The United States owns a tremendous amount of money to the rest of the world.

The world is holding close to $3 trillion dollars worth of treasury & bonds from Fannie Mae & Freddie Mac.

If the world starts to dump dollars and not buy those bonds and other investments the United States will go bankrupt.

Right this minute, the USA needs about $1.8 billion dollars per day to meet the requirements for foreign trade (known as the balance of payments surplus of deficit).The United States is servicing a major deficit.

So it's very important what the world thinks of the US Dollar, because if the dollar goes down in value all the goods that Americans buy, and most of them come from foreign countries now, are going to be much more expensive.

In the past, what countries have done, is debased. the value of their currencies to make their good cheap. That was good for America because it kept inflation down and these countries also reinvested some of the money back into US bonds & other investments.

A High Priced Depression

If these countries stop buying the bonds, and their products are more expensive, they're not going to sell as much - and Americans will have to pay more for what they do buy. So you will have a depression with higher prices.

The reality is, is that there already is a depression. The people just don't know it yet because the government probably will never officially announce it is in fact a depression.

In many countries, there are already bond problems. The Bank of England for the first time ever has started buying it's own bonds. And just last week the Federal Reserve in America has started to buy it's own countries treasuries.

This process is called monetization. The problem is, is that it's highly inflationary. Because you have high unemployment getting worse and meanwhile inflation is getting higher.

So for an American, a US Dollar collapse can mean that not only the loss of your job, but the price of living will also go up! The worst of all scenarios.

The Road To Hell

The first batch of funds requested by the Treasury for monetization is $300 billion dollars. And that is because the US Government can't sell the amount of bonds that they have to foreigners. In January 2009, the foreigners cut back by $148 billion dollars the amount of bonds they were willing to buy. Which is a significant figure.

So $300 billion is not going to cut it. Soon, they will ask for another trillion. And another trillion after that. Colossal amounts of money being monetized.

Bob Chapman, of the International Forecaster, predicts that over the next 2 years the Federal Reserve will monetize over $5 trillion dollars. Creating hyperinflation the likes of which the world has never seen.

 

Further reading:
The International Forecaster