Recently by Charles Goyette: China Dumping US Treasurys: What’stheMessage?
The Dollar Meltdown is definitely a gloom and doom book. Fortunately, the author’s style of writing and enthusiasm for his subject — how to avoid the doom — keep the book from being depressing. Charles Goyette — the author — simply tells it like it is. And what it is, is a sad state of affairs. Goyette’s presentation is composed of four parts: where we are; how we got here; what happens next; and what to do.
Under the heading of u201Cwhere we are,” Goyette points out that “the future of the dollar has already been determined.” For all intents and purposes, the dollar is dead. It has lost “96 percent of its purchasing power under the Federal Reserve System’s mismanagement.” Along with a valueless dollar, Goyette makes it abundantly clear where we are:
From January 2007 to 2009, 5.1 million jobs were lost; 13.7 million people were out of work and 32.2 million people were on welfare (food stamps). Retirement plans are all but worthless. $9.7 trillion was spent on bailouts. An astonishing number of homes — 19 million — stand vacant. U.S. debt is approximately $12 trillion.
Goyette then proceeds to discuss the great bailout, which he equates to robbing Peter to “subsidize a few hundred banking Pauls.” The result is massive debt. He quotes David Walker, the former comptroller general of the United States, who said, “The system is broken.” In a nutshell, Walker’s statement pretty much sums up where we are.
The second section of the book talks about “how we got here.” Goyettes begins by showing how gold came to “serve as money.” Nations whose economies are based on precious metals are healthy. Those that aren’t, fail. During the Civil War, America first forsook gold and silver. However, by 1879, the country went back to the gold standard. Then in 1934, private ownership of gold was abolished. And in 1971, Nixon chose to go off the gold standard. At that point, inflation took over.
Goyette provides historical examples of what happens when governments choose paper money over the gold standard. He cites China, the Roman Empire, the French Revolution, Germany, and Zimbabwe, where the annual inflation rate “hit 231 million percent in the summer of 2008.”
According to Goyette, the Federal Reserve System is leading America down the same path as Zimbabwe. “Inflation in the U.S. is a result of the Federal Reserve turning government money into debt.” The result is bad investments. “People and businesses make decisions n ways they otherwise would not.” In other words, legitimate investments are replaced by speculation, which is the same thing as gambling. Roll the dice and hope you get lucky. Which means that long-term planning — savings — is cast aside.
In u201Cwhat happens next,u201D Goyette predicts that repudiation of debt is looming on the horizon. The forerunner of repudiation is deflation, which, according to Goyette, is what is taking place in real estate values. And the only way governments can fight deflation is by printing money. This leads to u201Cstagflation,u201D which is u201Ca period of economic stagnation accompanied by inflation.u201D Somewhere in this scenario, u201Ccash is trash.u201D Which is when u201Cthe crack-up boomu201D occurs. If and when the crack-up does happen, runaway inflation is the result. And runaway inflation cannot be contained.
Charles Goyette [send him mail] is the author of the New York Times bestseller The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments.