Warning Signs of a Coming Currency Crisis

By Greg Hunter’s USAWatchdog.com

Gold hit an all-time high this week—again.  The yellow metal briefly topped $1,500 an ounce before falling back down a few dollars.  The world has become increasingly nervous about the size of the growing U.S. debt.  Just this week, America’s debt topped $14.3 trillion (also an all-time high) which is close to the limit Congress can legally borrow.A recent CNSNews.com report shows why the $38 billion, that was just cut, is a drop in the budgetary bucket.  The report said, “Friday’s $34.54-billion jump in the national debt almost equaled the $38.5 billion the Republican House leadership said would be cut from spending for the remainder of this fiscal year by the continuing resolution that the Congress passed on Thursday and President Obama signed Friday.  The federal government is now perilously close to hitting its legal limit on debt.”  (Click here for the complete CNSNews.com story.) Odds are the debt ceiling will be raised by more than $1 trillion.  Meanwhile, the Fed is printing more than $75 billion a month to finance 70% of the U.S. budget.  The math of this screams currency crisis 2011!

Even key members of the Fed are openly worried about America’s sea of red ink.  A few weeks ago, Dallas Federal Reserve Bank President Richard Fisher said, “If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when . . . I look at this as a tipping point.” (Click here to read the complete story from CNBC.) Mr. Fisher said we are just at the beginning of correcting our budget problems and “it’s going to be very painful.” What do you bet “painful” will mean forced budget cuts and high inflation.

The warning signs over the past few weeks are monumental.  The world’s largest bond fund, PIMCO, recently sold ALL of its U.S. Treasury bills.  The Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, has said many times, “I believe that our debt is the greatest threat to our national security.” And just this week, Standard and Poor’s threatened to cut the U.S credit rating if legislators can’t agree on meaningful ways to reduce the deficit.  There is no wonder why investors are converting dollars to gold and silver around the planet.  The University of Texas Investment Management Co. recently announced it bought almost $1 billion in gold bullion.  According to a Bloomberg story this week, “The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board . . . ‘Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,’ Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.” (Click here to read the complete Bloomberg story.)

In a recent report, economist John Williams of Shadowstats.com contends a declining U.S. currency is reflected in spiking gas prices.  Williams’ said, “. . . the primary problem behind higher oil and gasoline prices is the Fed’s efforts at dollar debasement, but few in the media are willing to blame the Fed . . . Also hitting the dollar, though, are increasing instabilities in and ineffectiveness of political Washington, D.C., as viewed by the rest of the world.”

Williams says gold and silver are nowhere near their former inflation adjusted highs of 1980.  Back then, gold hit $850 per ounce and silver $49.45 per ounce.  To truly equal that price in today’s inflated money, gold would have to be “$8,331 per troy ounce” and silver would have to be priced at “$485 per troy ounce,” according to Williams’ recent calculations.

Rising precious metal prices are signaling impending doom for the U.S. dollar.  Please keep in mind, $7 trillion is held outside the country by foreigners.  A sudden sell-off could spell ruin in the form of high inflation (if not hyper-inflation) for most Americans.  All the warning signs are flashing a coming currency crisis—the only question is when?  I’m betting the crisis starts by the end of this year – 2011.

Comments
  1. Reader

    I want to advise Americans that even if the US Government stopped operating, the US Dollar will continue to have a role in overseas trade. The simple fact is there no practical alternative and the hassle and pain of abandoning the US dollar in Trade simply is not worth it (despite the dumbo called ‘Euro’).

    It would be nice if the US politicians came up with some ideas that help the American people and pacify the Debt issue but it seems all they do is think about so-called “israeli security” and the ego trips of Bankers in DC and NY. It’s too bad such as can get away with it.

    I read somewhere that in 1869 NYers dragged bankers out of their office and hanged them on the street for their crimes – that was rough and ready justice, American Style.

    • Student in fact

      OK, so the rest of the world is stupid enough to take worthless USD for something that they could sell. Your plan didn’t work in Zimbabwe. Do you really think this would work anywhere? It sure as hell didn’t work in the South after the Civil War. It was gold and silver coinage or nothing down here. Your plan might work if you use the dollar bills for wall paper.

      • Greg

        Thank you Student.
        Greg

      • Adnan

        You think gold and silver trinkets will save the day for America??

        Good luck with your gold coins then…

      • reader

        ‘My plan’ is to pay off foreigners T-bills with cash e-printed at the Fed and cut the US Federal income tax for individuals and business to 0% percent. Just like the Chinese income tax rate, or if you prefer, the Founding Fathers original tax rate for America.

        You can find all the details at MartinArmstrong.org

    • Diane Carol Mark

      Hi Reader,
      Fascinating that you mention NY in 1869. I’m watching the fabulous PBS series again, New York: A Documentary Film. It’s an 8-part series of over 17 hours (available on NetFlix) and it covers what you mentioned and more. I highly recommend viewing this series for critical historical info that’s especially pertinent nowadays.

      :) Diane

      • reader

        Hey great – Thanks for the tip. NY is #1.

    • j Stuart

      I like the idea of pinstripe looters hanging from light posts.

      • reader

        You and me, Pal.

        • maria oceanna

          count me in, but we need to include Chris Dodd, THE FED staff, Mozillo, and a larger cast than a few bankers.

    • nitrus

      if the usd isant worth anything and other countrys trade with eachother and wont except the usd we are in a world of hurt . its known that russia,china,and europe had a meeting with out the us on introdusing or proposing a new currency if they do this they wont need to mess with the usd and wont need it to do buisness and they wont except the usd from the us nor anyother country for import and export exchange that are wanting to use usd for this perp, china is already changing there usd into solid securitys and getting away from the usd look it up.people think that gold,silver and oil is the most important investment in the world worng if the usd went to hell there are only 4 things that are sound assets food,water,shelter,and clothing.question if there was a poor person that had these 4 thing and a rich person that had gold,silver and oil the rich person is going to starve to death becouse he aint going to be able to buy food and water from the poor person becouse gold ,silver and iol aint going to be worth nothing think about it its not rocket science we are headed for a world of hurt.just my opinion is all.

  2. Lew

    It is beyond me how Washington can ignore the Federal debt year after year. In the current environment, I believe the clock is ticking and we are literally talking day to day, heading towards some kind of collapse. Most Americans will not realize anything is wrong until a bank holiday is declared (they will continue to believe the lies). I work in a corporate setting and find it amazing how many people “refuse” to acknowledge there is anything wrong, or believe we are simply in an unusually deep business cycle downturn and things are “returning” to normal.

    With inventories of nearly everything at historic lows, the refreshing of stock (inventories) will be at the dollars lower value. How will price increases (inflation) of 25% be explained away? I imagine that the baskets of goods used to measure inflation will change each month to products with the lowest price fluctuation for a given period. The current price increases appear to be following the lower value of the dollar.

    The institutional run on physical gold seems to be more of a preparation for the day after (the dollar). I also don’t believe for a moment that any purchase of gold will be used to fund anyone’s pension benefits. Even with these massive purchases being made, in the long run they may be useless unless the purchaser actually takes physical possession of the metal. The government may in the end seize all precious metal contained in vaults all over the country, especially in New York.

    No, I don’t believe for a minute that the Federal government can or will stabilize the dollar, or make the federal budget sustainable. Both of which would be in the best interest of the American people.

    • maria oceanna

      the federal government has forgotten that they depend on middle class taxes. since the congress, senate and presidential staff has a whole separate system of entitlements for themselves, they don’t view the demise of the country as their concern.

      but they may lose too.

  3. Mitch Bupp

    Lets be honest Greg, This ship has already sailed at it is heading into the stormy dark unknown waters. WEe have not changed captains when we could and change course but damned the torpedoes ahead. The captain is in emergency mode pumping out as much but the storm is slowly overwhelming his efforts and the ship will go down. The only real question is whether we can make it to port to bail out!

  4. Mike

    excerpt from scitzoflation:

    HIGH INFLATION
    3-5 years i.e. a few years from now

    Midwest Standard
    $7.50 drink becomes $11.00 – 15.00
    $47.00 steak becomes $70.00 – 94.00
    $70.00 phone bill becomes $135.00 – 140.00
    $200.00 energy bill becomes $300.00 – 400.00
    $2.50 per gallon gas becomes $3.75 – 5.00

    •Foreign markets phase out the dollar
    •Local crime rate will determine local tourisms rise or fall
    •The only people who can routinely afford these prices will be foreigner tourists and the super rich.
    •Unemployment continues civil unrest begins
    •Economy grinds to a halt
    •Government monetizes the debt
    •Foreigners liquidate U.S. currency assets go into commodities
    •Government contemplates price controls and rationing
    •Government installs draconian measures so that the few can maintain their lifestyle and protect themselves from a disenfranchised populace.
    •Gun control will precede the eradication of the free internet and the country will descend into an impoverished police state.
    •The sheeple will not realize this because it will creep up on them slowly and once they become aware it will be too late.

    The Fed only needs to get past the 2012 election and their re-up in 2013 then matters will be worse. “To defend America against all enemies DOMESTIC and foreign.” I swear Greg a few of us have vision and the rest of the world /country wears bi-focals.

    • Will

      It reminds me of the frog in the water and is cooked befor he realizes it is time to get out. Well the sheeple are in the pot the water has been added AND the fire has been lit.

  5. Sarkis

    In other words- Game OVER! Time to fasten our seat belts.

  6. Sam

    Dear Greg,

    Good analysis.

    As of this writing, gold is at $1503 per ounce, silver at $44.90. That’s great news if you hold precious metals, but bad news if you have dollar-denominated assets such as a stock and/or bond portfolio, a home, and so on. Although the market is trying to go higher, anything dollar-denominated is losing value. In the end, those who hold on to “hard” money, precious metals, will have real investment/purchasing power; whilst those who have dollars, or any other paper currency, will have to start out all over again.

    As to the slip in this country’s credit rating by S&P, one writer likened it to another “Pearl Harbor.” In other words, it was a “surprise.” Uh, I seem to recall S&P threatened to take this action TWO YEARS AGO. When I first read of this, I knew that politicians wouldn’t listen, much less the general public. Like a few others, all I can do is say, “What took S&P so long?” However, the announcement by S&P did more than cause Wall Street to lose ground, and give a lift to those who switched allegiance to the “barbaric” metals. One aftershock is from the Saudis, who have said that they will “cut back” on oil production, because the market is “saturated” with crude. Translation: we’re not going to sell to a bunch of bums like the U.S. who cannot pay their bills.

    We have yet to see any more aftershocks, at least, those that the LSM will report. But yes Greg, you are right, it looks like currency collapse this year. No doubt the liar-in-chief will sign into law stating that it’s the “duty” of all Americans to turn in gold and silver objects to their government, but this will not stave off the disaster. The dollar will still be valuable, as toilet paper, as sure as eggs are eggs.

    • Brian

      I might contend that having a dollar denominated asset such as a home might not be such a bad thing…provided your debt to equity ratio is very high. Then you are paying back those ‘evil’ bankers with cheaper dollars.

      What the German experience in hyperinflation instructs us, is that such a collapse is nothing more than a transfer of wealth from the savers to the borrowers. How sick is that?

      For as long as I can, and for everything possible I can, I will put my day to day expenses on a credit card, and pay back those bankers in 30-45 days with yet again, cheaper dollars. When the collapse finally does happen, I would doubt if I pay whatever outstanding balance I have at the time.

      • Greg

        Brian,
        I hope that works for you and against them. I hate the banksters.
        Greg

    • Greg

      Sam,
      Gold closed at $1,506 today. Wow, things are going to get pretty interesting from hear on out. Thank you for the comment.
      Greg

    • Teknikid

      Sam says:
      “That’s great news if you hold precious metals, but bad news if you have dollar-denominated assets such as a stock and/or bond portfolio, a home, and so on.”

      Why would that be bad news if you have a home? What if that home is paid off?

      Under the current central banking system, there is no way to get out of debt. Every cent in circulation is a liability, thanks to the all-powerful Federal Reserve. They are neither federal nor do they have any reserves. They issue debt-notes that claim to be dollars, yet they have no rational relationship to a true one-dollar silver coin. Even the Fed and the IRS have stated that Federal Reserve notes are not dollars. I have a hard time calling those notes “dollars.”

  7. John

    Gold & Silver are the canaries in the mine & they are screaming a warning.

    I don’t trust any of these people in management because they were the ones who created the problem. And you don’t hear any of them discussing paycuts for management or the politicians.

    They are calling themselves the best & the brightest & that they deserve their bonuses.

    They are using this event to cut the social programs for the elderly & the poor.

    Instead they should be called the most corrupt & wicked.

    John

    • Greg

      John,
      This a is the most outrageous crime in history!!! Instead of jail, the crooks who caused the problem got bonuses!!! Thank you for your comment.
      Greg

  8. Steve

    We can see that a hyperinflationary depression is on its way. Maybe by design? After all the crisis coming could be averted if the Federal budget gets much closer to be balanced on can only be done by huge budget cuts. Their smoke and mirrors games leading the stupid masses to believe they are doing their job. Well a 1990s Russian collapse is in order here and desired by the leadership. Default of foreign held US Treasuries and a new issuance of currency. Only tho other countries like Russia and China may want war with us, after all we cheated them big time. For the lack of balancing the Federal budget they (US Government) literally destroy the world. Armageddon does not sound so far fetched.

    • Greg

      Steve,
      It might be by design and it might be because of sheer stupidity but either way hyperinflation is on its way. I hope you and other readers have done some preparation.
      Greg

  9. John

    This quote from an article says it all:

    “Face it, former Goldman Sachs CEO Hank Paulson, who served as US Treasury Secretary just long enough to loot taxpayers is never going to jail. Neither are Alan Greenspan, Ben Bernanke, Angelo Mozilo, Phil Graham, Franklin Raines, Barney Frank…(I could do this all day). Justice (much like truth) is a luxury Americans can no longer afford.”

    http://acrossthestreetnet.wordpress.com/2011/04/14/why-silver-is-still-the-best-revenge/

    • Greg

      John,
      Thank you for the quote and the link. It’s good content!!!
      Greg

  10. david

    $2.75 a gallon gas in the Midwest??? It’s close to $4.00 here in WA state now! But anyway, Greg, very good analysis.

    Re the price of gold and silver: I regard any dollar valuation of those two as strictly academic. One guy (I forget his name) has said he expects the silver price to go to $50 and once there, you won’t be able to buy physical for any price–there’ll be no sellers. I know I don’t plan on selling my metals. I plan on having to barter with them.

    • Greg

      I am currently in the Midwest visiting my relative and it is $3.75 for regular everywhere around here. Good plan on the metals.
      Greg

  11. Marcel

    ‘I’m betting the crisis starts by the end of this year – 2011′

    Did you take into consideration not if but when a major U.S. city is hit by a 9+ quake as we saw in Japan,or how about a major terrorist attack that dwarf’s 9/11 ?
    The terrorist have proven creative,patient and methodical in their plan for a new attack.
    We’re about due for another surprise and with the always incompetent DHS,we know they will succeed.
    Our foes Russia and China,N.Korea,Iran and their many other partners have been preparing for this day to kick mortally wounded Uncle Sam when he is down on his back.
    I think you are being overly optimistic.
    The USS Titanic has more than a self inflicted currency iceberg targeting it.
    The perfect storm is closing in.

    • Greg

      Marcel,
      I made that prediction just on the fundamentals. If one of the things you mentioned happens then it starts right then and there. Thanks for the comment.
      Greg

    • yooperguy

      You believe in “terrorists”?!?! Bwahahahahahaha!!!!
      Hate to pop your bubble, friend, but a “terrorist” ranks right up there with the boogeyman, the easter bunny, and Santa Claus. You are confusing “gubmint shills and CIA assets” with “pissed off third world peasants bent on revenge”. I think you are spot on, but its called a “False Flag” event, not a terrorist attack.

  12. woody188

    You can’t eat silver or gold anymore than you could eat an iPad. Besides, most hold metal certificates which won’t be honored in a crash and are fraudulently over sold.

    If you really want to survive, invest in a garden and jarring/canning materials. Start an orchard. Raise livestock. Learn how to make it on your own.

    When people are starving, food is more valuable than any metal or stone. You’ll also want to invest in a weapon and some lead to protect your food investment. You’re gonna need it!

    • Greg

      Woody,
      You can’t eat paper dollars but they have worked great for buying things and Golds and silver will be even more effective if the S H T F. Thanks for weighing in my friend.
      Greg

  13. nm

    A reader said the following:

    “I want to advise Americans that even if the US Government stopped operating, the US Dollar will continue to have a role in overseas trade”

    Are you saying that other countries will still insist on using the dollar even as it’s value continues to collapse? As in, there is not (presently) an alternative currency to the dollar?

  14. Monica

    I see clearly but stand alone as many of us feel, so how do u get the lonely feeling to come together, and how does one get the bi-focules off to take notice???????????? Some of us are busy trying to pay taxes, pay all others bills, raise children, it would be hard for us to try and do the govements job as well thats why they are hire they have a job to do and just like in any buisness if the are not doing the job RIGHT then we need to get someone who will, and we dont stop firing them tell we do, instead of cutting everything we the people need, why do we start with making them start with really budgeting, instead of raising the taxes just make everyone pay them, or no one, quit sending our money to other country to fix them, fight for them when the real problem lies here in our country. Who of these people will be here for us, that we are for them, none!!!! Yes we all have opinions but talk is cheap and it does not get shit done, the answer is in we the people, the worker the ones that live the reality of real life, but yet seem to be letting people budget our money that obviously don’t have a clue how, but yet expect us to!!! so we can pay their dept as well as our own, as a small buisness owner I am doing my best to keep up with thing on my end, but because of others stupidity we at the bottom are drowning and take note if we drowned it won’t be long before the people standing on us will lose footing as well, like I said we all have our opinions this is mine, I’m not in the political aspect so I don’t talk that talk, I’m in the real world, so I just say it as I see it, nomally if people are holding me down I try and fight back, but in this case, I don’t have the right tools, and by myself there’s just to many, so what the hell do u do, I’ll keep fighting tell I’m taken out or untill I find an army to help me win, I am fighting for my life as we know it.

    • Greg

      Monica,
      Keep fighting and don’t give up. Thank you for commenting on this site.
      Greg

  15. Matt

    Fractional Reserve Lending always ends in poverty.

  16. William Ripskull

    Can you say “kaput”?

    • Greg

      William,
      It’s all down hill from here. Thanks for the comment.
      Greg

  17. lostinmissouri

    I thought the party was over in ’08. It should have been, but the Feds bailed and printed. They are still printing. #@%&* banksters!

    Over at Coinflation.com, the melt price of a pre-1964 quarter is now $8.17! For 60 years, real silver quarters, would buy a gallon of gasoline. Right now, that ratio, is out of balance.

    Want to guess, where the price of gasoline, is going? …I think it is safe to say… probably $8.17 a gallon. Coming soon.

    • Greg

      LostinMissouri,
      Good, sharp analysis!! Thank you.
      Greg

  18. Frank

    Tired of all the crooks in the government? Tired of the FEd? tired of only two choices at voting time; when the miss america pagent has 50? Do you want to kick the Bums out of your House? Go to G, triple O, H dot com and kick the bums out of your House! Pronounced GO! GOOOH

    Get Out Of Our House! GOOOH

    • Greg

      Frank,
      I wish more people like you would run for Congress.
      Greg

  19. Tony

    We may be lost, I agree!
    I’ve done the best I can with my IRA, I rolled it over to a self directed and bought silver from Kitco.
    It’s sitting in a trust with numbered bars. Can’t touch it for 8 more years. You guys think the GOV will come along in a few years and take it?

    • Greg

      Tony,
      Most people do not have anyone between them and their money and gold and silver are money. That said, I have never heard of a bad word mentioned about Kitco.com, but who knows how this will all turn out. Thank you for the question. Anybody else want to give an answer or advice to Tony?
      Greg

  20. Art Barnes

    $4.04 to $4.21 out here on the Western Front for gas. Why in 2008. when oil spiked to 140 a barrel, it didn’t rise any higher at the pump than now? I don’t know, but I do believe this time it won’t go down only higher.

    As to hyperinflation in my mind it is allready here. Out her on the Western Front, especially the central valley of California, homes are being lost, business closures are abound, underemmployment if one has a job is the norm. High State taxes, sales taxes of 10 percent with about a dollar now on every gallon of gas now. This thing is a mess and getting worst by the day. Yes, Greg, and the stock market rallies, go figure! If one is not worried it because of sure stupidy.

    The debt has caught up with the Fed, the government, our elite, the politicans, the MSM, and they know now they can’t kick the can further down the road much longer and pretend all is well with the US economy and the dollar. They must, however, continue to keep a lid on it so not to upset the masses until extreme measures must be done; and overnight they will invoke emergency measures on the economy. Of course, this will lead to a new currency & third world status for the prior late great american middle class – all great for the elite though.

    On another note, maybe they can convince the american people one more time that the next election will solve all the issues, and, if so, away we go for another four years sliding down the third world toilet.

    • Greg

      Thank you Art for the news and comment from the “Western Front.”
      Greg

  21. therooster

    The USD is more than a currency and its ultimate intention and design may not have been for the sake of a currency role at all. The USD acts as a currency within the fiat paradigm , but within a real-time gold-money paradigm, the dollar still has a vital role as a measure for gold weight. Bridging the paradigms of fiat pricing (for goods and services) and weighted gold payment requires an algorithm that runs right through the USD. The measure and the weight are reunited, but in real-time ….. this time.

    The fiat currency (floating) stage of the USD’s life cycle along with the severing of the FIXED gold peg (BW) were all part of the shift to real-time currency/gold markets which further led to real-time gold as a currency.

    One can now buy a stick of gum or a yacht with fully gold backed digital currency with the click of a mouse. Debt-free store of value now has married with instant global liquidity in REAL-TIME. How does one improve on that ???

    You cannot pour new wine into old wineskins.

    • Greg

      Therooster,
      Thank you for the comment and analysis.
      Greg

  22. hansadutta das

    in this world everything, be it a machine , and institution, a government, or an organic living being, bug, bird , beast , man or woman, must sucesively pass through six stages of development and decay. They are birth ( Comes into existance ), growth, produces some by products , stays for some time, dwindles
    ( Deteriorates ) , and finally vanishes ( dies ). There is no exception to this law. America is in gthe dwindling stage and entering the dying stage. No economic, political, social, or other adjustmet can prevent this from happening.

    Similarly, each and everyone of us also are in various stages to these six transformations, rich , poor, black , white man, woman, intelligent or dumb…. no one can counteract the incessant flow of natural tansformation from bifrth , old age , disease and death.

    Instead of wasting time struggling against the laws of material nature, it is the conclusion of all ancient cultures, especially – Vedic culture – to focus one’s resources and intelligence on solving the four common problems of BIRTH-OLD AGE-DISEASE AND DEATH.

    Even if there were no economic problems, health problems, political problems…… the above mentioned problems would still remain. What is being done to solve them ? ……. Nothing….. so what is the use of all this wrangling, it will not help anyone to slver the real problems.

  23. Will

    Tony,

    This is a tough one. I am active on several sites and am past the point of IRA, 401k requirements. I paid my taxes and bought my physical. On some of the sites there are younger men that have cashed out their retirement programs, paid the fines and taxes, bought physical and have done quite hansomely. I still think there is room for this approach to be profitable but boy it’s going to take some big ones to do it. You will have to look in the mirror and say “I believe, I believe, I believe” until you do.
    Will.

    • Tony

      Thanks Will

  24. Ben

    The Fed confiscted precious metals during the Great Depression. You can bet they will do it again.

    • Greg

      Ben,
      I am not so sure about that but I thank you for your comment!!
      Greg

    • Joe

      According to Charles Goyette, author of the “The Dollar Meltdown” even if the Fed confiscated all the gold that has been mined and is in current use in the world (assuming they can find it and have the means to confiscate it), at today’s market prices would be worth $6.82 trillion (the interview I quoting from is March 2010 when gold was at $1100/oz, and Mr. Goyette quoted the value in dollars at $5 trillion.) That means the national debt is more more than twice the current market value (in dollars) of all the gold that it is possible to confiscate, so even if they could aquire it all (and I’d like to know how the Fed would go about confiscating all the gold in Us, much less the world). It still wouldn’t do them much good.

  25. Sean S

    I believe the currency “crisis” for the USD has already begun. It’s here but no one in Government is ever going to admit it just as they will not admit that the “real economy” is still very much in “the can”.

    The Treasury says Congress must increase the debt ceiling in a matter of weeks or the US Government will have to default on some of it’s debts in a few months. The private market has little interest in buying new debt so it has to be largely purchased by the FED with new money printing. Government is now being kept afloat with unsustainable debt and massive phony currency creation, Zimbabwe style. Really healthy for the USD would you say?

    The bozos in Washington have now shown themselves to be totally inept at doing anything other than printing trillions of new USD (with zero incremental wealth to back it). Rather than halt this destructive path they are now going to do more of it! S and P has fired off it’s warning shot in relation to the future rating of US debt but it seems to be business as usual. (Now you might well expect some kind of official legal action to be launched against S and P, or at least a major investigation threatened, in relation to some of their past actions on MBS ratings and the like, just to “neutralize” them).

    The next stage will surely be the large scale refusals of businesses worldwide to accept USD for international transactions and to contract much more extensively in selective other currencies. In this increasingly hostile environment who wants to be caught out holding USDs when various other currencies are appreciating significantly against the USD – and for good reason.

    • Greg

      Sean S,
      I think you are correct. It has begun but you ain’t seen nothing yet! Thank you for weighing in.
      Greg

  26. Lew

    I think it is easy to get caught up in the reality of the economic situation we find ourselves, and because of this, we should take a step back and do some serious thinking about our personal position (while we still can).

    How bad can things get? That is a question we can not answer. Even with a sudden crash of the dollar, buildings are not going to fall, or water stop running (right away at least). The real danger with what we are potentially facing is in the initial “panic” of the general public. This is what we need to prepare for.
    Face it, the majority of people in the world today are incapable taking care of themselves. It would be these people that will cause the chaos that would accompany any devastating economic crash, this could take days, weeks or months (realize that we are already halfway there). Once the initial panic settles, we would probably see a reorganization of society, mainly a return to the local communities that built this nation. Things will continue to run, but on a very much diminished level.

    Consider what YOU can do (skills you have). If you are not in a safe place, could you get to one with 1 tank of fuel? In that moment, fuel may not be available or priced out of reach. These are the types of questions each of us should be considering and making plans for. Realize too that it is impractical to store enough food & water for the long term, I think realistically, a 3 month supply is practical (and portable).

    There is also the possibility that prices will simply slowly rise, and we will adjust to less. It’s better to prepare for the worst, and hope for the best.

    • Greg

      Lew,
      Great comment “How bad can things get? That is a question we can not answer.” It might get pretty bad and I think we have a lot further to fall! Thank you for the comment.
      Greg

      • Joe

        Greg, Lew, and anyone else,

        Do you know of anyone who has written about what the monetary collapse would look actually look like on a individual, local, and national scale? I know that no one can predict the future because so many things can change day-to-day, but based on what’s happening now: obviously the Fed will continue to quantatively ease the country into hyper-inflation, but what happens when the dollar is completely worthless and the masses discover that they are widely unprepared? Especially since much of our population is so far away from agriculture centers.

        Also, how would this affect Canada and Mexico whose economies (and currencies?) are so dependant on ours?

        • Greg

          Joe,
          The USA will ultimately replace the U.S. dollar with something new because they will have to. My guess is it will likely be backed by a basket of commodities or something tangible. It will very very painful and in some cases violent as may will lose everything in the next meltdown. It will be a disaster to the entire world as $7 trillion is held outside the country by foreigners.
          Greg

        • mile

          tomatoes???

  27. Marcel

    Thoughts for Tony ;
    The behavior of the terminally ill patient becomes more erratic and abnormal ,from high bonuses to criminal bankers to new never ending meaningless wars as we see another brewing in Libya.
    The big lies of the pathological liars in power get harder to swallow as fewer and fewer believe them and so they are left to make those who know the truth enemies of the state.
    The dying empire will resort to unthinkable ,insane acts such as turning a blind eye to a large terrorist attack on a major US city for the purpose of declaring draconian martial law already in place by executive order (courtesy of ex-president Bush) snuffing out any remaining constitutional restraints to their nefarious agenda.
    They have the list of gold and silver owners as well as gun owners and you trust these evil people to honor anything in a government under dictatorial,martial rule ?
    Hold onto your seats,this does not end well and only gets unbelievably worse from here on out.

    ‘The wicked shall be turned into hell,And all the nations that forget God.’ Psalm 9:17

    • mile

      pardon Marcel but revolution cant be spoken with the name Marcel……it makes the masses remiss

  28. jeff - Western NY

    The Fed has been “banking” on the inflation path we are on now with the hope that the stock maket bubble and cheap dollars will finally inflate real estate market…….thus helping the insolvent banks become solvent. IT IS NOT WORKING!

    The dual sets of books these banks are sitting on with mortgages, MBO’s, CDO’s and UFO’s are worth 40 cents on a dollar that they are showing at 100% on reported assets. This FED printing press has not worked in 2 + years and we still have a 10 year inventory in many places in the USA. No wonder gold hit an all time high yesterday!

    What Greg is your updated outlook on a QE3???????????????????????

  29. Freddy C.

    Great article, Greg. This is truly the mother of all stories right here. Sure, the fiascos in Afghanistan, Iraq, and now Libya are all newsworthy and there are a host of other important stories as well. But, the systematic debasing of our currency by the Fed is the giant turd in the middle of the room that most people are ignoring. This is why gas and food prices are soaring. I honestly have no idea where this is going or how it will end up, and our officials seem clueless as well.

    I love this quote:
    A few weeks ago, Dallas Federal Reserve Bank President Richard Fisher said, “If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when . . . I look at this as a tipping point.”

    Exactly- right on!

    But then he goes on to say:

    Fisher also said that the U.S. Federal Reserve had ways to tighten its monetary policy other than interest
    rates, including by selling Treasurys, changing reserves levels and using time deposits.

    Sounds like more borrowing, Lmao!!

    • Greg

      Freddy C.
      If he is openly saying this then it is common knowledge at the Fed. The top people know what’s going on, and they know we are in deep trouble. Too bad most of the public will not know what hit them! Thank you for the comment.
      Greg

  30. Steve

    Dear Greg
    I’m betting the crisis starts by the end of this year – 2011.

    If that would happen it may be a political re-election killer for Obama, unless he takes leadership and pulls a rabbit out of his hat…LOL…yea right…hehehehe

    So the game will be streched out to after election 2012 (hope springs eternal) and then AHBL
    AHBL is All Hell Breaks Loose…. so look for better conditions and $5 a gallon gas.. and $5 a gallon milk and we all have jobs to can not buy much…

    Republicans will win and get left with our Great Bannana Repubic With Nukes..
    Thanks!

    • Greg

      Thank you Steve. I agree with you my friend!
      Greg

  31. Tyson

    I did a quick look at the CPI calculator today. If you make a average annual income of $41000 a year in 2011, in 1913 that would have equate to $1800. However, that’s $1800 in gold. At $20 per ounce in 1913 meant you would have been paid around 90 ounces of gold, worth $136000 in todays prices. But that $41000 in FRN is only equal to 27 ounces of gold today. Ask yourself who was richer, your Great Grandfather being paid $1800 in 1913 gold dollars or you getting paid $41000 in worthless Federal Reserve Notes? I think at a 3-4% tax rate in 1913 I would choice my Great Grandfather’s pay rate today!

    • Greg

      Tyson,
      Thank you for the analysis and comment!!
      Greg

  32. slingshot

    I have given up on the government fixing anything. I can assure you that anything they do will make it worse. The Normal Bias that most people have today will be shattered by the reality of not being able to feed oneself. Corn which may be more valuable than oil as it is coverted into gas additives to run millions of vehicles for our modern conveinence, soon to turn us all into a survival mode if nothing changes.
    I look for change in conversation as, “Dancing with the Stars and Housewives of L.A.” are replaced with stock market and Dollar valuations.
    Yeah Baby, how’s the billfold today? Getting a little thin? One thing for sure is as the “Powers That Be” continue to state everything is fine, we feel the pinch of the loss of purchasing power.
    How long will this all last? As long as the world central banks allow us to print away and buy our own debt. A Bank Holiday in the future? Ever wonder how high the price gas can go in one day? I’m reading $6.00 instead of $5.00 this summer eventhough there is a glut according to Saudi Arabia. You would think the price would go down. Not much mention of BRICS, which are the countries that want to bypass the dollar for trade.

    Currency Crisis? Guess we will have to deal with it when it gets here. Hmmmmmm.

    • Greg

      Slingshot,
      It is coming my friend, and soon. Thanks for checking in.
      Greg

  33. Roderick Pagnossin

    Kitco is not out to get anyone. Saying that most coin stores are completly legit too and sell silver and gold for very fair prices with a modest 2% or 3% over charge of the metals value.

    But jeez… why have your gold in a trust?. Trust only yourself. You want to be able to hold your gold in your own hands.

    We do not understand how topsy turvy events can unfold in a moments time. Most people say hyperinflation happens slowly enough to be able to adjust to it. Not!

    Hyperinflation can and does happen in 10 minutes.

    You see inflation is a rise in prices coming from too much money created for the amount of goods and services in a economy. So inflation can and does creep up slow enough to fool people. Like today we are seeing food prices rise. Most people assume the rise is not so bad as they continue buying. They may notice the bag of groceries is smaller for the same amount of food this week over say a few weeks ago. Realtiy is food prices are skyrocketing!. That is if you are like me and understand we are seeng 30% increases in food prices over last year.

    To hide the jumps we are seeing creative marketing by food processors. My pint of Haggan Daz ice cream was $3.99 for a long time. I just picked up one the other day and good news.. it is still $3.99 a pint. Bad news unknown to hurried shoppers is that pint which was 16 ounces is now 14 ounces!

    Now my point.. this inflation is super hard on budget stretched families. There is a different inflation monster that lurks in the shadow. That monster that can jump out of nowhere suddenly is called hyperinflation and it is a monster meaace.

    Hyperinflation unlike regular inflation does not creeep up. In most cases when history is examined hyperinflation pounces upon a nation suddenly.

    With hyperinflation one day things are humming along about the same and something happens that triggers an enmasse exodus out of the countries currency. Its like those insects that suddenly start crawling out of the earth after laying dormant for 30 years.

    People all across the nation in a moments time all act in one direction sensing something very troubling is coming down the pike. So they all start getting rid of the paper currecy. It does not matter if they buy a coffee can of old bent nails, anything is better than holding the hot potatoe.. paper dollars.

    People get rid of dollars and buy stuff.. food, ammo, tools, gold, silver but many of these things become in short supply or cannot be had for any price. In a matter of minutes the whole country is on fire with inflation and the fires rage until days or weeks later the currency crashes.

    The run on paper dollars is not the cause of the dollar falling to zero worth. The dollar was already worth zero. What has changed is the perception of the worth of money.

    People enmasse get it at that point that the worth of money is the worth of what has been backing it for years since 1971 since Nixon took us off the gold standard. That is our money is worth as much as the faith of the U.S government is.. zero!

  34. BigTom

    Tony – take possession!!! – do what ever you have to do but get the physical and take possession! 8 yrs.? geeze! I’ve never been involved in any kind of retirement plan so better qualified persons than I are out there and know ‘how to do it’.

  35. C

    Bills still need to be paid in cash, not gold. When interest rates go up, some will sell gold to lock in higher rates or to pay off debt.
    There may be a better opportunity to buy gold up ahead.

    • Greg

      C,
      There may be but I am betting against that. Look what happened in the silver market. Supplies are very tight and one very well connected coin dealer friend of mine in NYC is no longer taking silver orders for Eagles because he is not sure when or even if he can deliver it. I think sitting on cash is very risky, but that’s just me. Don’t get me wrong you need some cash and diversification in your portfolio but you must have physical precious metals in your possession too. Good luck to you, and thank you for the comment.
      Greg

  36. nm

    Roderick:

    The problem with your theory is that most Americans have no clue about fiat currencies and thus, they’ll never lose hope in their currency and because of that, we may not have hyperinflation. Inflation yes, but not hyper.

    Just saying…

  37. Athlon

    It is inexplicable that Americans, as well as the rest of the world know so little about their personal finances.

  38. Joe Blocks

    You’re only paying back the bank for a mortgage in cheaper dollars (as a result of inflation) if your salary goes up along with gas, food etc.
    If there is still a lot of unemployment (don’t see the end of it), you’re paying the same percentage of your income (assuming a fixed rate) as before and your other expenses (incl real estate and other taxes) have gone up. This is a classic stagflation environment.

    Also what’s to stop the government from changing the rules at the behest of their banker friends..

  39. nm

    I just took possession of silver and someone told me that I should have bought the silver ETF instead. Lower commissions and easier to sell when I need to.

    • Greg

      NM,
      History will prove that you took the correct path. Thank you.
      Greg

    • mile

      reminds me the the fancy silver platters we had that come from merry olde england at the turn of the last century and disappeared in a lootin expedition at the household when silver was being manipulated the last time it hit 50 bucks an ounce,

  40. Bud

    Eleven years ago I purchased an original Honda Insight. I have kept it running for all these years and it’s milage of better than 50 mpg in town and 65 mpg on the highways continues to make us happy (fill-up about every 3 to 4 weeks). Our new car is a Prius, but even at 37 mpg, is no match for our economy champ.

    We also are starting to accumulate dried food. I suspect that we’ll be better off than the average bear. And getting a few silver coins will be appropriate, especially in the context of gold and silver being de facto reserve currencies. Better now than later.

    What’s that old saying? Better to be years early (in preparations) than a few days late!!

    • Greg

      Bud thank you for sharing this with us all.
      Greg

  41. Trap

    Greg I’ve been reading your blog for sometime and your writings are spot on and cutting edge, thanks for printing truth that others in your profession will not touch. I went to a lunch meeting with Lamar Smith yesterday to bring up these very issues as well as the Fabian plan to TRANSFORM AMERICA! unfortunately he would have no part of this discussion and would only talk about his desire to protect our interests on the issues of distraction (he’s gonna make sure NPR is defunded, what a friggin joke) these fools care not about fixing anything so yes we are doomed! Folks here talk about the current currency crisis exploding by the end of 2011, I however am firmly convinced that the time line is off a bit. Have ya’ll considered the following facts into your equation?
    Things to happen on or about May 15th;

    Ayers and Dorn in mideast organizing and promoting a floatilla to Gaza to arrive on the 15th

    Andy Stern(ex CEO of SEIU) has been in MENA for over a yr organizing and premoting union uprisings and building coalitions with the Islamic Socialist movement, culminating in a large protest in Israel on May 15th with the goal of dismantling the Isreali Govt (via social networking) He and the unions have had a major hand in festering unreat in MENA.

    Steve Lerner (SEIU EXEC) is working on an effort to bring down JPM Chase and the stock market, he has organized major protests to happen on May 15th

    May 15th we are projected to hit our Debt Limit (however in real numbers this happened on tues 4/19) Based on the Govt’s convaluted bookkeeping they are projecting May 15th (one wonders if this is all tied together?)

    QE2 is scheduled to end in late June, but reports are now out they will end it early some time around mid to late May.

    Trumpka is calling for union protest across America in mid May to show unity.

    We are now entering the corp earnings report season(keep in mind these numbers CANNOT be manipulated by Govt b/c there are to many checks and balances in the private market to verify true numbers) keeping this in mind the July reports will be the 1st report encompasing a full quarter showing the effects of Japan on the economy. ( I would post references but this is all very easily verified with a little googling)

    My timeline is for this to unravel about early to mid July right after the market crashes and QE3 kicks off.
    Time to prepare is short. Watch the PM markets on Monday (it should be very entertaining, and DO NOT FEAR THE CORRECTION!!! it is only manipulation and will have no lasting effect.)
    We must all become the Leader We Seek!!!!!!!!!!!!!!!

    I must admit a part of me is giddy about the coming collapse, the opportunities for those prepared will be great on the other side, and the ability to reset the Republic do give me the only hope I’ve had in a while.
    Good Luck
    Trap

  42. cher

    New to this site…you said ‘hope others have done some preparations’ how exactly?

    • Greg

      Cher
      Paying down debt, getting your financial house in order, getting your vehicle in top working order, buying some precious metals storing some emergency supplies of food and water getting everything fixed around your residence. . . things such at that. I hope this helps you.
      Greg

  43. Greg

    Trap,
    Thank you for sharing your information and views. May 15th sounds like a pretty scary date to me!!
    Greg

  44. mile

    and all the dirt, animals, foods, crops aND WATERS Are poisoned with radioactive isotopes some deadly, including strontium and plutonium particles..and trouble is headed our way..????

  45. Teknikid

    Greg,

    You just covered in part a good list people can do to prepare themselves. If I may offer, here is what I’ve done:

    1. Paid off the house.
    2. Keep only minimal credit card debt and pay it off monthly, and I don’t care at this point about a FICO score.
    3. Bought several months worth of long-term storeable food.
    4. Bought precious metals when they were cheap.
    5. Bought a firearm and ammo, and took lessons.
    6. Replaced the furnace and the hot water heater in recent years, so they are good for a while.
    7. Got the truck in good running order.
    8. Am currently effecting other repairs on the house while this is affordable.
    9. Have big containers for storing water.
    10. Got a Berkey water filter.
    11. Implemented additional home security.
    12. Locking gas caps for both cars, and carry the extra key.
    13. Stocking up on personal supplies such as shampoo, soap, TP, etc.
    14. Hand-crank radio in case power is down.
    15. Networking with others of like-mind, but using caution. Around some folks it’s best to keep the mouth shut.

    • Greg

      Teknikid,
      Thank you for the list!!
      Greg

  46. picomanning

    Hyper-inflation in America will mean economic chaos around the world. The consequences of hyper-inflation can only be guessed at, but if we are left to barracade ourselves in our homes, wondering under the duress of panic and anxiety, I’d think we’d conclude there’s another investment which might be highly desireable: Ammo!
    Think about the gold hoarder’s dilema. The family feeling pretty smart to have accumulated pounds of gold. But in the hyper-inflation crisis spending it will certainly draw attention to them. They might soon become a target to the not so bright who were clueless to the realities of our rotten economy.
    Visualize law of the old American west. If you don’t have guns, ammo and guts to protect what you have then you’ll soon see the wisdom to pay those with guns, ammo, and guts, to protect you! The commodity in demand then WILL be ammo. Unless our government enforces marshall law which would likely be a greater disaster for those trying to survive. Keep your gun clean and it can last decades, but you’ll not want to run shy on ammo. The Later American Government will likely become very controlling over it’s production and distribution as well as the production of most goods and services. Buy ammo it in small lots now so as to not bring attention to yourselves, and be prepared to live beyond the close grip of government.

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