By Patrick A. Heller
Commentary on Precious Metals Prepared for …..

The US Dollar (and, therefore, the US government) has experienced a terrible ten days:

On January 23, the Republican-controlled House of Representatives temporarily suspended the current limit for raising the Federal debt ceiling until May 19.  This action was taken after the US government had defaulted on making a required payment to the federal employees retirement pension.

The key words to pay attention to in this announcement are “temporary suspension.”  On August 15, 1971, then US President Richard Nixon announced a ‘temporary suspension” of the delivery of US gold to foreign central banks trying to redeem US currency.  Forty-two years later, that temporary suspension is still in effect, with no signs of ending.

I am not alone is predicting that the temporary suspension of raising the Federal debt limit will continue to be extended indefinitely.  Unfortunately, this suspension gives the US government a green light toward hyperinflation.

For the past several years since the US housing crash hit, politicians in Washington have been trying to claim that private Americans were de-leveraging, which means they were reducing debt levels.  The Saint Louis Federal Reserve’s latest report on total private debt in America reveals that it has grown from about $2.2 trillion when the housing crisis hit to almost $2.8 trillion, an increase of more than 25%!

On Tuesday, Zhu Min, the Deputy Directing Manager of the International Monetary Fund (IMF) announced at an economic forum in Hong Kong that China’s yuan renminbi currency is set to become a global reserve currency.  For the past several decades, the US dollar has been the lone global reserve currency.  I have heard rumors that the Chinese are preparing to formally announce in about 18 months that the yuan renminbi is THE ONLY global reserve currency.

On Wednesday, The Federal Reserve admitted that the US economy had declined in the 4th quarter of 2012, despite the inflated figures used by the Fed to calculate this statistic.  This is the first official quarterly decline in the US economy since 2009.

Also on Wednesday, the 10-year US Treasury interest rate ended at 1.99%.  This interest rate has jumped more than 30% since its low last summer.  Higher interest rates on US Treasury debt indicate a decline in confidence of the US dollar’s future value.

It’s almost impossible to state which of these reports will prove to have the greatest impact on the US dollar, the US government, and the US economy.  They all point to the likelihood that the US dollar’s continuing decline in value is on the brink of accelerating in the near future.  As the dollar falls, gold and silver prices can only go up.

Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award.  He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects.  Past newsletter issues can be viewed at  Other commentaries are available at Numismaster (under “News & Articles) .  His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at


  1. Hi Patrick,

    Good commentary this week, especially when talking about the “temporary suspension” of the debt ceiling. I am glad to know I am not the only one who thinks this temporary suspension is not so temporary. I was also unaware of how much private debt had grown.

    I don’t think I agree the Chinese renminbi is going to be able to be a reserve currency. China’s also masking huge economic problems and its growth right now is tied inextricably to the US and EU. If either of those engines break down completely, China will follow. It is possible China may find a way to decouple its economy from the Western world and insulate itself from the economic chaos around us, but I think that is still many years off. They’re doing some of the right things, especially with their importing of gold and silver, but I don’t think they’ve accumulated enough bullion yet.

  2. Agree with Captain O. China is doing all the right things but the have a massive real estate bubble that will implode and the government banks will need to be bailed out, when they actually right of the losses on non performing loans. Also renmbini is more like 4 – 5 years from being in a position to be a global reserve currency. If the US dollar tanks before that time – and that is a real possibility – the only alternatives are the EU (despite what anyone may think it is the world’s largest economy when taken as whole) or a basket of currencies.

  3. IF the commercial world allows the Chinese yuan to become a global reserve currency, the world will regret it, sooner rather than later. Whichever currency or currencies that attain that status come along with a tacit agreement that to some extent, we’re all going to “dance to that country’s fiddler”. So it has been with the dollar. And as odious as that state of affairs has been for some currency users with the US “calling the tune”, jst wait until an unrepentant authoritarian regime is calling the square dance moves. We will live to regret it.

    Our corporate sector has laid down with dogs in China, and now is infested with fleas. I hope we wise up soon.

    China admirer? Not me, not now, not ever.

  4. For true scholars of metals trading behaviors, take a gander at the silver (and gold too, pretty much) intra-day charts on February 7. That is a classic case of a pretty serious difference of opinion going on. About a half hour into NYMEX trading, without hitting any obvious trigger price, silver tumbles a good 1.5%, in about no time at all. It recovers all the way back to where it was by 11AM, and just after the London market closes, down she goes again in New York. The truly big hitters are out there, folks. Real ‘Battle of the Titans’ stuff.

    Keep in mind – large speculative trades in paper contracts rule metals markets; physical delivery does NOT.


This site uses Akismet to reduce spam. Learn how your comment data is processed.