Wednesday, October 14, 2009

Central Banks Fleeing U.S. Dollar

Banks are fleeing the U.S. dollar at an unprecedented rate as 63 percent of new cash is going into the euro and yen rather than the dollar over the last three months.

A decade ago the U.S. dollar accounted for about 66 percent of investment for the new cash in banks, while today it stands at only 37 percent.

Overall the greenback is only 62 percent of the currency reserve at central banks, the lowest level ever that has been recorded, according to the International Monetary Fund.

The obvious reason is it's losing it's value at an unprecedented rate, as it's down 10 percent over the last 90 days alone, generating interest in abandoning the U.S. dollar as the reserve currency and looking at alternatives, although that would take time to happen.

In the short term, money will continue to flow away from the dollar as the extraordinary run of the printing presses of the Federal Reserve and the outrageous Obama administration bailouts continue to hammer the U.S. dollar into the ground.

Government, central banks and investors are getting more concerned about the U.S. dollar going forward, as the almost non-existent return isn't worth the money they've invested in it to cover the growing U.S. government debt.

"He's (Bernanke) in a crisis worse than the meltdown ever was," said Peter Schiff, president of Euro Pacific Capital. "I fear that he could be the Fed chairman who brought down the whole thing."

With the horrific decision by the Obama administration to bail out everything, it has left no viable options on the table, because if the Federal Reserve raises interest rates, it'll smother any economic growth and clobber the housing market, which would slump back into a horrid situation it hasn't even escaped at this time.

On the other hand if he keeps things like they are, inflation could go as high as into the triple digits, collapsing the economy into something we would no longer recognize.

As Schiff and others have rightly concluded, "The stimulus is what's toxic -- we're poisoning ourselves and the global economy with it." Unfortunately no one that has power to make monetary decisions has the political and personal will to step in and stop the monetary madness of the Obama administration and the Federal Reserve.

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