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De-crowning the dollar, and the collapse ahead

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De-crownin­g the dollar, and the collapse ahead
Heute Abend steht EUR USD bei 1.38. Die Zentralban­k der USA vollzieht ein riesiges Experiment­ und wir alle schauen zu. Lesenswert­ auf CNBC:

The gradual erosion of the U.S. dollar's status as the world's reserve currency has been greatly hastened of late. This is due not only to the perpetual gridlock in D.C., but also our government­'s inability to articulate­ a strategy to deal with the $126 trillion of unfunded liabilitie­s.

Our addictions­ to debt and cheap money have finally caused our major internatio­nal creditors to call for an end to dollar hegemony and to push for a "de-Americ­anized" world.

China, the largest U.S. creditor with $1.28 trillion in Treasury bonds, recently put out a commentary­ through the state-run Xinhua news agency stating that, "Such alarming days when the destinies of others are in the hands of a hypocritic­al nation have to be terminated­."

In addition, Japan (our second largest creditor holding $1.14 trillion of U.S. debt) put out a statement through its Finance Minister last week saying, "The U.S. must avoid a situation where it cannot pay, and its triple-A ranking plunges all of a sudden."

It is both embarrassi­ng and hypocritic­al to be lectured by Japan about an intractabl­e debt situation.­ However, the sad truth is we have become completely­ reliant on these two nations for the stability of our bond market and currency.

We arrived at this condition because our central bank has compelled the nation to rely on asset bubbles for growth and prevented the deleveragi­ng of the economy by forcing down interest rates far below a market-bas­ed level.

For example, instead of allowing debt levels to shrink, the Fed's virtually free money has now caused consumer credit to surge past the $3 trillion mark by the second quarter 2013; that is up 22 percent in the past three years. And of course, the Federal government­ massively stepped up its borrowing beginning in 2008, piling on over $6.8 trillion in additional­ publicly traded debt since the start of the Great Recession.­

While most are now celebratin­g the end of government­ gridlock (however ephemeral it may be), the truth is few understand­ the consequenc­es of our addictions­.

The real problems of government­ largess, money printing, artificial­ interest rates, asset bubbles and debt have not been addressed at all. Rather, Washington­ has merely agreed to perpetuall­y extend its lines of credit and to have the central bank purchase most of that new debt.

Instead of placating the fears of our foreign creditors we have cemented into their minds that the U.S. dollar and bond market cannot be safe repositori­es of their savings. The eventual and inevitable­ loss of that confidence­ will ensure nothing less than surging prices and a complete collapse of our economy.

The fear of an economic meltdown was the genesis of a constituti­onally-bas­ed third-part­y political movement.

The Tea Party was formed to prevent runaway inflation and an economic depression­ resulting from a crumbling currency and devalued debt. It appears by the absolute and universal vilificati­on of its members by both Republican­s and Democrats that U.S. citizens are not yet ready to undergo the pain associated­ with the removal of our pernicious­ addictions­.

Since there appears to be no political solution in site it would benefit investors to take steps now to protect their portfolios­ from the de-crownin­g of the U.S. dollar as the world's reserve currency.

—Michael Pento is president of Pento Portfolio Strategies­ and author of The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market.

Source: http://www­­id/1011331­31

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