The latest news on the implosion of the dollar. All paper currencies eventually revert to thier original value and the dollar is no exception to this rule. Ever since Nixon cut the dollar's last link with gold the destruction of the dollar was a forgone conclusion. Consider the following warning signs to the perfect financial storm.

1. The price of gold hit 887 today, a new record and will probably be well over 1000 before midyear 2008. At the beginnning of the Bush presidency gold was valued at 256 and when Nixon decoupled the dollar from gold it was at 35.

2. OPEC Finance Ministers are meeting to reconsider the pricing of oil in terms of dollars. They are considering pricing oil in terms of a basket of currencies. . Apparently, OPEC nations are tired of trading their oil for depreciating pieces of paper with pictures of dead American Presidents.

3. Central Banks have reduced their exposure to the dollar by 3.8%. More transactions are conducted with the Euro worldwide than the dollar. The Canadian dollar is now valued higher than the American dollar.

4. The dollar has lost over 50% of its value over the last 5 years. Bernarke has recently cut interest rates in the face a dollar that is in a freefall, indicating to the world the Fed, and the US Government care nothing about the value of the dollar.

At all costs the United States Government must stop printing dollars and balance its budget. The ability of the Fed to create money out of thin air and keep afloat the corrupt fractional reserve banking system must be abolished. The dollar must be redefined in terms of a specific quantity of gold, and banks must adhere to a 100% reserve requirement. Government issued paper fiat money has always been the tool of swindlers and cheats, and what the government has done to the value of the dollar just proves this point.

Good Day Winston,

I have been trying to make sense out of something I heard Fed Chairman Bernacke talk about recently.

TAF Auction - whose and what assests is the Fed selling off?

These structured credit products they talk about with currency bank swaps? This process sounds like what people use to do before e-commerce - whereby you go to a store and cash a check without having the money in the bank and you just keep chasing that check until you can deposit the money or the bogus check catches up with you.

Do you know anything about TAF Auction and currency bank swaps?
Jo4Peace

TAF (Term Auction Facility) is just another way for the Fed to inject liquidity (give banks additional reserves to create more money out of thin air) into the banking system. The traditional method for the Fed to inject liquidity into the banking system is to buy and sell US debt obligations. (Open Market Operations) For example, let us say the Fed buys a US debt obligation from a bank for $1,000. The Fed now has a $1,000 US debt obligation and the bank has an additional $1,000 in reserves. If the reserve ratio is 10% this will allow the bank create an additional $900 out of thin air. Note also the Fed could have just cranked up the digital printing press to pay for the US debt obligation so in reality $1,900 might have been created out of thin air. When the Fed prints money out of thin air to pay for US debt this is a process call monetarizing the debt. The second way for the Fed to inject liquidity into the banking system is through adjustments to the Federal Funds Rate. The Federal Funds rate is the rate at which banks borrow from each other overnight. Bernarnke just reduced the Federal funds rate by 25 basis points to 4.25. THe third method the Fed uses to inject liquidity into the banking system is through the discount window. The Fed will lend money to member banks through the discount window that are facing a liquidity crisis. Borrowing through the discount window, however, is expensive (the Fed has maintained a 50 basis point difference between borrowing at the discount window and the federal funds rate) and there is stigma attached to it. TAFs are another method the Fed has created to inject liquidity into the banking system. Basically the Fed is auctioning off reserves to member banks. Each member bank that is eligible to participate in the auction will be able to bid how much interest they are willing to pay for the reserves. This will assure that the reserves go to the bank that needs the reserves the most. These reserves must be collateralized with the Fed. Under the terms of TAF banks could offer collateral that is less sound than if they were to borrow through the discount window. So TAF might also be a method for the Fed to get marginal loans off the books of banks and socialize the loss of banks that engaged in risky loan behavior.

Currency swaps are used by companies and financial institiions to take advantage of different interest rates in different countries. For example it might be less expensive for an American Company to borrow money in Switzerland than in the United States, so the company floats a bond issue in Switzerland and then converts the Swiss Francs into dollars. Since the Company is based in the United States and earns dollars, not francs, the company will seek to lock in an exchange rate between the dollar and franc to protect itself from currency risk. Basically currency swaps are a method that allows companies and financial institutions borrow money were it is least expensive and still have the priviledge of paying off that loan in thier own currrency.

Pay attention friends. Gold hit 915 today and receded slightly. Market analysts say it will run over 1,000 before the end of this month - January '08. MR W.S. appears to have a fair handle on the market.