So Ben Bernanke decided that he isn’t going to taper. The Fed will continue to buy 85 billion dollars of bonds a month. Most commentators were surprised because they expected a decrease in the Fed spending. The dollar is down and gold is up.
The Fed is going to continue destroying the value of the dollar. More dollars in circulation means the value is going down. That’s for certain.
Some economists, like Peter Schiff, have said that the Fed will probably not taper, on the contrary, the money printing could very well increase. Peter Schiff has made the analogy to a drug addict, who needs more and more drug in order to get the same high. America will need more and more money stimulus in order to get the same economic effect as before. I think this is a good analogy. The problem however, is that this will eventually lead to an overdose.
There will be new economic collapse, it’s inevitable, and the dollar will most likely lose its role as the world’s reserve and trade currency. Who would want to keep a currency, which is rapidly losing value? Some countries, like China, Japan, Russia, India and Brazil have already made deals to increase trading in their own currencies.
The fact that the dollar has been the world’s reserve currency for decades has benefitted America greatly but with great power comes great responsibility. If the government and the Fed don’t do a good job of managing the dollar other countries will turn to alternative currencies. Once that happens it will be devastating for America.