Follow the money — Supply & Demand
Assumming the law of supply & demand still applies, it would follow that if one could determine where money was flowing out of & into, one could best determine what to buy & sell.
Correct me if I’m wrong: one of the reasons for the huge increases in prices of tech stocks & housing (the two most recent bubbles) is simply that those are the sectors everyone was investing in, and eventually they simply became overbought. (Yes, I understand cheap & easily available credit had most to due with why home prices increased as they did.)
So, does it not follow that wherever the majority invest their money this year, that’s what will go up? Everyone’s scared & trying to determine how to hold on to what they’ve got, so as I mentioned in another post, I don’t understand why metals are taking the beating that they are! One would think that with all these new dollars being introduced into the money supply that the value of the dollar would be diluted, no? Yet gold declines & the dollar gets stonger!? It’s all such a mystery . . .
Inflation or deflation–which is it?!?!?
I’ve posted a reply to your other question (Re: Clive Maund: gold is about to pop) – I don’t know whether Chris or any contributors have any other viewpoints, but I think it’s only a matter of time.
I’ve read that the current strength of the dollar could be due to its (still?!) perceived notion of being the World reserve currency and, since every other country appears to be having similar financial problems that there is a flight back to ‘quality’ (hmmm!).
I’ve also read (sorry I don’t have the link, it was a couple of weeks ago) that it could be due to countries having dollar based assets that they need/want to sell, and need the physical dollars in order to do so.
Either way, from the Crash Course, we know that it WILL happen. Inflation and Dollar falling in value as a result of printing too much.
I’ve also read (sorry I don’t have the link, it was a couple of weeks
ago) that it could be due to countries having dollar based assets that
they need/want to sell, and need the physical dollars in order to do
I hadn’t thought of that angle, but it’s true. Because the dollar is the reserve currency of the world due to Bretten Woods, foreign banks can expand their money supply via fractional reserve banking with the dollars and treasuries they hold in reserve. This is another trend that can’t sustain itself. We’ll be watching for signs of the dollar’s dethronement. I find myself hoping this takes two or more years. When you are employed and not invested in financial instruments, deflation is a gift. It gives you more room to get prepared for the heavy inflation to follow.
As many commentators have mentioned (most prominently for me Kevin Phillips), economic hegemony and military hegemony go hand and hand. So I think the US dollar’s standing is at this point also being propped up by the perceived superiority of the US military apparatus. There’s simply no other military on the planet that rivals it, even though it’s in rough shape after several years of two wars. The UK and Israeli militaries are as advanced technologically as the US’ but considerably smaller obviously and with less gloabl reach.
(As an aside here for those who might bring it up: US military hegemony is not necessarily comprimised by its failure in Iraq because what’s occurring there is a guerrilla conflict or irregular conflict, if you will. Since the dawn of martial theory those students honest with themselves have known that guerrilla conflicts cannot be won simply with overwhelming conventional force. So the fact that it’s happening in 2008 to the preeminent military force is neither surprising nor a case for reevaluation of the strength of the US military.)
I think if there were another superpower with a viable currency ready to step in and fill the void, flight from the US dollar would have already happened but there is no one to do so. Most industrialized countries with "modern" economies have no real military clout to speak of or none at all: Australia, Korea, Japan, Brazil, Germany, etc. The combination of military and economic power is indeed rare. Russia is a candidate, but their economy’s a joke and their domestic infrastructure is hurting. And while they’ve done a lot military agitation, exercises with Venezuela, Georgia smackdown, etc., their military infrastructure is horribly outdated and in a general state of disrepair. And with oil prices falling there goes a great revenue stream, well, at least temporarily. Perhaps China, India? We’ll have to see.
But for now, and in the short term, the destruction of the dollar will probably be the result of trauma (global economic collapse, major war, etc) and not of decay.
mainecoonecat (Mon, 10/20/2008 – 11:30)
Catherine Austin Fitts (solari) was of the opinion that 90% of the Dollar’s worth, was being upheld by the US military. Put differently, in the absence of the US military, 90% of the value of the US $ would evaporate.
Agree on the guerrilla wars in Afghanistan and Iraq, but most of those were never about ‘military conquest’ but more about military positioning vis a vis Iraq’s oil fields and Caspian Basis oil pipeline and oil transportation routes, including other Military Strategy Great Game for the heart of Eurasia and the underbelly of Mother Russia.
In the absence of Peak Oil, I imagine the US military’s overwhelming force would probably be capable of asserting upon our planet’s ignorant and cowardly, the forced illusion to buy into the CONFIDENCE GAME ‘worth’ of the Dollar, irrespective of the reality of it having NO INTRINSIC WORTH WHATSOEVER.
Those Petro-Dollar rebels who wanted to tell the $$$ to kiss their Islamic or Middle East asses — namely Saddam, and recently Iran — via setting up Oil Bourses in other currency’s have received the Shock and Awe and ‘Nuclear B.S’ Sabre Rattling treatment…
The big problem for the US Military — in my opinion — is PEAK OIL. The US Military is one of, IF NOT THE LARGEST CONSUMER OF OIL ON THE PLANET!! The US Military is VERY, VERY, VERY DEPENDENT UPON OIL, LOTS AND LOTS AND LOTS OF OIL; IT’S ADDICTED TO LOTS AND LOTS OF OIL!!
But — ‘PROJECT RRR2GONG HUMINT DMW-NUCLEAR TOLERANCE — certainly may enable it additional ‘RMA ALLIGATOR DRAINAGE’ leverage, even in the absence of the Dollar, or whatever replaces the Dollar.
But that is just my personal off the cuff opinion and analysis.