Tuesday, September 23, 2003

The Coming Dollar Crisis - Interview

Richard Duncan has been interviewed by Christopher W. Runckel about his new book, "THE : CAUSES CONSEQUENCES CURES." This book will become the defining work in real world economics, though the world does not know it yet, and many will not until the future makes it overwhelmingly evident through a cataclysmic financial event, other's and I do.

Before going to the article I have entered a letter I wrote to Treasury Secretary Benson, back in the `90's, to show how my thinking was and is in line with Richard Duncan's. I had predicted the very cataclysmic financial events that took place from 1997 to the present day, as did he. He has an accurate mind as to what the global transactions' credit ball is all about. I join the chorus to sing the same song once again.

If you really want to know what is going on, and will be going on, please read Richard Duncan's new book. We are in grave danger of a final collapse of the planet's entire credit and monetary structure, now. It will not be a pretty picture. No one can truly imagine the horror of such an outcome. Later this winter I will publish a complementary paper to mathematically prove his and my points about an imminent credit collapse, due to the aggregate non-productivity of said global credit structures. There is a great deal of agreeing articles already posted about many other authors on the rest of this blog. Take a look at {C.H.I.P.S.}[clearing house interbank payments system] to see the true size of world transactions. Notice 1998 to 2000's big downturn in total global transactions. I wrote years ago that when CHIPS shows a shrinkage, that a major global contraction will have started, and can only end in an inflationary/deflationary prolonged real global depression. Sorry to be the bearer of bad news.

August 24, 2003
February 24, 1993

DEPT. OF TREASURY 15th St. and Pennsylvania Ave. N.W., Washington, DC 20220
Attention: Mr. Lloyd Benson

Dear Mr. Benson:

I have been trying all means possible to bring attention to America's most urgent problem. I am writing you as my last hope in understanding the importance of my concerns. I have watched you for years, and long ago decided you were the most intelligent Democrat. I am not stating this to flatter you. I say this so you may realize the importance of the power you actually hold - having control of the Treasury, makes you the most powerful man in the nation. The Federal Reserve is a small power compared to your awesome responsibilities. For these reasons, and since your authority controls the currency, I am addressing you.

Aristotle stated long ago, "It makes little difference what laws are passed when a nation loses control of its currency." America lost control of its currency in 1971, with the death of the Bretton Woods system. This central most important, controlling, economic and monetary factor, must be rectified. If America fails to correct its currency and exchange rate problem, there is no possible way for all your, and the entire administration's ideas, taxes, spending, laws, and best intentioned investment strategies, to work, long term.

The exchange rate, currency, and monetary system have been a raging inferno of cross-contradictory ideas for over twenty years. Historically, it has raged in varying degrees since Plato first introduced his exchange clearing thesis, some 2400 years ago. Presently, we see Russia heading into hyper-inflation, while the currency problem fills French fish markets to the point of destruction by angry fishermen. This is only one example of thousands, that could be cited over the last twenty years. This is the currency, exchange rate, and monetary issue; the same issue that has filled America's shores with foreign goods, and driven her business offshore, over the last two decades. Please, try to realize, this is only a currency problem that must be rectified before America, and the entire world, are destroyed.

There are hundreds of good books, and thousands of quotations, on this very issue in total agreement with my feelings. It is only the recent flurry of ill informed and misguided academics, intellectuals, and economists who preach the false road of totally destructive long term floating exchanges. They are wrong, as all history records them to be wrong. Yes, I will agree that such a monetary system fills the pockets of many wise and rich speculators, but at what cost to taxpayers? The increasing debt of America, and all world nations, easily answers this question.

America's problems, over the last two decades, are not totally attributable to such ballyhooed causes as entitlements, oil shock, war costs, and excess local spending. If all these issues are put aside, America's debt and desperation will continue increasing; due to the overall world transactions' increase costs [C.H.I.P.S.]. These costs are widening, yearly, as exchanges widen; creating massive currency speculation, capital flight, and hyper-inflations; reciprocating back into this country. These problems can only be resolved with major monetary reform.

I have already written President Clinton twice, and many other senators, representatives, academics, economists, and national leaders. I will enclose much of the material I sent the President, along with some new. I believe you can much better understand the material, as it is very complex. I have made it as plain as possible with new graphs and diagrams.

The central point of my thesis; which is a manuscript I have been working on for over twenty years; is that America, and the world, must go to either fixed, pegged, balanced, or cleared exchanges. My preference is INTERNAL EXCHANGE CLEARING, although external exchange clearing is better understood. External exchange clearing can be made palatable to the international banking community by linking it to a purchasing price parity, bond insurance policy. The details are too intricate to go into in a letter.

The reasons the above is necessary can best be explained by the first three or four diagrams. Further explanations exist in the other diagrams, graphs, and accompanying text. The first diagrams show the present problem. Total world transactions have increased from fifty trillion dollars since 1980 to $222 trillion in 1990; as recorded by {C.H.I.P.S.} (Clearing House Interbank Payments System). I simply ask, "How do you think the local economy can be improved, until we deal with the overwhelming international speculative problem at the top?" I tell you frankly, "We must deal with the international monetary and currency problems to solve the local economic troubles of America, and the world. No other solution is viable." The exostructure must be improved to improve the infrastructure... Please, for the future of our children, try to understand me.

I love my country greatly, as I love the entire world. I would gladly testify before the Senate about any of the massive problems and solutions to America's troubles. I am even going to ask you to make it possible for me to testify. I assure you, I hold the best interests of my nation in my heart. I do not mean to be unkind, but I know I am the only one writing in this vein. I have made major economic discoveries over the last twenty years. These discoveries must be shared with the nation, and the world.

You do not know me, and I have no degreed certificates, but I assure you I am more thoroughly self-educated than most Ph.D.'s, in the entire land. I do not mean to brag; I am simply trying to let you know the importance I feel for the discoveries I have made. I have developed many new, major economic laws. I was able to do this by joining the two diverse fields of economics and physics. The results, at first, even astounded myself. I am positive you would be extremely appreciative of my total information capacity. I am willing to offer everything free, for the good of my nation.

In closing, I will send what I can afford to mail at this time. I am just a penniless hillbilly, originally from the tiny town of Meddybemps, Maine. I will also enclose a resume, with references, for your convenience. I hope I will be able to impress you with the absolutely, necessary, importance of my mission. I thank you very much for your time, and if you have time, please respond. We could reach a much closer understanding, with direct questions and answers to the very complex and intricate topics involved.

L.A. Gillespie C.E.O.
Competition Engineering
Enclosure:Diagrams, Letters, Graphs, Text, and Resume


Question 1: Your new book was recently released by J. Wiley & Sons. In the book you argue that the current International monetary system is in danger of collapse. Could you explain why you believe the present international trade system is a danger to all of us?

Answer: It is the imbalances in the international trade system rather than the system itself that poses the danger. The United States; Current Account deficit is now $60 million AN HOUR! It increased 28% in 2002 to half a trillion dollars, an amount roughly equivalent to 5% of US GDP. This unprecedented trade imbalance has created extraordinary disequilibrium in the global economy. The countries that build up large stockpiles of international reserves due to large current account or financial account surpluses;such as Japan in the 1980, the Asia Crisis countries in the 1990s and China today;develop bubble economies. When those bubbles pop, as they inevitably do, they leave behind banking crises and excess capacity. The governments of those countries must then go deeply into debt to bail out the depositors of the failed banks. At the same time, the excess capacity in the economy results in deflation. Economic bubbles and systemic banking crises can be expected to reoccur and deflationary pressure can be expected to persist so long as the US Current Account deficits continue to flood the world with dollar liquidity.

Question 2: In your book you write that the current system is neither good for the countries who export goods to the U.S. nor ultimately to the U.S. How can a system that has brought such growth to so much of the world be bad?

Answer: Ultimately, the imbalances in the system are harmful to the United States; trading partners and to the United States itself. The countries with overall balance of payments surpluses are destabilized through the rise and collapse of economic bubbles. Ironically, the US current account deficits also helped fuel the New Paradigm Bubble in the United States . The surplus nations earn their surpluses in US Dollars. They must either invest those dollars in US dollar denominated assets or else convert the dollars into their own currencies. If they convert such large amounts of dollars into their own currencies, those currencies would appreciate sharply, putting an end to their trade surpluses and perhaps driving their economies into recession. Consequently, they park their surpluses in US dollar denominated assets instead. By investing their dollar surpluses in US dollar assets, the trading partners of the United States helped fuel the stock market bubble, facilitated the incredible misallocation of corporate capital, and, by acquiring Fannie Mae debt, contributed to the dangerous rise in US property prices.

The imbalances in the current international monetary system are also bad because they are unsustainable. The United States cannot continue going into debt to the rest of the world at the rate of $1 million a minute indefinitely. The net indebtedness of the US to the rest of the world is already approximately $3 trillion or 30% of US GDP;and its now growing at roughly 5% of GPD per annum. The economies of most of the United States; major trading partners have grown dependent on exporting much more to the US than the US imports from them. When the United States current account imbalance returns to equilibrium, and it eventually must, the era of export led growth will come to end and the world will find itself without an engine of economic growth.......{continued link} - Banking & global debt charts

About the Author: Richard Duncan has worked as a financial analyst in Asia for more than 16 years, conducting research and publishing investment reports on companies, industries, and economies from India to Korea.

In 1993, Mr. Duncan was one of the first to warn of the impending collapse of the Thai economy and the Thai stock market in a series of published reports and speeches directed at institutional investors. At the height of the Asian crisis, he worked as a consultant for the International Monetary Fund in Thailand. Subsequently, he joined the World Bank in Washington DC as a Financial Sector Specialist focusing on issues related to the economic crisis in Asia.

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