Reply #75: Final Days of US Dollar? [View All]

http://www.kitco.com/ind/Laird/apr262006.html

On May 5, 2004, I wrote an article entitled Mexican Stand-off. In it, I outlined the likelihood that foreign governments and institutional investors everywhere would reach a point of fleeing the US dollar. We may be looking at this situation quite soon.

The way it would happen would be that, many holders of large USD positions would be facing each other, waiting to see who pulls the trigger on the USD. Then all would fire at once, blasting each other with their USD asset sales, trying to salvage what remained of the real value of their US treasuries, US stocks, US bonds.

I surmised that, with the super fast electronic markets we have now, that, the USD could collapse in a matter of hours, not days or weeks. The idea that circuit breakers would stop this baby would probably fail because either the markets would just overrun them, or ‘bum rush’ them, or, there would be a week of limit down days, followed by another week of limit down days. End result? Possibly a complete or almost complete USD crash.

In such a scenario, I surmise that only paid off real assets will survive. At the inception of such a collapse, gold and other precious metals would become essentially unavailable, and off market. The USD would crash so fast that no one would take any amount of dollars for metal until either the USD stabilized at some much lower rate, or, disintegrated into oblivion.

If you own a paid off house, a paid off car, a few hundred ounces of gold and silver, they are all paid off, and are not USD assets. In these positions, you are insulated from a USD collapse, at least as far as these paid off assets are concerned.

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