The Lifespan of Reserve Currency Status

The US dollar is the reserve currency of the world. A reserve currency is a currency that is held in significant quantities by many governments as part of their foreign-exchange reserves. A side-effect of being the world’s reserve currency is that whenever a country purchases a commodity, they do so using dollars. So when France imports oil, they do so using dollars; they have to buy dollars in order to buy oil. In a sense, the dollar is the US’s largest export and is one reason the US hasn’t collapsed already. The dollar’s days as the reserve currency are numbered, however, as this chart shows:

Reserve Currency Status
Reserve Currency Status

Why you should own physical gold, precious metals

Most gold that is traded on the market isn’t actually gold; it’s paper or digits on a computer.  In the same way your bank does not actually hold your savings in cash in a vault, gold brokers do not actually own all the gold that they trade.  In fact, for every ounce of physical gold, there are at least 200 “paper” ounces.

Besides the obvious moral implications of trading something that doesn’t exist, this causes other problems. For example, it allows the true price of gold to be manipulated more easily.  Also, what happens if, for any number of reasons, too many people want to take possession their physical gold?  Recently when MF Global went bankrupt, Gerald Celente, and countless others lost over $1.6 billion when 33,000 client accounts simply “vaporized”.  So let that be a lesson for you: if it’s not in your hand, you don’t own it.

Dollar Devaluation since 1913

To devalue a currency, like the dollar, means that the value of the currency decreases. In the case of the dollar, we call this dollar devaluation.  The value of a currency is also referred to as purchasing power.  The more a currency is devalued, the less you can buy with it because the purchasing power decreases.

How much has the dollar devalued since 1913

The graph below shows the purchasing power of the US dollar since 1913. 1913 is when the Federal Reserve, which is actually a privately-owned central bank, took over the US banking system. As you can see, it’s been pretty much downhill since the Fed took over.  In fact, the dollar has lost over 96% of its value.  That means today’s dollar would be worth less than 4 cents back in 1913. How much longer will the dollar maintain its reserve-currency status at this rate?

Dollar Devaluation Chart 1913-2013
Dollar Devaluation 1913-2013

How does the Federal Reserve devalue the dollar? By printing more money.  Printing more money causes monetary inflation.  That means there are more dollars in circulation, but just because there is more paper money floating around, that doesn’t mean value has been created.  All you really get is price inflation.  Here’s an extreme example: Let’s say the Federal Reserve just gave everyone in America $1 million.  Wouldn’t that be great if everyone in America became a millionaire overnight?  Unfortunately, nothing would change, except prices would increase. Think about it.  How much would you have to pay the plumber to come to your house, if he’s already a millionaire?

Fighting inflation

Unlike paper money dollars, which can be printed out of thin air, gold does not lose value.  In fact, gold doesn’t really go up or down.  When gold goes up, it really means the dollar is going down and when gold goes down, it’s actually the dollar getting stronger (increasing its purchasing power).  So by keeping a portion of your savings in gold, you offset the losses of your dollar being devalued by the Federal Reserve and reckless government spending.  When you buy gold, silver or other commodities that resist inflation, it’s called a hedge against inflation.

S&P 500-to-Gold Ratio

Watch the S&P 500-to-gold ratio. If it reaches 0.1566, the S&P 500-to-Gold ratio has reached its historical low.

Today’s S&P 500-to-gold ratio has not yet fallen to its historical low of 0.1566. To reach historical lows set in 1981, the S&P 500 would either need to fall to 290, gold would need to rise to $7275/oz or some combination of the two would have to occur.

Source: Seeking Alpha

Real Inflation 10%

When the government creates inflation statistics, they use all kinds of trickery such as substitution and hedonics to massage the numbers to make themselves look good. Sometimes they even change the rules openly, but there are always people who keep track of the real inflation numbers.
If inflation was measured the same way that it was in 1980, the rate of annual consumer inflation in the United States would be well over 10 percent.  In other words, if you have federal reserve notes (aka dollars) in a savings account earning a whopping 0.05% interest, you’re actually losing over 10% of your savings every year!

Download What Has Government Done to Our Money? by Murray N. Rothbard

What Has The Government Done to Our Money
What Has The Government Done to Our Money

I can’t stress enough how important it is for you to read the book, What Has Government Done to Our Money? by Murray N. Rothbard, which you can download here (free and legal). This short book will give you an overview of the history of money, define money in simple terms, and explain how the current system is robbing us blind. What Has Government Done to Our Money? is easy to understand, even if you know nothing about economics.

Everyone should read this book, but I must warn you: After you read it, there is no turning back! You will be empowered with knowledge that will anger you.

After you’ve read it, you’ll probably want to do like I did and get a few hard copies to give away.  You can buy What Has Government Done to Our Money? for a good price.

Eighteen Percent of the EU is Literally Junk, Carried As Risk Free Assets at Par at 30x+ Leverage: Bank Collapse is Inevitable!!!

So, the next domino falls in the Pan-European Sovereign Debt Crisis. As has been the casse for much of the Asset Securitization Crisis and the Pan-European Sovereign Debt Crisis, the ratings agencies have arrived to smoldering pile of ashes littered with charred bones and remnants of the putrid smell of burnt flesh with a fire hose and a megaphone yelling “Get out! We have word there may be a fire here!Continue reading “Eighteen Percent of the EU is Literally Junk, Carried As Risk Free Assets at Par at 30x+ Leverage: Bank Collapse is Inevitable!!!”

The Pan-European Sovereign Debt Crisis

The Asset Securitization Crisis of 2007, 2008 and 2009 led to the demise of several global banks and institutions. Central bank induced risky asset bubbles gave rise to, what was popularly considered and reported as through the popular media, a rapid recovery. The reality was that the insolvencies that marked the crisis were passed on, in part, to the sovereign nations that sponsored the Crisis, and as the chickens came home to roost the Asset Securitization Crisis has now blown into a full Sovereign debt crisis.

The Pan-European Sovereign Debt Crisis, to date (free):

  1. The Coming Pan-European Sovereign Debt Crisis – introduces the crisis and identified it as a pan-European problem, not a

    Latest Pan-European Sovereign Risk Subscription Research – The Good Stuff!!!

    Actionable Intelligence Note For All Paying Subscribers on European Bank Research

    The Pan-European Sovereign Debt Crisis A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf

    The Pan-European Sovereign Debt Crisis A Review of the Spanish Banks from a Sovereign Risk Perspective – professional

    The Pan-European Sovereign Debt Crisis Ireland public finances projections

    The Pan-European Sovereign Debt Crisis Spain public finances projections_033010

    The Pan-European Sovereign Debt Crisis UK Public Finances March 2010

    The Pan-European Sovereign Debt Crisis Italy public finances projection

    The Pan-European Sovereign Debt Crisis Greece Public Finances Projections

    The Pan-European Sovereign Debt Crisis Banks exposed to Central and Eastern Europe

    The Pan-European Sovereign Debt Crisis Greek Banking Fundamental Tear Sheet

    The Pan-European Sovereign Debt Crisis Italian Banking Macro-Fundamental Discussion Note
    The Pan-European Sovereign Debt Crisis Spanish Banking Macro Discussion Note

    localized one.

  2. What Country is Next in the Coming Pan-European Sovereign Debt Crisis? – illustrates the potential for the domino effect

  3. The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. – attempts to illustrate the highly interdependent weaknesses in Europe’s sovereign nations can effect even the perceived “stronger” nations.

  4. The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries

  5. The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!

  6. The Beginning of the Endgame is Coming???

  7. I Think It’s Confirmed, Greece Will Be the First Domino to Fall

  8. Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!

  9. Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?

  10. Greek Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on Fire!

  11. Germany Finally Comes Out and Says, “We’re Not Touching Greece” – Well, Sort of…

  12. The Greece and the Greek Banks Get the Word “First” Etched on the Side of Their Domino

  13. As I Warned Earlier, Latvian Government Collapses Exacerbating Financial Crisis

  14. Once You Catch a Few EU Countries “Stretching the Truth”, Why Should You Trust the Rest?

  15. Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

  16. Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe

  17. Moody’s Follows Suit Behind Our Analysis and Downgrades 4 Greek Banks

  18. The EU Has Rescued Greece From the Bond Vigilantes,,, April Fools!!!

  19. How BoomBustBlog Research Intersects with That of the IMF: Greece in the Spotlight

  20. Grecian News and its Relevance to My Analysis

  21. A Summary and Related Thoughts on the IMF’s “Strategies for Fiscal Consolidation in the Post-Crisis

  22. Euro-Gossip Debunked, Courtesy of Trichet and the IMF!

  23. Greek Soap Opera Update: Back to the Bailout That Was Never Needed?

  24. Many Institutions Believe Ireland To Be A Model of Austerity Implementation But the Facts Beg to Differ!

  25. As I Explicitly Forwarned, Greece Is Well On Its Way To Default, and Previously Published Numbers Were Waaaayyy Too Optimistic!

  26. LTTP (Late to the Party), Euro Style: Goldman Recommends Betting On Contagion Risk In Portuguese, Spanish And Italian Banks 3 Months After BoomBustBlog

  27. Beware of the Potential Irish Ponzi Scheme!
  28. The Daisy Chain Effect That I Anticipated Appears To Have Commenced!
  29. How Greece Killed Its Own Banks!
  30. Introducing The BoomBustBlog Sovereign Contagion Model: Thus far, it has been right on the money for 5 months straight!
  31. With Europe’s First Real Test of Contagion Quarrantine Failing, BoomBustBloggers Should Doubt the Existence of a Vaccination
  32. What We Know About the Pan European Bailout Thus Far
  33. As I Warned Yesterday, It Appears the Market Is Calling the Europeans Bluff – It’s Now Put Up Or Get Put Down
  34. How the US Has Perfected the Use of Economic Imperialism Through the European Union!
  35. The Greek Bank Tear Sheet is Now Available to the Public
  36. BoomBustBlog Irish Research Becomes Reality
  37. PIIGSlets in a Bank: Another European Banks-at-Risk Actionable Research Note
  38. Sovereign debt exposure of Insurers and Reinsurers
  39. As We Have Warned, the Fissures Are Widening in the Spanish Banking System
  40. With the Euro Disintegrating, You Can Calculate Your Haircuts Here”
  41. What is the Most Likely Scenario in the Greek Debt Fiasco? Restructuring Via Extension of Maturity Dates
  42. The ECB and the Potential Failure of Quantitative Easing, Euro Edition – In the Spotlight!
  43. Introducing the Not So Stylish Portuguese Haircut Analysis
  44. A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina
  45. Osborne Seems to Have Read the BoomBustBlog UK Finances Analysis, His U.K. Deficit Cuts May Rattle Coalition

This Guy is Really Pessimistic. He Must Be Using That Math Thing!

This site ( came up in a Google search this morning, and it was just full of good cheer. Enjoy! In the future (if the guy is reading this), please link back to the blog).

2010 will also be challenging for G7 Sovereigns as they TRY to rollover inconceivable sums of existing debt while borrowing NEW money to pay for the WELFARE states’ spending. Trillions of dollars of borrowing challenges lie directly ahead; let’s look at some illustrations of the rollover requirements for Germany, France, Portugal, Ireland, Italy, Spain and Greece and Reggie Middleton’s Boom Bust blog;


These are just the rollover requirements for the United States and do not include NEW BORROWING of $1.6 TRILLION.  So, a total of OVER $3.5 Trillion is required, providing that the deficits are as projected by the CBO (are they ever accurate?).  That’s almost $300 Billion a month, or $10 Billion a day (10,000 million a day).  Mind numbing numbers!  Inconceivable sums.  Now let’s look at European rollovers from Reggie Middleton:

Think of the US issuance and add this to it.  Where will the money come from?  The printing press in one form or another.  That’s just the rollovers; now let’s look at NEW issuance to cover 2010 DEFICITS from

This is called INSANITY.  Only IndiaChina and the emerging world are growing in REAL terms, the rest of the borrowers are DEADBEAT welfare states with shrinking incomes and economies, when properly adjusted for inflation.  How the US and Europe are going to navigate the rest of the year without some MISHAP is inconceivable.  That will be the appearance of the “when HOPE to FEAR” moment we are looking for in 2010.   This DOES not include BANK and brokerage debt (totaling OVER a trillion dollars) which must roll.  

Well, the reason why it seems like China is growing in real terms is because they are blowing a BIG BUBBLE! It is not sustainable, and when it pops it will actually push them back some. See

I actually suggest you read the entire post, for although some of the charts and info are dated (the circumstances have changed somewhat) and other bits of info are anecdotal, it does give a good background of why anyone should be bearish –