Seeking Alpha Article On Possible Wreckage Of Greenback

The piece is called "The Destruction of the Dollar: It's Nearly Inevitable." The timing of its publication doesn't gibe well with recent trends - the U.S. dollar is recovering from a recent slide - but it's well-argued. The author, Paco Ahlgren, distilled points from about fifty Seeking Alpha articles he's written over the last couple of years. The overall themes are: The U.S. is now a huge debtor nation, both in the government and private spheres, and has become accustomed to permanent trade deficits. The zero-interest-rate policy is an accident waiting to happen, as an unprecedented amount of debt is either short term or at floating rates. The U.S. government's luck won't hold out forever; once the reckoning comes, there's a potential for a vicious inflationary spiral as money creation tries to outrun compensatory lenders' strikes to jack up nominal interest rates in recompense.

The points may be familiar to some, but it's a useful summary. I have to say that the risk of that inflationary spiral is there. The U.S. government was lucky this time 'round; the luck may run out next time. There's no ordainment from God commanding investors to always see U.S. Treasury securities as the ultimate safe haven. One of the mysteries of the financial crisis (to me, anyway) is why the U.S. Treasury didn't go long-term in its new borrowings. Back in the days when 30-year rates were below 3 1/4%, and everyone had to have Treasuries, they could have sold almost all they could print at 3 3/4%. Instead, they kept the terms short.


There's another SA article that I'd like to bring to your attention. Although unrelated to gold, it is related to investing. It's by Paul Kedrosky, and it debunks what the author calls "naive contrarianism." Simply put, naive contrarianism is bucking the crowd in order to feel smarter-than-thou, leading to "stopped clock" performance that seems like genius when the stopped clock is right when all the others aren't. It's called "Contrarianism: The New Consensus."