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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2 replies on “The Great Debate©: Is the Fed Destroying the Dollar?”

  1. I think the articles are slightly different.
    The first is that the real purchasing power of the USD for US citizens will decrease over time. (I understand tht over the past say 100 years that if interest is taken into account this is true after tax, depending on your tax rate, but not significant after interest is taken into account but not taxes).
    The second is about the role of the USD in the world and it’s value in other countries currencies. If there are all out efforts tom create a level of inflation (as suggested in the first article) then other countries may also be doing it, which could mean that both articles are substantially correct.

  2. @robcartervn Professor John: as I see reason 4 final Paragraph ” Merely make a dollar worth five cents, and those seemingly impossible government promises become quite payable.  The problem with this “solution”, however, is that it also requires making most people’s life savings worth five cents on the dollar.” will also nobble PRC plan to profit in similar destruction of USA international trade currency hold, at the same time make huge profit for PRC by suddenly requiring USA to pay gold or other currencies to clear the huge current account shortfall fsavoring PRC at the same time refusing to renew USD based $1.3tr of Sovereign Bonds so USA must give gold or cash USD or other currencies with similar effect if returned for demand of gold and metals etc., even commodity futures from USA after the currency becomes worthless? This expert failed to suggest as such, even Japan would join that band wagon for another $1.2tr bonds non renewals [email protected]

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