Yes, someday the U.S. dollar will essentially be toilet paper but that is not in our immediate future. What is in our immediate future is a “flight to safety” that will push the surging U.S. dollar even higher. This is what we witnessed in 2008, and this is happening once again right now…and when the U.S. dollar soars the global economy tends to experience a contraction so the fact that the U.S. dollar has been skyrocketing lately is a very, very bad sign.
By Michael Snyder (theeconomiccollapseblog.com). This article* was originally posted under the title Guess What Happened The Last Time The U.S. Dollar Skyrocketed In Value Like This?
Most people who write about the coming economic collapse love to talk about the coming collapse of the U.S. dollar as well but, in the initial deflationary stage of the coming financial crisis, we are likely to see the U.S. dollar actually strengthen considerably…We are then going to experience deflation and, after that deflationary phase, the desperate responses by the Federal Reserve and the U.S. government to that deflation will cause the inflationary panic that so many have written about.
Today, the globe is more interconnected than ever and its financial system is more vulnerable to currency movements than ever before. Most global trade is conducted in U.S. dollars, and much of the borrowing done by emerging markets all over the planet is denominated in U.S. dollars, so when the U.S. dollar goes up dramatically it can:
- put a tremendous amount of financial stress on economies all around the world and
- potentially greatly threaten the stability of the 65 trillion dollars in derivatives that are directly tied to the value of the U.S. dollar.
In the chart below you can see the U.S. dollar moved upward dramatically relative to other currencies starting in mid-2008 and toward the end of the chart you can see that the U.S. dollar is now experiencing a similar spike:
At the moment, almost every major currency in the world is falling relative to the U.S. dollar. For example, this next chart shows what the euro is doing relative to the dollar. As you can see, the euro is in the midst of a stunning decline.
Instead of focusing on the U.S. dollar, those that are looking for a harbinger of the coming financial crisis should be watching the euro. Analysts are telling us that if Greece leaves the euro zone the EUR/USD could fall all the way down to 0.90. If that happens, the chart above will soon resemble a waterfall.
The yen has been crashing as well.
The Implications Of More Expensive U.S. Dollars
Unfortunately, most Americans have absolutely no idea how important all of this is. In recent years, growing economies all over the world have borrowed gigantic piles of very cheap U.S. dollars but now they are faced with the prospect of repaying those debts and making interest payments using much more expensive U.S. dollars.
Investors are starting to get nervous. At one time, investors couldn’t wait to pour money into emerging markets, but now this process is beginning to reverse. If this turns into a panic, we are going to have one giant financial mess on our hands.
The warnings signs are really starting to pile up. When we look back at past financial crashes there are recognizable patterns that can be identified and anyone with half a brain should be able to see that a large number of those patterns are unfolding once again right before our eyes. Unfortunately, however, [most people apparently do, indeed, only have half a brain because] most people in this world end up believing exactly what they want to believe. No matter how much evidence you show them, they will not accept the truth until it is too late.
[The above article is presented by Lorimer Wilson, editor of www.munKNEE.com and www.FinancialArticleSummariesToday.com and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
*Original Source: http://theeconomiccollapseblog.com/archives/guess-happened-last-time-u-s-dollar-skyrocketed-value-like (Copyright © 2015 The Economic Collapse)
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