QUESTION: Mr. Armstrong; You seem often to be the guy with the level head when everyone else is losing it. Now we have this doomsday day prediction of the end of the dollar come September 27th to 30th, depending on the guru selling newsletters. They are focused on the IMF simply recalculating the SDR to include the Chinese yuan. You have taught me so much this smells like another con job. I think this is once again going down with the lunatics like Porter Stansberry who predicted the “end of America” if I recall in 2010 and in 2011. There were no riots and food shortages and the dollar is still the reserve currency. I think it would benefit many if you would comment on this. I realize you would probably prefer to laugh and have a drink of scotch you like so much.
ANSWER: Yes, I suppose it’s worth a comment since there are so many people that get sucked into such scams. All of these crazy forecasts of the end of the world have something in common. They are all predicated upon two connected delusions. They typically hate the dollar to start with and this feeds this idea that gold will rise if the quantity of money is increased. This was how they led so many people to lose their shirts from 2011 predicting $10,000 to $100,000 gold all because of Quantitative Easing. Gold rises when the confidence in government declines. It does not rise because the quantity of money was increased.
This theory of the quantity of money is COMPLETELY AND BLUNTLY – BULLSHIT. Here is gold from 1980 to 1999 when it fell intraday from $875 to under $300 while the national debt rose from about $1 trillion to almost $6 trillion. They will never talk about that and whenever they are forced to say something, they call it a bank manipulation intent on keeping only gold down perpetually to of course support the dollar. Bankers do NOTHING out of the goodness of their heart nor patriotism. If there is a buck to be made, they are there. If not, they will never spend billions to keep gold down with no immediate profit. There was no decline in public confidence between 1980 and 1999. Gold began to rise because “smart money” feared the coming euro. Plain and simple. They would be surrendering their currencies for the euro and nobody new what would happen. The euro fell from par to below 90 cents before it rallied. It was not the quantity of money, but what would be money.
There is absolutely no empirical evidence whatsoever that their theory has EVER been correct. These people have NEVER traded real money. They have no such experience whatsoever and just make up this nonsense to sell stuff for dollars they say will collapse and become worthless. That alone is curious indeed. Why sell newsletters for dollars who then forecast are worthless in a matter of days?
Whatever the IMF stuffs in the SDR (Special Drawing Right), it has no bearing whatsoever on the reserve status of the dollar, which is entirely based upon (1) geopolitical security, (2) political security, (3) depth of the bond and equity markets just for starters. It is total gibberish and honestly not even plausible. All we heard was how the euro was going to end the dollar as the reserve currency. Well, the IMF put that into the SDR. Why is the dollar still the reserve currency? It is up there with the predictions of YK2 in 2000 to the end of the gold exchanges in New York and London would collapse because China would begin to trade real gold not paper gold in Shanghai. Ya. Good one.
New York is still the main center for gold trading. Shanghai did not end that one either. These people are constantly making up schemes to portray the dollar as worthless. They never look beyond the shores and grasp what is happening globally. They are just ignorant of global events or how the world economy even functions or its not good enough to scare people to buy their newsletter or book. Emerging markets have issued dollar debt nearly equal to 50% of the total US national debt. Bonds can be issued in dollars without permission of the US government anywhere in the world, which is not true for many currencies like the Japanese yen. That is what makes the dollar the reserve currency. Hop on a plane to Moscow or Beijing and go shopping. Pull out a $100 bill and you have no problem. Go to Starbucks in New York City and try to pay with a €10 bill or ¥100 note from China. Good luck. That is the difference with a real reserve currency. That will not change because of some calculation at the IMF. The US government allowed skids of $100 bills to be sent to Russia. It was called the Money Plane. This was even discussed in Congress after exposed.
Just ask yourself, if the Russia goes into war in Europe, the Middle East erupts in warfare, and China goes into conflict with Japan, where do you want to park your money? When the euro is in complete disarray, the European banking system is really screwed because to be politically correct the banks had to have a piece of their reserves in all member’s bonds since there was no euro central bond, do you really want to hold your money in euro? An SDR they claim is only for the “financial elite” which again is a complete lie. The rich cannot park their money in SDRs, nor can Apple, IBM, Ford, Goldman Sachs, Warren Buffet, Bill Gates, or any corporation. This is purely a fictitious basket used internally at the IMF for loans to governments in trouble. There are other currencies in the SDR including the British pound and adding the Chinese yuan will not alter the world. It is merely an accounting feature and it is simply being done as a political recognition. There are no bonds in SDRs for any pension fund to park money. Give me a break!
These shysters might as well say send me 10% of your net worth, for it will be worthless anyway, and I will tell you what to do with the other 90% that will be even more worthless if you do not rush and send me the 10% before it becomes worthless. Anyone can stand up on a soap box and preach or forecast whatever they want at Speaker’s Corner in Hyde Park located in London. It’s an old tradition. Do people really take everything as real or is some of it just entertainment?
Look. We are headed into a monetary crisis that will end up resetting the monetary system. There are already proponents in Washington who support ending the dollar as the reserve currency because the Federal Reserve has become the world central bank by default and they have had to surrender domestic policy objectives because of international policy objectives. That means the entire theory of stimulating the economy under Keynesianism has utterly collapsed. If the Fed feels it needs to raise interest rates, the world lobbies against that because it would impact them since they issued their debt in dollars. Hello! That is losing domestic control which is surrender to international policy objectives. This is why many are starting to see the reserve status of the dollar is not always so great.
The IMF has been lobbying to have the SDR as the replacement for the dollar so the USA can turn back to its own agenda. But many are reluctant to hand that power to the IMF, myself included. The IMF is up for sale. It has been highly corrupt and any new reserve basket should be administered by an entirely new agency – not the IMF.
I have been in private meetings behind the curtain around the world arguing for this position. So I know first hand what is going on and who backs what and why. I have met with former board member of the IMF on such issues. The dollar will not collapse because it is not the reserve currency as these fear-mongers predict. These people are engaging in pure sophistry. The ONLY way to make that transition to end the dollar as the reserve currency is to STOP government borrowing, end the public debt, stop the income tax, and do a debt-to-equity swap (see Solution).
Socialism is ending. Governments are broke. Central Banks took rates negative and many pension funds by law must invest only in government bonds. Hello! Anyone smell disaster here? We either default wiping out all pensions, or we make a transition in an orderly fashion. That’s our choice. I am glad I am not 21 for I get to check out of this world and do not have to live in this chaos that will emerge and that is a totalitarian atmosphere. We fix this, or deal with the consequences. This BULLSHIT these people spread only fuel the ignorance of what we are really facing. They only make trying to fix this mess far worse.
These stupid sales-jobs that the world will end because the IMF will include the yuan in the SDR is just not even worthy of debate. It is just gibberish, but dangerous, since it misleads people as to the truth behind the curtain about to pop out on the stage..