GoldMoney Alert - 28 April 2007

The US Dollar in a Freefall

It has been a bad couple of weeks for the dollar. From its recent high of 83.10 on April 9th, the US Dollar Index has fallen to 81.53, a 1.9% decline. That may not sound like much, but it works out to a 32.7% decline on an annualized basis. Given that one presently earns only about 5% per annum in interest income on their dollars, the loss in purchasing power is obvious.

What's more, the US Dollar Index is now trading at a 2-year low. It is only 3.9% away from its all-time record low of 78.33, made on September 1st, 1992, which is denoted by the dotted line on the following chart.

The dollar is in a precarious position. It is in a freefall, which in itself is not new. I have noted on the above chart several previous examples of freefall declines (the red ovals) in the US Dollar Index, since it began several years ago the latest leg of its multi-decade bear market. This time though there is a difference.

It is important to note that the US Dollar Index is rapidly approaching its all-time low. That fact suggests the length and severity of the present freefall decline could exceed all previous examples. One must therefore ask, has the long anticipated final collapse of the dollar begun?

A collapse of the fiat dollar is inevitable. It is the principal theme that John Rubino and I put forward in our book, The Coming Collapse of the Dollar. The dollar is being mismanaged, just like all other fiat currencies before it. These currencies inevitably collapsed, so why should the outcome for the dollar be any different?

In my view there is no logical reason to suggest that the fate of the dollar will be anything but a collapse. Whether it will be like the Argentine peso several years ago or the Reichsmark in Weimar Germany or the collapse of dozens of other fiat currencies, it's just a matter of timing, which is the only uncertainty. In other words, no one can predict when the collapse will occur. It may yet be years away, but then again, the above chart opens up the possibility that the final collapse of the fiat dollar has already begun.

Meanwhile, gold and silver have both fallen back into support.

Both of the precious metals remain in uptrends. Most importantly, both look ready to break above their multi-decade high set one year ago. So in the coming weeks I expect to see gold and silver exceed their May 2006 high.

Published by GoldMoney
Copyright © 2007. All rights reserved.
Edited by James Turk

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