usdollar collapseSubmitted by Bill Holter:

Australia recently announced a deal struck with China where they will trade and settle in local currencies WITHOUT the use of Dollars.  This “type” of deal is now becoming more common as the writing on wall for all to see is that no one wants to be “stuck” with Dollars.  This poses a problem, a big problem for the U.S. as demand for Dollars is falling of a cliff at the same time supply (by necessity) has exploded.  This situation of course was evidenced last year as the Fed was “forced” to buy nearly 70% of Treasury issuance…because there were no other buyers.  In a sense this is becoming a self sustaining negative feedback circle where the Fed must purchase a larger percentage of issuance …because investors (trading blocs) see the over supply and reduce purchases further.

There is one last leg left to the chair that should it break, the whole tent will come down.
As explained here by Jim Willie, were Saudi Arabia decide to accept anything for their oil OTHER THAN Dollars the game will be over.  The  “petro” Dollar invented by Henry Kissinger back in 1973 is wobbling with the world doing deal after deal that excludes Dollars, Saudi Arabia would be the last straw.  As Jim Willie points out, the BRICS development bank (funded by US Treasuries) will supplant both the IMF and World Bank as funding for future global infrastructure of all types.
Think about “why” this is happening.  First off the U.S. Treasury market pays little to no interest at all.  At the same time they are being “issued” and over issued faster than demand, FAR faster.  Then to top it all off the Fed has “faked” price and yield by printing the money to “sop up the slop”.  If you were a foreigner would you not look at this situation and see that you must either use these Treasury bonds (Dollars) now while they still “spend” or…get stuck with the hot potato?  Besides, if you have already figured out that you were duped and that your Treasuries can nor will ever be “paid back”, what is the downside to “using” them now by pledging them to build out infrastructure (real stuff)?
This simply illustrates the mindset of “spend it while you can” which…by the way is ALWAYS the mindset that sets off hyperinflation within fiat systems.  What has and is happening in Cyprus also has the smell of “spend it while you can”.  As Cyprus has been described as the “template” for Europe (and ultimately Britain and the U.S.), the aim apparently is to get the populace to SPEND.  The old central bank fear of “pushing on a string” has gone terminal where money supplies exploded while velocity (turnover) dried up just as fast or faster.  This I believe is what the failure in Cyprus is all about, get the money moving!  The problem?  Once money starts “to move” it won’t stop and will only accelerate without any brakes!
In their infinite wisdom (total panic) the central banks have apparently decided that QE doesn’t work if the excess money just gets parked.  So…why not start a bank run?  Why not reinforce the idea of “spend it while you can”?  From here, this could really move quickly as computers will do the running and spending where as in the past it would be done by humans.  Will Cyprus be the spark?  Will it require another combustion somewhere else like Spain, Italy or Portugal?  Could Saudi Arabia change their allegiance to the Sino/Ruso side?  Australia just did…and they speak English…was anyone listening?  Spend it while you can!  Regards,  Bill H.

buff 728

    • @Andrew: To be sure I am no proponent of the dollar, only because of the immense manipulation that has rendered it almost useless.  That said, I realize that should the dollar go under–losing its reserve currency status–we (you, me and every other American) will immediately be thrust into a depression, no ifs, ands, or buts.  I am well aware of the last depression, I don’t think you have enough ammo to keep this upcoming depression from taking what you have stashed.  Do you get me?  You may want to rethink how much “skin” you have involved.

    • @silverrrrr all I can do is roll with the punches.  Bernanke is crapping on his own plate.  I’m just cheering him on.  It’s not like I can do anything about it otherwise.   Anyway I don’t think we will be thrust into a depression.  I think that some US citizens will be squirted out into a depressed economy.  Let er rip man.  I’m not worried.  

  1. If and when the Dollar loses reserve status, the concern I have is that some people in positions of power will overreact to the potential event of dollar reserve status and do something really stupid, thus increasing the chances of this loss. 

  2. All Ponzi schemes come to an end one day. 
    I don’t think this has anything to do with trust in the Dollar though, I think it just makes more sense to deal locally in currencies of your own country. Why on earth would a country deal with a third party broker currency when you have mutual trade agreements?
    Mutual Trade Agreements are more democratic.   
    This does cause problems for the Dollar, but I think it will be something that is discovered, not intentionally designed to bring down the dollar. 
    The Dollar has been slipping since the Nixon Shock, why deal in a currency not backed by anything apart from a countries promise that it is worth something?
    For Australia, China is their main export market and no doubt much of Australia’s imports are coming from China. This should have been done years ago.
    The UK and Europe are trying to get a Free trade agreement with the US. This should be interesting in years to come. This would basically put America under a great strain as Europe Exports mainly to China and America. How much does America Export to the UK and Europe. I got no idea. But I am typing this on a Dell, that was put together in China, exported to Ireland and couriered to the UK. The main processor was designed in America, but most of the silicon based stuff was created and manufactured by South Korea.
    What a strange old place this world is.

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