Thursday, March 19, 2009

U.S. Cash is Trash

The Fed officially said they are going to monetize Treasury Debt yesterday. That means the Fed will print money, then hand it to the Treasury in exchange for bonds that the Treasury will pay back over time. Unfortunately, they are both part of our government, so they are just passing money back and forth, and hoping nobody understands what is happening.

Monetizing Debt = Printing Money = Debasing the Currency.

It's a really sad day. The U.S. has owned the reserve currency in the world for a long time, which is a huge advantage. And yesterday, we started the process of handing it to someone else, or maybe something else (gold, oil, etc).

This chart from Paul Kedrosky's Infectious Greed summarizes it well. The dollar is going down .