The Economy of the United
States of America
The Reactor Goes "Critical"
Nigel H Maund
29 November, 2004
Introduction
One cannot but notice that
the collapse of the world's effective reserve currency, from
its manipulated holding triangle, coincided exactly with the
successful re-election of George W Bush. Beautifully orchestrated
if I may say so! However, the timing was a little too perfect
for those who care to notice such things.
Nothing better proves the dirty
manipulation of world markets for political reasons than this
little exercise, and, moreover, it speaks volumes concerning
how, and to what extent, the markets can be rigged if you have
the capability to create billions of digital dollars out of thin
air at a second's notice, such is the awesome power the Fed Chairman
wields. Tricking and trapping the markets and analysts has become
a grand game for the insiders; and this is what we call "free
markets." Some joke!
With the US$ in virtual freefall,
and Alan Greenspan now saying a weaker dollar is a good thing
for the US economy, one may sensibly ask:... "What next?"
Inflation
With the dollar headed towards
72 on "the Index," before any halt in its "Jules
Verne type voyage" to unfathomed depths, the obvious impact
on inflation barely needs any amplification. Responsible
un-syndicated writers such as Jim Puplava and Doug Noland, not
to mention a host of others whose articles one can read on these
pages, have already pointed out the building inflationary pressures
in the US economy over the past 12 months. These same writers
have also written articles concerning the unprecedented commodity
boom now underway, with major price rises (between 30% and 200%)
in gold, silver, copper, lead, zinc, nickel, cocoa, oil, soya,
etc. ad nauseum. On top of all this, comes the less obvious
impact of higher property rentals, due to vast property inflation,
on all goods and services, and, with these, the higher sales
and other taxes levied serve to compound the inflationary pressures.
The strongly "doctored," or, more aptly, debauched
CPI, is a totally meaningless and misleading figure. Real inflation
is already in double figures and headed towards the high teens.
If you now consider things
are getting tough, let me tell you: "you have seen nothing
yet!" The US dollar has only recently completed the first
leg of its decent, with the US election its watershed. It has
now commenced the second, and much more severe, leg of its three
phase devaluation. The big question is this: "At what point
will the Fed be forced to raise rates at a far higher rate than
a piddling 25 basis points per month to slow the US dollar decline
before "the hull is crushed" under massive selling
pressure, and goes into vertical freefall, thus marking the start
of Phase 3 (Total Collapse) ?"
Clearly, Mr. Greenspan's time,
and viable options, are all but non-existent, the end game is
upon him. His only gambit is "the Asian Defense;" i.e.,
so long as the Chinese and Japanese keep recycling their trade
surpluses into US securities, financial check mate is deferred
and, better still, hopefully avoided. So far this little gambit
has worked well. However, as the dollar's decline gathers real
momentum the major fault lines in the world economy come under
increasing stress. So far, no one has chickened out in this high
stakes economic game, because the stakes are quite simply colossal.
Furthermore, everyone is now so far into uncharted territory,
that they're too scared stiff to rock the economic boat as the
consequences are barely worth thinking about. Nonetheless, decisions
cannot be postponed forever. No doubt the Asians will be prepared
to take serious financial losses to keep the entire grossly distorted
world economy intact for the time being. In a race against time,
China is trying to nurture its potentially huge internal market
to replace the credit maxed out, and essentially bankrupt, US
consumer. However, the pressures to "bail out" are
increasing with the passing of every "nail biting"
day. Even now, Asian investors, institutions and Central Banks
are quietly leaking funds out of the US and into Euros, Sterling,
Canadian $, gold, silver, and commodity-based assets
and securities. For the Fed and US economy, the flood gates are
creaking.
The Economic Reactor Goes Critical
When the dollar entered phase
2 of its decline, the US economic reactor started to go critical.
The chain reaction leading to financial meltdown has begun. Nothing
can now prevent the inevitable. Like nuclear fission, one reaction
will lead to the next in the following sequence:
further and accelerating dollar
decline > rapidly rising inflation > accelerating rise
in US interest rates > bond market decline > equities decline
> real estate decline > accelerating dollar decline as
foreign investors "hit the exits" > further interest
rises and so on. However, the chain reaction set up is a spiraling
vortex of accelerating action and reaction and ultimately, uncertainty
is replaced by fear, and, finally, panic. The final denouement
will be hyperinflation and total economic collapse of the US
FIAT dollar system. By this time only gold and silver, and hard
commodity- or property-based assets will be worth
anything. The global currency system will be in ashes.
Mr. Greenspan will be able
to ponder his legacy and fame "as the banker who wrecked
the world, and the lives of billions." His name will join
other famous money creation architects whose FIAT money system
collapsed spectacularly in ruins, such as Scotland's John Law.
However, Mr. Greenspan may now consider the wider social implications
of his humongous credit machine, such as:
1. gross misallocation of resources
to the detriment of the entire world economy;
2. the enormous transfer of
wealth to the hands of the elite few;
3. the widening gap between
the world's rich and poor, with destruction of the so called
middle class, and all that this portends;
4. the immense downside effects
of uncontrolled credit expansion, particularly in the residential
housing market, causing an explosion of speculative greed, financial
exposure and ultimate ruin for millions;
5. uncontrolled access to credit,
coupled with a lack of education in use of credit facilities,
and control of credit issuing organizations has caused an explosion
of bankruptcies and credit related problems such as the massive
increase in crime, and social problems in society in general,
that can only accelerate as the impending crisis unfolds.
Yes, Mr. Greenspan and his
ilk have very much to answer for. One day, God willing, someone
will have the courage and wisdom to question the entire rotten
system of unbridled usery he has created, and its consequences.
Maybe, this form of totally inappropriate "Democracy"
and "Freebooting Unprincipled Capitalism" requires
serious revision, if the world is to advance into a more enlightened
and fairer future, for all mankind, on this tiny little planet.
There are far bigger issues confronting the USA than "the
War on Terrorism." However, these barely get a hearing...
yet!
Nigel H Maund
BSc (Hons) Lond., MSc, DIC, MBA, MIMMM, SEG
Economic Geologist
eMail: nhmgeol@yahoo.com.au
Footnote by Clive Maund: Previous articles by Nigel Maund have
been mistaken for my work. I did not write any of this article.
Nigel will one day have his own website.
Copyright ©2004
Nigel Maund. All Rights Reserved.
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reprinted
at 321gold Inc Miami USA
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