The Dollar's Fortunes

By: Rodney C. Cook | Tue, Jan 6, 2004
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Recent events in the world of geopolitics and global finance have kept me mesmerized for several weeks. Even when events transpire as expected, it can be difficult to appreciate the ramifications. And I have been watching with an intensity that is rare for even a zealot like me. The insights and wisdom of the Austrian economists are trickling up into the mainstream consciousness. The lines of probability are becoming more evident and lead in only one direction: A certain end to the imperial dollar. In a very few years the dollar will have become an entirely different beast. This will be a change of biblical proportions. Not literally let's hope.

The dollar's precipitous decline can no longer be ignored. This and the concomitant rise in precious metals and shares are major topics of discussion among the pundits and talking heads. After three years of out performance, it is about time. But I smell fear in their words. And currency sharks smell blood.

So what is the likely sequence of future events? No one knows, but that does not prelude prudent investment strategies, or even aggressive speculation. One thing for certain, the financial elite that have used the dollar's status as a world reserve currency to amass imperial powers will not relinquish that power readily, and most any defense that can be imagined will likely be used. This creates opportunities to front run the artificial machinations of the elite to retain power. So the subjects of that power now have a clear focus: A common enemy and it is the dollar. For those in America who wonder "why they hate us," they need look no further than their own wallet.

It is not freedom that is despised as the altruistic tenets of Jeffersonian democracy are not a threat. Above all, it is the servitude of debt that is despised, debt in dollars. Currency crashes are in the recent memory of many nations and their citizens. Especially where wealth was stored in local fiat, where dollar denominated debt remains.

As the dollar continues to decline there will be a battle for world reserve fiat status. But there will be no winners. The EU tauntings that exchange controls may be needed to control the rise of the Euro ring hollow for a socialist gaggle in decline. The Swiss once had this problem when their currency was backed by gold. Perhaps the EU has aspirations for Euro dominance because it expects or hopes that it's member nation's gold reserves will soar in value as the dollar declines. But would this not be a victory for gold? Perhaps it is this tenuous link that has benefited the Euro of late, as world Central Banks reserve assets are "diversified." Perhaps this is a hint of future trends. Private fortunes are also "diversifying" their currency holdings. A relative pittance is moving to gold. But this pittance has been sufficient to take gold to new highs, attracting the attention of foreign exchange traders and talking heads. So is gold now becoming a currency, or is recent gold price behavior starting to reveal it true nature? As gold begins to outperform commodities the waste laid to the globalists' ambitions by this relic will be barbarous indeed.

But empires fall reluctantly. And this empire of the dollar will strike back. It makes me nervous when talking heads mention currency control and gold price in the same show, let alone in the same conversation. I suppose that when our monetary authorities are forced to acknowledge gold as a currency this recognition will come in the form of some sort of price control. Of course this would just be a peg to gold if you have the proper perspective: The primordia for a gold standard, regardless of price or duration.

Over the past year I have discussed several interim measures that will likely be taken by our monetary elites before we get to this point. By recognizing the nature of the Kondratieff Wave and using the Austrian economic perspective it is rather straight-forward to make inferences as to how the future will most likely unfold. A variant of Gresham's Law whereby good monetary authorities are pushed out by bad allows us to gauge the magnitude and extent of these future events as likely to be the most tumultuous ever witnessed. The corruption and imbalances are so extreme that it is difficult to overstate the potential outcomes. A thumbnail sketch of my obscene rantings is in order, but I recommend that you go back and read Dirt Poor, Personal Central Banking, Refault and Housing Cover Clause for the full flavor of this perspective.

So with such powerful countermeasures, how can the dollar lose? Perhaps, it can't, if it is aligned with gold. But those who have their wealth stored in dollar denominated financial assets can loose big. A friend on the President's Council of Economic Advisors told me during the bubble of the nineties that this mania constituted the largest transfer of wealth in history. Well, you aint seen nuthin yet. As we progress deeper into the Kondratieff Winter there will be an assault on the dollar like never seen before. Emboldened by recent successes, sovereign nations and individuals will eviscerate the dollar as the debt based component is obliterated. Once again, wealth will return to its rightful owners: Those holding debt free hard assets. And front running this trend with precious metals may well become one of the most spectacular financial plays in history.


 

Author: Rodney C. Cook

Currently Rod is the founder and manager of Bull Trout Capital, a boutique investment company, and author of the FishWrapper, a private investment newsletter. Bull Trout Capital was founded to maximize returns based upon long cycle dynamics and Austrian economic principles. Dr. Cook uses internet based methodologies to identify sectors, strategies and shares that will most likely outperform at the current point in the cycle whilst maximizing upside exposure to potential economic dislocations. The FishWrapper features Dr. Cook's personal investments, methods and strategies where he has demonstrated extraordinary returns. Before Bull Trout he founded Sightward and authored patents (now owned by InfoUSA) to forecast human behavior on the internet; co-founded Ark Interface (now owned by xSides) to develop and patent innovative computer user interfaces; founded Optimas (now owned by Media Cybernetics) for medical and scientific image processing systems; and founded BioSonics Imaging division and developed their Optical Pattern Recognition System. Dr. Cook began his career as a Biometrician for the International Pacific Salmon Commission applying his doctoral dissertation in applied pattern recognition from the University of Washington College of Ocean and Fisheries Science.

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