New Packaging, Same Lame Currency

By Kat Von Rohr

Looks like Old Ben is getting another facelift.

Last week, Treasury Secretary Geithner announced that the Treasury is redesigning the U.S. $100 bill. This new and improved Benjamin will be released into circulation on February 11, 2011.

Why the new look? Simple. The Treasury wants to continue their concentrated effort against counterfeiters, and the U.S. dollar is the most counterfeited currency in the world.

Specifically, counterfeiters like to reproduce the $100 bill because it’s the largest bill the Treasury bothers to print.

So the Treasury is taking action to make sure this $100 holds its value…and they’re taking extreme measures to fight against these amateur counterfeiters.

I find it ironic that the Treasury is going to such lengths to ensure the U.S. dollar bill holds its value, when they themselves have taken drastic measures that have practically guaranteed the dollar continually drops its purchasing power every single year.

Consider some of the atrocities that the Treasury, led by Secretary Timothy Geithner has committed against the dollar in just the past year. 

1. Issuing WAY Too Many Treasuries: The Treasury is responsible for those rivers of Treasuries flowing to the Treasury auctions these days. At last count, they have issued a least $1 trillion in Treasuries over the last year. The extra Treasury issuance is already pushing down prices and jacking up yields.

All that extra debt for sale is inflating the already over-abused Treasury market. Should buyers suddenly stop buying, this “forever bull market” in Treasuries could disappear, it would be open season for dollar bears who want to sell the dollar.

2. Trading Debt for Devalued Dollars: It’s common knowledge that the Federal Reserve often adds Treasuries to its balance sheets. During the height of the credit crisis, the Fed was diving into the Treasury market and buying up Treasuries at a record-pace (buying 17% during 2009).

Now the Fed has supposedly cut back, but rumor has it that they’re still buying (just through backdoor mechanisms). If that’s true, it means that the Treasury is trading our debt for freshly printed dollars – and driving our debt up higher.

3. Making Noise about a “Strong Dollar:” It’s something the Treasury Secretary Geithner likes to say. It reality, he doesn’t want a strong dollar. A strong dollar will devalue our exports, and make it harder to dig ourselves out of this debt mess we have willingly stepped into.

4. Alienating Our Best Treasury Buyers: While Geithner chirps about a strong dollar, he keeps leading the charge against China and their undervalued currency. He keeps pushing Chinese officials to revalue. If China was to raise their currency, it would only devalue ours further by comparison. It also gives China one more reason to not buy our Treasuries. Thanks Geithner.

Also it’s worth mentioning that even if we stopped all the “amateur” counterfeiters from illegally printing our currency, we still can’t stop the professionals at the Federal Reserve from legally printing more money. Nor can we stop them from inflating our money supply and chipping away at the dollar’s value a little more each year.

Just something to think about when you’re holding the new glimmering Benjamin in your hand next year…

It’s the same devalued, beaten-up currency, just with a new facelift.

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