David Galland of Doug Casey Research on why in an election year cycle, the dollar (and dollar-saving schlepps) may be sacrificed to save King George….

“In a call with long-time friend Clyde Harrison, one of the most seasoned and sharpest players on the commodities scene (he invented the Rogers International Commodities Index Fund), he quipped to the effect of, “We’re in an election cycle and the foreign holders of U.S. dollars don’t vote. By contrast, the U.S. voting public is up to its neck in debt. When push comes to shove, the dollar will be sacrificed.”

We think he is right. And I would add one more observation. The only shred of fabric remaining somewhat intact in George Bush’s tattered legacy is the relative strength of the economy over his term. To now have the economy go down in flames on his watch is unacceptable to him and, more important, his political cronies. What moves are left to them at this point other than ramping up the money engines? None at all.

Oh, and choosing the path of inflation offers one more tangible benefit. The effect of a massive ramp-up in the supply of money, enough perhaps, to rescue the hundreds of billions otherwise destined for money heaven, is that the inevitable consequence — higher prices — won’t be fully felt until after the upcoming presidential elections. In other words, it won’t be crisis diverted, but rather crisis delayed.

There is a fly in the ointment, however. This particular fly won’t sit passively while its wealth is destroyed. I refer, of course, to the aforementioned foreign dollar holders. Looking under the hood as he is wont to do, our chief economist Bud Conrad has already found signs that they are starting to edge back from the weekly Treasury auction…”