Politicians have already sealed the fate of the dollar
It was rather refreshing to watch Congressman Ron Paul in his questioning of former Fed Chairman Paul Volcker. The point that Congressman Paul was trying to make - a warning that I have been making for years - is that the post-Bretton Woods fiat dollar standard is over. I wrote about this very subject back in November with this piece.
The most discouraging thing about the exchange between Congressman Paul and Chairman Volcker is that it was probably a flop. Congressman Paul wasn't trying to discover that the dollar standard is over so much as he was trying to put on an exhibition for the consumption of his colleagues. In other words: he wanted his colleagues to understand that the dollar standard is over, and the Congress must get its act together. For one reason or another, the others didn't seem to mentally process this message.
The United States government, the biggest sub-prime borrower in the world, is bankrupt. Without artificially low interest rates and cheap credit, its jig is up. If the market were allowed to function, the way it needs to, interest rates would rise and the insolvency of the government would be exposed outright. Good riddance. The problem with the Soviet government collapsing wasn't that it collapsed, but that it collapsed because it collapsed the economy. No doubt, our economy, too, will collapse as the politicians scramble to save socialism and hold onto power. In order for the recovery to begin, the welfare-warfare-police state has to collapse. Unfortunately, very few politicians understand, much less care about, the present situation we are in. Instead, they go along with fantasies to justify the spending orgy and holding onto power. As a result, the dollar's fate has been sealed, and the demise will be that much more chaotic.
We need market-cleansing bank runs. The money supply should be contracting faster than capital. Instead, politicians keep doing the same thing, only with more intensity. We are burning through what remains of capital and savings, i.e., living through a slow-motion run on real wealth. When store inventories are exhausted and the retail sector is finished off, that is when it will become self-evident that the dollar is bankrupt. You will see a sudden and rapid exit from the dollar, and Washington's game will be over. The dollar is already bankrupt. Most people just have yet to figure this out, but eventually the market will.
At this stage, any politician that advocates more government spending should be in jail. Since politicians in Washington will dependably do the inverse of the right thing, Americans need to start extricating themselves from the present arrangement. We need to tell Washington to leave us alone. States should secede from the union and return to using sound money. Until we are back to using sound money, the price mechanism will not work, the market won't be able to discover real prices, and there will be no economic recovery.
Mark served honorably for four years on active duty in the Marine Corps infantry, and was a Libertarian endorsed candidate for a municipal office in 2002. He re-enlisted in the ARNG in 2006 because he was depressed/at times SI without the military. He has held the NFA Series 3 license (futures and futures options broker) which he did a voluntary withdrawal on because he couldn't in good conscience sell managed futures since firms would do better to hire an in-house trader to trade a proprietary account with a discount broker, which he outlined in his well-written withdrawal request. Since the year 2000, he has spent much of his free time reading the great minds of the Austrian School of economics, such as Murray Rothbard, Henry Hazlitt, Ludwig von Mises, et al.