Dollar Exclusion Has Begun

[The Machine]

 

Little noticed so far, the US Dollar has begun to lose its #1 currency position...

 

THIS ESSAY addresses what I believe is the core financial issue of our generation, writes publisher and financial analyst Porter Stansberry.

 

These concerns are so important, they dwarf all other financial considerations.

 

Unfortunately, few journalists have any idea what these things mean. So you likely haven't heard of most of these things. So please...allow me a bit of basic reporting.

 

Last April...in a little-noticed move...Australia announced it was transferring 5% of its currency reserves from the US Dollar to the Chinese Yuan.

 

The deal was part of a broader currency agreement between the two countries that allows Australia's leading banks to handle trade settlements between the two countries without the use of the US Dollar as a reserve currency.

 

As CBS Marketwatch explained, "The agreement does away with the need for companies and currency traders to first convert their Australian Dollars or Yuan into US Dollars."

 

Similar direct-exchange agreements, swap lines, and bilateral trade agreements have now been established between China and virtually every major economy in the world: Japan, Brazil, Russia, India, Britain, and France – not to mention every economy in Asia. These agreements will allow China, the world's dominant consumer of commodities, to completely avoid using the US Dollar in virtually all of its raw-material sourcing.

 

Similar "Dollar exclusion" agreements have been formed by Russia with its major trading partners. London-based HSBC, one of the world's largest banks, now predicts that by 2015, the Chinese Yuan will equal the US Dollar and the Euro in cross-border transaction volume.

 

In December 2008, I began warning about the risk that the US could lose its "world reserve currency status," something I termed the "End of America". It's worth looking at what I wrote almost five years ago because so much of what I feared would happen has come true.

 

In the days following the huge crash of the stock market and the near-collapse of the world's banking system, I warned readers about what I saw coming. Before you continue...you should go read that essay.

 

As you'll see, almost everything I foresaw in December 2008 has happened. The Fed went on to print and spend more than $3 trillion. The prices of stocks and commodities soared. The Dollar fell versus sound currencies around the world. And the prices of US goods and services, even domestically made products, soared.

 

Now, some folks who have followed my research from the beginning might point out that I predicted the US would begin suffering from severe inflation as early as 2009. With the consumer price index hovering around 1%, isn't that inflation overdue?

 

If you look beyond the government's manipulated numbers and focus on the real prices people are paying...you'll see price inflation is here and getting worse...

 

As I've written extensively, inflation is found everywhere in our economy, except in the government's statistics. Corn, the most important food crop in America, is up 75% since 2008. Gasoline is up from $2.25 a gallon to more than $3 a gallon – an increase of more than 30%. The nationwide minimum wage is up by 40%. Rents are up by 25% nationwide and up 40% in most urban markets.

 

And my favorite example, the base price of a Ford F-150, the best-selling passenger vehicle in America, has gone from $18,225 to $23,670 – a 30% increase. That's a domestically sourced and manufactured product...its price is completely dominated by the value of the US Dollar.

 

Meanwhile...the government says there is no inflation...and that continuing to print $85 billion to buy government and mortgage debt is merely "interest-rate policy by other means." What could go wrong?

 

Billionaire investor Warren Buffett has sagely warned that buying all of those bonds and manipulating interest rates to stupidly low levels will prove to be much easier than selling them. The fact is, the moment our central bank begins to sell US Treasury bonds, the whole world will follow. After all, our Dollars aren't needed in trade for most of the big commodity countries. So the free ride will be over. All the traders who've enjoyed the free ride on the back of the Fed's buying will surely change course the moment it starts to sell.

And what, you might wonder, have our noble leaders done with all the money and credit they've created?

Mostly, they have expanded the welfare state at the fastest pace in history, creating more dependency in your fellow citizens than has ever existed before in the history of our country. There are now almost 100 million people collecting food stamps, disability, or long-term unemployment. Barely 60% of the adult population of America bothers to go to work, even on a part-time basis.

 

On the backs of the poor schleps in America who paid their mortgages and still go to work, a gargantuan pile of debts and obligations have been piled higher and higher over the last five years. Total debt now approaches $60 trillion. Federal debt has nearly doubled in the last five years, from $9 trillion to $17 trillion. And our governments (state, local, and federal) continue to take up more and more of our economy – comprising more than 40% of our roughly $15 trillion gross domestic product (GDP) today.

 

It seems completely obvious that none of this is sustainable. The few Americans who still work and pay taxes can't possibly support the income demands of nearly 40% of the population...especially considering the debt load our economy suffers under. We cannot possibly afford our existing debts, if we were to pay them back at a fair rate of interest in sound money.

 

And so...we race toward a day of reckoning when the Fed cannot continue to print new Dollars to bail us out because our trading partners have abandoned our currency.

 

Of course, not every American is an economist. Most people don't understand why the real value of their wages continues to fall, even as the government swears there's no inflation. I doubt even one in 100 Americans understands the risks our country faces as we attempt to manage total debts (public and private) that represent about 400% of GDP (not counting any of the future costs of the entitlement programs) while our trading partners abandon our currency as the reserve standard.

But...most people know something is wrong.

 

Gun ownership in America now stands at 47% of all adults – that's near the highest percentage ever recorded by Gallup. It marks a significant increase since 2008. The percentage of self-described liberals who own guns has grown from 30% to 40% in that period. So even folks who don't believe you should own a gun have been buying them.

 

I believe most people know that something isn't right...that we can't go on like this forever...printing money day after day. Most people simply know that far too many people are on the dole. And they can see that our Treasury has fallen into the hands of the voters, a fact that has spelled doom for every democracy in history.

 

So while they might not fully understand all the factors that I've written about here...they can see the hallmarks of a crisis. And that's why...despite the central banks' efforts to manipulate the paper price of gold down...there are never any gold coins left to buy. That's why the price of farmland has soared (as I predicted it would). That's why more and more wealthy people are leaving America. And that's why...I firmly believe...this ongoing bull market will end very, very badly.

 

Many people who read my End of America warnings over the years replied that it would take decades for America to lose its world reserve currency status. But if you simply look at the data on cross-border currency exchanges, you'll find that so far this year, more than 40% of the exchanges involved the Euro. Only 33% involved the Dollar.

 

Today, more than 60% of bank reserves around the world are still held in US Dollars. Mark my words: In less than a year, the Dollar will no longer make up even a majority of these reserves.

The End of America isn't coming. It is here.

 

[GARY2]

Thanks Machine, Do you think Scotland would be a good place to live in the future?  I have never had the privilege of being there in person but it is beautiful in my mind.  Gary2

[The Machine]

Actually it's not all that bad here, there's a lot of talk lately about independance .... Which is a double edged sword for Scotland both good and bad but we'll have to see what the future holds.

I could see myself staying here quite a while, just bought a new house last year. Been here 5 years on the 8th June.

Housing is pretty reasonable, free health care, free dentist, free education including university. State and private pensions, list goes on...... But like anywhere you still have taxs and all the rest.

I like it.

[savanna]

 Is all the free education and healthcare and that for people who were born there, or do you just have to be there a certain length of time to get that?

[The Machine]

 Is all the free education and healthcare and that for people who were born there, or do you just have to be there a certain length of time to get that?

 

well I wasn't born here and got it from the moment I moved here 5 years ago, I'm actually looking into starting another Masters degree in September or January 2014.

 

there are fee's to pay .... but could you get a Masters degree in the US from one of the top universities for less than $4,000..... I doubt it.

[GARY2]

That sounds pretty good.  How is the weather and who pays for the free medical and education? Gary2

[The Machine]

That sounds pretty good.  How is the weather and who pays for the free medical and education? Gary2

 

 

weather is good for Scotland .... 70 - 75 .

 

everybody pays for it .... we call it National Insurance, you pay a percentage on what you earn .... if you earn millions you pay a lot but not so much compared to your salary lol ...... if you earn an average amount  you pay a percentage ..... if you make very little you pay nothing.   

 

bottom line ..... everyone is entitled to healthcare & education.

[magawatt]

That sounds a little bit like the US except it seems to work.

[The Machine]

That sounds a little bit like the US except it seems to work.

It does work for the most part ..... Obviously if all the people claiming benefits that have no reason to be other than bieng lazy got off there ass's and did a little work and paid into the system it would be a little easier on everyone but your always gonna have those people.

It's only in Scotland you get free education England costs a lot of money. Education is free in Ireland also that's where I'm from origionally.

Obviously the US has such a large population and such a high rate of unemployment something like this would never work

[rightsonword]

Univeristy is actually quite affordable in the US, at least it is in Florida. The catch is you have to be resonsible while you're in high school. For example, If I recall the numbers correctly, Florida will pay 75% of your tuition if you simply get a measly 2.75 gpa and a 900 on the college entrance exam . . . out of 2400. Even then, most people qualify for grants and such.

Now, if your an adult looking to get back into school, then yes, you'll usually end up paying out of pocket.

 

[Maggie123]

Interesting...  Thank You Machine.

[The Machine]

Univeristy is actually quite affordable in the US, at least it is in Florida. The catch is you have to be resonsible while you're in high school. For example, If I recall the numbers correctly, Florida will pay 75% of your tuition if you simply get a measly 2.75 gpa and a 900 on the college entrance exam . . . out of 2400. Even then, most people qualify for grants and such.

Now, if your an adult looking to get back into school, then yes, you'll usually end up paying out of pocket.

 

 

Thats great to hear rightsonword ... education should not only be a privilege for the wealthy it should be for everyone.

[littlesam]

Thanks for sharing machine, Scotland sounds beautiful and sunny...

[Maggie123]

Thanks for sharing machine, Scotland sounds beautiful and sunny...

 

I know... huh Sam... kinda makes you want to at least get to go and see the place someday.

 

Lizzie is there too.   Sure would be fun for us to crash her wedding!

PS. Er... um... I just meant you, me and Machine... Haha... Not All Of DV.

 

 

 

That would freak Donald out!

 

No Worries Lizzie We Love Ya!

Edited June 9, 2013 by Maggie123

[littlesam]

I know... huh Sam... kinda makes you want to at least get to go and see the place someday.

 

Lizzie is there too.   Sure would be fun for us to crash her wedding!

PS. Er... um... I just meant you, me and Machine... Haha... Not All Of DV.

 

 

 

That would freak Donald out!

 

No Worries Lizzie We Love Ya!

 

 ...ummm.....yes it sounds beautiful, and Im sure Lizzie wouldnt mind either...oops...hmmmm...I hope scotland doesnt have porta potties every 2 ft on the sidewalks...lol!!!!!!!!!!!!!...just kidding mr machine...lol!!!!!!!!!!!....that really bugged me when I visited paris was thinking of this dreamy place which parts of it were until the subway smells hit you in the face, but Im sure things have changed by now.. that was a few years ago, in my younger days...lol!!!!!!!!!!!!

[The Machine]

ha ha ha ha .... Scotland is nothing like that, and Paris has changed too although some parts are still a little stinky lol.

 

well if you like subway's you'll like Glasgow's .... its the third oldest in the world built in 1896 and hasn't really been upgraded since the 60's, it's an experience.

[sandfly]

THANKS

[littlesam]

ha ha ha ha .... Scotland is nothing like that, and Paris has changed too although some parts are still a little stinky lol.

 

well if you like subway's you'll like Glasgow's .... its the third oldest in the world built in 1896 and hasn't really been upgraded since the 60's, it's an experience.

 

awh the subway, that was another story while being in Paris...Ive only had the opportunity of the subway experiences in Paris and New York....Wow, Glasgow's the third oldest subway in the world....Im sure when the upgrade happened it was an experience for many at that time, here they started the loop de loop....lol!!!!!!!!!..crossings, have to really pay attention..lol!!!!!!..feels strange driving on the opposite side of the road, ok...do you drive on the left hand side of the road or the right..lol!!!!!!!!!

[Reelemfast]

If the Klu-Klux-Klan boy's, (there's a bunch of them over there in Iraq).

Would push that Dam button, revalue sum fruit baskets, and quit playing

dress up, maybe put a dong in it, maybe we would quit smelling camel poop....

That's funny, i don't care what ya think????

[The Machine]

awh the subway, that was another story while being in Paris...Ive only had the opportunity of the subway experiences in Paris and New York....Wow, Glasgow's the third oldest subway in the world....Im sure when the upgrade happened it was an experience for many at that time, here they started the loop de loop....lol!!!!!!!!!..crossings, have to really pay attention..lol!!!!!!..feels strange driving on the opposite side of the road, ok...do you drive on the left hand side of the road or the right..lol!!!!!!!!!

 

 

on the left .... its only the UK and Ireland that drive on the left, the rest of Europe drive on the right, another reason why our cars are more expensive.

[littlesam]

on the left .... its only the UK and Ireland that drive on the left, the rest of Europe drive on the right, another reason why our cars are more expensive.

 

Thanks.....I guess the cars would have to be designed differently....