Debts and Deficits lead to Currency Downfall
August 4, 2011, Submitted by: Ken Tweet
The common denominator that led to the downfall of past currencies was Debts and Deficits.
Most Americans don’t believe the U.S. dollar will collapse.
With that in mind, here are a few thoughts from a recent article from the Market Oracle,
Morgan Stanley reported in 2009 that there’s “no historical precedent” for an economy that exceeds a 250% debt-to-GDP ratio without experiencing some sort of financial crisis or high inflation.
The U.S. total debt now exceeds GDP by roughly 400%.
Investment legend Marc Faber reports that once a country’s payments on debt exceed 30% of tax revenue, the currency is “done for.” On the current path, analyst Michael Murphy projects that
the U.S. will hit that figure by October.
Peter Bernholz, the leading expert on hyperinflation, states unequivocally that “hyperinflation is caused by government budget deficits.”
This year’s U.S. budget deficit will end up being $1.5 trillion, an amount never before seen in history.
Since the Federal Reserve’s creation in 1913, the dollar has lost 95% of its purchasing power.
The U.S. government leaders clearly don’t know how – or don’t wish – to keep the currency strong.
Whether the dollar goes to zero or merely becomes a second-class currency in the global arena, the possibility of the greenback being added to the list of currencies devaluing to zero, increases every day. And this will lead to serious and painful consequences in our standard of living.
Think about it.
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The chickens are coming to roost finally and it is only going to get that much worse. Countries have been spending phantom money for too long, now just like an overblown credit card there is no way to pay it. Many countries cannot even pay the interest on the money that is owed. People just do not get it, true money is something that has something that is valuable to back it. I could write out an amount of money on a piece of paper and if there is someone S… stupid enough to take it as payment then I can purchase something. This is what has been happening for the past 98 years.
Those that came up with fiat currency were truly brillant because they can control those around them with phantom numbers and manipulate those numbers in anyway they choose to without having any substance behind it. The problem is that with all good things must come an end, and that ceiling is very close to being reached. Lesson from history, when empires with large militaries have nowhere else to turn to but their armies, they always turn into that direction. IT IS COMING. BOOM goes the mushroom clouds. That is unless some comet or some plague or other unforeseen event doesn’t get us first.
The scary thing is that if things really go downhill in the short term, you have an incompetent in the Whitehouse and some economic illiterates in Congress.
The combination will surely make some stupid decisions when put on a spot.