According to Harry Schultz and many other economic analysts, there will be a collapse of the US currency and embassies should purchase local currency to last at least a year. This led to rumors of holidays and runs on banks and other rumors.
As you may know the Fed has had a huge program of currency swaps which corresponded with the weakness of the USD, which is conducted rapidly and may lead to new lows in USD. This could lead to new lows in USD and possibly trigger a currency crisis and, as it has been said repeatedly, the Fed is not willing to defend the dollar. However, it is unlikely that it will even cause a complete collapse of the currency. It will probably cause foreign buyers of US debt to sit on a few auctions, we call these Treasury auctions ‘failure’ auctions, with a new floor in the U.S. to trigger a collapse of our currency.
After all, it has happened in the case of the Argentine currency collapse of 2002 when their currency was defaulted and replaced with a new one because they could not pay their external debts. The Argentine economic crisis was a financial situation that affected Argentina’s economy during the late 1990s and early 2000s. Macro economically speaking, the critical period started with the decrease of real GDP in 1999 and ended in 2002 with the return to GDP growth, but the origins of the collapse of Argentina’s economy, and their effects on the population, can be found in action before. As of 2005, arguably the crisis was over, though many challenges remain for the country.
So, this is not as what you would call a “conspiracy theory” as it has happened before, but if it happens to the US dollar, the entire world economy would collapse.
October ‘Crash’ Still on the Way: CEO
Back in July, Enzio von Pfeil, chief executive officer of EconomicClock.com, predicted a stock market crash in October. On Wednesday, von Pfeil reiterated his forecast, saying: “It doesn’t have to be a calamitous crash. But I do think we’re heading towards something. One sees that the market’s become a lot more ‘toppy’. It’s stopped going up and up and up.”
This Earnings Season Won’t Be as Dazzling
The worst of the earnings results will come out of labor-intensive and consumer-led industries, according to von Pfeil.
“The key earnings surprises will be in those industries which cannot keep on cutting workers,” he said. “In other words, the basic materials and the very labor-intensive industries, like the car industry that very much have already gone through their cost-cutting exercises.”
The U.S. will have the worst earnings results, closely followed by Europe as problems in the housing sector and consumer sector remain. But von Pfeil warned that Asia will also be affected by the earnings news from the West.
China Won’t Save Us
Another reason for von Pfeil’s bearish prediction is that he has a “feeling that there may be some kind of a knee-jerk policy response in China. Given China’s global role, could very well lead to some very severe downward market surprises.”
“I do think that the Chinese growth story is a little bit of a tin drum that is understandably made to look very good,” he said, adding that he doesn’t believe so much in the positive growth numbers and outlook for China as he sees labor costs rising.
“I don’t believe that China, with a per capita income that is a fraction of America’s, is actually going to pull the world out of recession,” he said.
You can view the full article at CNBC