anoither very good resume from Peter of what is going on and where we are heading to. must read.
rest of the article:
"Now that the Fed has recklessly shown its hand, the mad dash to get out of Treasuries and dollars should not be far off. The more the Fed prints to
buy bonds the less the dollar is worth. Holders of our debt (read China and Japan) understand this dynamic. We must expect that they will not only
refuse to buy new bonds, but they will look to unload those bonds they already own.
Under normal circumstances, if creditors grew concerned that inflation was eating into their returns, the Fed would raise interest rates to entice
them to buy. However, the Fed will avoid this course of action as it fears higher rates are too heavy a burden for our debt laden economy to bear. To
maintain artificially low rates, the Fed will be forced to purchase trillions more debt than it expects as it becomes the only buyer in a seller’s
Just last week, Chinese premier Wen Jiabao voiced concern about his country’s massive investments in U.S. government debt. In the most unequivocal
statement yet by the Chinese leadership on this issue, Wen made it plain that he was concerned with depreciation, not default. With his fears now
officially confirmed by the Fed statement, we must wonder when the Chinese will finally change course.
There is a growing consensus that if China no longer wants to buy our bonds, we can simply print the money and buy them ourselves. This naïve view
fails to consider the consequences implicit in such a change. When the Treasury sells bonds to China, no new dollars are printed. Instead, China
prints yuan to buy dollars which it then uses to purchase treasurers. This effectively allows America to export its inflation to China. However, now
that we will be printing the money ourselves, the full inflationary impact will fall directly on us.
With such a policy in place, America has now become a banana republic. It won’t be too long before our living standards reflect our new status. Got
For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated
investments, read Peter Schiff’s book "Crash Proof: How to Profit from the Coming Economic Collapse".
(visit the link for the full news article)