India, the Fed, and dollar hyper-inflation
Richard Moore
From: "Lifeforce" <lifef...@rockymountains.net>Date: 8 November 2009 02:05:08 GMTTo: "AB" <lifef...@rockymountains.net>Subject: Fw: Indian Central Bank Warns the FedBy Richard J. Maybury
Indian Central Bank Warns the Fed
Copyright © 2009 by Henry Madison Research, Inc.
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Dear Reader,
The week of November 3, 2009, could someday be known as a major turning point in the Great Monetary Calamity.
The government of India traded away US dollars for 200 tons of gold - one of the largest central bank purchases in history.
The Indian regime paid $1,045 per ounce, which means they believe a US dollar is worth one 1,045th of an ounce of gold - an amount that is almost microscopic.
That's a far cry from the 1930s, when a dollar was worth one 20th of an ounce. It shows what the Federal Reserve has done to the value of the dollar since the Fed went into business in 1914.
The public announcement of the India purchase was made on November 4th, the day Fed officials met to decide whether to raise interest rates to strengthen the dollar.
The Fed did not raise rates, and in fact stated the opposite, that they would maintain "exceptionally low" interest rates for "an extended period."
In other words, the government of India fired a shot across Washington's bow, and Washington ignored it.
Many thanks to reader J.S. for pointing out that India is a second tier financial power. If a first tier power, say the government of China, Germany or Saudi Arabia, had fired the warning shot, this may have been startling enough to trigger a global stampede out of the dollar.
J.S. theorizes that the first tier powers secretly asked the Indians to make the move, so that the message would be sent in a less frightening way.
What's important for readers of EWR is that, as I explained in the September 2008 issue, I believe the Federal reserve has run out of maneuvering room. It no longer has a choice between recession and double-digit inflation. It has created so much malinvestment - which means so much new money must be created to keep the malinvestment alive - that the choice now is only between depression and runaway inflation.
By announcing on November 4th that it would not raise interest rates even so much as a quarter point, the Fed was saying it has made it's choice: runaway inflation. The Fed is sacrificing the dollar.
In the January 2010 EWR, I will give a lengthy update of the September 2008 article.
As for your personal situation, if you have been following my suggestions since the Great Monetary Calamity began in August 2007, then I don't think you need to change anything; you're ready.
If you are a new subscriber, I suggest you begin by reviewing the October 2009 article about endurables, and the April 1, 2009 Subscriber Bulletin "Prepare for the Coming Riots."
Summarizing, the Fed's November 4th refusal to defend the dollar in the face of the Indian attack means the dollar is a much more frail currency today than it was just a few days ago. The central bank of India has edged closer to the exit, which means a lot of other big holders of dollars must be thinking about the fact that it's never a good idea to be last in line at a run.
Interesting.
--Richard Maybury
P.S. Just when I think I'm becoming overly alarmist, this pops up in an editorial by the staid, sober Wall Street Journal (November 5, 2009, p.A18.): "This Fed is clearly on autopilot. It's a good time for the world to strap itself tightly into the passenger crash seat because it looks like the dollar is in for a daredevil ride."