The Great Debate©: Is the Fed Destroying the Dollar?

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There are two diametrically opposed camps on this question. This Great Debate© presents arguments from each side. First, Daniel R. Amerman, CFA, MBA will explain why he thinks inflation is the tool of choice (although he does argue at one point that the Fed has “effectively no choice“) and what the motivation of the Federal Reserve Bank is in pursuing the inflation policy. The opposing position is presented by Gary Shilling as reported by the staff at Financial Sense.

Six Reasons Why The Government Is Destroying The Dollar

by Daniel R. Amerman, CFA,MBA

The United States government has six interrelated motivations for destroying the value of the dollar:

1. Creating money out of thin air on a massive basis is all that stands between the current state of hidden depression, and overt depression with unemployment levels potentially rivaling those seen in the Great Depression of the 1930s.

2. It is the most effective way to not just pay down current crushing debt levels using devalued dollars, but also to deal with the rapidly approaching massive generational crisis of paying for Boomer retirement promises.

3. It creates a lucratively profitable $500 billion a year hidden tax for the benefit of the US government – a tax which is not understood by voters or debated in elections.

4. It creates a second and quite different form of hidden taxation by way of generating artificial market highs, which while non-existent in inflation-adjusted terms, do create artificial investment profits that are fully taxable and highly profitable for the US government.

5. It is the weapon of choice being used to wage currency war and reboot US economic growth; and

6. It is an essential component of political survival and enhanced power for incumbent politicians. In this article we take a holistic approach to understanding how individual short, medium and long-term pressures all come together to leave the government with effectively no choice but to create a significant rate of inflation that will steadily destroy the value of the dollar over time.       Continue Reading …

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Six Major Reasons Why the Dollar Won’t Collapse

by FS Staff

This year, longtime bear and well-known economic forecaster, Gary Shilling, recently made a splash in the financial community by turning positive on the U.S. economy and dollar. Given the lingering amount of pessimism by many investors after two major stock market crashes and the fear of another repeat event, there’s at least one thing that Shilling makes clear that investors SHOULDN’T be worried about happening anytime soon: a collapse of the U.S. dollar. Given that a currency reflects the strength of the nation that issues it, it’s important to consider the following six reasons why Gary believes the U.S. dollar will maintain its strength as the global reserve currency for many years to come. The following are taken from his exhaustive study of dominant world currencies going back to ancient Rome along with comments made in his recent interview with Financial Sense.       Continue Reading …

Hat tip to John O’Donnell for pointing out the Daniel Amerman article.

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