Welcome to illuminati silver we tell you the
truth about silver.
Today is Wednesday 16th November 2016 and
we are discussing the implications of a US
dollar shortage and its effect on the rest
of the world.
For many months now, Jim Rickards and a host
of gold and silver pumper channels have been
raising the prospect of a dollar shortage
and impending economic and financial collapse.
We smiled at first when we saw this, as we
recall many of these channels have advocated
for many years prior, that there were too
many dollars in circulation and this was going
to lead to the collapse of the dollar and
then the US economy.
We have always advocated that the dollar rather
than weaken was going to strengthen and would
be the ‘go to’ currency during any global
financial distress, and it appears that this
may be borne out.
However the issue of a potential dollar shortage
is a serious one and has consequences, which
we shall cover here.
This we are going to do spread over two videos
as we prefer to keep each of our videos within
10 minutes and this is quite a complex subject.
In video 1 we shall be covering what is actually
meant as a ‘dollar shortage’ and how it
may be caused, and in video 2, which will
be published tomorrow, we shall cover its
implications for the world’s economy.
OK so what do we mean by a dollar shortage?
Well we shall quote Jim Rickards who is a
well-established author and generally acknowledged
to be well versed in this area. We will add
that we also think him to be just a little
too bullish on gold and silver and too bearish
on his timings for economic collapse; however
he is learned and is always worth quoting.
This is what he has had to say recently:
“The idea of a dollar shortage sounds strange
to many observers…… didn’t the Fed print
$3.4 trillion of new money from 2008–2015?
How could there possibly be a dollar shortage
with that much new money around?”
His answer to that is that the world created
new dollar-denominated debt faster than the
Fed created money. Every dollar printed by
the Federal Reserve has attached to it a 20-fold
pyramid of debt.
He goes on to say that this situation was
fine:
“as long as global growth was solid and
dollars were flowing out of the U.S. and into
emerging markets.”
However, the current global recession could,
and is, causing the servicing of such debt
to become an impossible burden, especially
as the dollar has gained such significant
strength. A stronger dollar means dollar-denominated
debt is more expensive. And debtors don’t
have the dollars to pay back those debts - hence,
a dollar shortage.
This raises the prospect of a new liquidity
crisis and financial panic worse than 2008…
There are not enough dollars to go around.
This situation could in fact be worsened,
if one considers that President-elect Trump’s
policies, could potentially lead to higher
interest rates and an even stronger dollar.
The FED already promising to raise rates in
December could cause the dollar to rise even
further and exacerbate this problem.
Even the Bank for International Settlements
has said:
“When so many borrowers have borrowed so
much in dollars… dollar appreciation exposes
borrowers and lenders to valuation changes
and, in turn, impacts their balance sheets…
If banks react to resurgent volatility by
reducing their intermediation activity, as
happened during the 2007–09 crisis, the
banking sector may become an amplifier of
shocks rather than an absorber of shocks.”
Which is banking terminology for global liquidity
crisis.
However this is not the only potential cause
of a dollar shortage as has been published
by Bloomberg just a couple of hours ago. They
quote under the headline “How Donald Trump
Could Exacerbate a Global Dollar Shortage”
– the following:
“While some analysts expect the dollar to
strengthen under his Presidency that's not
necessarily what's going to constrict funding,
according to new research from Deutsche Bank
AG strategists George Saravelos and Robin
Winkler.
Instead, the election of Trump sets the stage
for a further balkanization of global money
markets and an impediment to the free flow
of trillions of dollars' worth of different
currencies, including a curtailment of cross-border
transactions and the possible end of currency
swap lines offered by friendly central banks.
For instance Trump's plan to repatriate corporate
profits to the U.S. could take a chunk out
of the world's available dollar funding, since
as much as $2 trillions' worth of corporate
earnings currently sit outside the country.
A U.S. corporate tax holiday or even a simplification
of the tax code to encourage repatriation
would be most likely to impact the availability
of dollar liquidity for European banks, where
most U.S. corporate earnings have been re-invested.
While scarce dollar funding could be combated
by central banks aiming to ease strains in
the bowels of the financial system, Trump's
populist rhetoric puts the availability of
dollar swap lines from the Federal Reserve
in doubt. Such dollar swap lines, in which
central banks agree essentially to swap currencies
with each other, saw the Fed provide some
$600 billion worth of dollar liquidity during
the 2008 financial crisis. In a world of rising
protectionism and anti-globalization sentiment
it is doubtful that the commitment to such
facilities can be taken for granted in the
future. The provision of dollar liquidity
caused material political backlash in the
U.S. during 2008 and tolerance from a Trump-led
administration is likely to be even smaller."
So in other words, a rising dollar, a repatriation
of corporate profits to the US and unwillingness
by the FED to issue dollar swap lines can
and possibly is already leading to a serious
global dollar shortage.
Tomorrow in part 2 we shall discuss how this
situation could pan out, the timings of such
an event and its implications for gold and
silver prices as well as other asset classes.
Finally we would like to thank one of our
subscribers Ray Vahey who suggested we cover
this topic, and whilst it was on the agenda
amongst a long list of other subjects to be
covered, we have brought it forward – thank
you Ray for your suggestion.
We hope you have found this video interesting
and informative and if so, please give it
a thumb up and share it on twitter. Also kindly
visit our website at illuminatisilver.com
and if you haven’t already done so please
subscribe as a free member for regular email
updates and offers. Our Facebook page which
is updated daily can be found at facebook.com/illuminatisilver
Disclaimer:
Illuminati Silver owners come from a background
of Banking, International Wealth Management
and Economics. Having now retired from these
worlds we are not qualified to give investment
advice. Therefore, this and other productions
must not be deemed to be giving such advice
and merely represent the personal views of
its owners.
