1. nations around the world are creating non-dollar trade agreements to reduce exposure to the dollar.
2. OPEC nations are looking at selling oil in a new currency and though they say the plans they are drawing up are for the long term, they would have to say that to not cause a panic. For awhile they were denials from some but, now, it is out in the open that they plan to end using the dollar but, we don’t know when or what the trigger will be for the switch.
3. The bulk of the G-20 is calling for a new global currency with a better backing.
4. The World Bank has said the dollar’s reign must end and this was from a President we appointed.
5. The IMF has stopped using dollars as much for loans and now is using SDR’s
6. Europe and other nations are turning their back on the U.S. to support emerging market nations who are the loudest in calling for an end to the dollar.
7. China is trying to spend as many dollars as it can to avoid buy more treasuries than it already does and has been backing off in some of its purchases.
8. Our interest on debt is not a major problem yet, at 8.6% of tax revenues but, the President projects it will consume 15% by 2014 and some economists say it will be 28%. The President also has interest consuming almost 20% (19.3%) by the end of the decade and that is with all tax revenue projections being met with no economic slowdowns for the next 10 years.
9. None of the policies that are weakening the dollar (i.e. driving jobs, business and investment dollars out of the U.S.) are being considered for reform. In fact, a tax increase is in the works that will be added to state and city tax increases that have us already as one of the top highest tax nations. Many people only look at the federal tax and forget that all taxes are added together to make a business uncompetitive with lower tax nations.
10. The FED is determined to devalue the dollar and though they say it helps exports, it is actually to help get debt under control by paying the interest with lower value dollars. They are also one of the biggest buyers already, of our debt. They just use “purchases” and “swaps” and let the money they printed for those “purchases” and “swaps” be used for buying our debt. Another round of QE will weaken the dollar more.
11. We now borrow $8 trillion a year. $1.6 is for new debt and the rest is to pay off maturing debt and then getting the bond, note, or bill holder to buy it back or find a new buyer. The treasury has a site where you can see the amount for the current fiscal year and the last month’s borrowing here.
http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_jun2010.pdf
12. We now borrow the money to pay interest on debt. 3 departments consume all the tax revenues. Defense, Health and Human Services and Social Security. 35%, 35% and 30% for the three departments. However, of course, we tell our lenders we pay them from tax revenues and borrow for those departments. Whether you add it up one way or the other, we are still digging a hole we can’t get out of even if we stop digging.
The President’s “Debt Commission,” has said we can’t grow or tax out of this. We have to cut spending but, if we do, we will have a depression sooner. If we don’t cut spending, then the risk to the dollar rises rapidly. A depression, however, reduces tax revenues and that means we either borrow, print or default on our debt, and printing and default destroys the dollar too.
From what I am reading, I get the feeling a dollar crisis could be a few months to a year, maybe two, in the making. The biggest problem is that we have no way out of this. No matter what the government does now, it makes things worse. We end up with a depression now or later but, we can’t avoid it due to the decades of creating jobs that depend on government spending.
52% of the nation now gets substantial income from the Government. The Government spends about 65% of National Income and National debt alone is over 100% to National Income and over 90% to GDP which will fall in a depression or serious downturn unless the government increases spending. The current positive GDP was about 3% but, we had to spend 11% of GDP to get it. We now lose money, according to LEAP 20/20’s think tank article on each dollar we borrow (40 cents).
About 1 in 4 jobs is tied to government spending. 700,000 jobs and $800 million tax revenue in Florida comes from defense spending and just one major city in Tx. has 200,000 jobs tied to defense spending. Ca. is included in that range too, with over 700,000 jobs tied to defense spending. 44 states make parts for just one jet fighter. One reason both parties keep spending more on defense is because of the millions of jobs tied to defense spending and they don’t want those added to the current unemployment numbers.
All of these things weaken the dollar because they are unsustainable with the private sector shrinking while the public sector spending increases and more jobs are tied to that spending.
- Jan Paul
