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Is there an ominous hazard building due to the Fed’s infinite quantitative stimulus?

*Dow Theory Letters, by Richard Russell, April 24, 2013

”You don’t hear much about it, but the world is slowly and ominously turning against the US dollar.  The world no longer sees the US dollar as a safe store of value.  And if a reserve currency doesn’t serve as a store of value, what good is it?  Almost every nation holds dollars in its reserves.  And quietly, almost every nation is trying to diversify out of dollars.  For many decades, you needed dollars to buy oil.  And here we see a change that will have its place in the history books.

Nations are making deals with each other to trade in their own currencies, thereby bypassing the need for dollars.  China is one of the leaders in this ‘bypassing the dollar’ system.  Just for your edification, go to Google and type in ‘China’s plan to bypass the dollar.’

With Bernanke’s program of QE2 infinity, the world knows that the purchasing power of the dollar is deteriorating week by week and month by month.  Recognition of this situation is going to foment a rout out of the dollar, and if this happens interest rates will rise in order to defend the dollar.  If rates rise, this will set off a massive bond market crash.

This is the ominous ‘Sword of Damocles’ that hangs over the US economy.  With the US bond market measured in the multi-trillions, a bond market crash would bring the US economy to its knees.  Remember, the rate on Treasuries back in 1981 was almost 15%.  Since then, the frenzy to buy and own ‘safe haven’ Treasuries has taken their yields down to almost zero.  The bond market controls everything — home prices, auto loans, credit card rates, state, city and federal finances — everything!  In pressuring rates down to ridiculously low levels, Ben Bernanke has rendered the US dangerously vulnerable.

I believe the real story of the bond market will be told this year.  This is the reason I want only gold in my ‘portfolio.’ ”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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