Ben "Weimar" Bernanke Sets Stage For The Dollar's Collapse

Thursday, November 04, 2010

Word has probably gotten around that the Federal Reserve will buy another $600 billion in US Treasuries in the next 8 months. This figure coincides with the net issuance of US debt and is proof that the USA will go the way of the Weimar republic which is the most famous example where a country tried to substitute dwindling revenues with money fresh off the printing press.
What is different this time is the circumstance that the USA's downward spiral finds an equal counterpart in Europe. Both Federal Reserve Notes (FRN) and the Euro will continue their race to the bottom against that 2,800 year old international currency aka gold.
As the Fed's holdings of total domestic debt will grow to $2.6 Trilion or roughly one fifth of GDP, Ben "Weimar" Bernanke has shifted into the next gear of Ponzinomics where a system can only be kept alive by continuously growing. Stop the inflow of fresh money and it will collapse. It has never been different in history. As QE2 confirms expectations that the Fed will continue on the path of monetary inflation the USA will find itself beyond the point of no return.
Now the question shifts to timing the inevitable as only one thing in QE2Infinity will change: the zeroes.
We are now in the 4th year of the crisis, taking the subprime meltdown in August 2007 as a starting point.
Adding in the political factor that the result of US midterm elections effectively guarantees a political stalemate there is not much hope for any meaningful reforms that would lead to a path of more sustainable budget deficits and a deleveraging in the banking sector.
Bernanke now has added another $600 bilion to the debt balls he already juggles. Once foreign investors will demand higher yields for increasingly risky US debt it is very likely he will not be able to keep them all aloft.


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