listening. It seems Bernanke really does want to destroy the dollar on his own watch. And with the way that sterling seems to have become entangled with the greenback, he probably wants to take the Great British pound down too. (Thanks, Ben.)

So what's the betting on a Japanese-style near-zero interest rate for the dollar in the next couple of months? Weeks? Days? Hours? Minutes? Seconds? Nanoseconds?

Stand by your roller coasters. Because nobody knows what's going to happen next. Especially Chopper Man. Well, not until his shareholders call him first to tell him what to do.


John East said...

A lot of people seem to think that the only way forward is a war. I've not managed to get my head around this concept yet, but all I can envisage is a falling dollar, unrepayable debt, and falling living standards throughout the West as China continues to grow.

I'll have to do some more backgound research to see how many examples I can find in history of empires that reversed their collapse by essentially doing more of what caused them to collapse in the first place. In our case - debt.

Jack Maturin said...

It may just be me, but if you read virtually the entire British business press at the moment (with possibly the exception of Jeff Randall), virtually all of them are falling over themselves to recommend that Bernanke keeps doing more of the same. It's very odd. "You've got a virus Mr. Jones. I think what we need to do to cure you from it, is to inject you with even more of it." Bizarre. And most of them have mathematics or economics degrees! ;-)

It's almost like the medieval medical practice of "bleeding" ill people. "You're ill, Mr Jones. We better bleed you of a couple of pints to make you better."

The Romans, of course, tried more and more inflation to beat the problem of inflation (tied to ever larger armies, neverending wars, increasing serfdom, and appalling tyranny), but they got their come-uppance in the end when the Goths and the Hun finished them off.

Ron Paul is right. Empires always end because the need for the rulers to pay for their armies with inflated currency always breaks them, eventually.

What was it Cicero said? "The sinews of war are infinite money". Or in our case, the sinews of the war in Iraq are an ever-inflating greenback.

Let us see, tomorrow, which way the cookie keeps crumbling. Alas, as I draw my income from the City I'm right inside the maelstrom so I've lost a lot of objectivity. If I was purely outside, it would be much more fun to observe! ;-)

John East said...

Objectivity is a gift few of us possess. I work in commodities, predominantly gold, which means I wear bearish blinkers. The current 10% pull back in gold is doing wonders for my objectivity, and forcing me to analyse the case for the status quo.
Fortunately, I'm not leveraged so I can afford to sit tight and watch things unfold. I'm sure I will not be able to convince myself that bailing out the banks and flooding the world with liquidity is the way forward, but in the interest of objectivity I'd better keep an open mind.

Jack Maturin said...

Don't worry. It's just the Fed messing about with their own gold reserves, to make the dollar look more secure, plus people taking their profits and cashing in on all the lemmings. Gold will go up again. And soon. Alas, there's never a good time to buy gold and never a good time to sell gold. That's because it's as good as gold, i.e. extremely difficult to print and extremely difficult to manipulate. Strangely, it's not even going up in value. It's just holding steady. It is merely an indicator of the declining value of fiat dollars and fiat pounds. When the chinese cash in their T-bills we will really see the paper storm hit the paper shredder. There's a lot of upside in gold to go yet. Trust me. I'm an Austrian.

Gekko said...

"You've got a virus Mr. Jones. I think what we need to do to cure you from it, is to inject you with even more of it."

Actually that would assume that they have a clue as to what is causing the problem in the first place and quite clearly they do not. Would it not be more accurate to say something like:

"Mr Jones. Your shivers, aching joints and nasal symptoms are simply due to too much nose-picking and backside-scratching. The cure is to inject you with a virus we call influenza which should provide a cure. We will monitor you for a week and if the virus has not managed to curtail your nose-picking caused symptoms by then we will keep giving you an increased dose until you are cured."

Actually I can feel a python-esque whole comdey series coming-on