The father of Reagonomics and former Wall Street Journal editor Paul Craig Roberts has warned that the collapsing dollar will eventually cripple the European economy and may even return the world economy to a barter system as financial chaos ensues.
Roberts served as an Assistant Secretary of the Treasury in the Reagan Administration and is a former editor and columnist for the Wall Street Journal, Business Week, and Scripps Howard News Service.
Speaking on the Alex Jones Show yesterday, Roberts cautioned that "The loss in value of the dollar is becoming so rapid it's alarming....we've got unmanageable trade deficits, budget deficits, the economy is set for recession, the wars show no end."
Asked how bad the dollar crisis can get, Roberts responded, "It can get awfully bad - the trouble is where can they go?"
"If China removes the peg and all the surplus dollars drive up the value of the Chinese currency then given our dependence on China....it's going to drive the prices up here a tremendous amount and Americans don't have any discretionary income left," said Roberts.
"At some point the foreigners will stop financing our budget and trade deficits - then we're going to have a massive crisis the likes of which we've not experienced....if you're totally dependent on imports of manufactured goods and you can't pay for them, what do you do?" asked Roberts, explaining that the only recourse would be to print more money, pushing the dollar down even further.
Citing the fact that the dollar had lost more than 60 per cent of its value against the Euro since 2001, Roberts said that the flight from the dollar could eventually wreck the European economy because it would cripple their exports.
Asked how low the dollar could go, Roberts said that there was a limit because "There's simply so many dollars, there's not enough room in other currencies to absorb them - at some point the flight of investors from the dollar to the Euro will cause amazing troubles in Europe - they won't be able to export anything because the prices are driven up so high."
Roberts said investors will eventually desert the Euro as a safe haven from the dollar and the same process will cause a crisis in Britain as the pound is devalued due to exports being hit.
"Wages are being frozen, profit margins are shrinking, exports are down - so it's starting to impact on Europe," said Roberts.
Roberts warned that the potential destruction of the dollar as the world's reserve currency could eventually return us to a system of barter, completely altering the landscape of the economic structure as we know it.
( Paul Joseph Watson
Friday, November 9, 2007)
Dollar collapse will cripple European economy