 Waiting
for The Crash
Larry LaBorde
Archives
November 9, 2004
This past weekend I had the pleasure of accompanying my wife
to LSU-Baton Rouge to visit my daughter who just this week was
initiated into her sorority. We pulled our small Airstream trailer
four hours South and enjoyed a delightful weekend visiting our
daughter and just relaxing in the perfect November weather of
South Louisiana. (clear blue sky, 68 degrees, sun and a slight
breeze) I even managed to finish Pat Buchanan's new book "Where
the Right Went Wrong."
In Mr. Buchanan's book he explains the post WWII US foreign policy.
It all starts out with Harry Dexter White's plan at Bretton Woods.
White was a Soviet spy working under Treasury Secretary Morgenthau.
The White plan consisted of the US dollar as the world's reserve
currency and that dollar being backed by gold at $35/oz. All
other currencies would be valued against the US dollar. The International
Monetary Fund was then set up and funded with 104 million oz
of US gold and billions of dollars of US cash. Other countries
contributed money and were granted voting rights in proportion
to their contributions. The IMF was set up to provide loans to
countries facing a run on their currencies. The International
Bank for Reconstruction and Development was also created to provide
loans to rebuild countries that suffered destruction during the
war. The IBR&D would later become known as the World Bank.
After WWII, peacetime America sold the rest of the world twice
as much as it imported. Since under the Bretton Woods plan the
USA was supposed to provide the liquidity for the rest of the
world the trade surplus would have to be worked around. Too much
of the world's money was piling up inside the USA. Some way would
have to be found to help send US dollars throughout the world.
The US stationed troops around the world and built bases which
helped export dollars. Foreign aid as well as loans from US banks
sent even more money overseas. US markets were opened to foreign
goods without import tariffs. Foreign currency was devalued to
make their goods more attractive in US markets to allow foreign
countries to earn cash to pay back their loans.
Pretty soon the flow of money going out of the US got out of
hand. Nixon and Treasury Secretary Connally severed the gold
link in 1971 to stop the subsequent gold redemptions. The IMF
then changed its mission. They loaned money to any country that
found itself unable to pay back its loans if that country would
pledge to follow IMF rules concerning their monetary policy.
With the Reagan tax cuts and economic boom as well as the defense
cuts at the end of the cold war the US was able to rescue Mexico,
Thailand, Indonesia, South Korea, Russia, Argentina and Brazil
from currency collapse. The IMF and the World Bank poured money
into these countries to allow them to continue to service their
foreign debts. The IMF insisted that these countries devalue
their currency so they could export their way out of the crisis
by flooding the US market with cheap goods to earn US dollars
to service their loans. The US agreed to keep its markets wide
open. ALL THIS WAS DONE AT THE EXPENSE OF THE US MARKET.
With our trade deficit at $600 billion + dollars the US is in
trouble. US dollars are piling up overseas. Unless the US can
substantially increase its exports (not possible) then the US
dollar MUST FALL. In the long run a devalued US dollar will help
us export goods and correct our trade imbalance. In the short
run there will be much pain. There will also be pain for anyone
foolish enough to be holding US dollars. Eventually US industry
will reassert itself but it will take a decade or more. Our standard
of living will drop. For now we must import many essential items
because we no longer make them in this country and when the dollar
devalues we will have to pay a much higher price for them until
we can produce them again.
Make no mistake - the dollar must devalue. Politically a devaluing
dollar will play havoc with our empire. Just study the UK and
see how well they were able to run their empire on a declining
currency. Perhaps some good will come out of all this if we are
forced to bring home our troops and quit meddling in
the affairs of others. (Vote against all incumbents and both
political parties whenever possible since they got us into this
mess. Small government and sound money are the only things that
can save us and no one in Washington wants either. OK- congressman
Ron Paul can stay but everyone else needs to go).
In the meantime foreigners are buying US assets such as treasury
securities and US businesses. Our great US companies are slowly
being sold. Our country is being deindustrialized while we sit
and watch.
Will there be a trigger that precipitates a dollar crisis? Will
the system blow up? Will the Middle Eastern oil countries suddenly
decide to sell their oil for Euros only? Will the Dinar upset
the US dollar? Or will we, the dollar, die the death of a thousand
cuts where it slowly but steadily devalues? When the dollar devalues
gold naturally goes up (unless it held down by artificial means).
Over the past few years the dollar has dropped around 35% against
the Euro and gold is up almost 70%. Maybe it is ALREADY HAPPENING
before our eyes.
Live life and enjoy today because it is the only life we have
- but be aware of what is happening all around us and take financial
precautions.
Got gold?
November 8, 2004
Larry LaBorde
 Silver Trading Company
318-470-7291
website: www.silvertrading.net
email: llabord@aol.com
Larry lives in Shreveport, LA with his wife Puddy, and sells
precious metals at the Silver Trading Company.
Larry can be contacted at llabord@aol.com. You can view his web
site at www.silvertrading.net.
Send questions, comments or corrections to llabord@silvertrading.net.
"Please note that I am by no means a financial advisor and
all investments should only be made after performing your own
due diligence." -Larry
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