Book Review: The Dollar Meltdown by Charles Goyette

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Charles Goyette has spent much of his life thinking about money. He has contemplated how it works, how governments manipulate it, and how it stores value.

Goyette, a radio show host, precious metals pro, and libertarian, shares his views on fate of the US dollar in “The Dollar Meltdown.” In his four-part book, Goyette details where the US economy and dollar are now, how we got here, what might happen next, and how to protect your money.

The topics Goyette presents are necessary reading for anyone wanting a well-rounded perspective on the current US economy. Even if you don’t agree with some of Goyette’s strong libertarian viewpoints, his colorful writing and factual anecdotes make “The Dollar Meltdown” an interesting read.

As its cover might imply, “The Dollar Meltdown” isn’t a gentle introduction to the collapse of the dollar. Libertarians and Austrian school aficionados would feel most at ease with this book. Refreshingly, the nonpartisan author implicates both Democrats and Republicans as fiscal and monetary ne’er do gooders.

Goyette says “the body economic is shuddering from the relentless compulsions of meddlers.” Thanks to government intervention in money and markets, the US faces runaway inflation. Between Sept 2008-March 2009, US monetary base grew 199%. Add the domestic dollar supply to foreign dollar reserves—up to half of US dollar reserves are in foreign hands—and you have a potential oversupply.

The country’s debt situation is making holders of dollars, both foreign and domestic, nervous about the value of their greenbacks. Goyette writes that our national debt adds up to $42,000/person for the bailout (March 2009 numbers). On top of that, China owns $767 billion in US Treasury securities. That’s the equivalent of each individual American borrowing $3,300 from people in China.

If people start dumping dollars, all that extra supply will make it back to the US. Inflation will result. Several countries are already seeking other kinds of reserves—euros and gold, for example—to replace dollars.

Why isn’t the government quaking in its boots? Because, says Goyette, it has always pursued inflation as a policy. Authorities aim for mild inflation as a manageable economic state. The government tries to alter deflationary states into inflation to gain a sense of control of the economy. “Helicopter” Ben Bernanke is doing exactly that right now. Moreover, as the country’s biggest debtor, the government benefits most from inflation. For example, at 4% inflation, a debt of $12 trillion depreciates by $480 billion/year.

Economic gyrations actually work well for politicians, because they can capitalize off the consequences of inflation. They can campaign based on economic woes. Inflation can help them get reelected. It also helps the government increase its own power. After the government produces inflation, it will initiate wage and price controls. It will use inflation as a vehicle to move towards central command (total economic control).

Goyette, a free-market proponent, says authorities can never be one step ahead of the economy. Inflationary policies aren’t good for the economy. “Saying some inflation is desirable is like saying a few termites are a good thing…,” he remarks.

To combat the wealth-destroying effects of runaway inflation, Goyette recommends you put 25% of your portfolio into gold and silver, ideally physically held. He offers expert, detailed advice on how and where to buy it. Goyette’s chapter on buying gold is one of the most cohesive and useful chapters in his book. His expertise in the field shines through.

Subsequent chapters aren’t as well-defined, but do offer detailed background information on each recommended investment. The next chapter talks about silver. Chapters on investing in oil, natural resources, commodities, bonds (using a long inverse strategy), and foreign currencies follow.

Analysis

At times, I found the book dogmatic. For example, throughout the book, Goyette mentions that America is transforming itself into a central command economy. He says command economies produce poverty. Fair enough.

But isn’t China, increasingly prosperous as it is, still a command economy? Goyette addresses this by saying that “as China freed its command economy, growth came.” Yes, but that doesn’t mean China is free from command. Nor does it mean that America won’t stop the top-down action until it becomes the USSA. This tendency to polarize marks some of his claims. What’s more, Goyette later recommends buying an ETN (exchange-traded note) issued by the (socialist) government of Sweden. We hate central command, but we support it when it’s in our own interest?

If you can get over a couple of belief-system rabbit holes, and the occasional divisive language—Ron Paul fans would claim it as fact, but if your belief system lands on the outskirts, Goyette can shock—“The Dollar Meltdown” is a worthy read. It covers a perspective you need to know about in an entertaining, interesting way.

Full disclosure: We were sent a free copy of The Dollar Meltdown.

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Comments

  1. Travis's Gravatar Comment by Travis on November 20th, 2009 at 6:28 am

    All I get from the summary is that the author can base a book on present day woes. There is an overabundance of the dollar, so inflation is going to be a problem. The value of gold has gone way up, so put money in gold. That’s almost like me saying “Invest in summer clothes, the earth is getting hotter”. The economy is much too volatile to start telling people how to invest based on what is happening in the present. Be smart about it and go with trends. Imagine if you had invested money in real estate in 2004 because an author said “Houses are being bought like crazy, invest in real estate.”

  2. Clark's Gravatar Comment by Clark on November 21st, 2009 at 2:36 am

    In 2004 the libertarians and Austrian Economist I was reading were telling me to stay away from real estate because it’s unsustainable and houses are being bought like crazy by people who were clueless about economics and finance, not to mention how it was financed by Dollars created out of thin air. There were many who foresaw the financial collapse of 2008 too, so if this fella Goyette is a libertarian he may know a thing or two I could find useful, like for instance I’m really curious what it is he has to say about silver.

  3. Bruce Koerber's Gravatar Comment by Bruce Koerber on November 21st, 2009 at 6:50 pm

    Please review:

    First book in the sequence:

    MORE THAN LAISSEZ-FAIRE (2008)

    Second book in the sequence:

    The HUMAN ESSENCE of Economics (2009)

    A combination of the first and second book:

    MACRO & MICRO Economics Renewed (2009)

  4. K's Gravatar Comment by K on November 21st, 2009 at 9:02 pm

    With all due respect, I am not sure that I understand Travis’ point. In 2004 many “wise” investors could read the underlying data which indicated a real estate bubble that had to burst at some point. Those investors got out of the market. The same can be said today of those who look at the underlying data and fundamentals and not simply at trends. We are $12 trillion in debt. The 2009 deficit was $1.3 trillion (give or take a hundred billion). We are wearing out the federal printing presses issueing new money, and the fed no longer reports M3 money supply. Can you say “inflation”?

  5. George Whitfield's Gravatar Comment by George Whitfield on November 22nd, 2009 at 2:28 pm

    I think that Charles Goyette is recommending gold because of what is coming in the future: continuously and ever larger dollars printed based on nothing.

  6. Jeros's Gravatar Comment by Jeros on November 22nd, 2009 at 10:54 pm

    A few points:

    “But isn’t China, increasingly prosperous as it is, still a command economy? Goyette addresses this by saying that “as China freed its command economy, growth came.” Yes, but that doesn’t mean China is free from command. Nor does it mean that America won’t stop the top-down action until it becomes the USSA.”

    America’s path of government growth has been incrementally consistent since the days of Lincoln. The pace has quickened since the days of Roosevelt. Since Clinton, government growth has been breakneck. The hundred+ year trend is clear. There has not been a decade when government size & power decreased. We are closer than you think to a soviet style economy. We will be there eventually.

    The level of government intrusion in Chinese markets has been consistently decreasing for decades. The level of government intrusion in American markets has been consistently increasing for decades. The level of government intrusion is markets is inversely proportional to wealth. This is the point Goyette makes, and your attempt to misrepresent is was misdirected to say the least.

    “Goyette later recommends buying an ETN (exchange-traded note) issued by the (socialist) government of Sweden. We hate central command, but we support it when it’s in our own interest?”

    Socialist governments are necessarily inefficient. If you don’t know why, read Human Action. With that said, in a world of socialist governments that redistribute and confiscate wealth through force, there is a possibility of investing in a government backed securities that could increase one’s wealth because, well, governments that confiscate wealth and print money can be reliable when paying their bills. Government is socialism. Goyette realizes the Swedish government is socialist.

    You criticisms are not very well thought out. Please think of the potential simple explanations to your arguments before commenting on the incredibly diverse subjects of economic and social theory.

    “If you can get over a couple of belief-system rabbit holes, and the occasional divisive language”

    If you can prove a certain theory to be incorrect, or certain Rhetoric to be unnecessary, do so already, but just don’t state as much without providing any specific criticism. That was a cheap shot. It was an intellectually lazy attempt to disparage a philosophy that obviously hits a sore spot of yours.

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