Undollars.com - Advocates For Honest Money

"Our purpose is to expose the failure of America's fiat money system."

That original goal, expressed at the outset of this site 7 years ago, still holds true. But how incredibly more complex the global economic landscape has become, and how much more challenging the financial markets are as a consequence.

This site will continue to shed light on the demise of modern central banking and the tragic fiat-money fiasco that threatens our wealth and welfare and is now unfolding before our eyes.

The Undollar Digest

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VIEWS & COMMENTARIES....

Is the United States in a Liquidity Trap?
Frank Shostak 01/25/2012

In his New York Times article of January 11, 2012, the Nobel laureate Paul Krugman wrote,

If nothing else, we’ve learned that the liquidity trap is neither a figment of our imaginations nor something that only happens in Japan; it’s a very real threat, and if and when it ends we should nonetheless be guarding against its return — which means that there’s a very strong case both for a higher inflation target, and for aggressive policy when unemployment is high at low inflation.

The bottom line is that the Fed almost surely won’t, and very surely shouldn’t, start raising interest rates any time soon.

But does it make sense that by means of more inflation the US economy could be pulled out of the liquidity trap?   Read more»

Gentlemen, Start Your Printing Presses!
Eric Fry 01/25/2012

Whoops!…Oh dear!…It looks like Ben fell off the wagon again!

Such a shame. He had been doing so well ever since he put that bottle of “Old Q.E.” back on the shelf last June… and got sober. But a few weeks back, he tripped up on his 12-step program and started nipping at the bottle again. Slowly at first… then to excess.

Yes, it’s true, dear reader, Federal Reserve Chairman Ben Bernanke, is printing money again. That’s bad enough. But this time, after he prints it, he sends it over to Europe. Crazy, but true. The chart below tells the tale. It shows the quantity of currency swaps on the Fed’s balance sheet.   Read more»

Thoughts on the Crisis of Capitalism
Doug Noland 01/20/2012

I am convinced that a capitalistic system must have a monetary anchor to be sustainable…It is the pricing mechanism within the  financial sphere that has become so badly out of whack to the point of  posing dire risk to global Capitalism.”

“Policymakers have repeatedly responded to dysfunction and inevitable booms-turned-bust with unprecedented market intervention…What began as tinkering has regressed to the point of policymakers attempting to take virtual command over the pricing of finance. Capitalism now hangs in the balance.”

George Soros’ “The Crisis of Global Capitalism…” was published back in late-1998, following a dreadful period of global instability. Such concerns for the most part dissipated over the years with the resuscitation of global market and economic booms. The market value of global debt, equities and commodities skyrocketed. Bigger booms and busts followed and, not surprisingly, global Capitalism is today under only more intense fire.

Strangely enough, there remains a fine line between a “crisis of global Capitalism” and utter euphoria in the financial markets. The ECB’s $620bn first round Long-Term Refinancing Operation (LTRO) – along with expectations for an even more grandiose 3-year lending facility (LTRO II) next month – has the markets abuzz. Crisis resolved? The unleashing of another global reflationary backdrop on which to capitalize?   Read more»

Auditing the FED’s Gold
Gary North 01/20/2012

I have posted a video of something I thought I would never see: all five of the Republican candidates for the U.S. Senate verbally demanding an audit of the Federal Reserve System. You can see it here.

Bernanke is facing what no Federal Reserve chairman has ever faced: public awareness of the Federal Reserve System. From late December 1913, when an almost deserted Senate voted for the Federal Reserve Act, until 2008, when the recession confirmed Ron Paul’s warning in late 2007, there was almost no public awareness or even a vague understanding of the Federal Reserve System. The genie is now out of the bottle, where it had been corked since 1913. Ron Paul has uncorked it.   Read more»

How Deflationary Forces Will Be Turned into Inflation
Thorsten Polleit 01/19/2012

The ongoing financial and economic crisis has not only stoked fears that it will end in inflation — as central banks will print up ever-greater amounts of money — but it has also given rise to a diametrically opposed concern: namely, that of deflation.

For instance, in December 2011 Christine Lagarde, head of the International Monetary Fund (IMF), warned that the world might risk sliding into a 1930s-style slump, such as the Great Depression. This episode was characterized by worldwide defaulting banks, a shrinking of the money supply (or, deflation), which in turn led to falling prices across the board, sharply falling production and drastically rising unemployment.

In today’s fiat-money regime — which contrasts with the gold-exchange-standard that was in place in many countries at that time — the possibility of deflation appears fairly small indeed.[1] This becomes obvious if one takes a look at the workings of today’s fiat-money system, a system in which the money supply can actually be increased at any point in time in any amount deemed politically desirable.   Read more»

Currency Love Triangle
Jim Rickards 01/17/2012

The ongoing financial crisis in Europe is the biggest financial story in the world today and is covered daily. The stories are filled with doom and gloom and predictions of imminent collapse of the currency and the monetary union. Our view is the euro sovereign bonds are in distress and European banks are mostly insolvent but that does not mean the currency will fail. The bonds, banks and currency are three different things and the failure of the first two does not mean failure of the third. The reasons for this are based on the fact that the U.S., China and Germany are united in their desire for a strong euro. The U.S. and China both need a strong euro so Europeans can buy more of their exported goods to maintain growth. China’s leverage comes from the fact that it can prop up the European bond market with fresh purchases. The U.S. leverage comes from the fact that it provides the dollar liquidity Europe needs via central bank swap lines. Germany has a demonstrated capacity, dating to the 1970’s and earlier, to remain an export powerhouse even with a strong currency and a strong euro all but eliminates intra-European competition. In this sense, the euro is the biggest loser in the currency wars.

The Chinese growth story is so taken for granted that markets and analysts have difficulty imagining anything else. In fact, Chinese growth is on the brink of collapse – something the world and the markets have not fully priced in.     Read more»

Man vs. Machine, a Jobless Recovery
Timothy Aeppel 01/17/2012

In no other U.S. recovery since World War II have companies been simultaneously faster to boost spending on machines and software, while slower to add people to run them.

Part of this is the old story of substituting capital for labor. But a combination of temporary tax breaks that allowed companies in 2011 to write off 100% of investments in the first year and historically low short- and long-term interest rates [Ed: The unintended consequences of the Fed’s easy money policies…] have pushed that process into overdrive.

Hiring, meanwhile, is too slow to bring the unemployment rate down rapidly. Employers have added workers at a monthly rate of 142,000 for the past six months, half the pace needed to significantly reduce unemployment, which is now at 8.5%.   Read more»

The Fed’s Housing Politics
Wall Street Journal Editorial 01/11/2012

The central bank compromises its independence with rank electioneering.

These columns have defended the independence of the Federal Reserve from attacks on the right and left, but after last week the central bank is on its own. It’s impossible to defend the Fed’s rank electioneering as it lobbies for more political and taxpayer intervention in the housing market—just in time for the election campaign.

This extraordinary political intrusion came in the form of a 26-page paper that the Fed sent to Capitol Hill last Wednesday, without invitation, graciously offering what Chairman Ben Bernanke called a “framework” for “thinking about certain issues and tradeoffs.” He was underselling his document. The paper is a clear attempt to provide intellectual cover for politicians to spend more taxpayer money to support housing prices.   Read more»

Ponzi Planet: The Danger Debt Poses to the Western World
Alexander Jung 01/05/2012

Countries around the world, particularly in the West, are hopelessly in the red, with debt rising every day. Even worse, politicians seem paralyzed, unable — or unwilling — to do anything about it.  It is a global disaster that threatens the immediate future. But there might be a way out.

[This lengthy article is a valuable look at the West’s dysfunctional monetary system from a German’s perspective.]

When Carlo Ponzi, a dishwasher from Parma, Italy, immigrated to the United States in 1903, he had $2.50 in his pocket and a million-dollar dream in his head. He was able to fulfill that dream, at least temporarily.  Ponzi promised people that he would multiply their money in a miraculous way: by 50 percent in six weeks.

With his carefully parted hair and charming accent, Ponzi beguiled investors and fueled their avarice. The first investors raked in fantastic returns. What they didn’t know was that Ponzi was simply using the next investors’ money to pay them their profits.   Read more»

2011 in Review
Doug Noland 12/30/2011

Coming into the year, I held to the thesis that 2011 was a “Bubble Year.”  If the Bubble ran uninterrupted, global risk markets would likely turn only more speculative, with an upward “inflationary” bias.  On the other hand, if the Bubble burst the markets might rather abruptly find themselves right back in a de-leveraging-induced crisis.  I have for some time noted the parallels between Greece and U.S. subprime, the first cracks in respective Bubbles whereby the marginal high-risk borrower lost access to cheap finance.  My analytical bias coming into the year was that the Greek situation would worsen, contagion effects would be unleashed and the “Global Government Finance Bubble” would be at risk.  From this analytical perspective, we end the year with as many questions as answers – and the situation anything but resolved.

Global Credit, policymaking and market dynamics are extraordinarily complex.  I believe we are at a critical juncture in financial history.  A multi-decade global Credit Bubble and Financial Mania has reached the point of serious fragility.  With stakes that seemingly couldn’t be higher, increasingly desperate policymakers can be counted on to do everything possible to try to sustain the Credit and asset markets.     Read more»

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