The Big Picture .... by Jeff Berwick

It is with breathtaking speed now that two massive global shifts are taking place. Two major changes in the world as we know it - and both of them are the basic underlying theme of this newsletter: The collapse of the US Dollar financial system and the return of gold & silver as money.

Both of these events are, of course, heavily intertwined.

But what is fascinating, even to us here at The Dollar Vigilante, who have predicted almost everything that has come to pass in this regard to date is the speed with which it is all accelerating now. There are dozens of headlines per day with incredibly important paradigm shifts in how the world now works on a financial and geopolitical basis.

However, it should be noted, that just because these events are accelerating it does not mean we are necessarily within days or months of the "end game" - a collapse of the US Dollar and the global financial system centered around it. This could still drag on for another few years. Or it may not. We are in uncharted waters.

The US Continues to Falter While The Rest of the World Goes About Business

It is becoming more obvious by the day that the US, the world's greatest superpower for much of the 20th century, is barely even a player in the 21st century. In fact, two of the biggest superpowers of the last century have been reduced to bit roles on the global stage.

The US and Britain are bankrupt and are becoming varying levels of socialist police states. Where is the news of US or British interests buying up African or South American resources? Financing international megaprojects?

Most of the movements in the US and UK are internally focused - mainly at how to get the last pennies from their overtaxed and heavily indebted citizens. Britain is moving towards having all paychecks in the country deposited into government bank accounts prior to being released, after taxes levied, to the groveling masses. And they are even looking into using lie detector tests on British families just to make sure that the government doesn't miss a penny of tax income.

Meanwhile, in the US, federal agencies and police departments were in attendance to see a demonstration of a system that trawls phone conversations, emails and instant messages to detect “resentment toward government,” alerting authorities to potential “terrorists” who are then placed under surveillance at a recent International First Responder-Military Symposium held at Hilbert College.

Any externally focused events coming from the US & Britain are mostly in regard to wars, occupations and entangling alliances.

Contrast this to what much of the rest of the world is doing. Where's the action? China. Russia. India. Brazil. Indonesia. Malaysia. Vietnam. Thailand. Colombia. Ghana. Kazakhstan. And many more.

In early September it was announced that China and Russia plan to start trading in each other’s currencies as the world’s second-biggest energy consumer and the largest energy supplier seek to diminish the dollars role in global trade.

China also announced it plans to build two nuclear power reactors for Pakistan. The Chinese Foreign Office's Jiang Yu said, “China plans to help Pakistan expand its Chashama nuclear energy complex in Punjab by building two reactors in addition to the one already operating, and another under completion.”

Japan and India are forming alliances for increased trade. The Indian commerce minister was in Tokyo in early September after agreeing in principle to an Economic Partnership Agreement with Japan. Prime Minister Manmohan Singh will be in Tokyo in October to sign that deal once the Cabinet clears it.

Also, with not even a pretext of caring what the US thinks of the matter, Japan intervened in the foreign exchange market to sell 2 trillion yen (approximately $24 billion USD) for US dollars in an attempt to slow the Yen's dramatic rise versus the US Dollar.

The intervention was a failure, much like an earlier attempt by Switzerland to slow the rise in the Swiss Franc. Governments are finding out that interventions are best left to the A&E Channel. But the point is that there was hardly a word uttered from Washington who has resigned itself to being a follower and not a leader on the world stage as it is the most indebted nation in world history and is in no position to tell its lenders what to do.

What Is The Real Cause of the Problems in the US?

Many Americans seem to now be awakening to the fact that their country has been hollowed out from the inside like a termite infestation. However as is almost always the case the blame is getting put on symptoms of the problem, not the real reason why the USA has seen its wealth robbed and eroded over decades.

Faced with a horrible unemployment situation and the appearance of many companies moving out of the US to countries such as China and India many point the finger of blame at "globalism". But companies aren't necessarily leaving the US just because it can be cheaper to operate in other regions. The problem is much deeper and has more to do with companies escaping high taxation, ridiculous amount of regulation and moving to regions that are growing as opposed to the US which is in a terrible state of disrepair and only getting worse.

The Federal Reserve is Destroying What's Left of the USA

Which brings us to the Federal Reserve, which has impoverished the US over decades and continues to do so.

Central banking offers no benefits to society at large and contributes, mostly through the process of inflation, to numerous serious problems. The following are just a few of the issues engendered by central banking and inflation:

• It hinders economic calculation and causes capital consumption and malinvestment
• It taxes fixed income earners (savers and fixed wage laborers)
• It discourages saving or forces savers to take more risk
• It encourages general consumption and debt
• It benefits debtors (especially government), speculators, politicians, lobbyists, and fractional reserve banks
• It produces the business cycle -boom/bust sequence
• It rewards corruption and corrupts morals
• It causes capital decumulation (the formation of capital in reverse) due to several of the above
• It bolsters the growth of government and therefore the trend toward decivilization
• And if not abandoned it can result in a crisis of confidence, total impoverishment and chaos

By continually manipulating interest rates away from their natural free-market level central banks distort the pricing mechanisms by which entrepreneurs, businesses and consumers make decisions. This continual distortion results in massive amounts of wasted resources as capital gets invested in unsustainable areas and soon after that capital is destroyed. Row after row of empty houses in Florida, Nevada and Arizona are excellent such examples of capital that was put to work in the wrong area because people were fooled by artificially low interest rates into believing there was a large need for new housing.

This boom and bust process has been recurring over and over for decades now and the boom/bust cycle is now accelerating as the system nears collapse. This continual boom/bust cycle and massive amount of malinvestment has destroyed trillions of dollars in wealth and is the real reason why the US is in such terrible shape today.

Yet, despite decades of impoverishment caused by the Federal Reserve, who is it the American public look to in order to fix the problems? Unbelievably, they look to Bennie and the Feds.