"dollar collapse inevitable”

8/7/2019 "Dollar Collapse Inevitable

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Investment Legends - Dollar Collapse Inevitable

What will happen to the U.S. economy and the dollar in the near term? Will inflation increasedramatically? What is the outlook for gold, and where should you put your money? BIG GOLDasked a world-class panel of economists, authors, and investment advisors what they expect for thefuture. Caution: strong opinions ahead...

Jim Rogers is a self-made billionaire, author of the best-sellers Adventure Capitalist andInvestment Biker, and a sought-after financial commentator. He was a co-founder of the QuantumFund, a successful hedge fund, and creator of the Rogers International Commodities Index (RICI).

Bill Bonner is the president and founder of Agora, Inc., a worldwide publisher of financial adviceand opinions. He is also the author of the Internet-based Daily Reckoning and a regular columnist in

MoneyWeek magazine.

Peter Schiffis CEO of Euro Pacific Precious Metals (www.europacmetals.com) and host of thedaily radio show The Peter Schiff Show(www.schiffradio.com). He is the author of the economicparable How an Economy Grows and Why It Crashes and the recent financial bestsellerThe LittleBook of Bull Moves: Updated and Expanded. Hes a frequent guest on CNBC, Fox Business, and isquoted often in print media.

Jeffrey Christian is managing director of CPM Group (www.cpmgroup.com) and a prominentanalyst on precious metals and commodities markets. CPM Group produces comprehensiveyearbooks on gold, silver, and platinum group metals, and provides a wide range of consultingservices. Jeffrey published Commodities Rising, an investors guide to commodities, in 2006.

Walter J. "John" Williams, private consulting economist and economic whistleblower, has beenworking with Fortune 500 companies for 30 years. His newsletter Shadow Government Statistics(shadowstats.com) provides in-depth analysis of the governments creative economic reportingpractices.

Steve Henningsen is chief investment strategist and partner at The Wealth Conservancy in Boulder,CO, assisting clients interested in wealth preservation. Current assets under management exceed$200 million.

Frank Trotter is an executive vice president of EverBank and a founding partner ofEverBank.com, a national branchless bank that was acquired by the current EverBank in 2002. He

received an M.B.A. from Washington University and has over 30 years experience in the bankingindustry.

Dr. Krassimir Petrov is an Austrian economist and holds a Ph.D. in economics from Ohio StateUniversity. He was assistant professor in economics at the American University in Bulgaria, then anassociate professor in finance at Prince Sultan University in Riyadh, Saudi Arabia. He is currentlyan associate professor at Ahlia University in Manama, Bahrain. Hes been a contributing editor forAgora Financial and Casey Research.

Bob Hoye is chief financial strategist of Institutional Advisors and writes Pivotal Events, a weeklymarket overview. His articles have been published by Barrons, Financial Post, Financial Times, andNational Post.
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BIG GOLD: A lot of economists, including the government, believe the worst is behind useconomically. Do you agree? If not, what should we be on the lookout for in 2011?

Jim Rogers: It is better for those getting all the government largesse, but the overall situation isworse. More currency turmoil. State and local problems, plus pension problems.

Bill Bonner: None of the problems that caused the crises in Europe and America have been

resolved. They have been delayed and expanded by more debt and more money printing and willlead to more and worse crises. Deleveraging takes time. 2011 will, most likely, be a transition year...not unlike 2010. But the risk is that one of these latent crises will become an active crisis.

Peter Schiff: To me, it's like watching someone walk into the same sliding glass door again andagain. Wall Street must know by now that large infusions of liquidity from the Fed spur presentconsumption at the expense of investment for the future. We are an indebted family going out for anexpensive meal to celebrate getting approved for a new credit card. It might feel good (at the time),but we're still simply delaying the inevitable.

Jeffrey Christian: We believe the worst is behind us economically, in the short term. The recessionended in late 2009, and 2010 saw U.S. economic growth in line with what CPM had expected, but

higher than the more pessimistic consensus had been. In 2011 we expect continued expansion. Wethink some economists and observers are too enthusiastic about economic prospects right now.

For the U.S. in 2011, we are looking for real GDP of 2.5% - 2.8%, inflation to remain low, and forthe economy to avoid deflation. Interest rates are expected to start rising, perhaps significantly inthe second half of 2011. The dollar is expected to be volatile, rising somewhat against the euro butcontinuing to weaken against the Canadian and Australian dollars, the rupee, yuan, rand, and othercurrencies.

European sovereign debt issues will continue to plague financial markets, but market reactions willbe less severe than they were regarding Greece in April 2010.

John Williams:An intensifying economic downturn what formally will be viewed as the seconddip of a double-dip depression already has started to unfold. The problem with the economyremains structural, where household income is not growing fast enough to beat inflation, and wheredebt expansion encouraged for many years by the Fed as a way to get around the economicgrowth problems inherent from a lack of income growth generally is not available, as a result ofthe systemic solvency crisis. Accordingly, individual consumers, who account for more than 70%GDP, do not have the ability, and increasingly lack the willingness, to fuel the needed growth inconsumption on which the U.S. economy is so dependent.

Steve Henningsen: The governments worldwide (I dont pay much attention to economists) wantus to believe that the worst is behind us because the financial system is built upon the foundation oftrust and confidence. Both of these were battered badly when it was shown that much of the worlds

prosperity over the past few decades was simply a mirage that, once dispersed, left behind only debtwith no means of future production. Now they want us to believe that they fixed the problem viamore debt.

What I will be watching for this year is sovereign and U.S. municipal debt corpses floating to thesurface sometime in the months ahead.

Frank Trotter: Right now I have a somewhat dark but not dismal outlook. I think that over 2011,we will continue to experience a Jimmy Carter-style malaise that combines continuing highunemployment, tentative business investment, rising prices, low housing numbers when looked aton an absolute basis, and creeping interest rates.

As a very large mortgage servicer, we are not seeing significant improvements in payment patternsthat would indicate the worst is fully behind us, and with mortgage rates moving upward, we seeless ability for current mortgage holders to refinance and reduce payments.


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Krassimir Petrov: No, the worst is yet to come. No structural changes have been made, noproblems have been fixed. Printing money, a.k.a. Quantitative Easing, is a quick fix that haspostponed the problem, yet also made it a lot worse. I would say that we are still in the early stagesof the crisis and have another 4-8 years to go.

Bob Hoye: The worst of the post-bubble economic adversity is not behind us.

BG: Price inflation is creeping up, but the enormous amount of money printing hasn't really hitthe system yet. Does that happen in 2011, further down the road, or not at all?

Jim Rogers: It is happening. The U.S. and CNBC lie about it. Most other countries do not lie andacknowledge it is worsening.

Bill Bonner: Most likely, substantial consumer price inflation will not show up in 2011. Theexplosion of money printing is being contained by the bomb squad of deleveraging. That willprobably continue in 2011. But not forever.

Peter Schiff: 2010 was the year that China began cutting back its Treasury purchases in favor of

gold, hard assets, and emerging market currencies. The Fed has stepped in as a major purchaser ofTreasuries. This represents a new phase on the path to dollar collapse, and it will manifest in 2011in the form of more "unexplainable" inflation as we are now seeing in the prices of everythingfrom corn to gasoline.

Jeffrey Christian: We are now beginning to see some increases in monetary aggregates, suggestingthat some of the monetary accommodations are beginning to filter into the economy. We expect thistrend to accelerate over the course of 2011. This will bring some increase in inflation, but we expectthe major manifestation will be through higher U.S. Treasury interest rates as the Fed and Treasuryseek to sell bonds to sterilize the inflationary implications of the monetary easing and to financeongoing massive federal deficits.

John Williams: The problems of the money creation will become increasingly obvious inexchange-rate weakness of the U.S. dollar. Related upside pricing pressure already is being seen ondollar-denominated commodities such as oil. There is high risk of consumer prices rising rapidlybefore year-end 2011, setting the stage for a hyperinflation. The outside date for the onset of a U.S.hyperinflation is 2014.

Steve Henningsen: My guess is further down the road, as the deleveraging cycle continues withdeflationary-housing winds in our face and the banks still hoarding money like my 9-year-olddaughter stockpiles American Girl doll paraphernalia. I still expect inflation to continue in areassuch as energy, bread, circuses, and whatever else provides sustenance to the Romans I meanpeople.

Frank Trotter: Most research has shown that over time the increase in money supply is not a short-term economic stimulus, but rather has a moderate effect in the 18- to 36-month range. In addition,this theory contends that a growth in the monetary base which is what has happened so far onlyincreases economic activity when accompanied by a decent multiplier; this is not occurring. Thereal risk is that with rising rates and continued soft economy, the Fed will feel obliged to continue toQE3, QE4, and so on, all of which may have a significant inflationary impact.

I am more concerned about general price inflation here in the U.S. and the potential it has to reduceglobal growth.

Krassimir Petrov: This is a tough one. I would have thought that price inflation would have beenraging by now, but this is obviously not the case. I have the feeling that 2011 will be a repeat of

early 2008, with commodity prices (CRB) making new all-time highs. A falling dollar will trigger arush into commodities as a hedge against inflation. I am really tempted to make a totally outrageous


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forecast that oil could make a run for $200 as QE3 unleashes another dollar scare, or maybe even adollar crisis.

Bob Hoye: Massive "printing" has been widely publicized and is "in the market."

BG: The U.S. dollar ended 2010 about where it started; does it resume its downtrend in 2011, or

are fears about its demise overblown?

Jim Rogers: No, but further down the road.

Bill Bonner: No opinion. But there is more risk in the dollar than potential reward.

Peter Schiff: It's hard to pinpoint exactly when the dollar will collapse, but it will take a miracle toavoid that outcome in the near term. It really depends on when the creditors of the United Statesrealize that they are not going to get their principal returned to them in real terms, but rather ingrossly devalued dollars. We have already seen the average duration of U.S. Treasury debt dropbelow that of Greece. No one wants to buy a 30-year bond with negative real interest rates as far asthe eye can see.

Jeffrey Christian: We expect the dollar to be volatile against most currencies in 2011, but that itsdemise has been prematurely predicted. The dollar may move sideways to slightly higher againstthe euro, yen, and pound, while continuing to deteriorate against the Canadian and Australiandollars, the rupee, yuan, rand, and other emerging economy currencies.

John Williams: There remains high risk of a dollar selling panic unfolding in the year ahead, as theU.S. economy tanks anew, as the Fed continuously expands its easing, and as dollar holders dumpthe U.S. currency and dollar-denominated paper assets. Such would be a precursor to the inflationproblem.

Steve Henningsen: Similar to my thoughts last year, I still believe the dollar is headed down long-term, but it could bounce around over the next year. If sovereign debts become a problem again, like

I think they will later this year, then everyone will go running back to Mother Dollar once againfor one last hug before she lies back down on her sickbed.

Frank Trotter: As the economy waffles and the global investing community's attention is drawnfrom one crisis to the next, I expect the U.S. dollar to bounce up and down in the current range.After that, however, my analysis suggests that measured by the key factors of fiscal and monetarypolicy, combined with a significant trade deficit, the U.S. does not look as good as our majortrading partners, and I thus expect the dollar to decline, perhaps significantly, in the intermediateterm. Big geopolitical events may accelerate this or create a flight to U.S. dollar quality, so hold onto your hats.

Krassimir Petrov: I think the dollar resumes lower. I expect QE3 and QE4 a dollar-printing festthat will eventually sink the dollar. Sure, all fiat currencies are in deep trouble and prone tooverprinting, but the reserve status of the dollar actually makes it more vulnerable now. Whether thedollar sinks against other currencies is a fool's game not worth playing. It is like being in thehospital, where all patients are suffering from cancer, and trying to guess who will feel best at theend of next year, or trying to guess who will succumb first. That's why it is so much safer to playthe dollar against gold.

Bob Hoye: Fears of the dollar's demise have been widely discussed and are "in the market." Thedollar, itself, will not be repudiated just the mavens that have been "managing" it.

BG: Gold has risen 10 years in a row, so some are calling it a bubble, yet it's roughly $1,000below its inflation-adjusted high. What's your outlook for the metal in 2011?


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Jim Rogers: It is hardly a bubble when very few own it still. Who knows? Overdue for acorrection, but who knows?

Bill Bonner: The smart money is in gold. It will stay in gold until the bull market that began 10years ago finally reaches its peak. It is extremely unlikely that the top will come in 2011; it'sprobably years in the future. In the meantime, gold is bound to have a losing year or two. Don'tworry about it. Buy gold. Be happy.

Peter Schiff: The funny thing about a bubble is that when it's real, no one can see it. The samecommentators who were blind to the tech bubble, the housing bubble, and now the Treasury bubbleare quick to call gold a bubble. The truth is that many of them have a personal aversion to goldbecause they directly benefit from our fiat money system. Goldman Sachs was paid 100 cents onthe dollar in the AIG bailout, which never would have happened in a gold-based system. It's a loteasier to print a billion paper dollars than dig up a million ounces of gold.

Gold will continue to climb in 2011 as the currency war continues and investors continue to seekstability. Unless there is a major sea change in the way the U.S. does business, I think the gold tradeis a safe one.

Jeffrey Christian: A price of $1,550 is possible, although given the enormous investor buyingpressure, prices could spike to almost anywhere. After that, we expect prices to fall back, initially toaround $1,340 or $1,380. We expect gold prices to stay above $1,280 or so for most of 2011, and toaverage around $1,369 for the full year.

John Williams: As the U.S. dollar increasingly is debased, and where gold tends to preserve thepurchasing power of the dollars invested in it, the upside to gold in the year ahead is open-ended,restricted only by any limits to the massive downside potential for the U.S. dollar. Any intermittentgold price volatility, extreme or otherwise, will be short-lived. There is no bubble only increasingweakness in the U.S. dollar with the gold price fundamentally headed much higher in the yearsahead.

Steve Henningsen: I believe gold will once again prove the bubble-boys wrong and end the yearpositive (I have no idea by how much and dont really care). However, I think this year will be morevolatile and that Gold Bugs better remain seated on the precious metals express or they might getsquished.

Frank Trotter: I still think that with price inflation on the rise and big political events occurring,there may be room to continue to rise. If stock markets take off, then there will be a reduction inappreciation or even a significant decline, but based on the factors I mentioned above, I don't seethat as highly likely.

Krassimir Petrov: Gold still has outstanding fundamentals. I believe that over the course of 2010,the fundamentals have strengthened significantly: (1) "No Exit [Strategy] for Ben" as he unleashed

QE2, and will likely unleash QE3, QE4, etc., (2) no more central bank selling of gold, (3) morecentral banks become buyers of gold, and (4) trial balloons for a global gold-backed currency.

I have no idea how people could even claim that gold is in a bubble barely 1 out of 100 peoplehave any idea about investing in gold. During the real estate bubble, every second person wasinvolved in it. Maria "Money Honey" Bartiromo has yet to report from the COMEX gold pits; goldfund managers and analysts have yet to obtain rock-star status; and glamorous models are not yetdating the gold guys. Who is the Henry Blodget [co-host of Tech Ticker] of the gold sector, do wehave one yet?

Yes, gold will eventually become a bubble, but that feels 5-8 years away.

Bob Hoye: In 2011, gold's real price will resume its uptrend.

BG: What's your best investment advice for 2011?


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Jim Rogers: Buy the rmb [renminbi, the Chinese currency].

Bill Bonner: We are in a period much like the period following WWI, in which the great debts andlosses of the war had to be reckoned with. It is an era of great risk. The U.S. faces many of the samechallenges faced by Germany and England after WWI. Like England, it has huge debts. It is awaning imperial power. And it has the world's reserve currency. And like Germany, it is attemptingto fix its problems by printing more money. This is not a good time to be long either U.S. stocks or

U.S. Bonds.

Peter Schiff: Don't be suckered into the idea that recovery is just around the corner. The currentclimate is like living in a hurricane or earthquake zone; it's important to stay vigilant because younever know when disaster will strike. Physical gold is the financial equivalent of a flashlight, first-aid kit, and store of canned goods. It's a basic way to protect yourself from any eventuality. Fromthere, if you're looking for returns, there are plenty of foreign markets with strong fundamentals, aswell as commodities that feed those markets.

Investing in the U.S. is now driven largely by force of habit. It's a habit you should resolve to break.

Jeffrey Christian:Do not invest based on what you believe, but on what you know. Gold is a

market, like other markets. It rises and falls. You probably want to stay long gold on a long-termbasis, but may want to cull the weaker gold assets from your portfolio in the first quarter, and putsome hedges in place to protect a long-term core long gold position against the potential ofsignificant price weakness over the next two years or so. Such a period of weakness would be anexcellent time to add to ones gold assets.

John Williams: As an economist, I look for the U.S. dollar ultimately to lose virtually all of itscurrent purchasing power. Accordingly, for those living in a U.S. dollar-denominated world, itwould make sense to move to preserve wealth and assets over the long-term. Physical gold is aprimary hedge (as is silver). Holding some stronger currencies outside the U.S. dollar, as well ashaving some assets outside the United States, also may make sense.

Steve Henningsen: Dramamine (for volatile markets), a stash of cash (for potential investmentopportunities), and move some of your assets offshore if you havent already.

Frank Trotter: My advice is first to look at the other side of your balance sheet the liability andrisk equation before seeking out absolute gains. What are your goals, what resources do youalready have to meet those goals, and what events (health, income stream, upheavals) might impactthese risks? Place some assets to hedge these risks directly, then look to diversify globally intomarkets with higher growth potential than we see here at home, and that may balance your globalpurchasing power risk. Almost like a religion, we have had the phrase "Stocks are the onlylegitimate hedge against inflation" beaten into our heads. I say, look at assets that define inflationlike commodities and currencies and evaluate where these fit into your risk portfolio.

Krassimir Petrov: Last year I recommended silver, and I would stick to silver again, despite thephenomenal run in 2010. Then it gets tricky. I usually don't recommend diversification, but now Iwould again recommend a broad portfolio of commodities. Investing in 2011 should be easy: stayout of real estate, out of bonds, out of fiat currencies, and out of stocks; stay fully invested incommodities, overweight gold and silver.

What to watch in 2011: stay focused on the sovereign debt crisis and bond yields. Spiking yieldswill trigger the next stage of the crisis.

Bob Hoye: Once past the early part of 2011, the best returns are likely to be obtained from thejunior gold exploration sector.

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