Thursday, July 7, 2011

The Dodd-Frank regulation act or How to prop up the value of the dollar

The Dodd-Frank Wall street regulation act will make it significantly harder to trade metals such as gold and silver. This should come as a surprise to nobody; if an act has the name "Dodd-Frank", you know it's going to be stupid.

OTC trading will be banned, and while there are still ways for individuals to bet on gold, it certainly makes things harder. The real question is; why? There's no motivation for the regulation anywhere on the internet, and probably not anywhere else either.

I'm sorry if this makes me sound like a Paulbot, thinking the government is conspiring against me, but isn't it strange that the government is regulating the only way to escape the dollar? It's well-known that when people don't trust the currency in the country they are in, they tend to escape by investing in precious metals such as gold and to a lesser extent silver.

If people - and by people I mean regular American moms and dads - lose trust in the dollar, they will simply keep their savings in gold instead, leaving the dollar weaker. A "run" on the dollar could have a disastrous effect on the US economy and the government's ability to borrow money.

Is the whole regulation all about protecting the US dollar from such a run? I'd definitely say so. The rich (to which Dodd and Frank belong) can still protect their money by buying gold, but it becomes significantly harder for regular americans. This is really about propping up the dollar, keeping its value artificially high.

This shows the desperation of the US government; now it's not about solving the fiscal crisis any more, it's about forcing Americans into holding a currency that is on the brink of collapse.

I'd imagine we'll see more of this kind of regulation soon, as the debt problem becomes more severe.

Some day soon I'll go through what will happen if the dollar does collapse, and which country will stand as the winner when the dust has settled (hint; it's an old enemy in the east).

John Gustavsson

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Ohio JOE said...

"I'm sorry if this makes me sound like a Paulbot," Haha, I know what you mean. I think that Dr. Paul is a litlle too extreme on his banking views, but he is looking less crazy than he did a few years ago. If I were forced to chose between Dr. Paul on one extreme on the banking scale and Dodd-Frank-Romney on the other. I'd chose Dr. Paul. While Mr. Romney of course is not nearly as nutty as Dodd-Frank, his banking views are troubling nevertheless.

BTW, while the dollar is struggling due to some economic issues, I doubt the dollar will actually completely collapse anytime soon.

John said...


Yeah, I don't want to be associated with the tin foil hat-wearing Paulbots. That being said, Paul is a great resource for the Republicans. He stirs the pot and creates debate, if nothing else.

Well, it all depends. The dollar is being held up by the fact that there is no credible option, no alternative reserve currency in the world.

The dollar however could collapse if the eurozone collapses, because that will mean bankruptcy for several American investment banks who have made large investments in the eurozone. A second bailout? Not credible, in particular not with all the tea party congressmen and senators. A meltdown of the financial system can destroy any currency. Also, if there are signs the dollar might collapse, that's the kind of stuff that could convince China to dump their 3 trillion something dollars on the market (kind of like you sell a stock if you believe it will drop in value), which would only speed up the demise.

Anonymous said...

I agree that anything with Dodd-Frank sponsorship is a bad idea.


Anonymous said...

Ya! We should have self regulation on our freeways. Get rid of the state patrol and let people self regulate. People will choose on their own to drive the speed limit. Self regulation of all our financial systems is the best idea because everyone is honest.
Regulation of our financial system should have been in effect all along. The reason why people are gravitating to gold is because we allowed the banks to self regulate which allowed them to mess up the housing market. Then we bailed the banks out and they paid back the loans to the gov. by naked shorting, insider trading and creating debt swaps. They used their customers money in the bank to short their customers portfolios in the stock market. And now that the banks are being regulated, the banks are complaining and saying that they don't know how to make money without frauding the stock market. And the dod frank regulation is preventing them from risking the customers money in the bank in the stock market. The Gov. is not going to FDIC insure the customers money in the bank so that we can bail out the banks over and over and over again.
Short sellers in the market created debt swaps in order to naked short and be able to choose when to buy in and cover their short. They are suposed to cover their short 3 market days later. Instead they can short a stock down from $26.00 to $0.37 cents all the while getting on message boards telling the share holders to sell saying it's a fraud, scam, crappy stock and share holders are stupid. Stock promoters figure that it is easier to convince people to sell than to buy. So stock promoters shorts stocks down then write bad article that are false about companies in order to convince share holders to sell and call other shorts to the stock in order for the promoter to cover their short position. The shorts can easily take a stock down 70% in one day. All the while telling the longs/share holders that they are going to take their $26.00 stock down to one red cent. And we wonder why people are running to gold because of what the banks and the short sellers in the stock market are doing. Our financial system is one big manipulation. 63 trillion dollars worth of debt swaps have been created by the brokers in the stock market, and they still need to be bought in to cover short positions. Brokers were bypassing registered clearing houses and forming their own so that they could rape the stock market without the share holders and gov. knowing. Why? So that they could make more money by charging higher interest to their naked short clients. I could go on and on with more info but I don't want to get Carpul Tunnel.
Regulation of our entire financial systems will help to prevent depressions like this one. More than two bad quarters is considered a depression. The early eighties recession lasted two years and this one is going on four years and counting. Capitalism works with regulation. Capitalism falls apart with self regulation because self regulation breeds corruption.