End of the Dollar

There is a looming crisis that can turn the United States into a 3rd World Country overnight. This crisis is the collapse of the US dollar. The United Nations along with Syria, Iran, Russia, China and the Oil Producing Arab States are all calling for a global currency to replace the unstable dollar. China and Russia dumped the US dollar in December of 2010 and began trading in the Russian ruble and Chinese yuan.

There are two prominent reserve currencies today: the US dollar and the Euro.  These two reserve currencies comprise the bulk of all assets held by foreign governments, and both are used as the standard savings mechanism for smaller and lesser developed countries.

After the Second World War the United States dollar, then backed by gold, served as an essential central medium of exchange. Most European nations now use the Euro as a secondary reserve currency of choice.

The Federal Reserve has made large-scale purchases of long-term US bonds (Quantitative Easing) — essentially printing billions of dollars. This is causing countries holding US dollars to look for a new reserve currency.

A number of countries hold a significant portion of the US debt, which is essentially in the US dollar.  Should China, the largest owner of US debt sell its holdings, the dollar would plummet drastically overnight.

A recent United Nations report says the dollar’s movements have been too erratic to hold value and the U.N. urges central banks to replace it.

What will be the result of the dollar loosing reserve status:

  • The dollar’s value will plunge overnight
  • US credit markets will collapse
  • US interest rates will soar
  • The price of Oil, Food and Consumer Products will grow steeply
  • The price of gold and other precious metals will explode
  • The US will experience hyperinflation

Currently the following countries hold the bulk of US debt:

                       
Country               2010 Year   
                     ------ 

China, Mainland       906.8   
Japan                 877.4   
United Kingdom 2/     477.6 
Oil Exporters 3/      213.9
Brazil                177.6
Hong Kong             139.2
Carib Bnkng Ctrs 4/   133.7
Russia                131.6
Taiwan                131.2
Canada                125.2   
Switzerland           101.3   
Luxembourg             78.5    
Thailand               66.2    
Singapore              63.6    
Germany                60.1    
Ireland                41.4    
India                  41.1    
Korea, South           41.1    
France                 35.1    
Egypt                  34.9    
Mexico                 34.9    
Turkey                 27.6    
Poland                 26.3    
Italy                  21.0    
Norway                 18.7    
Israel                 17.9    
Colombia               17.3    
Belgium                15.7    
Sweden                 15.0    
Netherlands            14.6    
Chile                  13.6    
Philippines            12.9    
Denmark                12.5    
Australia              11.8    
Malaysia               11.6    
All Other             161.0   
Grand Total          4310.2

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