Shorting the US Dollar

Will Germany’s hyperinflation happen to the US? Yes!

The huge ball of excess money that is traveling around the world creating the real estate bubble and now the treasury bubble, will roll on over to the US Dollar. The world will short the dollar and dump it on the market, ensuring a hyperinflationary depression in the United States.

Here is an quote from a great article describing what they don’t teach in economics class.

The Weimar Hyperinflation? Could it Happen Again? by Ellen Brown 

Schacht Lets the Cat Out of the Bag

 Light is thrown on this mystery by the later writings of Hjalmar Schacht, the currency commissioner for the Weimar Republic. The facts are explored at length in The Lost Science of Money by Stephen Zarlenga, who writes that in Schacht’s 1967 book The Magic of Money, he “let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the ‘accepted wisdom’ the financial community has promulgated on the German hyperinflation.” What actually drove the wartime inflation into hyperinflation, said Schacht, was speculation by foreign investors, who would bet on the mark’s decreasing value by selling it short.

Short selling is a technique used by investors to try to profit from an asset’s falling price. It involves borrowing the asset and selling it, with the understanding that the asset must later be bought back and returned to the original owner. The speculator is gambling that the price will have dropped in the meantime and he can pocket the difference. Short selling of the German mark was made possible because private banks made massive amounts of currency available for borrowing, marks that were created on demand and lent to investors, returning a profitable interest to the banks.   At first, the speculation was fed by the Reichsbank (the German central bank), which had recently been privatized. But when the Reichsbank could no longer keep up with the voracious demand for marks, other private banks were allowed to create them out of nothing and lend them at interest as well.

Sound familiar?

The shorting of the dollar will cause a huge implosion. This will be the “waterfall effect” that Martin Armstrong has been talking about the last year. Another global currency or basket of currencies will have taken hold or will be quickly created so global commerce can continue.

The same finanical derrivative instruments that imploded the real estate market will implode the dollar.

Prepare to get out of as many dollar investments as possible. The timing of this event is difficult to say, but one thing is for sure, it will happen, and it will seem to come “out of nowhere”, like the derrivative implosion in 2007.

 

5 places to put your money for the next 3 years

My assumptions:

• You have some cash you need to preserve for a rainy day, job loss, death of a spouse, kid’s collage funds, your retirement, etc.
• You have paid down your debt to a reasonable level.
• You have enough savings to pay your monthly expenses for at least 6 months.
• You live in the US and have most of your assets dominated in US Dollars.

Five Places to put your Money:

1. Cash for the unemployed rainy day goes into 2-3  brick and mortar banks near you. This cash should make up less and less of your net worth as the USDollar loses its purchasing power. You will move the cash into liquid tangible assets. Like…

2. Gold and Silver. This is the money you need to preserve its purchasing power over the next 3 years. I suggest dividing up that investment into coins (physical metals), allocated metals at a reliable bank vault (outside of the US), and an exchange traded fund like GLD or SLV.

3. Other non-dollar currencies. CDs or cash held in different currencies, especially those countries with large commodity-based economies, like Canada, New Zealand, and Australia. There are limited places to hold currencies inside the US, banks want you to hold dollars. Paypal will let you hold currencies in your account for a fee.

4. Food and energy related commodities. Anything from the actual commodity, index funds, or mining, drilling or processing stocks. Stick with mostly gas and oil for energy until solar and alternative energy really take off. Remember the focus is preservation, not a huge return.

5. Stored tangibles that could be consumed by you or your family during a time of unemployment or traded during a disaster. Such as canned goods, toiletries, medicine, generators. I am sure you can think of some other very practical things Planting a garden or fruit trees would fall in this category.

These investing suggestions are focused on first, saving for an interruption in income, such as unemployment, sickness, or natural disaster. Secondly, a complete breakdown of the USDollar and loss of purchasing power. And third, an extended hyper inflationary depression which includes disruption in the supply chain, massive inflation, higher interest for credit or no credit available, higher taxes, and massive under/unemployment (at least 30%) with rioting in certain areas.

It is in my opinion that these things will be set firmly in place and effecting everyone on Main Street before the end of 2011.

If you and your family prepare now as best you can, you will not be panicked when the time arrives.

If you need money during the hyperinflation period, sell investment option 2-4 or use investment option 5.

If you don’t need to sell, buy valuable investments cheap. People will be selling everything they can for whatever they can just to survive. This will be a time of opportunity and bargains.

After 3 years, modify your investment strategy to fit the situation. Things will not go back to the way they were and they will not stay the same either. Keep your eyes and ears open.

As with every investment, do your due diligence and consult your tax adviser.

9 out of 10 Economists Agree……

That the US economy will be moving out of the recession by the end of 2009.

Not the economists I read.

Anyway, may I just say a word about this media spin? About how  the end is near, the bottom is reached, the light at the end of the tunnel…all at the end of 2009.

First, “they” originally said it would be the middle of 2009.

Secondly, it will “look” like things are getting back to normal, but your checkbook will say something else.

The US Dollar is dropping in purchasing power. It will continue to drop and that will make the end of 2009 “appear” as if things are getting better. The stats will look better. However, it will be the illusion of growth created by inflation, not investment and industry growth.

The massive amounts of dollars flooding the global market will make its way back into the economy in prices, giving the illusion of profit and capital.

Finally, as soon as “they” say the financial crisis is over, hyperinflation will hit. The dollars flooding the global market will be dumped in the US, and the dollar will be worthless. A hyper inflationary depression, think Argentina and Zimbabwe, will occur. Prepare now. Hyperinflation comes quickly.

And when Ben and Tim say they can “drain” the excess money out of the system, they are lying. They may be able to do that before the world starts dumping dollars, draining just the last 18 months of their massive prining press solution.  But after the world decides to sell all the dollars it has held for the last 50 years, it is done, over, not to return.

Martin Armstrong-Alf Fields-Gold Predictions

Jim Sinclair gave a summary of the next move in gold and the USDollar. He agrees with Martin Armstrong and Alf Fields and others. Check out my blog roll for his website link. The bolded items are my comments.

Jim says that the bull gold market will be Alf Fields’ price in Martin Armstrong’s timing.

 

The punch line: gold will begin its third wave up in June. This wave will top at least $3500. Bolded items (and red updates) are groovygirl’s comments.

From Jim Sinclair Predictions:

1. Gold reacts as currency support for the dollar enters mid June to a slow decline (that is the official definition of a strong dollar policy, really). Gold is now trading as a secure currency, not a commodity. This is a completely different type of investor/investment.
2. End of 2nd week going into the beginning of the 3rd week of June Gold launches towards $1000 and this time through the neckline of the reverse head and shoulders formation. Update August 24, 2009…we are still going sideways, battling deflation, trend to change soon. Wait for it….wait for it. Update October 13, 2009…looks like gold is moving up along the trend line again. We will have to fall below $800 to break this trend upward. Conversely, the dollar index is moving downward, it will have to move above .86 to break the downward trendline.
3. Gold rises to $1224 where it hesitates. Update Dec 9, 2009: we are experiencing the hesitation, not a break in trend. Don’t panic.
4. The OTC derivative market takes on the dollar as short sellers into dollar support.
5. This OTC derivative currency short position builds.
6. It is the US dollar where Armstrong will get his WATERFALL. Martin has predicted a waterfall effect. This means a quick plunge, never to return. The US Dollar is soon to be toast. Get out NOW. This drop will be so quick, that you will not have time to move investments out of the dollar when it is clear you should do so. Especially, if all your assets are dominated in dollars. Update Dec. 9, 2009: John Williams of shadowstats.com is saying the same thing from another perspective when he predicts a hyperinflationary depression by 2015.
7. The main selling (for the dollar) takes place when Israel makes a major miscalculation. The timing for Israel is 2011. Update: October 13, 2009….we are experiencing extreme pressure on the dollar right now, but not a waterfall..yet until closer to 2015.
8. Hyperinflation is always and will continue to be a currency event. The government will continue to print money and a hyperinflationary depression will occur in the US. Timing for the start is 2011-2012. Update Dec. 9, 2009 John Williams is saying a start of the major decline in the dollar in 2012, but the extreme hyperinflationary period will be closer to 2015.
9. Hyperinflation will be a product of the upcoming massive OTC derivative short dollar raid.

Should I be correct in the gold price action going into late June, it will fit Armstrong’s criterion for a move to $5000.

Alf’s work permits an over-run of the gold price to $3500 in the major 3rd phase, indicating overruns into the major 5th. Translation….Martin is predicting a major move in gold to $5000. If he is correct, Alf Fields’ prediction of $10,000 per ounce before the bull market is over (during the 5th wave) is completely conceivable. Update October 13, 2009…we are firmly in gold’s 3rd wave and would have to break below $800 to break this trend. Update Dec. 9, 2009: continued confirmation of Martin’s timing (2015) and Alf’s numbers ($10,000).

Do not think you will make a huge ROI on gold and silver. Gold and silver will be so ridiculously high, because the dollar will be crushed, never to return to its value of  today. It will throw all the global fiat currencies of the world on edge.

 

The rules of investing are totally different from they have been the last 25 years. This is a world-wide currency crisis, a systematic breakdown. Your focus is to PRESERVE capital, especially if your investments are in USDollars. I can not stress this point enough.

Hyperinflation and the Dollar Crisis

If you read my blog regularly, you already know my view…..the US is headed for a hyper-inflationary depression spurred on by the continued loss of purchasing power of the US Dollar. The government will continue to print more and more money.

Beware, at first glance, a losing dollar will make the trade deficit and other stats look good for the economy. Main Street will quickly figure out that their cost of living is rising and their dollar doesn’t go as far as it used to. Everyone knows this and has seen this happen, especially in the last 7 years, but it is going to get worse, very quickly.

Here is a link to an excellent article at financialsense.com on hyperinflation and what to do with your savings during this time.

Although I do not agree with the author’s suggested allotment of savings to precious metal ETFs, his suggestions are sound. (I prefer to hold the physical metal, or at least a larger portion than suggested.)

Protecting your retirement savings, 401K, or IRA from the losing dollar over the next 3-6 years.

Solutions

Everbank.com will hold CDs in different currencies, but it requires a $10,000 minimum at the moment.

Pay-pal will let you fund your account and hold your money in different currencies for a small fee. (The fee will pay for itself when the dollar tanks.)

This is about preserving your capital, not making a return. You will be unable to make any return on capital in the future, if you don’t have any.

You can set-up an offshore account and have a number of currencies to chose from. (Remember always keep it legal and declare it on your tax return  

Buy gold coins or buillon. You can buy the physical stuff and take possession. My favorite option. You can have a bank or company store it for you in their vaults and assign the gold to you. You may purchase an ETF in gold or silver (GLD or SLV) through your brokerage or maybe 401K account. This is my least favorite option, as the ETFs will never have enough metal to back the paper they are issuing. Use this option if it is the only way you can invest in metals.

Purchase gold and silver mining stocks or index funds of those stocks.

Purchase oil and gas ETFs and /or mining/processing stocks.

For long term, all food commodities are a good place to park money (through index funds, individual stocks, actual commodities or processing stocks).

Reverse index funds having to do with real estate or bank funds that rise when those indexes fall. This is risky and short term, use money you can lose. We have not reached a bottom yet, more decline to come in these stocks.

Two final thoughts

The stock market will be apt to high volatility during this time. So any investing associated with stocks and funds, beware of ups and downs. The long term trend will be up for these types of stocks, but with the uncertain economy, they may take the rocky scenic route to get there.

Never put more than 10% of your net worth in one investment with one broker/bank. Spread it out. If you want to invest 30% of your savings in gold related investments, do 10% coin in your possession, 10% in another vault (outside your home country), and 10% in stocks or ETFs with another brokerage house. Another example, if you want to invest 30% of your net worth in stocks, use 3 different brokerage/banks houses (with at least one outside the US banking system).

As always, these suggestions are only my opinion, do your due diligence on any investment and consult your tax adviser.

Jim Sinclair says, “It is NOW”.

I read Jim’s website daily. He has been right on target since I started reading in 2005. Heed his warning, the next leg down in the economic crisis is starting NOW and will go into 2011.

Martin Armstrong’s timing with Alf Field’s gold price.

Here is a taste:

This is without a doubt the most important piece of information we will present to you this year. What you will read ahead addresses the pivot point of the literally thousands of missives we have posted here on www.JSMineset.com telling you this is coming. It is happening here and now. Be prepared and stay strong.

We are approaching the beginning of the final drama in this unfolding OTC derivative meltdown. This is the beginning period for the 5th leg of Alf Field’s correct analysis.

This is the re-acceleration of the long down wave in Martin Armstrong’s Business Cycle analysis. This is the approach of the acceleration of the gold price into my price objective of $1650 by January 14, 2011.

Link to Jim Sinclair’s entire post May 20, 2009

What to do:

Buy physical gold and silver, take possession.

Insiders are selling

Alistair Bair with MarketWatch.com lifts the curtain on what all those executives are doing. The insiders are selling. This could mean another leg down soon for the stock market.

Read Mr. Bair’s complete article here.

Regardless of whether the stock market tumbles some more or insiders just need cash for some reason, the conclusion is clear. Insiders are NOT getting back into the market right now. This means that the market is NOT stabilizing, contrary to what Timmy and everyone else is saying. I noticed that Ben has not been voicing his opinion on the market and economy. Maybe he is tired of lying all the time.

As an invetsor, you should be very cautious about getting back into the stock market. The stats are rigged from the government, all the fundalmentals point to further downturns in the next 2 years, the stress test were a joke, and most of all, the government spokespersons and TV talking heads say that the economy is looking better. Since they haven’t been right so far, I won’t bet on it.

However, more instability and lack of confidence means precious metals go up.

China is now in charge

There has occurred a fundamental sift in global power. Just as Britain relinquished financial power to the United States, so has the United States to China.

Anyone who thinks that China is not financially in charge of the future global economy should take a look at these charts.

Top Banks in 1999

 

Top Banks in 2009

 

In 1999, the US and Europe had most of the top banks, now China, in particular, then Asia and South America have the top banks. And who is Brazil’s new top trading partner, China.

This doesn’t mean that the US had nothing valuable to offer, but it’s global power is now on a downward slope. Keep this in mind for long term investing. And remember, South America and Asia do not invest, buy, or save like Americans and Europeans. These are different cultures with different priorities. The next twenty years will be completely unlike the last twenty years.

The Kondratieff Wave Predicts Coming Depression

“When the time cycle is up, neither Republican, not Democrat, nor our good President Hoover can stem the tide. It is natural law. Action equals reaction in the opposite direction.”  W.D. Gann 1928

Let us learn from past mistakes even if our government refuses. Mr. Gann studied Kondratieff’s Wave Theory. He predicted the Crash of 1929 and the following Depression. We again are entering the Kondratieff Winter Cycle. Do not fear, but be educated to choose a new direction, not an old lie.

At the Long Wave Group, they too, predicted the crash of 2008 and coming Greater Depression. You may download their (now public) January 2002 newsletter here.

So, you think the government can turn this thing around? Or you think that the government can make sure this thing doesn’t fall into a depression? Think that all you want, but invest as if it were happening now.

Let’s look at some of the prediction criteria for a K-Wave Winter Cycle:

(A full list is on page 13-14 of the down-loadable newsletter.)

Massive overbuilding in the capital goods sector. Check, real estate bubble is prime example.

An unprecedented increase in debt on all levels, public, private, and individual. Check, the government has huge debt levels. Social security and Medicare are headed into the red. Corporate credit derivative market is an unprecedented debt vehicle. We are already hearing about the huge debt level of consumers via housing and credit cards.

A huge increase in speculation in the stock market followed by a crash-”worse crash in 50 years“. Yeah…check.

Huge rise in commerical and residential real estate prior to the crash. Check…..

Speculative behavior not limited to one or two countries, but world-wide. Check….

Troubles in the banking system with a rising curve of bank failures up to a decade before the crash. I believe that if the government had not bailed out Long Term Management Group in 1999, there would have been a similar cascade of bankruptcies then as we are seeing now. Freddie Mac and Fannie Mae were technically bankrupt in 2003-2004. They have not released an independently audited balance sheet since 2004. We have in fact been experiencing banking/investment failures for the last 10 years, but they have been hidden from the public.

Increase in the number of people employed by the financial sector, including brokers, banks, investment advisors, etc. Check….

Donald Hoppe complied this list in 1988.

The point I am trying to make….this is a  normal cycle and it WILL become a depression. Do not listen to the talking heads that all will be well. It will not. Invest for a depression.

The problem is that most analysts work off of a 20-year database of information with only minor recessions in the mix. This is a classic example of bad or incomplete information in, bad information out.

How should you invest for a K-Wave Winter? Click here  for another post on “Winter” investing.

The Losing USDollar

Tyler Durben (yes, that’s what I said) over at seekingalpha.com copied this chart. A picture is worth a thousand words or just one word-inflation:

The US Dollar

 

No, it’s not your imagination. Your salary has doubled in the 10 years, but you can’t keep up with expenses.

Since the USDollar is a fiat currency, its purchasing power will continue to lose value as the government prints more and more money. Inflation is built into the system of fiat currency. As the chart above clearly shows the dollar has lost 94% of its purchasing power. This is called the unseen tax in most economic circles.

If you are holding your savings or retirement money in USDollars, get out now. Gold and silver is the best place to be until the world figures out what reserve currency they prefer.

Choose investments in your retirement savings plan that move with inflation such as commodities, agriculture, energy, and precious metals.