Is the U.S. Dollar Dying?

Today the top headlines on the WSJ is that China is buying a huge U.S. food company, Smithfield Foods.  Who in China?  China's largest meat processor. 

If this goes through it will be the largest Chinese takeover of an American company EVER!!!

So what happens if the world starts looking to other ascendant countries as having a MORE PROMISING FUTURE than the USA?  Simple....they will start using those country's currencies...and the dollar will start to fade...and the wealth will begin to flow AWAY from the USA.

We KNOW this is going to happen.  What we don't know is HOW FAST.  It could be a breathtaking slide of confidence where the world literally flees the U.S dollar....or it could be a slow fade, where we wake up in 20 yrs and realize that the typical America can't afford to travel to Canada because our money is so worthless their.

The U.S dollar is shrinking as a percentage of the world's currency supply, raising concerns that the greenback is about to see its long run as the world's premier denomination come to an end.

When compared to its peers, the dollar has drifted to a 15-year low, according to the International Monetary Fund, indicating that more countries are willing to use other currencies to do business.

While the American currency still reigns supreme -- it constitutes $3.72 trillion, or 62 percent, of the $6 trillion in allocated foreign exchange holdings by the world's central banks -- the Japanese yen, Swiss franc and what the IMF classifies as "other currencies" such as the Chinese yuan are gaining.

"Generally speaking, it is not believed by the vast majority that the American dollar will be overthrown," Dick Bove, vice president of equity research at Rafferty Capital Markets, said in a note. "But it will be, and this defrocking may occur in as short a period as five to 10 years."

For a country with a budget deficit in excess of $1 trillion a year, the consequences of losing standing as the world's reserve currency would be dire.

"If the dollar loses status as the world's most reliable currency the United States will lose the right to print money to pay its debt. It will be forced to pay this debt," Bove said. "The ratings agencies are already arguing that the government's debt may be too highly rated. Plus, the United States Congress, in both its houses, as well as the president are demonstrating a total lack of fiscal credibility."

"The No. 1 security issue we have as a nation is the preservation of the U.S. dollar as the world's reserve currency," said Michael Pento, president of Pento Portfolio Strategies. "It's a thousand times more important than a nuclear bomb being tested by North Korea. It's a thousand times more important that we keep the dollar as the world's reserve currency, and yet we are doing everything to abuse that status."

The dollar's seemingly precarious status is why Pento remains bullish on gold and believes the dollar's demise as the premier reserve currency could end even sooner than Bove predicts -- perhaps by 2015.

"Five to 10 years -- that would be an outlier," he said. "I would say 2015, 2016, that would be the time when it becomes a particularly salient issue. When we're spending 30 to 50 percent of our revenue on debt service payments, we enter into a bond market crisis. The dollar starts to drop along with bond prices. That would set off the whole thing."

Here;  http://www.cnbc.com/id/100461159

This guy sounds an awful lot like what we have been blogging about for the past 5 years!  Ever since we won WWII we have had the privilege of having our U.S. dollars as the world's ONLY RESERVE currency!!  So we have a built in demand...which serves to retain value.  (remember supply and demand curves from Econ 101?)  Even better than that WE OWN THE PRINTING PRESS!!

So whenever Congress and the White House can't balance the budget (aka..."live within our means") they just dial up the U.S. Treasury and tell them to sell some more IOU's and put the money in our check book please.

"But Dennis...what if no one is willing to buy all the IOU's that the U.S. Treasury is selling?"

Have no fear friends....if no one bids on our IOU's at an interest rate DEEMED DESIRABLE....then the Federal Reserve steps in and "buys" the IOU's from the Treasury!!

Brilliant!! 

The big problem is that the Federal Reserve HAS NO MONEY!!  It's all just an illusion.

It is a giant Ponzi scheme...and one day Humpty Dumpty will fall off his wall...and all the Presidents, Congressmen and Senators will NOT BE ABLE TO PUT HIM BACK TOGETHER AGAIN.

Remember friends....America is NO WHERE mentioned in the Last Days Bible prophecy.  What this means is that for some reason America is not a player.  We like to believe that the rapture is what puts the final nail in America's coffin...but maybe it's our financial mismanagement and collapse that makes us unable to attend the events of the Last Days?