 The Dollar-Titanic
The fiat-dollar is a disaster waiting to happen
Alex Wallenwein
August 9, 2004
It's just like the Titanic
in a way, except that this currency-cruiser is not really about
to hit an iceberg. Instead, it has been set on a wrong course
from the very beginning (meaning 1971) with the rudder structurally
tethered so that the course cannot be changed. Unfortunately,
the inevitable consequence of this is that, the longer this ship
sails, the greater is the likelihood that it will hit dry land
- eventually. (And that eventuality isn't too far away anymore,
as July's non-farm payrolls fiasco has shown us today!)
The only question is: will
it hit a nice, sandy beach - or a steep, jagged cliff?
A mighty ship she surely is,
this fiat-pleasure cruiser of ours. The entire world's monetary
and international trading system has learned to ride on it. But
most of the world (except for the top monetary thinkers of every
nation, maybe) has no clue that it is about to hit rock-bottom.
Unfortunately, too many of
us peasants, and especially our families, friends, co-workers,
and happy-hour drinking buddies, have no idea what's about to
hit us, either. That's because this monetary juggernaut is currently
sailing through a huge, artificially created bank of extremely
dense fog - the fog of a massive, coordinated, deliberate, and
pervasive public disinformation campaign.
This 'fog' is to make sure
that everybody has their eyes (and all of their desires and hopes
for the future) firmly fixed on the ship itself - and not on
what may lie ahead.
How awesome, how splendid a
ship she is, isn't she? She has sailed on an inflexibly straight
course for over thirty years now, and she's still plowing full
steam ahead in all her glory. That's longer than some of us "investors"
have been alive. A whole generation has grown up that cannot
remember the days of the gold standard, or even the gold exchange
standard, in action - and that generation has now come of age
and is "investing" left and right as if this fiat-ship
could never sink.
"Just look around you,
friend," they say. "Not a single sign of danger anywhere
in sight!" (thus quoth the blind man who can't see his own
hand before his eyes).
This officially sanctioned
disinformation-fog is surely doing its job.
According to this ship's congressionally
appointed 'captain' (whose hands are just as tethered as the
rudder is) this fog-diversion is absolutely 'necessary'. It's
even in the interest of 'public policy.' Can't allow a "panic"
to occur, right?
"Whaaaat?" they scream
when you tell them there is danger waiting ahead: "you say
we should invest in golden life boats? You say we should prepare
to abandon this stunning palace of floating pleasure that has
thus far satisfied our every whim? Are you insane? Who would
want to leave this gorgeous ship? Lifeboats? ...Lifeboats? We
don't need no stinkin' lifeboats!"
"You say there is danger
ahead? You say our dashing captain might as well be a blow-up
doll like the emergency pilot in the Mel Brooks movie "airplane?"
You dare call him incompetent? You misanthrope! You party
pooper! Don't you see we are having a great time here? Why don't
you just get yourself a drink and relax, buddy? Maybe you should
see a shrink about that. Ha! Ha! Ha!"
(Meanwhile, below deck,
a group of slightly better informed people has been busily sawing,
hacking, and hammering away at whatever wooden furniture they
could find on board in order to construct at least the semblance
of a lifeboat. It's a fledgling currency that is to be launched
alongside the Dollar-Titanic so that, just in case we should
hit something untoward on our journey into nothingness, at least
some of the Titanic's passengers can and will be saved).
Eventually the work is completed.
A good number of passengers have been persuaded to contribute
to this new vessel (most of those on "Deck E," aka
"Europe,") and they have jumped on it and launched
it successfully. Thus, the euro came into being.
At first this new vessel was
steaming right alongside the giant dollar-cruiser, but it soon
fell behind, left in its mighty wake. (Watch the remaining Titanic
passengers jeering and hollering from the back of their main
deck, shouting "Ha! So you thought you could pass us up,
huh?" So you thought your measly little contraption can
compete with the mighty Titanic, hmm?)
And so they sailed, on and
on. But soon their pleasure cruiser started showing the effects
of decades of taking on "water" (speak: tens of trillions
of dollars in total indebtedness, a mammoth current account/trade
deficit, and an equally large budget deficit, etc., etc.) To
their utter disbelief, those pleasure-prone cruiser-captives
were forced to watch 'that dinky little lifeboat' catch up with
them. (Apparently there is less fog to the rear of the ship than
to its front!)
But as the euro-lifeboat began
to pass and pull ahead of the Titanic in December 2003/January
2004, its captain (named something like "Trichet"),
figured that there were too many headwinds that made its little
engine work too hard. He figured that, for the time being, it
was wiser to sail downwind from the Titanic - so he "spoke
the word" and the little lifeboat slowed somewhat.
Not too much, though.
Just a bit. Just enough to
make the Titanic actually work in favor of the euro - without
even realizing it. (In economic terms, Trichet intimated in January
that the ECB "might" lower ECB interest rates, and
that slowed down the euro's relentless advance enough to let
the dollar catch up a bit - just enough to make sure a too-strong
euro wouldn't undercut the EU countries' struggling export markets
any further. By all appearances, it turns out that was a most
successful move).
Now the dollar-captives are
jeering again - but a great number of them, those who are not
from the tribe that built this cruiser, are really just sitting
by the railing, waiting, until the Titanic runs aground. They
are just making sure they can 'jump ship' at the first opportunity
and wade over to the (in terms of total indebtedness) much lighter
- and therefore far more maneuverable - euro boat. Once there,
they intend to complete their journey, leaving the dollar-tribe
to rot on their stranded carcass of a ship.
In the process of all this,
physical gold (another form of 'lifeboat,' made of a substance
that naturally "floats" on top of the ocean of human
value judgments - especially when times get rough) will suddenly
be 'remembered' even by many of the dollar-tribe. It will see
a tremendous rise in popularity.
One can only hope that the
dollar-tribe's memory gets jogged before this fiat-whale
finally beaches itself.
And that's how things look
from here - through the periscope of the EURO vs DOLLAR CURRENCY
WAR MONITOR.
Got gold?
Aug 7, 2004
 Alex Wallenwein
Editor, Publisher
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Alex Wallenwein
writes the Euro vs Dollar Currency War Monitor. He is helping
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