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Prepare for the Collapse of the Dollar

Monday, January 30, 2012, 1:39 PM
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Prepare for the Collapse of the Dollar

by Gregor Macdonald, contributing editor
Monday, January 30, 2012

Executive Summary

  • The decision whether to export its commodities will become increasingly strategic to the US
  • Understanding why Washington has decided to kill the dollar
  • What's driving the dollar now
  • What to expect from a coming secular decline of the dollar
  • Why the deflation risk is ending and grand quantitative easing (QE) is now underway

Part I: The Price of Growth

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II: Prepare for the Collapse of the Dollar

The just-released GDP report, which wraps up the 2011 performance of the US economy, made for unhappy reading.

While the headline number was stronger in the fourth quarter, after adjusting for inflation, the reading for the entire year came in at 1.7%. As Business Insiders Joe Weisenthal put it, that is the "final, pathetic growth number for 2011."

Many writers over the past year, including me, have hammered away at the idea that the performance of the US economy in real terms was statistically indistinguishable from a flatline in the aggregate.

No one disputes that some sectors of the economy, like exports and shipping, are growing. At issue is whether the economy as a whole is operating for the majority and not just segments of the populace. (Again, in real terms.) At a growth rate of 1.7%, we can at least conclude that no meaningful headway can be made in employment. Since the 2008 crisis, the US has been building a multi-million sub-population of people who are unemployed long-term. Only monthly job growth that first utilizes all new workers coming into the labor force will be able to eventually cut into this labor pool. Hence the revelations from the Federal Reserve this week related to targeting inflation, maintaining a zero-interest rate policy through late 2014, and conducting further quantitative easing (QE).



Before we dissect this week’s Fed meeting, let’s take a look at the recent trend in exports.

 

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