Countries around the world have been actively seeking ways to not do business in dollars for the past few years. The U.S. dollar is the so-called world reserve currency, but the big question is for how long? China and Japan are beginning to shun the dollar in trade between the two countries. Mind you, this is the 2nd biggest economy in the world doing business without dollars with the 3rd biggest economy in the world. Russia and China, also, have an agreement to not use the dollar, and even India recently announced it would trade gold for oil with Iran. Additionally, the International Monetary Fund (IMF) has been calling for an alternative to the buck. The big push is not because the U.S. dollar is held in the highest regard but because it is losing its luster on the world stage. After all, the debt debacle facing America is worse than what the Greeks are facing according to a new report from U.S. Senator Jeff Sessions. Senator Sessions says every man, woman and child in the country is saddled with $44,000 in debt.
The difference is the U.S. can print money, Greece cannot, and that is the problem for the rest of the world. Every dollar that is created devalues the other dollars in existence. America spends 43 cents more than it takes in every year. There is a current $15 trillion national debt and future commitments that some economists say exceeds $200 trillion. Last August, Congress raised the debt ceiling $2.1 trillion to $16.4 trillion. That money is likely to run out before the November 2012 election, and then, Congress will need to raise it again or the U.S. will face default. My money is on yet another debt ceiling increase. Is there any wonder why the world wants to move away from the dollar? The more you have of something, the less it is worth.
Now, even some U.S. states want to do business in something other than dollars. Wyoming is the latest to consider what some are calling the “Doomsday bill.” A local news organization called Trib.com reported last week, “State representatives on Friday advanced legislation to launch a study into what Wyoming should do in the event of a complete economic or political collapse in the United States. . . . The task force would look at the feasibility of Wyoming issuing its own alternative currency, if needed. . . . “I don’t think there’s anyone in this room today what would come up here and say that this country is in good shape, that the world is stable and in good shape — because that is clearly not the case,” state Rep. Lorraine Quarberg, R-Thermopolis, said. “To put your head in the sand and think that nothing bad’s going to happen, and that we have no obligation to the citizens of the state of Wyoming to at least have the discussion, is not healthy.”
Wyoming is just one of more than a dozen states that are exploring or passing legislation to have an alternative to the dollar just in case of some sort of calamity. CNN reported earlier this month, “A growing number of states are seeking shiny new currencies made of silver and gold. Worried that the Federal Reserve and the U.S. dollar are on the brink of collapse, lawmakers from 13 states, including Minnesota, Tennessee, Iowa, South Carolina and Georgia, are seeking approval from their state governments to either issue their own alternative currency or explore it as an option. Just three years ago, only three states had similar proposals in place. “In the event of hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System … the State’s governmental finances and private economy will be thrown into chaos,” said North Carolina Republican Representative Glen Bradley in a currency bill he introduced last year. Unlike individual communities, which are allowed to create their own currency — as long as it is easily distinguishable from U.S. dollars — the Constitution bans states from printing their own paper money or issuing their own currency. But it allows the states to make “gold and silver Coin a Tender in Payment of Debts.”
Gold and silver coins could be exchanged for their bullion value. That means, even though a one ounce U.S. Gold Eagle is stamped $50, it would be valued at its weight on the spot market. As I write this, gold is trading for more than $1,785 per ounce. Same would go for Silver Eagles and other forms of U.S. minted gold and silver. They would be exempt from state taxes, but federal taxes would still apply as it stands now. Some legislation, as in South Carolina, would allow any kind of gold or silver coin to be used. That would include coins such as Krugerrands from South Africa, Maple Leafs from Canada and many others.
This is all taking place under a backdrop of a sovereign debt crisis in Europe that could destabilize the U.S. banking system and runaway deficits and spending on wars, bailouts and Obama care. There is a reason we keep hearing stories about alternatives to the U.S. dollar, and it is signaling bad news ahead for the world’s reserve currency. The idea of an alternative to the buck is not coming from a few crazy people from the fringe. It’s coming from world and state governments that fear a currency crisis of epic proportions that is well on its way.