Consequences of Fed Policy and Lack of Congressional Oversight

The dollar is really just an "idea" in the minds of people the world over who are familiar with it. Dollars are a "promise to pay" and are freely exchangeable for goods and services. They used to represent fixed amounts of gold or silver, but no longer, and as a result, their value fluctuates (while the value of gold and silver -- expressed in how much gold or silver one needs to "buy something" -- has remained pretty much the same).

If lots of people familiar with the dollar begin to think that it might become worth less in the future, then one could say they have less faith in the "promise to pay" and will probably demand more dollars for their goods and services. This can make the dollar "drop like a rock."

At the same time, there are monumental efforts afoot to "prop up" the dollar at home and abroad, not the least of which are vast sales of gold and silver futures and leases by the central banks of the world. These send the dollar-price of precious metals plunging and raise the value of each paper dollar.

It's hard to imagine that there is enough gold and silver in the world to counterbalance the immense debt levels that have been generated in the past 20 years, however. Something has to give, and pretty soon.

The FED is creating more dollars than are being retired, at an annual rate of somewhere around eight to eighteen percent more (we can't be sure because the FED no longer will say how many dollars it's printing), and this alone causes the value of each dollar issued to decline. They HAVE to do this however, in order for there to be enough extra money each year to pay the interest on the ever-increasing numbers of outstanding debts we owe to the world...

Large financial institutions create investments out of "packages of loans" of which the value can no longer be determined, and this has destroyed the value of the dollars used to purchase those investments (to the tune of billions of dollars ). This has also caused the dollar to "drop like a rock" through the devaluation that destruction of wealth causes.

Lately, several large investment banks have begun "voluntarily" spending billions of dollars to buy back the "auction-rate securities" they've sold to unwitting municipalities and retirement funds. This is no doubt to stave off what would surely become an orgy of congressional finger-pointing and public wrath when it is determined that these investments are worthless...

There are a lot of other currencies in the world, most of which are also based on "promises to pay," and so depending on how people feel about the relative strength of one country's economy vs another's, the dollar will decline or rise relative to that currency. Really, even "the experts" find all this too complex to understand or predict, due to the high number of variables. There really is no one in control of the economic situation -- they're all just hanging on to the steering wheel for dear life...

For an excellent explanation of how the economy works (or not) take Chris Martenson's "Crash Course" in economics at www.chrismartenson.com/crashcourse .

The one main thing to keep in mind as we think about a currency that is not based on precious metal (say, like... the dollar for example) -- the more of them we print and put out in the world, the less each one is worth. When we do this on an exponential basis, and we've reached the "point of verticality" in the chart of the numbers of dollars in the world, look out!

Hope for the best, but prepare for the worst...