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Goyette: We're near the 'crack-up boom'

10/23/2009

To say that author and radio show host Charles Goyette is bearish on the US dollar would be a gross understatement. In a wide-ranging podcast at MartinKronicle.com that covered many topics in his new book The Dollar Meltdown, Charles Goyette discussed several hard-hit areas of the political economy that according to him will tank the dollar much further.

According to Goyette, the fallacy of "energy independence," the bumper-crop the Treasury is printing in US dollars, and vote-buying on the Hill are just a few on the list. But it's the US deficit that is the highest on his list. "The real level of the national debt is over $100 trillion - it's an amount of money that can never be paid off. The only thing the government can do is print a lot more money."

Paper money was created as a convenience, a claim-check on the gold, but there's nothing behind it anymore. "One day, those who are paid in $US will realize that they aren't worth anything. Look at gold over $1,000. The price of gold today is a referendum on the quality and quantity of the paper money."


Inflation Then Hyperinflation

A "bumper crop" is one where there is an over-abundance of corn, for example. There is so much corn, that each kernel is worth very little. That's what's happening to the value of the US dollar with the amount of them coming off the printing presses at the Treasury. "The paper currency is a declining asset and as that happens people will convert it to something of tangible worth, such as hard assets. Paper money can be printed with no cost to the politicians." When that happens, prices of raw materials and hard assets will rise in an inflationary environment.

"Sooner or later, everyone is going to realize that the only way we can pay back one bond is to issue another one and you have a situation where you're using MasterCard to pay your Visa." That's when Goyette thinks we'll see what Mises called the "crack-up boom," hyperinflation and the demise of the exchange economy.


Higher Crude Prices

Peak oil may be the new norm, not an outlier event. "When Nixon took us off the Gold Standard, the price of Crude Oil quadrupled. Ten years after that it was up 1,000 %." All because there was nothing backing the dollar. If the dollar continues its slide, you'll see crude prices going higher, "the current Administration is on a course to tank the dollar."

According Nobel winning Economist Joe Stiglitz, the cost of the Iraq war was $3 trillion and could go as high as $5 trillion, yet the first foreign nation to strike an oil deal with Iraq was China. "They are acting like Capitalists all over the world," said Goyette, "and they didn't spend $2 in Iraq."

That does not bode well for Americans - even while our summer driving patterns are as predictable as colder weather in the winter. Goyette also does not believe that the concept of energy independence is nothing more than a fantasy. "Every President since Nixon has been ringing that bell. Carter gave us the Department of Energy (DOE) and they've managed to spend $50 billion over the years and they not created a single drop of oil."

The Dollar Meltdown include several chapters on how Americans can preserve their wealth and personal sovereignty by converting their US dollars to hard assets such as various forms of gold, silver, and crude oil investments. But beware something like the Gold Reserve Act of 1934 where the Government made it a felony to possess gold and mandated that Americans turn it in for $20.67 - and then commanded that gold not be worth less than $35.00 - thereby fleecing Americans of $3 billion.

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