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The Decline and Fall of the United States of America

It began today, when the Fed told the world the dollar is worthless.

by James Leroy Wilson
March 22, 2006

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The Decline and Fall of the United States of America
Today we are entering a new world. The change may come suddenly, as a shock. Or perhaps we won't notice it for several months. It may come in one great financial crash, or it may eat at us steadily over a period of time. But today, March 23, 2006, is an important day in our history. If, as is the scenario in V for Vendetta, the USA breaks up in the near future and falls into civil war, historians will mark this day as the start of it all. For beginning today the Federal Reserve, the nation's central bank, will stop counting the world's supply of American dollars.
The dollar's value is judged in prices. There are two reasons prices go up. One is that the demand for something is greater than its supply. The other is that there are just too many dollars, with more and more pumped into the economy every day. If the Rocky Mountains were made of gold, we'd probably have gold pennies. And if our rivers flowed with oil, we wouldn't pay very much for a gallon of gas. That's because the supply would be much greater than the demand. The more there is of something, the less valuable it is. The same is true of the dollar. The more dollars there are, the less valuable they are.
Monetary inflation, the cheapening of the dollar, happens when there are more dollars in the economy than what people earn by producing goods and providing services. This doesn't seem to make any sense, yet it is possible because the government spends more money than it collects in taxes. The Federal Reserve "prints" more money (or creates it with a few keystrokes) to finance Congress's deficits. This extra cash flows into the economy as the government spends it, so it makes the dollars that were already there not quite as valuable as they had been. The supply of dollars becomes greater than the demand for them, and so the dollar's value falls in comparison to goods and services. Prices rise.
American society has adjusted to this. After the severe price hikes of the 1970's, when the government broke off the dollar's link to gold and the nation suffered oil shortages, we are now seemingly accustomed to both high deficit spending and moderate inflation. We rely on gains in production and wages to more than offset the effects of inflation. Inflation is supposedly "under control."
But you can't tell it by the prices of houses, of gasoline, of college tuition. You couldn't tell it by the huge increase in consumer debt the average American carries, which indicates that wages do not keep pace with inflation. The goods found at discount and dollar stores, produced by cheap foreign labor, hide the obvious. While the government's "Consumer Price Index" of February 2006 suggests a twelve-month inflation rate of 3.6%, the real measure of inflation is the number of dollars in the world. This measure, which the Federal Reserve calls M3, has risen 7.9% over the same time period. Meanwhile, the Gross Domestic Product – the nation's total value of goods and services -  grew just 3.2% in 2005 (xls).
The money supply is growing two and a half times faster than the economy. The nation is consuming far more than it is producing. This has been known for a long time, but now it's reaching drastic levels.
The Fed knows that M3 is proof to the world's bankers and investors that the American dollar supply is rapidly increasing, and that therefore its value is decreasing. The Fed is afraid that foreign banks, who hold a giant chunk of our national debt, will want to dump their dollars. The Fed is also afraid that oil-producing countries will likewise want to stop selling their stuff in dollars, and switch to the euro.
What has the Fed done to address this situation?
It has decided to cover it up. Beginning today, it will no longer publish M3. From now on, nobody will now how many more dollars the Fed will create out of thin air.
And this will make a bad situation much worse. The Fed's refusal to tell us how many dollars there are, is a sign that it is too afraid to admit how worthless the dollar really is. The world will abandon the dollar, with disastrous effects for Americans. Prices of goods and services will rise quickly and drastically, while wages will not even remotely keep pace. The number of bankruptcies will explode. Our financial system will collapse.
Combine this with military setbacks, the chaos on the Southern border, and Red State – Blue State animosity, we could very well witness the decline and fall of the United States within a few years' time.
Admittedly, this may happen anyway, but the Fed's M3 cover-up will only accelerate the process. So the best thing to do now is reverse course immediately. Not only should the Fed continue to publish M3, but Congress should get to the heart of the matter. The government's budget deficits are at the heart of this problem of inflation. It must cut government spending and balance the budget. Only then will America avoid collapse.

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Michael H. Thomson from Hidden location near Washington D.C. writes:
March 22, 2006
James Leroy Wilson, this is one of the most disturbing articles I have read in a very long time. Your logic is impeccable. From my first economics class at the University of Tennessee until now, I have never heard of our government not disclosing our money supply. Are we going to become like Argentina a few years ago? Should be invest in gold while we can?

I know two individuals who are extremely prominent and extremely conservative. I engage in conversations with them on a weekly basis. Now some of what they are saying is starting to make sense - even though I don't agree with their solutions to what both see as a coming national crisis which transcends the current war and the president's ratings.

I was drowsy before I read your article, but now I'm fully awake!!

GreginOz writes:
March 23, 2006

Fascinating article on collapse of empire via currency devaluation. Regards.

Robert McNaughton from Middletown, CT writes:
March 25, 2006
It's no big deal to hide the monetary situation - it's only a part of the continuing extension of the present administration's policy to hide everything! It has recently reclassified as secret thousands of benign documents that had been released for public view, having been closed for the legally required time period. Don't be surprised at the hiding of anything - in fact, expect it.

jim carter from Missouri writes:
May 1, 2006
Dear Mr. Wilson,

You approach economics as if the system established in 1913 can be rescued. I do not believe you comprehend the basic nature of the system. I submit, by the design of the economic system, that it is inherently constructed to self-destruct.

The Fed, with the assistence of Congress, issues Bills, Bonds, and Notes for which they charge interest. Every dollar in circulation is a result of an issuance of interest bearing debt. The principle is created but the principle and the interest are promised to be repaid. The interest has never been created. The promise is impossible to preform. The only way the interest can be paid is to issue more debt. This is precisely the same operation, on a much grander scale, of the original Ponzi scheme.

The scheme will continue only as long as the debt can be sold. When people realize thay are being taken, they will quit buying the debt. In the reality of the scale of this scheme, only foreign nations refusing to hold US debt will bring the house of cards down. Unfortunately, the requirement to sell constantly more debt each year to finance the exponentially increasing interest payments on the national debt requires more deficit spending which devaluates the currency more rapidly. The spiral accelerates.

It is not a question of IF the system will self-destruct. The question is WHEN.

Jim Carter

Jim Quinn from Ottawa writes:
August 11, 2007
Great article

The FED continues to act as if the US dollar functions as worlds standard for commerce by divine right ("in God we trust"). For some reason, the US is wedded to the belief world commence bound to pray at the alter of "Wall Street".

As you essentially point out, the dollar retains its credibility at the pleasure of Beijing and Tokyo (plus a few others). At some point likely post 2008 Olympics I expect China to flex its muscles (lust for power, status and conquests are our primal instincts that sooner or later trump all else, as evidenced by the history of mankind). The vultures, Beijing perhaps with Moscow and Tokyo, will be circling and will be more than prepared to accept a little short term pain for the spoils (remnants of the western economies).

My hope is that Canada with its natural resources will fare reasonably well but that will depend if the US tries to drag us down with it.

concerned writes:
February 20, 2008
I question the chair of the Reserve, Ben Bernanke, his predecessor Greenspan and their kin-related counterparts, Wolfowitz and company, whose influence knows no party lines, about the direction they have taken our country.

Without our knowledge.

Anna from Kuwait writes:
October 8, 2008
Wow i am surprised, i knew that the second biggest bank in the us just went bankrupt but now i know that the us might not even survive when i am like 50!

elm from 98851 writes:
October 10, 2008
Once again, you hit home. Looks as if your 2006 article has been exhumed by posters and revisited. Your points now ringing more powerfull than in 2006.

Indeed, We, the people, need to be more carefull who we choose to govern our nation. Put aside electing those to govern who trick you into thinking they are Godly. A political trick pulled time after time to get the vast majority of church member votes. Mixing church and state when voting is what got us into Bush's shadey so called CONSERVATIVE leadership. Conservative would not fit Bush. Mixing church and state has never worked in other countrys. Iraq is a good example. Why think it will work in America. There always has been war over religion. Lest we forget, our forefathers said there shall be "no mixture of church and state". Lest we forget, truth does not come to light where secrecy is condoned and reigns in government. Secrecy of the Buch Administration leaked. A devious designed and flawed government strategy that has left the American people "a day late and a dollar short." Behind the 8 ball.

Power is a dangerous tool when given to the wrong hands. We hold America's future in our hands at the voting polls! Those who voted in the past corrupt leaders are liable. We are ALL paying a dear price for it.

On November 4th, many will again be holding our future in their hands. I am from the once bitten, twice shy school of thinking.

Anyone wanting more of the same, are really gonna love McCain and Palin.

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