Monetary System is Like a “Drunken Sailor”

The below is an excerpt from Richard Russell’s excellent daily newsletter, Dow Theory Letters.

“A clearer picture is seen in the precious metals market. The bull market in the precious metals is underscored by the ominous weakness in the Dollar Index. I say “ominous” because the dollar weakness is setting off international demands for a new reserve currency. If the US dollar loses its status as the world’s reserve currency, it will be a disaster for the US, which can print “money” in the same currency that its debts are denominated in. If the US has to borrow foreign currency to cover its debts, interest rates will head higher.”

“Once the US mountain of debt is subject to rising interest rates, the game is over, and the compounding cost of carrying the Federal debt will throw the nation into virtual bankruptcy, an emergency that the US can’t print itself out of.”

The chart that no one wants to look at…It’s the Dollar Index, heading inexorable lower, perhaps to test it record low of 70.50. At stake — the reserve currency status of the “almighty dollar.” Already there are plans for a new reserve currency made up perhaps of the euro, the French franc, the renminbi and gold.

Russell prediction — sooner or later (probably sooner) gold will re-enter the world monetary system.

The current monetary system based on competing fiat currencies is like a drunken sailor who is unsteady on his feet while trying to adjust the ship’s broken compass.

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