Commodity Online
Is the world nearing the end of the Dollar standard? If so, what will that do to the Dollar Gold Price – and the purchasing power of currency?
These are all questions pondered by ShadowStats.com editor John Williams in this interview with The Gold Report (TGR)
TGR:You've repeatedly said that the global economic crisis is not Europe's fault but part of a pending systemic collapse that started with the manipulation of the US financial markets — the moves you've been talking about. What countries or sectors will suffer the most if the crisis continues?
John Williams: The more closely they're tied to the Dollar, the greater the inflation impact will be in other areas, but the runaway inflation I'm talking about will be largely in the US and for people living in a US Dollar-denominated world.
That's from an inflation standpoint. Yet, it also will have an extremely negative impact on the US economy, and problems in the US economy indeed will have a global impact. The US economy is still the largest in the world, and you can't push it deeper into a depression without having negative economic consequences outside the US
But while the global economic problems will worsen, systems can ride out bad economies. We can't ride out a hyperinflation because the currency becomes worthless. That's an ultimate crisis that forces a resetting of the system.
TGR: Can Europe or China do anything to counteract what's going on in the US?
John Williams: Dump the Dollar. China needs to de-link from the Dollar, and it will be forced to do so. It's importing inflation. If China doesn't want that inflation problem, all it has to do is cut its link with the Dollar, and oil suddenly becomes a lot cheaper.
TGR: But how practical would it be for China to sell off all the US Dollars and US Treasuries it holds?
John Williams: In terms of insulating itself against US inflation, all China has to do is delink its currency from the US Dollar. That's true of other currencies as well. The Swiss franc is artificially linked to the Euro now, but because of the general weakness in the Dollar, it's ironically also intervening to support the Dollar against the Euro.
Whenever major holders of Dollar-denominated assets decide to sell those assets, that will determine how large a loss they will take on the US currency.
TGR: Will the Euro survive?
John Williams: I wouldn't bet on a long-term survival of the Euro, but I think it will survive the current crisis as long as its survival is needed to prevent a systemic collapse in the US The Fed will do whatever it has to do to keep Europe's problems from imploding the US banking system. It can create whatever money it wants to do that.
Long term, I would not look at the Euro as surviving in its current form. The loss of the Dollar eventually will force a re-examination of the global currency structure. That might be a time when other currency disorders get resolved and we may see the Euro break up. It was never practical to think that all the countries within the Euro would be able to align their economic and fiscal policies in a way that would enable them to operate together. The Euro was doomed from the beginning.
Source: theaureport
