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Saturday, January 21, 2012

The long march to US Currency Crisis

I have heard many people say the US dollar can't have a crisis like other countries due to fiscal irresponsibility. The US is needed too much by the world for them to allow the US dollar to have a crisis.

While I still agree that 2012 is too early for such an event, 2013 to 2017 is the target I am watching.
Since the US dollar has been the world reserve currency since the end of World War 2, there has to be steps first to allow for the US dollar to enter into crisis mode.

We already saw the first step, when countries selling oil started accepting other currencies.   The event itself did not cause any issue for the US dollar, but it is a step in a long list of steps of the world decoupling from US dollar dependency.

In the last year we have now seen China, India, Russia, Iran and Japan are exchanging their currencies directly to resolve debt.  The US dollar used to be the 3rd party clearing house for such exchanges.  These events are a natural outcome of the global currency war raging right now, that gets little press.  This started in earnest back in 2009, and continues to this day.  The last time this happened, the Great Depression hit the world.

Again, I do not expect any issues with the US dollar valuation due to these moves.   It is only a technicality that these countries used to take currencies and go from Country A to USD to Country B currency.   But each action of eliminating the USD from world financial transactions enables the day when the US Dollar will have it's own crisis.  For once the world is sufficiently (but never completely) insulated from USD valuation change, we may pass the tipping point for the world accepting USD as the world class currency.

The actual opinion shift of USD currency is likely to be resolved with the next president.  This is why this election is going to be the most important in my lifetime.  Ron Paul, although not a well rounded candidate, is the best option to avoid this event.   Such an event exceeds almost any other topics being discussed by the candidates, and this ONE topic is not being discussed.

I am adding this to my Financial Ground Zero series, for the on-going decoupling of USD is a key setup for the larger crisis ahead.

Years 2013-2017 will be nothing like we ever seen before.  At least life won't be boring.

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