Monday, June 27, 2011

Could America's Economy Be on the Verge of Collapse?

Courtesy of Paul Katz / Getty Images

Lately, it seems we have seen a barrage of videos, ads, text messages, and internet links about the demise of the U.S. dollar as the world's reserve currency. Many economists, investment researchers, politicians, and the like, have bombarded us with their personal forecasts for the fiscal future of the United States. One of the most controversial videos that has recently surfaced is "The End of America": brainchild of Porter Stansberry of Stansberry & Associates Investment Research. The firm was founded by the investment researcher, whose video has gone completely viral, drawing considerable criticism and skepticism, on one hand, and support and validation on the other.

      Many Americans are legitimately concerned about our country's economic outlook and are searching for answers to questions that are being raised publicly, as well as those that we've never even thought to ask. In turn, we seek sound advice from experts who could possibly help us navigate through all of the propaganda disseminated by the government, as well as those watch dog or whistleblower organizations that claim to be serving the best interest of the people.

      Sentiments expressed in many of these messages forecasting the collapse of the dollar, have been said to play on the consternation of an already fearful American populous, concerned about the direction our economy has taken. While there has been some debate about whether Porter Stansberry's recent web video has been formulated to illicit sentiments of fear, it's also worth focusing in on the facts that he asserts in order to determine if the U.S. could possibly experience the type of fall out that is essentially being predicting.

      It is becoming a commonly known fact that the Unites States' currency is in trouble, but in his video, Stansberry has prescribed the formula for the collapse of our monetary system in some pretty graphic terms. He claims that although the global banking system has not yet abandoned the dollar, the rise of many other commodities such as gold, silver, oil, and wheat, are telltale signs that the world's economy will, indeed, reject the dollar much more quickly. He asserts that superpowers such as France, Japan, Russia, and China have begun talks to "end dollar dealings for oil..." and instead move toward currencies like the euro, the Japanese yen, the Chinese yuan, and even a new unified currency created for nations in the Gulf Co-operation Council. According to Robert Fisk of The Independent, a news organization based in the U.K., finance ministers and central bank governors in Brazil, China, Russia, and Japan plan to "...transition from dollar markets within nine years." One of the reasons for the transition has been the (global) financial crisis that has crippled the U.S. economy, branding China as the new financial power. To Stansberry's point, by 2018, we could be seeing the conversion from the dollar become a reality. Once this transition takes place, he predicts prices for everyday things like gas, food, and clothing will shoot straight through the roof. Interest rates will soar and housing prices will be virtually unattainable. He argues that inflation will be higher than we've ever seen before.

      One of the causes that Stansberry cites for the continuing financial crisis, is the strategy of quantitative easing (QE) employed by the federal government. The Federal Reserve resorts to QE in order to keep interest rates low, but many argue that while it looks for ways to improve the economy, the fed runs the risk of causing hyperinflation and the devaluation of the US dollar. According to the National Inflation Association, "... the U.S. dollar is likely to lose nearly all of its purchasing power over the next few years." The NIA predicts that programs like unemployment, food stamps, and social security will become extinct and those dependent on these programs will likely lose their livelihood.

Courtesy of the National Bank of Serbia

An extreme example of the type of chaos that ensued during a currency crisis referenced in Stansberry's video was in Yugloslavia in 1993. Not only had the country's way of life begun to drastically change, it had also experienced the worst bout of hyperinflation in the world. Its government's attempt to create currency to deal with its budget deficit, led to an all-out economic catastrophe. It began to impose price controls, depriving citizens of basic necessities like electricity and heat, and had even resorted to pillaging the savings of its people. In less than two years, prices of everyday items increased 5 quadrillion percent and according to Economics instructor Dr. Thayer Watkins, Yugoslavia's "... social structure began to collapse."

      Stansberry also made claims in December of 2010, about the economic future of Greece: "In 2001, the Greek government borrowed $1 billion from Goldman Sachs to help balance the budget. In total, the Greek government owes $1.2 trillion. It's merely a matter of time before the Greeks default." Last Friday, news of a pending Greek financial meltdown sent American and European financial markets into a tailspin (escalating protests in the streets of Athens). Stansberry asserted that the fate of the U.S. economy will be no different: possibly even worse. He states that any government that has used paper money has ended up borrowing in excess, stressing commodity investor, Rick Rule's sentiments: "Paper money's track record is unblemished by success. The return of paper money to its intrinsic value (nothing) is guaranteed."
Take a look at the facts; judge for yourself.

      Could the U.S. be heading down that economic slippery slope that so many countries before us have succumbed to? Only time (and money) will tell.

1 comment:

  1. If you have any questions about Stansberry and Associates, please do not hesitate to call customer service at 1-888-261-2693. We would be happy to assist you. We are open Monday – Friday 9-5 EST.