No Way Out: A 50% Dollar Devaluation

[Jcrowley]

NO WAY OUT: A 50% DOLLAR DEVALUATION
by Robert McHugh, Ph.D.
January 14, 2007

Artificial Economics, the brainchild of the Master Planners, has focused on building an economy where debt — not income — pays for goods and services. The emphasis upon debt instead of income via hyper-inflating the money supply in stealth fashion, has destroyed the dreams of millions of Americans. Artificial Economics is a silent economic disease. A coming significant devaluation of the dollar is a likely and necessary consequence.

The use of hyper-inflated money supply to postpone a recession over recent years has served to create an imbalance between income and assets. Debt covered the gap for a while, but now debt is extreme, with a limited useful life. With high paying jobs being exported, and a limit to what is essentially slave labor from illegal immigrants, future productivity gains which translate into income are almost entirely technology dependent. If technology fails us, then the debt-to-income imbalance, then the asset-to-income imbalance must be reckoned with. Undoubtedly, that reckoning will either be a nasty recession/depression — where asset values drop below debt levels, leaving us with an imbalance between both assets and debt, and income and debt — or a significant and sudden devaluation of the dollar.

What is accomplished by a significant and sudden dollar devaluation? It is a way to pay off debt with suddenly-more-available dollars; cheaper dollars. We have been witnessing a slow meticulous devaluation of the dollar over the past two decades, with an acceleration over the past decade. This has come from an increase in the money supply via the credit creation route — debt. But that has served to replace income, and postpone a recession, at the great cost of hyperinflation of real estate, related taxes, and just about everything you buy. The result is debt. Once the debt creation train stops, then there will be no way to pay for things; no way to pay off that debt. There will soon be a point of no return, with an inevitable sudden and significant dollar devaluation as the only solution. It would require the Treasury printing an amount of money equal to the current entire money supply, more than 11 trillion dollars, and literally handing it out to each household so that the broadest spectrum of people have the ability to payoff their debt. Debt does not rise in value as the dollar devalues. It is a contracted amount in former-dollar-value, notional terms. Thus, if we suddenly hand several hundred thousand dollars to each and every household, a dollar will become worth 50 cents in real terms, but in debt terms, it will still be worth a dollar, and folks will have more of them.

http://www.financialsense.com/fsu/editorials/mchugh/2007/0114.html