We are at the most perilous point that this Global Economic system has faced in decades.

The Dollar and US debt are reaching critical points of no return.

Current US debt is as below:

The Gross National Debt

This is probably the best explanation of the 2008/9 Credit Crisis to date. For those still wondering what the hell happened.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

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I was wondering about the acronym “FIAT” when used to describe our “money”. Greenspan says, “I believe it is short for Financial Instrument Administering Theft, but I am not sure. Could you please confirm? Thanks!”

Gold will cont to incr. in purchsg power as long its infltn rate (supply) < than the incr in the money supply. Mine supply incr = 1.5% ann

Weimar Germany — Mark
Post-World War I Weimar Germany was one of the greatest periods of hyperinflation that ever existed. The Treaty of Versailles was essentially a financial punishment placed on Germany to make reparations.

The sums of money to be paid by Germany were enormous, and the only way it could make repayment was by running the printing press. (Huge unpayable debt — that sounds familiar. I wonder what the solution in the U.S. will be.)

Inflation got so bad in this period that German citizens were literally using stacks of marks to heat their furnaces. Here is a brief timeline of the marks per one U.S. dollar exchange rate:

April 1919: 12 marks

November 1921: 263 marks

January 1923: 17,000 marks

August 1923: 4.621 million marks

October 1923: 25.26 billion marks

December 1923: 4.2 trillion marks.

“Under the infallible leadership of President Franklin Roosevelt, it was made illegal to own gold. On March 11, 1933, he issued an order forbidding banks to make gold payments. On April 5, Roosevelt ordered all citizens to surrender their gold — no person could hold more than $100 in gold coins, except for collector’s coins. He also made it unlawful to export gold for payment abroad, unless done through the Treasury. The penalty for defying Roosevelt was 10 years in prison and a $250,000 fine.”

But the official demise of the dollar was locked into place in 1971 when “Tricky Dick” Nixon completely severed all ties between the dollar and the gold standard. During the decade that followed, the U.S. experienced some of the worst inflation in its history, only matched by today’s U.S. monetary and fiscal irresponsibility.

The U.S. of A. has all the characteristics set in place that have led to the collapse of every other fiat currency money in history.

We are currently at war, and the financing of this war is extremely inflationary. In fact, if you look back at our history, since 1914, the U.S has engaged in 16 military conflicts. We have been involved in some form of violent international accord in 44 of the past 93 years. The overwhelming majority of military conflicts result in monetary inflation.

The U.S. has a debt similar to that of Weimar Germany. All though the reasons for the debt are completely different, it appears thatthis Mount Everest of IOUs is going to be impossible to pay back. I guess the U.S. could just print 10 trillion dollar bills and hand them out, but the implications of such actions are obvious.
We are currently increasing the supply of dollars at a rate of 13% per annum. This overissuance of a currency has been the leading indicator of a currency on the brink.

So what’s in the future for the dollar?

Some, myself included, might say that the dollar has already failed. It has lost over 92% of its value since its initial issuance in 1913. After the revaluation in 1934, the dollar dropped another 41%. In my opinion, it already is toilet paper money, but for the above-mentioned characteristics, which are alarmingly similar to the circumstances that led up to the eventual collapse of the dollar’s toilet paper predecessors, I believe that we have seen only the tip of the iceberg of the dollar’s inevitable path toward becoming toilet paper money.

My Next predictionof Currency Controls for USA citizens…

An Interview with Doug Casey from Cafayate, Argentina

Interviewer: Doug, we recently talked about getting assets out of your home country, especially the US, where to take them and what to do with them. In so doing, you touched on the inevitability of currency controls just ahead, especially for Americans. Can you tell us more about that?

Doug: Yes, I’m quite serious about what I said about “the grim reality of impending currency controls.” As the global economy continues to deteriorate, governments will have to appear to be “doing something.” It’s going to become very fashionable to institute some sort of foreign exchange control.

Why might that be? Because obviously, people who are taking their money out of the country are unpatriotic… Besides, getting money abroad is obviously something that only rich people would do…and of course, it’s time to eat the rich, as well. For those two reasons, there won’t be much resistance to controls. And the state gets to appear to be “doing something.”

And when they do, more people – at least those with any sense – will get scared and really try to get their money out, which will exacerbate the run to the exits. The bottom line is that if you want to get your money out, the time to do it is now. Beat the last-minute rush.

I don’t know what form the exchange controls are going to take, but there are two general possibilities: regulation and taxation.

The regulations might take the form of a rule prohibiting you from taking more than X-thousands of dollars abroad per year without special permission. No expensive vacations, no foreign asset purchases without state approval.

As for the taxation, if you want to, say, buy foreign stocks or real estate, you might have to pay an “Interest Equalization Tax” or some such. So, you could do it, but it’d cost you a lot of money to do it.

Something like either of these, or both, is definitely in the cards.

Interviewer: But aren’t foreign exchange controls something from the past? I mean, where do they exist today?

Doug: Well, foreign exchange controls have been used since the days of the Roman Empire. A country debases its currency, raises taxes beyond a certain level, and makes regulations too onerous – and productive people naturally react by getting their capital, and then themselves, out of Dodge. But the government can’t have that, so it puts on foreign exchange controls. They’re almost inevitable at this point.

Almost every country – except for the US, Canada, Switzerland, and a few others – had them until at least the ’70s. I remember leaving Britain once in the ’60s, and a border guy searched me to see if I had more than 50 pounds on me. In those days currency violations in the Soviet Bloc countries could get you the death penalty. Things liberalized around the world with Reagan and Thatcher, and then the collapse of the USSR. But you have to remember that that was in the context of the Long Boom. Now, during the Greater Depression, things will become much stricter again.

Interviewer: Okay, so, we talked last week about Americans at least setting up a Canadian bank account and safe deposit box, and better yet going in person to Panama, Uruguay, Malaysia, or a similar place to do the same. And once there, you advised getting with a lawyer, either referred by someone you trust or found through an interview process, to set up a corporation that can handle your assets and investments for you. This all needs to be reported but it’s wise to do it in advance of the higher costs or other limitations to come.

Doug: Yes. While US persons must report foreign bank and brokerage accounts, safe deposit boxes are not – at least not yet – reportable. This leads me to the biggest and best “loophole” when it comes to potential foreign exchange controls, and that’s foreign real estate.

I’m of the opinion that, broadly speaking, real estate as an asset class is going to be a poor performer for a long time to come – but that won’t be equally true across all countries. Real estate in countries that rely on mortgage debt to buy and sell will continue to be the worst hit.

People don’t understand that buying property with a mortgage is just the same as buying stocks on margin. It’s caused speculative bubbles and malinvestment. Until the malinvestment in those countries is entirely liquidated, you don’t want to invest in real estate in them. But a lot of countries, especially in the third world, have no mortgage debt whatsoever. Zero mortgage debt. You want a piece of property, you pay for it in cash. That keeps prices down and the market much more stable. And it makes for more interesting speculations, because if a mortgage market develops in the future, it could light a fire under prices.

But, from the viewpoint of foreign exchange controls, the nice thing about real estate is that there is no way they can make you repatriate it. Other than owning a business abroad, real estate is the only sure way to legally keep your capital offshore.

Interviewer: So, part of your thinking here isn’t just speculative. You’re talking about strategies for wealth preservation, not just in the face of foreign exchange controls, but more aggressive, predatory taxation and confiscation by the state – they can seize your assets, even real estate, in the US, but not abroad.

Doug: Exactly. Argentina is excellent from that point of view; rights to real property are, if anything, better than those in the US In many ways, Argentina is culturally and demographically more like Europe than Europe. Uruguay is also excellent, although culturally it’s like a backward province of Argentina.

I’m not currently up-to-date on the Chilean real estate market, but Chile is definitely now the richest and most advanced South American country, and an excellent choice. Brazil is fine. Colombia is improving greatly. Ecuador has a goofy president, but parts of it are very nice, and it’s about as cheap as Argentina. Eastern Bolivia is interesting, actually, despite Morales. Only Venezuela is out of the question in South America – but Chavez won’t last forever. It’s just a pity they have all that oil, which is always a corrupting influence.

Interviewer: Well, then, what about Central America? I know you prefer South America for speculative purposes, but what if someone wants to park a lot of wealth by buying a couple miles of beautiful beachfront property in Costa Rica, or some place like that?

Doug: I was a big fan of Costa Rica for many years… The first time I went down there was 35 years ago – but it’s a different place now. Then, it was very cheap, and now it’s very expensive. And it’s totally overrun with gringos. So, Costa Rica is not of that much interest to me at this point; it’s pleasant, but there’s limited upside.

I think an excellent place to be in Central America is Belize. Although culturally and ethnically, it’s not really part of Central America; it’s part of the Caribbean.

Interviewer: And they speak English there.

Doug: They do indeed, though things are changing. The Guatemalan government has always regarded British Honduras, which is what Belize used to be called, as part of Guatemala. There have actually been confrontations between Britain and Guatemala over this. But that’s in the past; now there’s a different problem. Guatemalans are rolling over the border in much the same way that Mexicans are in Texas, New Mexico, Arizona, and California.

So, the character of Belize is changing, but for the foreseeable future, it’s still going to be Belize, and I rather like it. Aside from Panama, Belize would be my first choice in Central America.

The problem with Central America, however, is that it’s a bunch of small countries that have historically been very unstable…The most culturally advanced country in Central America, not counting Mexico, of course, since it’s in North America, is Guatemala. But Guatemala has had huge troubles with violence, which has only recently come to an end… I hate going through checkpoints at night, manned by jumpy, uneducated, heavily armed teenagers.

Nicaragua is the low-cost alternative. Panama is probably the best choice. It’s very international, very urban (in Panama City), and it’s very sophisticated, infrastructure-wise.

If I didn’t like Argentina and Uruguay so much, I would put Panama at the top of my shopping list.

To be continued…