On April 18 Standard & Poor Ratings Services downgraded the US long term as well as short term sovereign debt from “Stable” to “negative.”
Those at the S&P are sending a message to the administration to clean up the fiscal mess or they will downgrade US sovereign debt even more.
The effects of this downgrade are quiet visible this morning in the news we are reading these days.
Basically stated, America’s financial empire is on it’s last leg.
There are several indicators that I keep an eye on to tell me when things are “volatile” and to prepare for “Bank Day” or a Bank Holiday. One of those is the US Dollar Index which is currently sitting at 74.01.
As you can see the dollar has been declining very steadily now since the beginning of the new year in Jan 11.
If it goes below 70 and holds, there is a very good chance that it will not recover.
The dollar index gives us an idea of the “strength” of our currency.
I am one who looks at historical trends. As you can see by this chart the dollar has been slipping steadily now 1-2 points per month.
If the trends hold, we can be looking at a dollar index of approx 68 by Oct 2011.
What does this all mean?
Historically two of the darkest moments on Wall Street took place in Oct.
Black Monday, 28 October 1929 – a day in the Wall Street Crash of 1929, which also saw major stock market upheaval.
Black Monday, 19 October 1987 – the largest one-day percentage decline in recorded stock market history.
Other countries that have fallen to a financial demise have also taken place in Dec. The one that sticks out in my mind the most is Argentina who fell to hyperinflation in Dec of 2001. Which, they are still suffering in a hyperinflated economy with an indigent rate of 25%(unable to earn enough to literally feed themselves) and some of the highest crime rates in the world.
Just over the weekend Silver rose 8% where it opened this morning at $48.63. In 1980 the actual London high was $49.45 and here in the US it hit $50.00.
I believe that there is a very good chance we will see silver go beyond the $50.00 mark before the beginning of summer vacation.
Now a couple of things could happen because of this. People will sell their silver and the prices will drop, or people will purchase silver thinking it will go even higher, thus driving the price up even more.
I believe we will see a mix of both with the second option being the outcome. I say this because in the 1980s the US Dollar was not in trouble to the point of defaulting like it is today. So silver and gold will continue to climb up and will do so until the dollar is stabilized. But for that to happen the US will have to default on her loans which means a whole other set of events will then take place before there is any stabilization. But needless to say, I believe silver will continue to rise through all of this.
So why am I writing this?
To give you an early warning that I believe that the roller coaster is getting ready to speed up eventually bringing about a bank holiday aka BANK DAY.
When the bank holiday or BANK DAY hits, chaos will ensue. This is a historical fact. If you have not stored up AT A MINIMUM of 30 days worth of supplies, now is the time to do it and do it fast. If anything you are building a “hedge” against food inflation. In other words, buy now while prices are still low.
I would also advise having some extra cash on hand. The banks will be closed, ATMs, Credit /Debit cards will not work and odds are people will not take checks. Cash will be king, but you will need a lot of it to purchase items because hyperinflation will begin to ensue.
We are already seeing prices for food literally go up weekly. Right now it is only by fractions of a cent to a full cent. In the weeks to come we will see this jump from going up cents, to going up in dollars.
This is the beginning stages of hyperinflation and when hyperinflation takes hold, the dollar will lose value literally over night.
You will see major activity take place on Wall Street. Trading will be stopped multiple times per day to slow the trading. Eventually this will spill over to main street and this is when the chaos will begin and the store shelves will go empty.
People will lose faith in the US Dollar and will try to buy anything and everything knowing that the dollar is going belly up.
This is when we will see people’s savings go up in flames. Yes the “money” will still be there, but to buy anything, you will need more of it.
An example is looking at gas prices today vs. three months ago. Three months ago $30.00 would fill your tank. Today due to rising gas prices that same $30.00 will only put in about a quarter to one third a tank. Today’s average cost to fill the tank is about $50 – $75.
It takes more dollars to fill the tank, in other words your dollar is losing buying power due to inflation.
This is what will happen to people’s savings accounts, thier buying power will be eroded away. That is unless they put the money in some other form to preserve their wealth like silver, gold, jewlery, or some other form of tangible asset.
The rubber is meeting the road and we are running out of time. People have the choice to be part of the fray or not. They do this by preparing for this coming storm now while one still has time and the dollar still will buy a decent amount of goods.
Because when BANK DAY takes place, chaos will ensue and “herd” mentality will take hold. The best place to be is home and not part of “the herd” knowing that you prepared your ark for the storm that is eventually going to hit.
By Ray Gano