Gold Hits All Time Highs While Dollar Continues to Slide!
In case anyone needed another big move in gold prices to confirm the coming currency crisis, there is was Monday with gold at $1,140 (and even a few dollars higher in after- hours trading). Oil prices, which have doubled since lows at the end of 2008, inched ahead Monday as well, while the dollar continued its slide.
For the ancient Greeks it was the three fates that spun the destiny of life, measuring and finally cutting it short. Now, highlighted by events of the past few days, the unmistakable hands of reserve currency, monetary, and fiscal fates can be seen in the dollar’s latest unraveling.
The dollar’s deepening woes and gold’s ascent coincide with President Obama’s visit to China. I can find no reports of Obama having made smooth promises to the Chinese that the dollar’s value will be maintained. This allowed his hosts to maintain a courteous decorum. It would have been unseemly for the president to provoke the outright laughter that greeted Treasury secretary Tim Geithner last summer in Beijing when he made assurances about the safety of Chinese dollar investments. Not to be ignored is the significance of gold striking new highs with Obama in China, a reflection of the market judgment that long-term Chinese funding of U.S. debt remains at increasing risk.
Federal Reserve chairman Ben Bernanke played his part Monday in foreshadowing the dollar’s grim future. He offered the hollow assurance that the fed was “attentive to the implications of changes in the value of the dollar.” Such benign neglect whispers the truth: impotence in the face of impending misfortune.
On the fiscal front were the first deficit numbers for the new accounting year. To say the Obama administration is merely off to a bad start is to tempt fate. The October deficit of $176.4 billion annualizes to well over $2 trillion for the year. It is unsustainable. The dollar meltdown is underway.
Perhaps it is the gods who have made America’s governing classes mad. The Chinese and other foreign creditors’ warnings about the consequences of America’s fiscal behavior go utterly unheeded. Meanwhile the monetary officials who thought nothing of the housing and credit bubble as it grew, acknowledge their powerless with words unspoken in the face of a ravaged economy and a collapsing currency. And as federal debt grows at a rate that can only be described as metastasizing, the Washington party debates adding still more red ink.
Indeed, there will remain only massive dollar inflation to fund the growth of America's debt. But that is why the Fed exists. Except for money printing, U.S. fiscal and monetary authorities have no contingency whatsoever to replace foreign holders of our debt as they begin to begin to show aversion to its certain risk.
If, as was said, that not even mighty Zeus himself could be spared his destiny at the hands of the three spinning fates of Greek mythology, can dollar holders avoid an implacable fate? The best that can be hoped is that some individuals, recognizing the finality of economic reckoning, will chose to untie themselves from the dollar’s fate with time-tested strategies for safety and even profit during a currency crisis.
