Hi Tyc:
".....are you sure.... etc." LOL!!
Nope. Like most, I simply struggle to find meaning in what is going on.
That said, if one simply looks at what is currently going on vis-a-vis the US dollar, then it is difficult to believe that the rest of the planet is going to put up with the greenback as "the reserve currency" for much longer. Personally, I do not think there will be a grand announcement that the US dollar has lost its reserve currency status, but rather a simple withering away of dollar usage on a world-wide scale (which is already happening in any event).
The dollar was accepted as the global reserve currency when it really was "almost as good as gold" But today?
The US has lived well beyond its means for decades, primarily by issuing tons of IOUs (Treasuries) to (largely) unsuspecting foreigners. Today, that issuance has reached an "Alice in Wonderland" level and is "unsustainable". One doesn't need to be a wizard to understand that those IOUs will never be paid back..... except via newly printed "monopoly money". Not to state the obvious but buying (or hanging on to) a bond that pays next to nil interest, and that will lose value due to explosive money printing, doesn't make much sense.
Under such circumstances, one can frequently benefit by copying the pros.... if they are quietly departing the party, can a police raid be far in the future? And there is evidence that bond pros are sneaking out the back door.
China's business model is flawed. Put in simplistic terms, it buys commodities with hard currency (its own), has expanded its manufacturing base far, far too aggressively (again with its own hard currency), pays its workers with its own hard currency, then sells its products, primarily to a country that pays for those products with IOUs and a flabby currency. So far, China has lost 30% or more in this flaky approach to doing business.
Today, thousands of Chinese factories are closed and many of its workers are unemployed. Beware the unemployed peasants.
Who will be worse off? ALL of us. This is a global depression and it is barely underway. Unfortunately, it looks to be like one of those "you can run but you can't hide" situations.
Best,
Earlie |
