The Ultimate Destruction of the US Dollar and World Markets Will Not Happen

[konkon]

This is pretty much in response to Damon Vickers' 15 day devastation scenario on world markets, triggered by China not buying US bonds which subsequently collapses the US dollar. He claims the Dow will even drop around 3,000 points in a single day, and there will be carnage in all types of markets around the world. He also claims the Fed will be forced to increase interest rates by up to 6% in a day, to desperately entice investment in the US. The net result from all this devastation will be a creation of a single world currency by a unified world order.

The following is from http://www.wealthbuildingcourse.com/world-order-weeks-dollar-crashes.html

"This begins with a Chinese choice to not buy any more U.S. Treasuries. That single day will be the death nail in the dollar’s coffin. Over the next two weeks, events will spin out of control in financial markets the world over....Vickers lays out scenes of chaos and rioting, looting of grocery stores, empty ATM machines, and shootings around the world."

The following is from Glen Beck's segment on the dollar's decline and it's well worth a watch:
http://www.youtube.com/watch?v=mdt2SjG1Bz8

The diagrams are to the point.

I don't see this scenario playing-out like this. Do you? Pressure is definitely mounting on the Fed to further protect the USD. QE3 may be an option mid year. Bill Gross has done an about face by not buying treasuries and this has alarmed many. Vickers is saying the Chinese will be next. Maybe, but this will do more harm to China as it still will peg its currency, the yuan, to the US dollar. If China breaks free form the USD its currency will appreciate so much in such a short amount of time that it will do long term damage to its economy. Even if China pegs the yuan to the euro, it will still appreciate. The Chinese played their hand and used the USD to take advantage of markets and it has to live with this. Vickers doesn't seem to account for this dynamic. He makes it out that China can easily stop buying US bonds. They might but go ahead and see which country benefits the least. This will be more devastating for the Chinese and other Asian countries.

The US dollar is destined to fall further but I don't see it eventually being replaced by a unified world currency. This is something all governments would want to avoid especially the US government (military etc too). A unified currency for the world just won't work. It will eliminate the necessary (competitive) dynamics that all countries need to function.

There's nothing intrinsically wrong with any type of currency, like the USD, itself. The practices associated with lending, trading, speculating etc are the problem. A single world currency won't 'fix' these flawed practices and newer, less predictable (at the outset) problems would surface.

Vickers talks about debt resets which is an interesting concept, but can still work with the set of world currencies we have today.

Just look at Europe with the euro. Countries like Greece and Ireland have lost their freedom to print money in times of trouble and have gone to the European Central Bank for loans. The EU setup has made the ECB a big bank that will lend money to countries that were destined to go to it for loans. This was bound to happen and it did!

A creation of a central world currency will dish-out pretty much the same headaches for countries, because you will eventually have a (new) world order operating as a big bank to nations. How many people want this to happen? Give me the system we have and let's go after those that want to destroy this free market system, even with all it's imperfections.


Here is Damon Vickers' video on his theory, but the Glen Beck one above is excellent:
http://www.damonvickers.com/TheDollarCrash

 

[jbocker]

I reckon if i sat down to a dinner conversation with Damon, i would have slit my own throat by about half way through the main course.

i wont be buying his book, might wait for the movie, reckon Bruce Willis will be the star saviour, if there is anyway we can be saved.

 

[springhill]

Vickers lays out scenes of chaos and rioting, looting of grocery stores, empty ATM machines, and shootings around the world."

How does that differ from what is happening in the world today? Common occurences on the nightly news.

You forgot Jupiter crashing into earth, human males' reproductive organs falling off and women becoming asexual, Jason Voorhees, Mike Myers, Freddy Kruger and the Boogeyman teaming up to form a NWO, plus all vegetation dying out causing herbivores to start eat humans hence us dropping to the bottom of the food chain.

Not in my lifetime.

 

[konkon]

I think that there is a motive to reset all asset classes into some 'organization's' control. Not like the communists tried over the last century. It's more like the way the European Central Bank 'controls' the money supply and destiny of the EU countries. But worse!

One of the alarming comments made by Vickers is that there is a new world order behind this. 'They' have often sought a single world currency throughout history, one that they can control. I still think it won't happen. But if there is a 'conspiracy' to destroy the USD (and world currencies, markets etc) then it really is up to our best enforcement agencies (not necessarily law enforcing agencies!) to put a stop to this, before this so called new world order has their way. Imagine every one and every country having to go to these 'mobsters' for loans. So no country will be able to print its own currency, like Ireland and Greece for example, and will forever be indebted to a faceless few, that ultimately controls the money supply, interest rates and the intricate dynamics of the capitalist system! I wonder how the military and other higher-end law enforcement agencies feel about this potential move to strip them of their power and freedom? How do governments feel about this?

This secretive organization won't, I believe, succeed in establishing a world currency, but instead, they will (unintentionally or intentionally) set to destroy the fabric and structure of all known and current world markets (asset classes etc) by pushing for the USD's collapse. Don't forget that pretty much everything can (and is) priced in US dollars. If they get their way then the GFC of 2008 will end up like the Queens Tournament before Wimbledon.

 

[konkon]

How does that differ from what is happening in the world today? Common occurences on the nightly news.

You forgot Jupiter crashing into earth, human males' reproductive organs falling off and women becoming asexual, Jason Voorhees, Mike Myers, Freddy Kruger and the Boogeyman teaming up to form a NWO, plus all vegetation dying out causing herbivores to start eat humans hence us dropping to the bottom of the food chain.

Not in my lifetime.

I don't think you understand what it means for world markets (not just stock markets) if the US dollar does collapse. I don't think it will, but if there is an attempt to destroy the USD then it will have catastrophic consequences for all asset classes all over the world. Much more serious wars could break-out overnight. Printing more money, that saved us this time, will be meaningless as currencies will be worth nothing but the paper/plastic its printed on.

Those that are predicting the US dollars destruction have made money shorting all types of markets way before anyone realised what was happening during the GFC. They are ready to take-on a similar bet in the future and just the magnitude and volumes of 'money' they will outlay to short markets, currencies etc will move these markets to the downside. They were responsible for the heavy momentum short selling that triggered serious and bankrupting margin calls during the GFC. They have stated that they will do it again.

At the end of the day, the US dollar is just another market or asset class that can easily be targeted. Jupiter of course won't slam into Earth and although a mate of mine looks like Freddy Kruger, the latter won't haunt me in my dreams tonight. There are many investment 'wall street' gurus that are stating that the US dollar is deliberately being targeted. I think we need to listen to them. The same people were on the other side of the GFC trade and made billions.

Short sellers have a direct motive and whether or not a stock, currency, country etc comes out of the carnage still intact is not that important to them. So the US dollar's ultimate decline as a MOTIVE (and even if this doesn't happen) will have dire consequences for us all.

 

[konkon]

The US dollar is tied into nearly all asset classes around the world, to some extent. Its 'destruction' or even possible destruction will to some extent rip through these asset classes.

Is this the plan by those that want to establish another reserve currency or seek to debunk the USD? The US dollars' collapse might (will, I think) cause all kinds of problems around the globe.

And at the end of this possible carnage we have another 'little' problem: The ones that own your debt end up owning you

 

[tothemax6]

People seem to forget that the world has already had a world currency before.

 

[konkon]

People seem to forget that the world has already had a world currency before.

But these times are different. The world needs the US dollar as the reserve currency or things will begin to unwind.

The question is, who will control this alternative currency? How does Asia in general deal with the change, when several countries in that region 'peg' their currency to the USD? Do they run the risk of their own markets (not China's) collapsing to some extent?

A so called world currency might appear stable, but will easily be manipulated to suit needs. A zero-sum-gain theory means that some will lose and some will win at 't'.

My guess is if the USD is replaced it will be done much quicker than markets can handle. Asia will suffer the most as their reliance on the USD will cause another type of asia crisis (different to the last one).

 

[Tanaka]

But these times are different. The world needs the US dollar as the reserve currency or things will begin to unwind.

The question is, who will control this alternative currency? How does Asia in general deal with the change, when several countries in that region 'peg' their currency to the USD? Do they run the risk of their own markets (not China's) collapsing to some extent?

A so called world currency might appear stable, but will easily be manipulated to suit needs. A zero-sum-gain theory means that some will lose and some will win at 't'.

My guess is if the USD is replaced it will be done much quicker than markets can handle. Asia will suffer the most as their reliance on the USD will cause another type of asia crisis (different to the last one).

I can see it happening. China continues to peg its currency to the U.S, builds its nation to the point that it's the worlds biggest by GDP and its wealth is more evenly distributed. At this point the internal economy is fit enough to weather falls in exports, and then bang! floats its currency. World domination overnight. I don’t expect this to happen in the near future but is possible near the end of my lifetime. Strategically I think this is where China is heading, and good on them. They had the foresight to see the stupidity in the currency markets.

 

[konkon]

I can see it happening. China continues to peg its currency to the U.S, builds its nation to the point that it's the worlds biggest by GDP and its wealth is more evenly distributed. At this point the internal economy is fit enough to weather falls in exports, and then bang! floats its currency. World domination overnight. I don’t expect this to happen in the near future but is possible near the end of my lifetime. Strategically I think this is where China is heading, and good on them. They had the foresight to see the stupidity in the currency markets.

If China floats its currency, then it will appreciate to the point of killing its export market; its products will be too expensive for the west and the rest of the world. This will happen anytime within our lifetimes. The Chinese know this. I believe the Chinese economy will have a greater net wealth than any country on earth (but will NOT be the most economically superior one!), but will go the way of Japan with a stronger currency over time. This pretty much screwed Japan in the late 80s and 90s and its fate was manipulated by the west (mainly the US).

I agree there is stupidity in the currency markets, but China stands to lose-out pretty badly too. In fact, all of Asia does.

The Asian countries ended up pegging their currencies to the US dollar after the Asia crisis, to protect their currencies and economies. But now they are kind-of stuck in an undesirable place and will suffer badly if there is a run on the US dollar, like many are predicting.

China is in trouble (in the long run) and here's one reason why: If China keeps buying US treasuries/dollars then the US dollar will drag the (pegged) yuan down. But this is a problem when China's +10% growth means the yuan should be going the other way - up! And at around 5% per year, at least. So there is a spread in the dynamics in China, which pretty much means high inflation down the track. Which means interest rates there should be going up much higher and faster than what is happening right now. Problems down the track.

Now look at an alternative. If China stops buying US treasuries/dollars, like many are predicting, then there will be a run on the US dollar. It may collapse, which would create volatility in markets around the world, kind of like we saw in October of 2008. Vickers said that China not buying US bonds will trigger a meltdown, far worse than 2008. He was shorting and making money back then and knows what he is talking about. It's a question of whether China stops buying US bonds.

Either scenario is problematic for China. Where did it all go wrong? I think I know, I'm just being dramatic.

So much for the zero-sum-gain theory. Who wins in either scenario?

 

[Tanaka]

If China floats its currency, then it will appreciate to the point of killing its export market; its products will be too expensive for the west and the rest of the world...

You're preaching to the converted. But my point was that if you can turn your economy into an internally functioning economy then there is room for bad exports, especially when you concider by the time this happens the world is going to be mostly Chinese

There are great similatities with the Chinese story that have already happened to the Japanese, but I'm concidering that the Chinese population is so much bigger than Japan's that I'd expect thing to blow out bigger but take longer to blow out, hence I don't see it happening anytime soon.

Just my thoughts on the matter, economics ain't my strong point.

 

[konkon]

You're preaching to the converted. But my point was that if you can turn your economy into an internally functioning economy then there is room for bad exports, especially when you concider by the time this happens the world is going to be mostly Chinese

There are great similatities with the Chinese story that have already happened to the Japanese, but I'm concidering that the Chinese population is so much bigger than Japan's that I'd expect thing to blow out bigger but take longer to blow out, hence I don't see it happening anytime soon.

Just my thoughts on the matter, economics ain't my strong point.

You make some very strong points. China can't have it this good for too long. They still don't know how the capitalist system works and this will forever be a problem. I can't see China adopting the capitalist model.

Another problem will be this and the next generation onwards having to foot the bill for an aging demographic. What would the ratio look like; 1 elderly person being supported by 4? This will put a strain on their economy too, especially when costs in China will continue to escalate. Japan would have been pretty cheap in the 1960s too, but it only took them a further 20 years to end up the most expensive country to live in on Earth. China's cost of living will have moments of it skyrocketing, like it did in Japan. The west will make sure of this.

The Chinese are a very clever race too.

 

[tothemax6]

The Chinese are a very clever race too.

I would hesitate to call the Chinese a race, or even a nation for that matter. Given its linguistic, ethnic, and perhaps even national diversity, it is at most a state. However, yes China averages a higher than average IQ, however if this has a genetic basis (and to a large extent it does), one should be reminded that its level is thus fairly constant - but China's prowess has not been. Hence there is more to success than IQ.

I can see it happening. China continues to peg its currency to the U.S, builds its nation to the point that it's the worlds biggest by GDP and its wealth is more evenly distributed. At this point the internal economy is fit enough to weather falls in exports, and then bang! floats its currency. World domination overnight. I don’t expect this to happen in the near future but is possible near the end of my lifetime. Strategically I think this is where China is heading, and good on them. They had the foresight to see the stupidity in the currency markets.

To respond to both of you, I have a different scenario: China is a nation of industrious men, this is clear. They have many intelligent men, this is true. But so too is and was this this case in Japan, leading up to its crash. A nation can be as industrious as it wants, but if there are large market distortions, and in China there are, that industry and intelligence may not be aimed in the right and natural direction.

So here is my scenario: China is in the midst of a crack-up boom fueled by credit expansion. They have negative real interest rates. Their 'GDP' is to a large extent comprised of steel, concrete, and sweat going into building buildings for which there will be no occupants. They have piles of empty condos held by the owners as 'investments'. They have empty cities. The claims that these vacancies will be filled fail to see that there is more office and house space than even the Chinese can fill, and that few Chinese can afford the elevated prices. The so called Chinese export prowess misses the point that this export is not a legitimate part of the economy - since due to the currency peg any profits from the export simply accumulate as piles of foreign bonds on the floor of the PBoC. Hence the export itself is a huge market distortion created by the central bank.
China crashes, and it crashes hard. The world then worries about the next nation that will 'take over the world'.
We will see...

 

[konkon]

So here is my scenario: China is in the midst of a crack-up boom fueled by credit expansion. They have negative real interest rates. Their 'GDP' is to a large extent comprised of steel, concrete, and sweat going into building buildings for which there will be no occupants. They have piles of empty condos held by the owners as 'investments'. They have empty cities. The claims that these vacancies will be filled fail to see that there is more office and house space than even the Chinese can fill, and that few Chinese can afford the elevated prices. The so called Chinese export prowess misses the point that this export is not a legitimate part of the economy - since due to the currency peg any profits from the export simply accumulate as piles of foreign bonds on the floor of the PBoC. Hence the export itself is a huge market distortion created by the central bank.
China crashes, and it crashes hard. The world then worries about the next nation that will 'take over the world'.
We will see...

Interesting post. Some insight into an enigma of an economy and a nation. The west is fed a different picture of how things function in China.

 

[konkon]

I've been reading up on the possible demise of the US dollar and have viewed many Youtube documentaries (many of which are quite good) on the future of the American currency and its impact on global markets. I have also discussed this with many people here and I'm surprised many don't see its potential downfall as an issue. What am I missing?

I still believe the USD will firm up in a few years and the Fed may have to, by default, increase interest rates in the US. But it will fall further over the next year, I guess. That might depend on whether the Fed in the US stops the quantitative easing. If it does, then the US dollar might drop even further. Maybe. Quite difficult to predict, but very important to know. Is it going to continue to fall no matter what the Fed does? The Fed may just slow the process down.

When the Fed does stop its quantitative easing, there will be more volatility on the markets. You can be sure of this. The VIX will rise and fall with greater frequency and momentum. Quantitative easing has soften the VIX at the moment.

I guess people just feel like the USD is a lot more isolated than what I think; I believe it's tied to every single asset class to some extent. Like a widespread rising tide in the middle of the ocean, it can be easily overlooked. All those asset classes around the world (and here) will be rising and then potentially falling and we just won't know it being in the position and location that we're in. If we're not sure of not just the current state of the US dollar, but of its future, then we might find it difficult to put a value (or future value) on a certain type of asset.

Our point of reference might be beyond the horizon, so this may give us a false sense of security.

Some of the feedback I'm getting is 'yes, the US dollar is finished, and that's that'. But I worry too much that it's not just that.

 

[konkon]

There are too many committed markets, investment models and asset classes etc holding up the USD. Pressure is definitely building on this world currency to devalue even further, but all of these commitments are too interwoven into the very fabric that makes the USD function. All of the examples of hyperinflation and currency destruction that has occurred around the world over the last century have one thing in common; they are not the world's reserve currency. There is a different dynamic at play with the USD. The attempted transfer from the use of the USD to another currency or newly created currency, as the reserve currency, will have lots of latent and sometimes direct opposition. This could even come in the form of a battle, and not just in the electronic and market world! A long shot down the track, perhaps and hopefully for everyone's sake it remains a long shot.

But the battle could likely be fought in the electronic market world, where a new reserve currency gets manipulated (becomes expensive, perhaps) to, for example, screw the export markets of the countries that host and use that currency. Would China, for example, really want to rely on an expensive currency to sell its exports overseas?

There is nothing intrinsically wrong with the USD, and the fact that it ended up, perhaps, manipulated over the years means that the same fate could be bestowed on a potential next reserve currency of the world.

I guess in theory the world could establish a kind of electronic crediting system currency, like you would have in the old Space Invaders Game, where all players play by the same or similar rules and use the same crediting system (to keep ahead of the Joneses!). But the 'free' markets are chaotic in nature, perhaps because they follow the same 2nd law of thermodynamics like we all do, in which it's near impossible to make a system become more organized over time. Therefore, you couldn't get all countries, for example, to adopt a universal crediting system or single (only one) world currency. So what you're left with is a currency just like the USD. So why change?

 

[tothemax6]

Konkon, I don't follow you.

The world already used to have a global currency - gold. And it worked pretty damn well.

The value of the USD is a function of how much USD exists, and the demand for USD. The latter is determined by foreign demand for US products versus the US demand for foreign products. The former is determined by the size of the monetary base (created the Fed) and the aggregate amount of credit extended against this monetary base (created by banks etc) - which is itself a function of the size of the monetary base.

The use of the USD as a 'reserve currency' will largely rest on its value as a currency. Thus whether or not the USD retains its position as the favoured currency in finance, commodity pricing etc, depends only on:
Is the purchasing power of the USD increasing, decreasing, or staying constant.

If the USD turns to garbage, people will not use it. They will use something better.

 

[konkon]

Konkon, I don't follow you.

The world already used to have a global currency - gold. And it worked pretty damn well.

The value of the USD is a function of how much USD exists, and the demand for USD. The latter is determined by foreign demand for US products versus the US demand for foreign products. The former is determined by the size of the monetary base (created the Fed) and the aggregate amount of credit extended against this monetary base (created by banks etc) - which is itself a function of the size of the monetary base.

The use of the USD as a 'reserve currency' will largely rest on its value as a currency. Thus whether or not the USD retains its position as the favoured currency in finance, commodity pricing etc, depends only on:
Is the purchasing power of the USD increasing, decreasing, or staying constant.

If the USD turns to garbage, people will not use it. They will use something better.

I can't see a finite product like gold being good in the long run or good in general. Speculators would just increase its value and distortions in markets would result. Even using it as a gold standard would restrict lending practices and heat-up economies. Imaging fighting for credit these days. What would interest rates end up as? People weren't as money savvy or greedy as they are today and so, you have a different dynamic to deal with. Using gold as a gold standard or itself would prop-up other commodity prices too; "If gold's more valuable today, then why shouldn't a similar commodity like silver, and a similar one to that..." This could end up being the underlying logic.

I agree if the US dollar does turn to garbage, then hardly anyone would want to use it. But I don't think it will eventually turn to garbage. Do people and markets really believe the US dollar will turn to garbage? If so, then why isn't there a run on the US dollar? Markets are, after all, about placing future bets. Where is this bet? The dollars decline in the last decade? It needed to decline eventually.

The explanation you gave is excellent and to the point. But this is pretty much an explanation about nearly any currency. It obviously does include the US dollar, but being the reserve modern-day world currency the US dollar does have special privileges that have been assigned to it. As mentioned before, "There are too many committed markets, investment models and asset classes etc holding up the USD." The US dollar is interconnected with several major asset classes. There will always be support for the US dollar as long as the US keeps controlling the world markets, the money supply and keeps its status as the number one military force, which it will. The supply and demand dynamic is just one side of this argument. There are many latent forces which makes the US dollar the world's reserve currency.

I think that a modern day dynamic that has to go hand in hand is: you won't have the number one military force if your currency is not the world's reserve currency. Sure logically the two don't have to be united in the way stated, and I'm well aware of this. But I think that the two must go together considering the times we live in. The US will not give up its number one military status. Period. It needs to have the most widely used and influential currency too. The two dynamics reinforce each other to some extent. And they will support one another in the long run.

I did like your post too.

 

[konkon]

I think we need to bring in all kinds of factors into the equation, even though the US would be scoring a very low score on its overall economy, if you were to isolate the economy from all other variables. But in the real world, you can't.

The US along with Germany and the UK controls the future of trading: with sophisticated and intelligent computers that do around 70%+ of major trades. This is what ultimately will continue to give the United States the edge on the rest of the world. Do you really think the US will allow China etc to take charge here? No chance. It won't happen, no matter how wealthy the Chinese become. I'm not talking about GDP vs GDP here or some other economic dynamic. I'm talking about who will always be the ultimate economic gate-keeper, and yes, the US will still be in charge here even if its wealth is half that of China's in the foreseeable future.

As a last resort, if the US had to restructure its currency and/or default on outstanding debts it would do so, but not in the traditional sense, that would ultimately harm them the most. No, the United States will find ways to restructure its economy (and it might not and most likely won't be pretty!).

Initially, it would look like the United States is losing while some emerging countries have gained ground, overnight. But, most countries stand to lose more from a sophisticated restructuring event, than the US. Economists will tell you to look at the text books for reasons why the US will suffer the most. But these economists and text books can't see the overall picture and (not just economic) reasons why other countries will stand to lose the most. For example, when does the might and influence of the United States military factor into some macro economic (text book or economist's) reasoning? Hardly ever, because they don't see it as a major historical influence in United States' economic success. Text books will strip-out all of these necessary 'bits' and discuss economic dynamics in isolation, and even treat the United States as another potential eg. Yugoslavia without realizing that there's so much more to the United States economy than just its economy.

Well, for starters, non US countries might not get paid and their old US treasuries would be worth nothing. So what do these countries do to retaliate? Not use new US treasuries and not have the the new USD as a reserve currency or just trade amongst themselves and leave out the US? Really? What if they're given little choice but to (eventually) adopt this new currency and the new system, still run by the United States? Do you really believe that countries can just trade amongst themselves without being 'entrapped' into the economic matrix that the United States set up and would still control?

I think that people underestimate the sophisticated nature of the higher-end United States in general, and the influence it's had on the longevity of the United States economy. Sorry, and I don't mean to offend, but the US didn't just get to where it is (was) from just back-breaking hard work! Plenty of countries have and are doing this and this alone has got them nowhere. Once again, I don't mean to offend (after all, I'm just an average guy going to work too). I am talking about (historically) macro-focused higher-end groups that set to control different aspects of the world, directly or (mainly) indirectly, by establishing, maintaining and controlling the set of systems or matrix that underlies the very structure of perhaps all asset classes, worldwide. And they are still at it, even though they don't and can't advertise this.

The US will eventually hike rates, even by default. Along with a clever restructuring program that's implemented gradually, they will stimulate their own domestic economy. But the US doesn't have to and won't pay its bills in full. Who really stands to lose here, if you take into account what I stated above and not respond to this in isolation.

I don't see the US as the big losers here if they slowly and cleverly restructure their economy and if it doesn't end up paying its bills in full; which it won't do.

So does the US have to 'play fair' (whatever that means!)? Why should it when countries have piggy-backed on all of the United States' risk taking over the last decade plus. Pegging your own currency to gain advantages in various markets is an example of this.

 

[dhukka]

This is pretty much in response to Damon Vickers' 15 day devastation scenario on world markets, triggered by China not buying US bonds which subsequently collapses the US dollar. He claims the Dow will even drop around 3,000 points in a single day, and there will be carnage in all types of markets around the world. He also claims the Fed will be forced to increase interest rates by up to 6% in a day, to desperately entice investment in the US. The net result from all this devastation will be a creation of a single world currency by a unified world order.

The following is from http://www.wealthbuildingcourse.com/world-order-weeks-dollar-crashes.html

"This begins with a Chinese choice to not buy any more U.S. Treasuries. That single day will be the death nail in the dollar’s coffin. Over the next two weeks, events will spin out of control in financial markets the world over....Vickers lays out scenes of chaos and rioting, looting of grocery stores, empty ATM machines, and shootings around the world."

The following is from Glen Beck's segment on the dollar's decline and it's well worth a watch:
http://www.youtube.com/watch?v=mdt2SjG1Bz8

The diagrams are to the point.

I don't see this scenario playing-out like this. Do you? Pressure is definitely mounting on the Fed to further protect the USD. QE3 may be an option mid year. Bill Gross has done an about face by not buying treasuries and this has alarmed many. Vickers is saying the Chinese will be next. Maybe, but this will do more harm to China as it still will peg its currency, the yuan, to the US dollar. If China breaks free form the USD its currency will appreciate so much in such a short amount of time that it will do long term damage to its economy. Even if China pegs the yuan to the euro, it will still appreciate. The Chinese played their hand and used the USD to take advantage of markets and it has to live with this. Vickers doesn't seem to account for this dynamic. He makes it out that China can easily stop buying US bonds. They might but go ahead and see which country benefits the least. This will be more devastating for the Chinese and other Asian countries.

The US dollar is destined to fall further but I don't see it eventually being replaced by a unified world currency. This is something all governments would want to avoid especially the US government (military etc too). A unified currency for the world just won't work. It will eliminate the necessary (competitive) dynamics that all countries need to function.

There's nothing intrinsically wrong with any type of currency, like the USD, itself. The practices associated with lending, trading, speculating etc are the problem. A single world currency won't 'fix' these flawed practices and newer, less predictable (at the outset) problems would surface.

Vickers talks about debt resets which is an interesting concept, but can still work with the set of world currencies we have today.

Just look at Europe with the euro. Countries like Greece and Ireland have lost their freedom to print money in times of trouble and have gone to the European Central Bank for loans. The EU setup has made the ECB a big bank that will lend money to countries that were destined to go to it for loans. This was bound to happen and it did!

A creation of a central world currency will dish-out pretty much the same headaches for countries, because you will eventually have a (new) world order operating as a big bank to nations. How many people want this to happen? Give me the system we have and let's go after those that want to destroy this free market system, even with all it's imperfections.


Here is Damon Vickers' video on his theory, but the Glen Beck one above is excellent:
http://www.damonvickers.com/TheDollarCrash

konkon, if you are going to copy and paste large chunks of text from other sites, wouldn't it be appropriate to provide a link and acknowledge the source?