Tuesday, June 21, 2011

Shortage of Commodities? er...ummmm....shortage of U.S. Dollars? MAJOR U.S. Dollar Bull Market setting up

Many people are talking about a shortage of commodities and peak oil and how that will send commodity prices to the moon. These same people are also talking about all the "Money Printing" that is going on, causing an abundance of U.S. Dollars (and other fiat currencies) and how that will also send prices skyrocketing. In my view, the situation is EXACTLY the opposite. There is actually a massive shortage of U.S. Dollars, due to the fact that there is large sea of unpayable debt in the global monetary system. This debt is denominated in fiat currencies, but there is more U.S. Dollar denominated debt than any other currency in the world. Creditors want to be paid in U.S. Dollars, not Gold or Silver or other commodities. So essentially there is not enough money in the world, and too much debt. Debt satisfaction creates a demand for the currency it is denomninated in, while at the same time all the contracting debt is diminishing the supply of U.S. Dollars. So there are two forces at work here

1. An increase in demand for Dollars to satisfy debt payments

2. A MASSIVE reduction in the supply of available Dollars due to debt contraction that can collapse much faster than the Fed can counter it.

This money dynamic is extremely Bullish for the U.S. Dollar going forward. As  the world's debt money system collapses, deflation will take hold and send the value of the U.S. Dollar skyrocketing, and the value of U.S. Dollar denominated assets to virtually ZERO. This does sounds extreme, but what has already occurred since the inception of the Federal Reserve since 1913 is the real extreme that most people don't even take notice to. It is the Massive inflation of our money supply through Credit Inflation. the crash will correct this extreme.  In addition, Since most all of our money is debt (with the exception of coins, which make up about 5% of the money supply), for the Federal Government to "Pay off the debt" would be to contract the money supply and cause a depression. Since an ultimate default by the U.S. Government is virtually inevitable (unless they decide to print their way out of it, which they are not likely to do until after the collapse happens, using 1929-1932 as an historical precedent), a massive contraction in our money supply is also inevitable. This has already begun in 2008, and is the first contraction in the money supply since the 1930's. The difference this time is, the bubble leading up to the 2007 top is much bigger than the one leading up to the 1929-1932 crash. This means we should expect a decline greater than 1929-1932. DOW 570 would equate to a 96% decline, greater than the 89% decline of 1929-1932. While all this happens, the U.S. Dollar will be in a Super Bull Market as credit contracts and the few dollars that are left in the system will be scrambled for by debtors. The U.S. Dollar does not appear to be finished with its bear market, however, contrary to what I previously thought. While it could just take off from here, it is likely to get down to the mid-to upper 60's on the U.S. Dollar index, fool everyone into this Dollar Collapse Scam, and then take off in a Super Bull Market. This should last until the debt collapse is over, most likely 2020-2023, although the chances are high for a final low in the stock market in 2016 or 2017.

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