ECON How much of the World is ditching the Dollar as reserve currency (and what it might mean for us)
- Thread starter jward
- Start date
jward
passin' thru
The Crow
@SpiritAvenged
·
China is dumping their US debt and sheltering in gold.
Not because they want to destroy the dollar or are particularly bullish on metals.
But because they know war is coming, and have learned from the Russian asset thefts to never hold foreign debt of those you will be fighting.
@SpiritAvenged
·
China is dumping their US debt and sheltering in gold.
Not because they want to destroy the dollar or are particularly bullish on metals.
But because they know war is coming, and have learned from the Russian asset thefts to never hold foreign debt of those you will be fighting.
jward
passin' thru
No need to apologize for length, this is the site that spends a great portion of time mocking everyone else for being morons; if we can't handle a lil critical thinking and normal attention span requirements, might as well hand out the 'snowflakes need safe spaces' signs eh?
:: sigh :: we really are our worst enemies, aren't we???
..thanks for all the posts and information on the subject(s)!
Of Two Minds - De-Dollarization and Trade: Be Careful What You Wish For
De-Dollarization and Trade: Be Careful What You Wish For
April 10, 2023
Be careful what you wish for, because currencies are not abstractions we ponder, they are commodities that serve real-world functions that place demands on the currency as a mechanism of trade, trust, value and risk.
The current telling of the story of de-dollarization--the replacement of the US dollar as the global economy's primary reserve currency with a new BRIC (Brazil, Russia, India, China) funded reserve currency--depicts the loss of the reserve currency as a catastrophe that will crush America.
As delightful as this prospect may be to various audiences, once we shift from considering a reserve currency as an abstraction to a mechanism of trade and finance, then another outcome takes shape: supporting a reserve currency is a burden, and lifting that burden from the US will benefit the US and hurt mercantilist exporting nations.
As a bonus, it will also shift the burden of supporting a reserve currency to the BRIC participants, who will then have to do what the US has done for decades:
1. Export their new reserve currency in size by running vast, sustained trade deficits, for the only way a reserve currency can function is there is sufficient quantities of it floating around as a transparently traded, market-priced commodity to grease trade and finance.
2. Become the dumping ground for the world's surplus production of goods and services as the means to run the vast, sustained trade deficits that are the other side of exporting currency so others can use it in global trade.
Many commentators such as Mish Shedlock and Michael Pettis have explained these mechanisms of reserve currencies and pointed out that being relieved of the burden of supporting the primary reserve currency would be a great long-term benefit to the US. I have written about Triffin's Paradox for many years, the reality that no currency can serve both the domestic economy and the global economy (i.e. be a reserve currency) as issuing a reserve currency demands running trade deficits as a means of exporting trillions of units of the currency for use by others.
Understanding the "Exorbitant Privilege" of the U.S. Dollar (November 19, 2012)
What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012)
In a similar fashion, proponents of a gold-backed currency view such a currency as an abstraction without considering the actual mechanics of backing a currency with a tangible commodity. The currency isn't actually "backed" by the commodity unless it can be converted into the commodity upon demand. A currency is only "backed by gold" if there is a conversion mechanism in which the holder of the currency can trade the currency for the equivalent quantity of gold.
This is the only mechanism that counts. Waving around the phrase "backed by gold" doesn't turn a fiat currency backed by nothing tangible into a currency backed by gold unless that currency can be converted into gold upon demand.
Contrarian Thoughts on the Petro-Yuan and Gold-Backed Currencies (January 19, 2023)
You Want Truly "Sound Money"? A Thought Experiment (January 24, 2023)
So let's think this through a bit rather than expound on abstractions. Let's say the US loses its reserve status; nobody wants the USD any more and so nobody will trade goods and services for dollars. That means the US can only import as much as it exports, i.e. a trade balance.
According to the Bureau of Economic Analysis (BEA), the US exports about $3 trillion of goods and services and imports about $4 trillion. So once surplus imports can no longer be purchased with dollars, that surplus $1 trillion in sales to mercantilist economies like China vanishes.
Globalists love to weep and gnash their teeth over the fact that costs of goods made in the US will be higher than in sweatshops overseas. But globalists never consider quality, which has been declining since globalization took the world by the throat. Let's do the math: a poorly made imported item that only lasts a year before it must be replaced costs $25. This item costs $50 when manufactured in the US.
Oh, boo-hoo, right? Not so fast.
If the domestically produced item lasts 5 years, the total cost over 5 years is $50. The total cost of the shoddy imported item is 5 X $25 or $125. The domestic product is much, much cheaper once we expand the time frame to the entire lifetime of the product.
Stainless Steal (February 26, 2023)
Who's going to be crying real tears of anguish are all the mercantilist economies that have dumped their surplus production in the US for decades, as there is no alternative economy large enough to absorb the $1 trillion in (mostly shoddy) goods and services that the US will no longer buy.
The issuers of the new reserve currency will have to run massive, sustained trade deficits to export enough of their new currency to meet the demands of a reserve currency and they'll have to let the price of the new currency float freely on global markets, or it cannot be trusted to retain its value--a key attribute of a reserve currency.
If this new reserve currency is "backed by gold," then nations that pile up the new currency in trade must be able to demand gold in exchange for the currency, as France demanded (and received) gold in exchange for its surplus US dollars in 1971. If the currency can't be converted into gold, it's not a gold-backed currency. It's only backed by, well, nothing, just like all the other fiat currencies.
Actually, fiat currencies are backed by something: interest-paying bonds. The higher the interest and the lower the risk profile of the bonds, the greater demand for that currency above others with riskier profiles and lower rates of return on the bonds.
This leads to an irony: the US dollar will become much more valuable once it is no longer a reserve currency as it will no longer be exported in vast quantities. US dollars will be scarce and will thus increase in value.
Personally, I'm in favor of competition in currencies--the more the merrier. The more options available on a transparent global market where all currencies are floating freely on market supply and demand, the better for everyone.
But be careful what you wish for, because currencies are not abstractions we ponder, they are commodities that serve real-world functions that place demands on the currency as a mechanism of trade, trust, value and risk.
vector7
Dot Collector
Brazil's request to remove the dollar from the international trade of the BRICS group
View: https://twitter.com/Spriter99880/status/1646839497592586242?s=20
BREAKING: Biden Regime Backed Brazilian President Lula arrives in Shanghai, gives Speech at BRICS Bank denouncing US Dollar in World Trade as CCP officials cheer
RT 5min
View: https://twitter.com/JackPosobiec/status/1646873901836775430?s=20
View: https://twitter.com/Spriter99880/status/1646839497592586242?s=20
BREAKING: Biden Regime Backed Brazilian President Lula arrives in Shanghai, gives Speech at BRICS Bank denouncing US Dollar in World Trade as CCP officials cheer
RT 5min
View: https://twitter.com/JackPosobiec/status/1646873901836775430?s=20
Last edited:
Truthsearch
Doom is ALWAYS 6 Months Away...
Of Two Minds - De-Dollarization and Trade: Be Careful What You Wish For
www.oftwominds.com
De-Dollarization and Trade: Be Careful What You Wish For
April 10, 2023
Be careful what you wish for, because currencies are not abstractions we ponder, they are commodities that serve real-world functions that place demands on the currency as a mechanism of trade, trust, value and risk.
The current telling of the story of de-dollarization--the replacement of the US dollar as the global economy's primary reserve currency with a new BRIC (Brazil, Russia, India, China) funded reserve currency--depicts the loss of the reserve currency as a catastrophe that will crush America.
As delightful as this prospect may be to various audiences, once we shift from considering a reserve currency as an abstraction to a mechanism of trade and finance, then another outcome takes shape: supporting a reserve currency is a burden, and lifting that burden from the US will benefit the US and hurt mercantilist exporting nations.
As a bonus, it will also shift the burden of supporting a reserve currency to the BRIC participants, who will then have to do what the US has done for decades:
1. Export their new reserve currency in size by running vast, sustained trade deficits, for the only way a reserve currency can function is there is sufficient quantities of it floating around as a transparently traded, market-priced commodity to grease trade and finance.
2. Become the dumping ground for the world's surplus production of goods and services as the means to run the vast, sustained trade deficits that are the other side of exporting currency so others can use it in global trade.
Many commentators such as Mish Shedlock and Michael Pettis have explained these mechanisms of reserve currencies and pointed out that being relieved of the burden of supporting the primary reserve currency would be a great long-term benefit to the US. I have written about Triffin's Paradox for many years, the reality that no currency can serve both the domestic economy and the global economy (i.e. be a reserve currency) as issuing a reserve currency demands running trade deficits as a means of exporting trillions of units of the currency for use by others.
Understanding the "Exorbitant Privilege" of the U.S. Dollar (November 19, 2012)
What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012)
In a similar fashion, proponents of a gold-backed currency view such a currency as an abstraction without considering the actual mechanics of backing a currency with a tangible commodity. The currency isn't actually "backed" by the commodity unless it can be converted into the commodity upon demand. A currency is only "backed by gold" if there is a conversion mechanism in which the holder of the currency can trade the currency for the equivalent quantity of gold.
This is the only mechanism that counts. Waving around the phrase "backed by gold" doesn't turn a fiat currency backed by nothing tangible into a currency backed by gold unless that currency can be converted into gold upon demand.
Contrarian Thoughts on the Petro-Yuan and Gold-Backed Currencies (January 19, 2023)
You Want Truly "Sound Money"? A Thought Experiment (January 24, 2023)
So let's think this through a bit rather than expound on abstractions. Let's say the US loses its reserve status; nobody wants the USD any more and so nobody will trade goods and services for dollars. That means the US can only import as much as it exports, i.e. a trade balance.
According to the Bureau of Economic Analysis (BEA), the US exports about $3 trillion of goods and services and imports about $4 trillion. So once surplus imports can no longer be purchased with dollars, that surplus $1 trillion in sales to mercantilist economies like China vanishes.
Globalists love to weep and gnash their teeth over the fact that costs of goods made in the US will be higher than in sweatshops overseas. But globalists never consider quality, which has been declining since globalization took the world by the throat. Let's do the math: a poorly made imported item that only lasts a year before it must be replaced costs $25. This item costs $50 when manufactured in the US.
Oh, boo-hoo, right? Not so fast.
If the domestically produced item lasts 5 years, the total cost over 5 years is $50. The total cost of the shoddy imported item is 5 X $25 or $125. The domestic product is much, much cheaper once we expand the time frame to the entire lifetime of the product.
Stainless Steal (February 26, 2023)
Who's going to be crying real tears of anguish are all the mercantilist economies that have dumped their surplus production in the US for decades, as there is no alternative economy large enough to absorb the $1 trillion in (mostly shoddy) goods and services that the US will no longer buy.
The issuers of the new reserve currency will have to run massive, sustained trade deficits to export enough of their new currency to meet the demands of a reserve currency and they'll have to let the price of the new currency float freely on global markets, or it cannot be trusted to retain its value--a key attribute of a reserve currency.
If this new reserve currency is "backed by gold," then nations that pile up the new currency in trade must be able to demand gold in exchange for the currency, as France demanded (and received) gold in exchange for its surplus US dollars in 1971. If the currency can't be converted into gold, it's not a gold-backed currency. It's only backed by, well, nothing, just like all the other fiat currencies.
Actually, fiat currencies are backed by something: interest-paying bonds. The higher the interest and the lower the risk profile of the bonds, the greater demand for that currency above others with riskier profiles and lower rates of return on the bonds.
This leads to an irony: the US dollar will become much more valuable once it is no longer a reserve currency as it will no longer be exported in vast quantities. US dollars will be scarce and will thus increase in value.
Personally, I'm in favor of competition in currencies--the more the merrier. The more options available on a transparent global market where all currencies are floating freely on market supply and demand, the better for everyone.
But be careful what you wish for, because currencies are not abstractions we ponder, they are commodities that serve real-world functions that place demands on the currency as a mechanism of trade, trust, value and risk.
This article is completely wrong and flies in the face of even the most basic economic concepts. I dunno what this author is smoking but dollars will be nothing more than toilet paper once the rest of the world renounces them and they come flooding back to America.
The most basic of economic concepts today are Keynesean if not worse -MMT for example.
Truthsearch
Doom is ALWAYS 6 Months Away...
I meant traditional, real-world economics like supply & demand, purchasing power, etc. You know, the stuff the Federal Reserve seems to have forgotten.
Just say 'Austrian.' 
mises.org
Mises Institute
The Mises Institute exists to promote teaching and research in the Austrian school of economics, and individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.
vector7
Dot Collector
JUST IN: Chinese Communist Party accused of weaponizing the DOJ, FBI and SEC..
ZERO media coverage..
WHAT DO THEY HAVE ON JOE?
RT 2min
View: https://twitter.com/ChuckCallesto/status/1646900669205422080?s=20
Also working with Russia and now India thanks to Biden's polarizing Ukraine war so many other countries are abandoning America and it's currency.
Banned US Commercial about CCP taking over America by 2030 (1min)
Nov 2, 2010
In 1986, the U.S. national debt was around 2 trillion dollars.
When Barack Hussein Obama came in office the US National debt was around 10 trillion.
When this video came out Obama was just about to enter his second year in office. He and House/Senate controlled democrats ran the debt up to 14 trillion dollars.
After 8 years of Obama, 2 years Democrat House controlled under Trump backing the 2020 COVID shut downs and DNC-BLM/ANTIFA Revolutions (costing another 10tln), and now after 3 years of Biden (JoeBama)...today we're at nearly 32 trillion in debt.
Now the DNC are taking us quickly toward 50 Trillion by 2030.
View: https://youtu.be/TYKAbRK_wKA
ZERO media coverage..
WHAT DO THEY HAVE ON JOE?
RT 2min
View: https://twitter.com/ChuckCallesto/status/1646900669205422080?s=20
Also working with Russia and now India thanks to Biden's polarizing Ukraine war so many other countries are abandoning America and it's currency.
Banned US Commercial about CCP taking over America by 2030 (1min)
Nov 2, 2010
In 1986, the U.S. national debt was around 2 trillion dollars.
When Barack Hussein Obama came in office the US National debt was around 10 trillion.
When this video came out Obama was just about to enter his second year in office. He and House/Senate controlled democrats ran the debt up to 14 trillion dollars.
After 8 years of Obama, 2 years Democrat House controlled under Trump backing the 2020 COVID shut downs and DNC-BLM/ANTIFA Revolutions (costing another 10tln), and now after 3 years of Biden (JoeBama)...today we're at nearly 32 trillion in debt.
Now the DNC are taking us quickly toward 50 Trillion by 2030.
Last edited:
Zahra
Veteran Member
I do my best to be forward thinking so I bought 1,000 shares of PBR last week and will be adding EWZ when I like the entry point. One can see the direction the WEF and big money folks wants to take the globe so might as well make money along the way ... (along with keeping gold as well of course). I tried to invest in LUKOIL right after the Russian special op began, but the sanctions prevented it... that would have been a killer trade!
Doc1
Has No Life - Lives on TB
Had to look it up. Initially I was thinking, "How the 'ell did she invest in Pabst Blue Ribbon. They don't have that ticker symbol, do they?"
Looks like you did well.
Best
Doc
hiwall
Has No Life - Lives on TB
If the Dollar does a complete collapse, I would expect most world trade to cease.
At first countries would use one fiat currency or another but I don't think that would last long.
If the Dollar dies so would many countries that really depend on American dollars flowing in and through their country. Trade dollars, tourist dollars, grant dollars, aid dollars, etc.
If you were involved in world trade and the bestest fiat currency became worthless, would you trust some other fiat currency?
Tristan
Has No Life - Lives on TB
Tristan
Has No Life - Lives on TB
Kevin O'Leary's contrarian view on the whole De-Dollarization thing:
(Posted for 'Balance',
)
View: https://www.youtube.com/watch?v=xtmTET3MG3s
rt: 25:38
(Posted for 'Balance',
)Kevin O’Leary: 'Get Over It', There Is No De-dollarization and No Country That Matters Dumping USD
rt: 25:38
That must be why nobody mentioned it. Blows the whole narrative.
hiwall
Has No Life - Lives on TB
Let's say that reliable information leaked out that instead of the Federal Reserve injecting just 8 trillion new Dollars into the economy it was really 2 or 3 or more times that amount. Would it really make any difference other than some sound bites? I don't think it would do much of anything.
Hfcomms
EN66iq
Heh.....him and his son taking lots of money from the CCP for starters. 10% for the big guy and all that.
Attica coins for sale - Buy Attica coins from the most respected dealers around the world | VCoins
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Possibly the world's first reserve currency -https://en.wikipedia.org/wiki/Obol_(coin)
SageRock
Veteran Member
Fair use cited. From ZeroHedge. See original article for embedded links.
What If The Dollar Falls? | ZeroHedge
SATURDAY, APR 15, 2023 - 05:30 PM
Authored by Peter St.Onge via The Mises Institute,
The past few weeks, major countries have been moving away from the US dollar, raising doubts about the dollar’s long-dominant role in the world. Eight weeks ago, it was just pariah nations like Iran or Russia trying to de-dollarize. Now it’s Brazil, France, even Saudi Arabia—the lynchpin of the decades-long “petrodollar” arrangement.
If the dollar does lose its position as the global reserve currency, it will be catastrophic for the American economy. Catastrophic for the American people on whose backs 80 years of reserve status were built. And it will subject billions of foreigners, for whom the dollar has meant decades of being bullied, to history’s greatest bait and switch.
Dollar at Risk
In late March, Saudi Arabia announced it will price oil in Chinese yuan. Even CNN was worried, in a rare display of situational awareness, while Fox fretted about “Weimar”—hyperinflation.
The dollar has been the undisputed global reserve currency since the 1940s. Reserve currency status looks great on paper: You get to print stacks of green paper and foreigners give you cool stuff for it, like toasters, luxury cars, and copper mines. The problem is who profits—who gets paid when foreigners crave the green paper?
Unfortunately, it’s not the American people; it’s whomever’s printing money: The Fed, meaning the Treasury, to whom they hand their ill-gotten profits, and—you guessed it—Wall Street. Commercial banks.
To see why, imagine foreigners didn’t want dollars. The Fed and banks could only print a little bit since printing a lot would create inflation, and voters would toss them out.
But if foreigners want a large number of dollars, the Fed and banks can print a matching amount. It’s like a river flowing into the money supply reservoir, matched up with a river flowing out to foreigners. The reservoir stays stable, and voters don’t riot.
But notice where the profits went. That river to foreigners didn’t go to we the dollar-holders—we are the reservoir; we are unchanged. The profits went right through us to the source of the river: the US Treasury and Wall Street.
So, like the rest of our crony financial system, it’s a hustle. The American people think they’re benefitting from reserve status, but the profits were sucked out and handed to the people who designed the institutional fleecing we call a financial system.
Enter Weimar
Now, here’s the problem. What if foreigners suddenly don’t want dollars?
Maybe China’s paying them to sell oil in yuan, or maybe the Fed lost the plot and creates too much inflation.
Demand dries up, the dollar starts to lose value, and foreigners start worry their life savings and corporate treasuries are melting. They sell out of the dollar. A little at first, more and more if it accelerates.
Now that river to foreigners reverses, it flows back into the reservoir. The dollar collapses. 70 years of Fed and Wall Street money printing comes rushing back like a tsunami running up a canyon. We’re talking double-digital inflation, over multiple years, at a minimum.
If they screw this up, reserve currency status could turn out to be a trap, an absolute catastrophe for the American people.
What Are the Stages of De-dollarization?
So what happens if the dollar falls?
For starters, foreigners don’t need as many dollars. Meaning there are extra dollars nobody wants. This makes the price of the dollar fall—it gets weaker.
It’s usually slow at first, then picks up speed if it keeps going, a progressive rush for the exits. This is because the first ones out only lose a little bit, but the longer they waited, the more they’ll lose.
Who’s left holding the bag as the dollar becomes increasingly worthless? Easy: Americans. The only people on earth who are actually obligated to use the US dollar, thanks to an obscure law passed in 1862 as a wartime emergency that nevertheless managed to stick around for 151 years.
So Americans have no choice: unless you swapped your dollars for gold, or Bitcoin, or goats, you go down with the ship.
What happens to those Americans? A falling dollar drives up the price of everything that comes into America. But it also drives up the price of anything traded on world markets. Meaning the raw materials and imported components that drive American factories and sustain American consumers.
The first to jump would be gasoline, heating fuel, and food prices—all of those are world markets. Along with prescription medicines since China has a creeping stranglehold thanks to our idiotic over-regulation—indeed, this is more or less true for every consumer product that China dominates: we shot ourselves in the foot, and now it’s coming back to bite us.
Next, those expensive commodities and input prices pour out through the supply chain. Yanking prices up in industry after industry—cars, construction materials like steel or concrete, clothes, furniture, TVs, computers, and medical devices.
Gone are the days of affordable luxuries—now you gotta work for them.
The Main Event: Capital Flows
And that’s when the main event begins: capital flows.
If foreigners get nervous, they sell not only dollars, they sell assets denominated in dollars. Starting with the most liquid: stocks, bonds, and treasuries. These are easy to trade—IBM stock is easier to sell than a Taiwanese factory in Wisconsin—so they go first.
About 40% of American stocks are owned by foreigners and about one-third of corporate bonds. If foreigners start fleeing, both plunge. This could cut your 401k almost in half, and it could drive up borrowing costs for companies to impossible levels.
Leading to mass bankruptcies on top of the wave of bankruptcies the Fed’s already engineering to try and stop the inflation it started.
It doesn’t stop there: one-third of US treasuries are owned by foreigners—over $8 trillion in bonds. If foreigners start dumping those, it will either send US government debt service soaring by potentially hundreds of billions of dollars a year. Or, much more likely, it forces the Fed to step in and buy up all that foreign demand, flooding yet more trillions into the economy.
This would flip inflation overnight marching back towards double-digits.
Conclusion
There are ways to stop this. But given the Washington clown show to raise the debt ceiling yet again, paired with their obsession with sanctions that scare foreign countries off the dollar, Washington isn’t remotely close to the serious thinking it will take to right this ship.
Losing reserve currency status would savage the American economy, and it would savage the American people. No country needs reserve currency status—after all, it doesn’t benefit the people. But, like climbing a cliffside with no gear, once you go halfway, you better not let go.
[A version of this article first appeared on Peter St. Onge's substack.]
What If The Dollar Falls? | ZeroHedge
SATURDAY, APR 15, 2023 - 05:30 PM
Authored by Peter St.Onge via The Mises Institute,
The past few weeks, major countries have been moving away from the US dollar, raising doubts about the dollar’s long-dominant role in the world. Eight weeks ago, it was just pariah nations like Iran or Russia trying to de-dollarize. Now it’s Brazil, France, even Saudi Arabia—the lynchpin of the decades-long “petrodollar” arrangement.
If the dollar does lose its position as the global reserve currency, it will be catastrophic for the American economy. Catastrophic for the American people on whose backs 80 years of reserve status were built. And it will subject billions of foreigners, for whom the dollar has meant decades of being bullied, to history’s greatest bait and switch.
Dollar at Risk
In late March, Saudi Arabia announced it will price oil in Chinese yuan. Even CNN was worried, in a rare display of situational awareness, while Fox fretted about “Weimar”—hyperinflation.
The dollar has been the undisputed global reserve currency since the 1940s. Reserve currency status looks great on paper: You get to print stacks of green paper and foreigners give you cool stuff for it, like toasters, luxury cars, and copper mines. The problem is who profits—who gets paid when foreigners crave the green paper?
Unfortunately, it’s not the American people; it’s whomever’s printing money: The Fed, meaning the Treasury, to whom they hand their ill-gotten profits, and—you guessed it—Wall Street. Commercial banks.
To see why, imagine foreigners didn’t want dollars. The Fed and banks could only print a little bit since printing a lot would create inflation, and voters would toss them out.
But if foreigners want a large number of dollars, the Fed and banks can print a matching amount. It’s like a river flowing into the money supply reservoir, matched up with a river flowing out to foreigners. The reservoir stays stable, and voters don’t riot.
But notice where the profits went. That river to foreigners didn’t go to we the dollar-holders—we are the reservoir; we are unchanged. The profits went right through us to the source of the river: the US Treasury and Wall Street.
So, like the rest of our crony financial system, it’s a hustle. The American people think they’re benefitting from reserve status, but the profits were sucked out and handed to the people who designed the institutional fleecing we call a financial system.
Enter Weimar
Now, here’s the problem. What if foreigners suddenly don’t want dollars?
Maybe China’s paying them to sell oil in yuan, or maybe the Fed lost the plot and creates too much inflation.
Demand dries up, the dollar starts to lose value, and foreigners start worry their life savings and corporate treasuries are melting. They sell out of the dollar. A little at first, more and more if it accelerates.
Now that river to foreigners reverses, it flows back into the reservoir. The dollar collapses. 70 years of Fed and Wall Street money printing comes rushing back like a tsunami running up a canyon. We’re talking double-digital inflation, over multiple years, at a minimum.
If they screw this up, reserve currency status could turn out to be a trap, an absolute catastrophe for the American people.
What Are the Stages of De-dollarization?
So what happens if the dollar falls?
For starters, foreigners don’t need as many dollars. Meaning there are extra dollars nobody wants. This makes the price of the dollar fall—it gets weaker.
It’s usually slow at first, then picks up speed if it keeps going, a progressive rush for the exits. This is because the first ones out only lose a little bit, but the longer they waited, the more they’ll lose.
Who’s left holding the bag as the dollar becomes increasingly worthless? Easy: Americans. The only people on earth who are actually obligated to use the US dollar, thanks to an obscure law passed in 1862 as a wartime emergency that nevertheless managed to stick around for 151 years.
So Americans have no choice: unless you swapped your dollars for gold, or Bitcoin, or goats, you go down with the ship.
What happens to those Americans? A falling dollar drives up the price of everything that comes into America. But it also drives up the price of anything traded on world markets. Meaning the raw materials and imported components that drive American factories and sustain American consumers.
The first to jump would be gasoline, heating fuel, and food prices—all of those are world markets. Along with prescription medicines since China has a creeping stranglehold thanks to our idiotic over-regulation—indeed, this is more or less true for every consumer product that China dominates: we shot ourselves in the foot, and now it’s coming back to bite us.
Next, those expensive commodities and input prices pour out through the supply chain. Yanking prices up in industry after industry—cars, construction materials like steel or concrete, clothes, furniture, TVs, computers, and medical devices.
Gone are the days of affordable luxuries—now you gotta work for them.
The Main Event: Capital Flows
And that’s when the main event begins: capital flows.
If foreigners get nervous, they sell not only dollars, they sell assets denominated in dollars. Starting with the most liquid: stocks, bonds, and treasuries. These are easy to trade—IBM stock is easier to sell than a Taiwanese factory in Wisconsin—so they go first.
About 40% of American stocks are owned by foreigners and about one-third of corporate bonds. If foreigners start fleeing, both plunge. This could cut your 401k almost in half, and it could drive up borrowing costs for companies to impossible levels.
Leading to mass bankruptcies on top of the wave of bankruptcies the Fed’s already engineering to try and stop the inflation it started.
It doesn’t stop there: one-third of US treasuries are owned by foreigners—over $8 trillion in bonds. If foreigners start dumping those, it will either send US government debt service soaring by potentially hundreds of billions of dollars a year. Or, much more likely, it forces the Fed to step in and buy up all that foreign demand, flooding yet more trillions into the economy.
This would flip inflation overnight marching back towards double-digits.
Conclusion
There are ways to stop this. But given the Washington clown show to raise the debt ceiling yet again, paired with their obsession with sanctions that scare foreign countries off the dollar, Washington isn’t remotely close to the serious thinking it will take to right this ship.
Losing reserve currency status would savage the American economy, and it would savage the American people. No country needs reserve currency status—after all, it doesn’t benefit the people. But, like climbing a cliffside with no gear, once you go halfway, you better not let go.
[A version of this article first appeared on Peter St. Onge's substack.]
Tristan
Has No Life - Lives on TB
Well, one side is mentioning it, but it seems to be relatively absent from the MSM.
Which side and 'narrative' are you referring to?
Tristan
Has No Life - Lives on TB
This guy's got an interesting take on the issue...
Warning: there's mention of Gold sales in the video...
View: https://www.youtube.com/watch?v=Gmy6lCgldNY
rt: 14:58
Basically, to protect the dollar overseas, the Fed may be required to print lots of dollars; once that's done, all that liquidity causes the value to plummet, and the $ becomes worthless.
Is the scenario plausible?
Is he hyping sales?
Warning: there's mention of Gold sales in the video...
The Dollar will Spike First, then Collapse
rt: 14:58
Basically, to protect the dollar overseas, the Fed may be required to print lots of dollars; once that's done, all that liquidity causes the value to plummet, and the $ becomes worthless.
Is the scenario plausible?
Is he hyping sales?
Last edited:
jward
passin' thru
Yellen says sanctions may risk hegemony of US dollar - Insider Paper
AFP
Economic sanctions imposed on Russia and other countries by the United States put the dollar’s dominance at risk as targeted nations seek out an alternative, Treasury Secretary Janet Yellen said Sunday.
“There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar,” Yellen said on CNN.
“Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative,” she told the network’s Fareed Zakaria in an interview. “But the dollar is used as a global currency for reasons that are not easy for other countries to find an alternative with the same properties.”
The robust US capital markets and rule of law “are essential in a currency that is going to be used globally for transactions,” she added. “And we haven’t seen any other country that has the basic… institutional infrastructure that would enable its currency to serve the world like this.”
Yellen noted that sanctions are an “extremely important tool,” all the more so when used by the United States and its allies as “a coalition of partners acting together to impose these sanctions.”
Asked about the possibility of using frozen Russian assets to rebuild war-ravaged Ukraine after Moscow’s invasion, Yellen said that “Russia should pay for the damages that it’s caused.”
But she noted there are “legal constraints on what we can do with frozen Russian assets, and we’re discussing with our partners what might lie in the future.”
Yellen says sanctions may risk hegemony of US dollar - Insider Paper
Surprised! Most People Still Don't Realise What's About To Come Gold & Silver - Andy Schectman
RT 08:32
The Central Bankers' Battle for Survival.
RT 37:07
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Join us for a special live stream with Andy Schectman and Rafi Farber in which we will cover what is going on in the financial and monetary systems.
We will also be conducting our usual Q&A.
jward
passin' thru
Abandoning the US Dollar for a Better Alternative
By Lyle Opolentisima | source:Here Apr 8th, 2023
The dollar has held a monopoly on global trade for decades, but that’s changing. China is leading the way, but there are other countries that are following suit. It is time to think about how you should handle your money and keep an eye on China if you want to stay ahead of the curve in this situation.
The dollar has held a monopoly on global trade for decades, but that’s changing.
It’s no secret that the US dollar has been the world’s reserve currency since 1944. In fact, it’s been so dominant that many people have never thought about what would happen if we were to abandon it for a different option or even how we got here in the first place. When World War II ended and America emerged as one of only two superpowers left standing (the other being Russia), its economy was strong enough to convince other countries around the world that their money was safer if they kept their reserves in dollars rather than converting them into gold. This led other nations to do business with each other using American currency rather than local currencies or bartering goods like livestock or crops–and this created an economic system where everyone wants dollars because everyone needs them!Other nations are starting to abandon the dollar. China is the biggest example, with its desire to create a new global currency that would replace the U.S. dollar as the dominant reserve currency. India has also begun moving away from using dollars in international trade deals and transactions, instead favoring their own rupee or other currencies such as euros and yen. Other countries like Iran have considered abandoning their reliance on U.S.-backed currencies because of sanctions imposed by America’s government–in fact, those sanctions were placed on Iran in response to its refusal to use dollars for many things (like oil).
China is leading the way, but there are other countries that are following suit.
As the United States continues to wage war on China, it’s no surprise that the country is looking for alternatives to the US Dollar. But what is more surprising is that other countries are following suit. China has already begun using its own currency as a means of payment in global trade, and other countries are expected to follow suit soon enough. This will lead to more competition between currencies and more innovation within the financial sector as well as throughout society at large.It is time to think about how you should handle your money and keep an eye on China if you want to stay ahead of the curve in this situation
It’s important to consider how you should handle your money and keep an eye on China if you want to stay ahead of the curve in this situation. It may be time to think about how you should handle your money, especially if you have been following the news and seeing what other countries are doing. In fact, there are many countries that are abandoning the US dollar as well (such as Russia). This means that if they make this move, then they will need another currency or asset that they can use instead of relying solely on one type of currency like most people do now when it comes down to trading goods with each other around the world. The truth is that no one really knows exactly what will happen next but there is always a chance that something could happen soon enough which would force us all into making some hard decisions about our futures because none of us wants any part of their plans unless we’re getting paid well enough first!
We hope that this article has given you a good idea of what’s going on in the world of money and trade. The US dollar has been king for so long that it can be hard to imagine life without it, but as more countries abandon it, we may need to start looking at alternatives sooner than expected.
Abandoning the US Dollar for a Better Alternative | Daily Infographic
dailyinfographic.com
Tristan
Has No Life - Lives on TB
Another from the Heretic at Heresy Financial:
View: https://www.youtube.com/watch?v=WyE-2rmPi3E
rt: 13:19
He explains why he thinks a Deflationary death spiral is on the horizon.
He also admits that many will disagree.
I guess the takeaway from all the info on this thread (and many others) is to just protect youself the best you can... 'Cause it's out of our hands.
A Deflationary Storm is on the Horizon
rt: 13:19
He explains why he thinks a Deflationary death spiral is on the horizon.
He also admits that many will disagree.
I guess the takeaway from all the info on this thread (and many others) is to just protect youself the best you can... 'Cause it's out of our hands.
West
Senior
Properties in the cities and autos will be dirt cheap.
But assets/commodities that don't have liabilities mandated on them will stay expensive and then unattainable.
Thinking the cost of insurance will continue to rise, along with Healthcare and good foods.
Booze and drugs will stay the same. Expensive.
All will be hard to find, except commercial and rent properties, TVs, plastic crap, plus automobiles will be cheap and many.
Just a WAG.
But assets/commodities that don't have liabilities mandated on them will stay expensive and then unattainable.
Thinking the cost of insurance will continue to rise, along with Healthcare and good foods.
Booze and drugs will stay the same. Expensive.
All will be hard to find, except commercial and rent properties, TVs, plastic crap, plus automobiles will be cheap and many.
Just a WAG.
Tristan
Has No Life - Lives on TB
A good reason to have some saved up, as part of an overall strategy of Hedging.
jward
passin' thru
| Philip Pilkington@philippilk Macroeconomist/investment professional. Tweeting all things macro/investment. Host of the Multipolarity podcast, @MultipolarPod |
1/ This Yellen interview will very likely be used by future historians to assess why the US continued on its present course despite many people realising where it would lead. Its worth listening carefully to what the justifications are.
2/ There’s little point in focusing on Yellen’s assertion that the current sanctions will not lead to the decline of the dollar. It is just that: an assertion without an argument. She recognises the risk, that is relevant - the forced assessment of that risk is uninteresting.
3/ Much more interesting is listening to the interview as a whole. Yellen and the Biden administration view the sanctions holistically. She starts the interview making the case that the sanctions are vastly degrading the Russian war effort.
4/ To support this argument she points first to the decline in Russian oil revenue from a year ago. Does Yellen believe this is due to sanctions and not slowing world growth and falling oil prices? I doubt she is that ill-informed.
5/ Next she talks about how Russia is unable to resupply its army due to sanctions and is stuck relying on Iran and North Korea. Yellen may believe this as it is not her field, but few serious observers would.
6/ These are talking points, not arguments. What they tell us is that the Biden administration has made a decision to prioritise its Ukraine policy over everything else. The Treasury’s job is not to question this, but to justify it. So, talking points trump analysis.
7/ The problem here is twofold. First, the foreign policy people do not understand that economics are often far more important than military force in geopolitics. This was once understood in DC; it no longer is.
8/ Second, the economists like Yellen and those who work for her are unable to communicate this to the foreign policy crowd. They may not even fully grasp it themselves - due to economics becoming overly technical - but if they do they are clearly failing to communicate it.
9/ The foreign policy people in other countries - notably China and Russia - do understand this. They view economics and foreign policy as interlinked. This gives them a huge advantage over the US, where the two are siloed.
10/ And so Yellen’s job is only to defend the sanctions using whatever talking points are at hand. When everyone is talking about the future of the dollar she must acknowledge the risk, but it can’t go further than that.
11/ Here is the interview.
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