The Death Of The Dollar? 11 Signs That We Could Be On The Verge Of A Global Currency Crisis

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Over the past several decades, the U.S. dollar and other major currencies around the globe have been continually devalued, but they have still remained stable enough for trade to flourish and for the world to enjoy an unprecedented era of prosperity.  However, that all may now be changing.  Many analysts now fear that the new $600 billion program of quantitative easing by the U.S. Federal Reserve may set off a round of “competitive devaluations” across the globe that could precipitate a global currency crisis.  If that happens, it might not just be the death of the dollar that we are talking about.  Instead, we could potentially see the death of fiat currencies worldwide in the coming years.  Under the current system, nations have a built-in incentive to devalue their national currencies because it gives them a competitive advantage in world trade.  In fact, quite a few countries have been doing this for years, but in 2010 currency devaluations have become a “hot button” issue and the extreme actions taken recently by the U.S. Federal Reserve and other global central banks have pushed us to the brink of a global currency war.


The U.S. dollar was the first fiat currency to ever be used as a true reserve currency literally all over the globe.  For decades, nearly the entire world has had a tremendous amount of faith in the U.S. dollar and in U.S. government debt.  If the world was to lose faith in the U.S. dollar and in U.S. government debt, the entire global financial system would crumble.  Unfortunately, thanks to the foolish actions of the Federal Reserve, it looks like that is exactly what is starting to happen.

The following are 11 signs that we could be on the verge of the death of the U.S. dollar and of a global currency crisis….

#1 China’s leading credit rating agency has downgraded U.S. debt to “A” in the aftermath of last week’s announcement of a second round of quantitative easing by the Federal Reserve.

#2 Top finance officials from China, Russia, Germany, Brazil and many other countries all over the globe are expressing anger over the decision by the Federal Reserve to initiate another round of quantitative easing.  A number of key exporting nations are now evaluating whether or not they should devalue their own currencies in retaliation.

#3 Alarmingly high sovereign debt levels in Ireland, Portugal and Spain are raising fears that the euro is set for another significant tumble.

#4 Investors are flocking to precious metals as they become disillusioned with paper currencies.  On Tuesday, gold closed at $1,409.80 an ounce on the New York Mercantile Exchange, and silver soared to a 30-year high of $28.46 an ounce before moving back down a bit.

#5 It isn’t just precious metals that are exploding in price.  Virtually every major commodity has been skyrocketing in price in 2010, and things only accelerated once the Federal Reserve announced this new round of quantitative easing.  Some analysts fear that this commodity bubble could put significant inflationary pressure on economies across the globe.

#6 The head of the Federal Reserve Bank of Dallas is admitting that for at least the next eight months, the Federal Reserve is going to be monetizing U.S. government debt.

#7 One top Citibank official has publicly declared that he believes that central banks around the globe are going to start dumping U.S. dollars in the coming weeks.

#8 Earlier this year, Japan publicly intervened in the foreign exchange market for the first time since 2004.  Japan’s stunning 12 billion dollar move to push down the value of the yen made headlines all over the world.

#9 Even economies that are on a relatively solid footing are openly attempting to manipulate currency rates in 2010.  For example, the Swiss National Bank experienced losses equivalent to about 15 billion dollars trying to stop the rapid rise of the Swiss franc earlier this year.

#10 Things have gotten so desperate that World Bank President Robert Zoellick is actually proposing that the world’s biggest economies should consider using gold as an indicator to help set foreign exchange rates.

#11 Unfortunately, the financial problems of the U.S. government look like they are only going to get worse.  According to the Wall Street Journal, in order to repay maturing bonds and finance the budget deficit, the U.S. government will have to borrow 4.2 trillion dollars over the next year.  If other nations decide that they are tired of the games and that they are going to stop lending so much money to the U.S. government, where will all that money come from?  Would the Federal Reserve step in and monetize most of it?

The truth is that the United States financial system is starting to come apart at the seams.  America simply cannot run a half trillion dollar trade deficit and a trillion dollar federal government budget deficit each year indefinitely.  There is no way in the world that those twin deficits are sustainable.

If the Federal Reserve thinks that it can solve these problems by printing up a bunch of money and throwing it on to the table they are sadly mistaken.  The main thing that is going to do is cause a dramatic drop in the faith that other nations have in the U.S. dollar and in U.S. government debt.

But without faith in the U.S. dollar and in U.S. government debt, the world financial system is headed for a world of hurt.  If the rest of the world starts rejecting U.S. dollars and U.S. Treasuries, the fallout will be horrifying.

Not only that, but if we do start to see a full-out currency war with nation after nation “competitively devaluing” their currencies, we might see faith being lost in all paper currencies.  If that happens it will create a financial horror of unprecedented proportions.

So let us hope that cooler heads prevail and that we don’t see a full-fledged currency war break out.  Let us hope that faith in the U.S. dollar and other major currencies remains high for as long as possible.

Because once the “tipping point” comes, there will simply be no putting the toothpaste back into the tube.

  • hipshotpercusion

    And, Obama and all his family and friends are dancing and singing with Indian School children, while he stabs us in the back! Did I mention, that this little(sic)Dicktator spends OUR money like a drunken Sailor(with apologies to drunken Sailors)?

    Wake up Sheoples!!

  • zack

    Anyone that still has faith in the US dollar isn’t paying attention. Of course, chances are if you’re reading this site, you ARE paying attention and are taking the necessary steps to protect yourself by diversifying investments away from the dollar.

  • mondobeyondo

    It’s starting to get ugly.

    How nice of us to print more bucks and throw them into the mix. It will make our products cheaper overseas, but their products more expensive for us to buy (sorry, no French wine this Christmas! Can you settle for Napa Valley champagne?)

    So those overseas will try to allow their currency (euros, etc) to drop in value, so Americans can buy more of their stuff. Maybe even a bottle of authentic French wine.

    In the end, everyone loses, and nobody will be able to buy anything. Ahh yes.. hyperinflation! And it probably will be global.

    This is not good.

  • mondobeyondo

    Bye, bye Miss American Pie…
    Drove my Chevy to the levee, GM almost died.
    You good old folks keep drinking whiskey and rye.
    This whole situation makes me wanna cry.

  • Stray Cat

    Gee Wally, I’ve always wanted to be around when the currency collapses. Ya think Mom and Dad know about this?

    I don’t know, Beav, but I guess we better get home and tell them. Maybe we can pick up some gold and silver on the way, huh?

    Yeah, Wally and some ammo too?

  • A Dodgy Bloke

    What can I say most of the folks I listen to or read are saying we’re reached the tipping point and in the next 24 48 months the world as most of the people in the western world knows is over. I’m frightened because this is a global issue not just a US issue, everybody has spent money they don’t have on badly ran programs of dubious value. Students are rioting in the UK Morgan Kelly wrote a very good article in the Irish Times about a US style mortgage melt down in Ireland. Most of the EU (Not just the reviled PIIGS) have some sort of fiscal problem either with Government debt or their banks are in trouble or both.
    What will be fascinating to watch is how people react here in the US, most people are either totally asleep. Or are aware something vaguely is wrong, and don’t understand any of it but hope if the ignore it or ridicule it the monster will go away. How will it end some think it will be a crash in hard assets, and commodities will go to the moon. How people will react not being able to get to work, eat or warm their homes. I think once the death plunge starts foreclosures will simply overwhelm the system. How will Police react not being able to get paid once the currency is worthless? Things to think about.

  • Rod

    Nitpicking, but China downgraded the USD and Europe/UK credit from AAA to AA.
    The USA could CRUSH China in one go if they wanted to, which no doubt would do absolute wonders for domestic production :-)
    But it ain’t gunna happen…

  • Mr Carpenter

    Rod, if the US crushed China (presumably I am reading into this “militarily crush”) then we would in fact be absolutely no better than Japan was with their sneak attack in 1941, nor any better than Nazi Germany in attacking Poland in 1939.

    The reality is that the borrower is the slave to the lender, and the Untied Status of Amerika has become a slave, with no intentions of honoring its debts.

    My WAG (wild-ass guess) is that this will become a worldwide collapse and we’ll see a good third of the world population die out within a matter of months. Including a large proportion of the (once) US citizens.

    And we won’t be dying peacefully in our sleep, by my WAG, either.

  • Tumbleweed

    This has been in the making for a long time. The End of National Currency [look under Foreign Affairs by Ben Steil-May/June 2007].

    Summary:Global financial instability has sparked a surge in “monetary nationalism”–the idea that countries must make and control their own currencies. But globalization and monetary nationalism are a dangerous combination, a cause of financial crises and geopolitical tension. The world needs to abandon unwanted currencies, replacing them with dollars, euros, and multinational currencies as yet unborn.

    ** so far we have seen the news try to test the waters with a “new look” for american currencies, we have a so-called expert on Depression era at the helm [I think we on this site could have done just as well without the in-depth knowledge he supposedly has]and creating their own new credit rating agencies in Iran and China…..I like the part “multinational currencies as yet unborn!…

  • Collin

    I’m and a little naive when it comes to politics or how the economy works. Can someone break it down to basics. Talk of buying ammo and a third of the world dying is scary. What would happen if currency i.e notes in your wallet, suddenly became worthless overnight. Are we talking about everything stopping dead in it’s tracks? Nobody bothering to show up to work, police, doctors, nurses, delivery trucks, that kind of thing. So when already existing supplies currently in the shops are bought out there’s no more? Then we have to fight each other to survive? Are we serious? Or am being paranoid?

    • seeing through the smoke

      give it 12 to 24 months, when everyone else in the world says we aren’t accepting dollars anymore, and u have to have 5 dollars to buy one peso. it’s coming guaranteed

  • whitewash

    the irish bankster crisis !!! what a joke…..Ireland is in a black hole when it comes to the banks, this is commerical property crisis shoe droppping….Next we are going to have the consumer shoe dropping…,Lenihan is right it is pointless going to ECB for a bailout. If this was in the US it would mean many (16)TRILLIONS OF DOLLARS (36 trillion to blush the banks clean if ireland was the USA)
    It looks like Ireland will be leaving the Euro…But staying in the EU. Ireland is in for a world of pain….the worse crisis sense the great famine… This was planned !!! over several years in plain sight…,that what happens when you have dumb,greedy, arrogant, self centered,politician’s in Ireland.
    You the Irish people will be paying for this for years to come….(celtic tiger my arse),
    As one irish man said to me “my grandparents went to school bare footed and it looks like my
    grandchrildren will be doing the same….” Get ready for a 90% haircut in the standard of living
    (third world living)

  • I personally don’t understand enough about world markets and economics to know what to think about all of this. Are they purposefully trying to bring on an economic disaster? If so, why? Aren’t these the guys that are supposed to know better than the rest of us – if so, why do we see disaster and they don’t unless they actually want one. Time to start learning how to survive with a lot less! Is there any way out of this mess or did I bring my child into a world she will be unable to live in?

  • Dee

    Were done! Finished. Over. Our country’s debt is far to great to turn the tide now. Jesus Christ please take us out of here!!!!

  • Greg L

    $16,000,000,000,000.00 debt divided by 330,000,000 people living in the USA. = $48484.84 per person to pay off debt to equal 0.0

    I don’t know about you, but that’s a good years salary for a job. Why don’t all people in this county just work for one full year each and take home nothing, just a smile that you helped the county out of debt. Wait until it hits 17T.

  • Guy

    ^A reasonable tax code and an end to a series of pointless and extremely expensive wars (War on Terror, War on Drugs) would go a long way to fix that. Wouldn’t be instant, but would at least start reducing it.

  • marvin nubwaxer

    baloney. what are they selling here? i’d say snake oil.

  • seeing through the smoke

    Check out how Venezuela’s’ government works, how the people live. welcome to the new u.s. Tyranny has triumphed again. We had a few decades of the American dream, a “real mid class” now she’s over. archive Mad Max the movie, u better start hoarding gas oil and food. oh yea, and lots of ammo, just like the government did. To use against you when the dollar fails, social security checks quit coming, food stamps end, and unless u have gold or silver u ain’t getting any meds. The boys in Washington have sold us out to the big banks, and they’re chunking it up! opinions, everyone’s got one, right??