Great short video presentation on the dollar (2007)
Although the below film is outdated and does not reflect the recent swing towards the dollar, it rings true and projects where it will go. I don’t see the other currencies being too successful either though, considering they aren’t gold backed either. That is why I strongly support gold silver and oil (GLD, SLV, USO or BP). I own USO and BP.
Gold and silver are great but its oils time to ’shine’. It might take some time before it catches fire again, but it definitely will once the impact of the doubling of the FRB (Federal Reserve Bank) Balance sheet recently. Because the FRB uses a fractional reserve system which allows it to Lend $75 for every dollar it ‘has’ this means that the fed has the ability to monetarily create $150 trillion from the 2 trillion on its balance sheet currently. When this is lent out, commercial banks then turn around and lend at least 10x so this could turn into $1,500 trillion. Wait…what is that? A quadrillion. Yeah, within a few years that could be the next term to become familiar with (we’re only recently coming to terms with a trillion). This is starting to sound suspiciously like Russia, when they used their currency as toilet paper and barrelled it to the store. We’re going to see a return of the $1,000 and $10,000 and $100,000 bill.
There are two ways to capitalize on this. One is to have fixed rate debt like a 30 yr fixed mortgage. If inflation doubles dollars then your $1000 mortgage has just effectively become a $500 mortgage. Inflation is not good though, because salaries typically do not keep scale with inflation.
The other is to put money into commodities, which are the universal currency and were the original currency, like the old school fur traders. Or you can short the price of the treasury bond through TBT. This essentially says that the demand for dollars will go down and thus the price of bonds, and the yields will go up. I explain this in another post, search TBT.
Related posts:
- China finally declares that the US should no longer be the reserve currency of the world
- I’ve said it before and I’ll say it again. The decline still isn’t over and heres why I’m short the DJIA.
- Mark To Market accounting Relaxed…has anything really changed?
- Detaching regulatory capital requirements from Mark to Market
