Little has changed in the basic outlook. The U.S. economic and systemic-solvency crises of the last five years continue to deteriorate. Yet they remain just the precursors to the coming Great Collapse: a hyperinflationary great depression. The unfolding circumstance will encompass a complete loss in the purchasing power of the U.S. dollar; a collapse in the normal stream of U.S. commercial and economic activity; a collapse in the U.S. financial system, as we know it; and a likely realignment of the U.S. political environment. Outside timing on the hyperinflation remains 2014, but events of the last year have accelerated the movement towards this ultimate dollar catastrophe. Following Mr. Bernanke’s extraordinary efforts to debase the U.S. currency in late-2010, the dollar had lost its traditional safe-haven status by early-2011. Whatever global confidence had remained behind the U.S dollar was lost in July and August. That was in response to the lack of political will—shown by those who control the White House and Congress—to address the long-range insolvency of the U.S. government, and as a result of the later credit-rating downgrade to U.S. Treasury debt.
Those latter circumstances triggered something of dollar selling panic, particularly as reflected in the corresponding buying of gold and Swiss francs, but various interventions, misdirection and manipulations helped to quell the currency disorders. Still, many financial markets were left rocking with the aftershocks of a major shift in the global view of the U.S. dollar.
The economy has underperformed and likely will continue to underperform consensus forecasts by a significant margin. In turn, weaker-than-expected economic growth will mean significantly worse-than-expected federal budget deficits, Treasury funding needs and banking-system solvency conditions.