What will it be like if the USD Crashes?

[Thogey]

Most of you are much smarter than I concerning economic issues.

So here is my question: If the USD crashes, what would that look like?

Will we have advanced warning? Are we in that "warning" phase now?

How will events most likely progress, in what order and what is on the other side of it?

How long will the collapse period last before thing get reorganized?

Lookin forward to your ideas.

[Kurr]

Have you by chance read ferfal's account of the Argentina collapse?

He had first hand experience of this situation and amazing explanations and writings of what followed for years.

[68Camaro]

Great question, Eric. I'm still thinking on it, because this is/will be so completely different that any other prior collapse. We've never had the world's reserve currency collapse while based on fiat. We've never had this level of interconnected-ness between countries. We've never had this happen in a world full of weapons of mass destruction, or where the abilty to feed the world is only one major crop failure away. Certainly not with all at same time.

Ultimately I'm thinking this is going to end in a dictatorship or war or both. What happens in-between, I'm still working to digest, but I'm sure I'll be wrong, whatever it is.

[beauanderos]

Regardless of who has money and who has none, who has prepped or who hopes to mooch... one thing will be certain.

Food and essentials will be in short supply. There will be rationing and black markets.

Beyond that? Anarchy, riots, looting, arson, murder, martial law. Incarceration in internment camps on flimsy pretense.

The have nots will be looking for the haves.

[Copper Catcher]

As to what things will look like I can only speculate. It will not be pretty!

It is not a matter however of if this will happen but when. Why, because the economies of the world are all interconnected. When "The Crash" occurs it will be instant and occur within hours versus days. Then a global reset will have to occur i.e. as they say a New World Order.

Maybe your wondering what would bring down not just the US economy but the global financial markets? That would be a “little thing” call derivatives.

The way I understand a derivative is not really an investment in anything like investing in stocks and bonds. Rather is a legal bet on the future value or performance of something else.

It is sort of like you going to Vegas and betting on the outcome of a game, the bankers on Wall Street make trillions of dollars of betting on just about anything that you can imagine. All this in theory can work when everything is “normal” what ever that might be. But back in 2008 you might remember the world’s largest insurance company AIG made a bad bet with derivatives and crashed needing a government bailout. Then MF Global and the six billion dollar loss JPMorgan Chase announced, all due to derivatives.

So why is all this a big deal you might wonder? Well no one really knows the total value of all the derivatives but estimates say the global derivatives market is anywhere from 600 trillion dollars all the way up to 1.5 quadrillion dollars! To put things into perspective the Global GDP is somewhere around 70 trillion dollars for an entire year!

In 2009, five banks held 80% of derivatives in America. Now, just four banks hold 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller. The four banks in question: JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc.

Is anyone surprised?

But, relax I’m sure the banksters have everything under their control; I mean they are in control. No, I mean they control everything. Well you know what I’m saying… Ugh!

[beauanderos]

also... disruption of essential services. No postal system, electric grid brownouts, water systems down, trash pickups, Hah! No gasoline, Fire and Police... pshaaaw. Medical services, not happening. Be prepared to bunker down with your loved ones until the dust settles. Probably some trigger happy psychos pushing a few red buttons.

[Country]

Of note, is that market derivitives also have derivitives on these derivitives. In addition, these derivitive-derivitives are on margin usually, say 50-100/1 leverage. Now how's that for an avalanche!

[DTEJD1997]

Hey all:

A derivative is a financial instrument that "derives" it's value from something else. For example, the most traditional "derivatives" are options on stocks & stock indexes. Additionally, you have other traditional derivatives in the "futures market" for physical assets such as grains, livestock, and metals. About 30 years ago, there were futures on interest rates and foreign currencies.

About 15 years ago you started to get derivatives on more exotic things, "credit default swaps, swoptions, volatility indexes, ETF's that are x3 leverage, and so on.

Derivatives are a problem, but probably not as big a problem as some people make it out to be. A lot of derivatives will cancel out or the investors or speculators have offsetting positions. For example, covered calls, OR a farmer selling grain futures against his crop. While there is RISK in the contracts, the risk is NO WHERE NEAR it's notional value, as you have your offsets...

Other derivatives have limited amounts of risk...for example, who seriously thinks gold is going to go to $50/oz. in the next two years?

So I really have to question how people are measuring the notional value of these things...

The main problem with derivatives, as I see it, is why are deposit taking banks allowed to SPECULATE with derivatives? If they want to HEDGE some of their portfolio, that is FINE. If they want to speculate, they can get the F OUT. Taxpayers & FDIC should not be backstopping ANY speculative derivative positions...

So I think derivatives are certainly a problem, but take all the "doom & gloom" about them with a grain of salt!

[mbailey1234]

This wouldn't apply to all derivatives and I'm definitely am not expert on the subject but this is how I see it.

If party A takes on a position and wants to limit his risk he can buy insurance or whatever from party B which will limit party A's risk but they are also giving some of the potential profit to party B in return for them taking much of the risk. So party B doesn't like being out on a limb so they do the same thing with party C. C with D, D with party E, etc. etc.... If the system fails the only way E can pay D is if they have the cash. D can't pay C unless E pays them. C can't pay B unless D pays them. See where I am going with this? If the domino affect doesn't happen fast enough of someone doesn't pay up then the whole system is screwed.

I believe this is the main reason they wouldn't call a 30% "haircut" over in Europe a "default" because it they did determine it to be a default it would have put into motion a vicious circle of chain reactions and I think they had a pretty good idea that someone along the way wouldn't have paid the next guy so the whole thing would have snapped.

I agree with the thoughts that several derivative contracts should offset ending up with a somewhat neutral position overall but you still have to wonder if the circle would go unbroken if the day ever came when the system goes BOOM.

If the USD crashes I think I will be glad I have a basement full of non perishable goods that we need or could possibly use to barter with instead of having it all in FRN's or in a savings account drawing 0.2% APY. If it were to happen this time of year I could make it until winter with limited problems. Life as we know it could change in a flash. Don't let it sneak up on you like the firearm prices/availability did. We were all thinking about it but nobody really thought it would happen that quickly and that dramatically.

[Copper Catcher]

To further clarify you might want to read a piece by Ellen Brown titled: It Can Happen Here: The Bank Confiscation Scheme for US and UK Depositors

http://www.globalresearch.ca/it-can-hap ... rs/5328954

[DTEJD1997]

Hey all:

I think the decline in the USD will likely be a slow motion train wreck. In fact, there is evidence it has already started...

BUT if there is a shock to the system it will happen QUICKLY. I have no idea what form it could take, but if it happens there might be some "tremors" that well connected people will see/feel. This happened back in 2007 & 2008. When the real big shock comes there is going to be LITTLE or NO time at all.

You have GOT to get your desired positions in place BEFORE it happens. When it starts, it will likely be too late.

So if you want metals, you need to get them NOW. If you want/need food, you need to get it NOW. If you are going to hedge your portfolio, you need to do it NOW.

You can't buy insurance when your house is on fire...

[theo]

Hey all:

A derivative is a financial instrument that "derives" it's value from something else. For example, the most traditional "derivatives" are options on stocks & stock indexes. Additionally, you have other traditional derivatives in the "futures market" for physical assets such as grains, livestock, and metals. About 30 years ago, there were futures on interest rates and foreign currencies.

About 15 years ago you started to get derivatives on more exotic things, "credit default swaps, swoptions, volatility indexes, ETF's that are x3 leverage, and so on.

Derivatives are a problem, but probably not as big a problem as some people make it out to be. A lot of derivatives will cancel out or the investors or speculators have offsetting positions. For example, covered calls, OR a farmer selling grain futures against his crop. While there is RISK in the contracts, the risk is NO WHERE NEAR it's notional value, as you have your offsets...

Other derivatives have limited amounts of risk...for example, who seriously thinks gold is going to go to $50/oz. in the next two years?

So I really have to question how people are measuring the notional value of these things...

The main problem with derivatives, as I see it, is why are deposit taking banks allowed to SPECULATE with derivatives? If they want to HEDGE some of their portfolio, that is FINE. If they want to speculate, they can get the F OUT. Taxpayers & FDIC should not be backstopping ANY speculative derivative positions...

So I think derivatives are certainly a problem, but take all the "doom & gloom" about them with a grain of salt!

Good post. Trumpeting exorbitant notional values without explaining what it means in practical terms doesn't seem to be helpful. Having said that the presence of "exotic" derivatives that are fully understood by only a few is troubling. A good example of how dangerous derivatives can be would be AIG's position in "Credit Default Swaps" during the 2008 crisis. In the early stages of the crisis we were assured that it would be primarily contained in the banking sector; and then out of nowhere AIG the nation's largest insurer is dead broke and out of cash because they bet the wrong way on mortgage debt. Many blamed the problem on the CDS's, but I think the real problem was a lack of transparency (perhaps outright fraud!) concerning mortgage debt.

[thedrifter]

You can't buy insurance when your house is on fire...

But you can buy health insurance after a heart attack or cancer

[TwoPenniesEarned]

You can't buy insurance when your house is on fire...

But you can buy health insurance after a heart attack or cancer

Not under Obamacare. Pre-existing conditions are out! I know Obama said they would not be, but he also said that he would not increase your taxes and that he would not take any of your guns. He's a filthy scumbag liar and a traitor.

[shinnosuke]

The dollar crash has been compared to a slow-moving train wreck in this thread. That's right because the Federal Reserve Bank was established 100 years ago this year. In the intervening century the USD has lost 95-98% of its purchasing power. If that ain't a train wreck, I don't know what is. But it's been coming on in the same way that old story about how to boil frogs goes. Slowly, gradually. But the kleptomaniacs are becoming impatient about stealing the last of the wealth from us peons so they're going to have to crank it up a notch or two to squeeze the last few drops out of us. They're planning on killing a lot of us, you know. A LOT! Can't have all the rabble crowding up the planet and consuming limited resources after all.

I hope nobody will protest me introducing a religious element to this discussion. In the 24th chapter of Matthew's Gospel we read Christ's response to His disciples' questions about the signs of the end of the world.

12 And because iniquity shall abound, the love of many shall wax cold.

13 But he that shall endure unto the end, the same shall be saved.

14 And this gospel of the kingdom shall be preached in all the world for a witness unto all nations; and then shall the end come.

15 When ye therefore shall see the abomination of desolation, spoken of by Daniel the prophet, stand in the holy place, (whoso readeth, let him understand:)

16 Then let them which be in Judæa flee into the mountains:

17 Let him which is on the housetop not come down to take any thing out of his house:

18 Neither let him which is in the field return back to take his clothes.

19 And woe unto them that are with child, and to them that give suck in those days!

20 But pray ye that your flight be not in the winter, neither on the sabbath day:

21 For then shall be great tribulation, such as was not since the beginning of the world to this time, no, nor ever shall be.

22 And except those days should be shortened, there should no flesh be saved: but for the elect’s sake those days shall be shortened.

Couple these with the verses in Revelations about the people of the world needing the mark of the beast to buy and sell and we can see it's going to be mighty tough.

I don't think precious metals will save us, but I am buying a few to prepare for the day when I will have to trade outside of the "official" system.

I don't think firearms will save us, but I've got X just in case I need to protect my family.

I don't even think a years' supply of food storage will save us even though I have more than that as my church recommends.

My most important goal is to be a better person who exhibits more faith and renders more service. Verses 21 & 22 are pretty clear about how bad it will be. Worse than ever before. The people on this planet have seen some vicious times. Apparently, we ain't seen nothing yet. So whatever I can't do to get prepared for the days ahead, I'm hoping the Savior will make up the difference.

To answer Thogey's question about how long the collapse will last until we order is restored, I believe this time is different from all previous crashes. The next recovery is going to take place under Christ's supervision. And if we believe what Matthew wrote, He will cut the hard times short for the sake of the believers.