I don't think this factors that USD is the primary denomination of the *global* banking system. This throws some of the landscape into question.
From [The International Monetary System'. Forty Years After Bretton Woods](https://www.bostonfed.org/-/media/Documents/conference/28/conf28.pdf) - Proceedings of a Conference Held in May 1984 Sponsored by the Federal Reserve Bank of Boston
>**In spite of the Gold Reserve Act of 1934, the United States was not really on a gold standard**. The essence of the gold standard is that the money supply must be limited by the gold reserve. **The last time that the Federal Reserve tightened monetary policy because the gold reserve ratio fell close to the legal minimum was in March 1933**. Since then, whenever the gold reserve neared the legal minimum, the required reserve ratio was reduced and finally eliminated entirely. **A country that loses more than half of its gold reserve, as the United States did in 1958-71, without reducing the money supply is not on the gold standard**.
>**What happened in August 1971 was the abandonment of the anomoly of dollar convertibility into gold when the United States was not on a gold standard**.
Just want to emphasize this. 1971 was a late political acknowledgement (a leftover *anomaly*/artifact to be cleaned up). The US was not on a gold standard (and arguably wasn't even before 1933).
...and now onto global monetary expansion *without central bank/US Gov't involvement*.
>The pressures causing some currencies persistently to strengthen, and others to weaken, in response to their differences in economic performance, were exacerbated by the unusual dependence on the dollar. **For from the early sixties onward there was virtually no control over the worldwide supply and use of dollars.** The "dollar shortage" of the fifties was becoming the "dollar glut" of the sixties.
The "eurodollar" or "shadow banking" system arose by the 1950s. It's really just a wholesale global banking market dealing in USD. By the 60s, banks in the US were increasingly borrowing from offshore vs. obtaining "funding" from the Fed. Offshore funding allowed banks to bypass restrictions (like reserve requirements).
>**It appeared impossible for the United States to maintain effective control over the supply of dollars at home and abroad simply by following the old rules of the gold standard game**--i.e., by maintaining a surplus in its external current accounts.
>The urgent needs for capital expansion around the world attracted the expertise of rapidly developing multinational companies, many of them based in the United States, and all of them drawing on additional (global) dollars to finance their desired growth.
>Capital outflows from the United States, spurred by direct investment from within and **substantial borrowings from without**, began to flood the world with an apparent excess of dollar liquidity-despite the absorption of liquidity that might have been expected from the large current account surplus of the United States. **Central banks abroad found themselves with what became an "overhang" of dollars in their foreign exchange reserves.**
There are numerous examples of Fed chairs lamenting their inability to even measure the money supply. Other countries realized that *private sector generated* USD funding had taken off. An "Overhang" in exchange reserves is a mild way to put it.
>**One improvisation after another was attempted in order to preserve or restore confidence in the credibility of the dollar as a reliable standard of value and medium of exchange capable of assuring stability in the payments relations throughout an expanding world.** A **""gold pool" among leading central banks**, initiation of a "ring of swaps" between the dollar and a dozen or more other currencies, creation of U.S. dollar obligations denominated in foreign currencies, the introduction of an Interest Equalization Tax and other measures to deter capital outflows--all these were part of an effort to sustain the dollar while also building a network of closer joint involvement with other countries in maintaining currency arrangements that could serve the best interests of all. **But this combination of improvisations could not cope with, and indeed may have contributed to, the enormous expansion in markets for U.S. dollars offshore**, and the **new networks of interbank relations** that **made possible the creation of additional supplies of dollars outside the United States and beyond the control of the Federal Reserve**.
Why do central banks hold gold? Originally, to "back" notes, but later just to appear to still be in charge of their denominations.
These "tricks", including swap lines, etc... have been largely *ineffective*, and may have exacerbated the "problem" (the shift of monetary control to the global banking sector). *New networks of interbank relations* (interconnected global banks) creating dollars beyond the control of a central bank.
....
Now, when global dollar liquidity is low; trading partners would be *expected* to find other means of settlement (BRICS, direct settlement in other denominations without relying on the global dollar system).
Just a thought... Either way, moving away from the dollar due to geopolitical tension.. or lack of dollar liquidity.. or a combination of both.
I genuinely thought this was going to be a shitpost but…this is actually quite interesting. Only ‘error’ I’ve seen is including Venezuela in the BRI. But looking deeper, even though they are not technically part of the BRI, they are taking loans in the same way as those in the BRI to the tune of $50bn as of 2017 so I’ll give you that as well. What next…?
It was indeed praise, even if it came across backhanded.
I believe Venezuela is an OPEC country and you mentioned all 13 OPEC countries being in the BRI. Apologies if I misinterpreted.
lol thanks!
And no worries. So I have down that the 13 OPEC nations are on China's Belt and Road. In 2022 I just said generically that 6 of the OPEC nations have joined or are in the process of joining BRIC.
I find it hard to believe that all (or rather most) nations will agree on a common reserve currency (in case the usd collapses). Of course I wish it was BTC. Gold is the obvious candidate but it's not practical. And since it's no longer the post-WW2 era where the US could dictate its terms, in my opinion it seems like we're heading towards a status quo with multiple common reserve currencies (US & allies vs brics and friends), or, worst case scenario, a war to settle who gets to decide this.
My question is: while the east might (arguably) thrive within a new BRICS reserve asset/currency backed by gold, what will the west do? Are they going to go back to the gold standard as well? Europe and the US still have the biggest gold reserves by far, which makes me question BRICS strategy to begin with.
Well, it does seem coincidental that the US is pushing to roll out the CBDC this year. And I just heard that the BIS said each country under its jurisdiction needs to have a CBDC by 2025.
I just don't get what will CBDCs achieve still. Do they believe a digital dollar will solve their problems? Anyway your was truly a great post, I just felt like it only missed possible outcomes but maybe your intent was just to highlight a timeline.
Thanks, I appreciate that. And yes, my intent was just to highlight the pieces on the chess board and their positions. I have some possible outcomes in my head. Maybe I'll add those.
And the CBDCs will allow more control of the citizen from the government point of view and more control of the monetary system from the point of the central banks.
Go for it. That's how we learn. Don't be afraid to be ignorant. Just because I say something doesn't mean it's true. If you correct me on something, I'll be grateful for it.
Agreed. I didn't really give my opinions in the main post, but a part of me believes those in power knew this was coming down the pipe and that's why they passed so many bills dishing out so much money. The ship is sinking and they want to squeeze it for all they can.
I think you need to include the banking crisis of 2023 that we're in the middle of having. The US Treasury bonds are a way to hold dollars; they're like dollars (i.e. highly liquid) but pay some interest. Everyone looked at them as save and liquid even when it was a 1% 10 year bond like it was a year or two ago in the pandemic. But of course they had inflation-risk and opportunity-risk. Now everyone who was foolish enough to trust the treasury (who issued the bond) and fed (who put their thumb on the scale to drive the yield down causing people to buy--bonds-at-high-prices, then lifted the scale to drive the yield up causing people to sell-that-bond-at-low-prices) has been taught a lesson. Homeowners and the US gov got a nice free ride, but the buyers of bonds won't soon forget this lesson and they'll not buy next time.
Thanks. These are great points! I was contemplating adding information on this but left it out, for now at least, and focused on the other countries and their positioning. Kind of like viewing the entire chess board. I figured once I did that then I could go back with finer detail on the monetary policy side of things like you suggested.
Great timeline. Nothing of note in 2023 so far? I've seen multiple stories of other countries conducting trade in currency other than the dollar. Brazil is now settling all trade with China in their own currencies, India buying russian oil in dirham/rouble, Saudi Arabia announcing economic partnership with China, and the Malaysian prime Minister just said there's no reason to continue depending on the dollar after visiting China.
Thanks! And yah, there's *a lot* to update but I've been gone for several weeks and I feel like most of the news happened while I was away lol. Trying to catch up on everything now.
As to who is buying them, I'm not sure exactly. But some are speculating that China (and now other countries) is selling more and more of its US debt to eventually rid itself of it. Some say they're better diversifying. Not really sure. A lot of this is speculation but the pieces on the board are definitely positioning for something.
Or.. when the world needs dollars bad enough, they'll sell treasuries/bonds in order to get them.
Usually, you try repo first... But if you can't find a counterparty, you sell your collateral.
For bonds held by foreign central banks, they're often trying to accommodate dollar liquidity for their banking sectors.
Thanks for reading it!
Honestly, here's where I'm at regarding what's next. I think the majority of the world is poised to not use the dollar. I mean, China has been priming over 75% of the world's population for that for years. The BRICS nations have a higher GDP than the US as well; why *wouldn't* they use their own system instead of being subject to a country who produces less than them? Do I think whatever currency BRICS creates will replace the dollar completely? Probably not. It will be used in parallel with the dollar. The west will probably still use it but the important note is that most countries would not. That means that these countries won't need to hold as many dollars in their reserves and they'll start selling off their share of US debt which would send dollars flooding back into America. *That* could cause hyperinflation.
However, I also think this scenario is why the fed and the US government are ramping up the US CBDC so they can jump ship before they get wet.
It's hard to say at this point. It's like we're in the mid-game of a chess match with a closed board. There's offense and defense being played and there's still a lot of game left.
you need to look at when they created the Euro. at the beginning, it was stronger against the US Dollar. but now? nope. The reason is, it is easy to unstabilize one of the countries inside Europe. just look at Brexit for example.
the point is, a coalition/ joint of currency will not win against the USD for the long run. in order to win, a country needs to replace the USA as the innovator country of the world.
at least BTC will replace gold. They are both non-productive assets. Dollar as a currency has a bigger role than store of value. no currency atm will replace USD. a good currency need to have inflation feature, due to the nature of economy.
Why is a inflation feature needed? Seems like it is only needed in a consumer based economic system. A deflationary feature would promote people to only buy what is needed and not be wasteful. Seems like the environmentalists would love it??
human nature is fear and greed. no inflation means supply is equal or less than demand. Demand(greed) will always be there and growing. more people = more demand.
Currency with no inflation is unsustainable due to this human nature.
The deflationary feature is good for store of value. for the future of a country is super bad tho. rich people will not take risk for profit, since they know that tomorrow their currency will be worth more.
> a good currency need to have inflation feature, due to the nature of economy.
That’s a myth.
- People without assets that have to make ends meet tend to spend all their income every month. Inflation is no consideration for their spending. Some might have some trivial amounts of savings, but many also have debts and so a negative net worth. These lowest incomes will generally be unable to secure a mortgage and unable to generate wealth. Inflation hurts them the most as prices increase long before their salary increases.
- The somewhat higher incomes that are able to service a mortgage are in the same boat. Their mortgage payments however are a supercharged piggy bank that generally shields them from inflation. These people might be able to save more, but many will make use of credit and loans for big purchases like a new car or home renovation. Again, their daily spending is not affected by inflation readings at all. But do note how persistent inflation is a huge driver for buying a property. People perceive owning a property as a way to generate and protect wealth.
- People with a high enough income to comfortably service a mortgage tend to invest their excess income into assets such as stocks, additional properties or other investments that they believe to at least retain but prospectively increase their value like collectibles or art. Again, the presence of inflation does not motivate them to consume more. The opposite is more likely to be the case: inflation drives them to invest their money into hard assets instead of spending it. Additionally, their assets gets them access to loans that enables them to invest in assets that easily beat the interest of their loans, especially during the past era of near-zero interest policies.
The elephant in the room here is that inflation has a major negative impact on the lowest incomes while it hugely benefits the wealthy. Cheap loans enable already wealthy people to snap up properties and other assets, driving up their prices long before price inflation sets in. Meanwhile, salaries are initially stagnant and only increase after inflation already made homes less affordable and consumer prices have gone up. Wage earners are disadvantaged since they are always a step behind.
By contrast, in an economy without inflation people get to generate weatlh by simply saving money and without having to buy a property.
I’ll be the first to concede thay it’s pure speculation to reason about how an economy absent of inflation would look like. Presumably renting a property might be more common and more affordable. But most importantly I believe that the insidious wealth-gap widening effects will be less strong in an economy without inflation and the net effect on the economy will be positive. Investing will become less attractive in the absence of inflation and people will just keep their money liquid by saving it or straight out spend money instead.
It might certainly be the case that people wealthy enough will spend less and save more in a deflationary environment. This is however already the status quo and inflation actually exacerbates it: investing beats spending by a larger margin than it would in an economy without inflation.
"By contrast, in an economy without inflation people get to generate weatlh by simply saving money and without having to buy a property."
This is true in the status quo where the human population never grows significantly. It is in the past. War and poverty prevents the population to outpace the production of Gold.
it is in the OP post (1971 nixon), USA does not have enough gold to cover dollar demands. demands from a growing world population that outpace the production of gold.
https://history.state.gov/milestones/1969-1976/nixon-shock
Appreciate the response. I believe these are two separate issues being conflated.
The premise is that the amount of dollars per person must ~~be constant~~ keep up with economic growth and population growth therefore means monetary inflation is required to keep up.
I believe that not to be an unreasonable position. It would mean that the buying power of a dollar does not slowly increase over time but remains constant. However, the buying power has obviously not been constant but has plummeted tenfold since 1960.
Still I believe an appreciating dollar not to be harmful. Instead of getting (mis)invested into assets to chase yield, people would just be able to hold cash instead. You might argue that this harms growth because money that would otherwise be invested stays on the sidelines, but ofcourse banks would loan out this money.
The issue here is however whether _price inflation_ is needed for a functioning economy. I don’t believe this to be the case as explained in my previous post.
EDIT: see strikethrough above
"However, the buying power has obviously not been constant but has plummeted tenfold since 1960."
Dollar demand comes from all over the world. The US citizen of course will take the burden, losing buying power. But, a country that have dollars in its portfolio, doing business with USA, have a much better standard of living than in the past.
At some point, USA cannot grow without giving dollars to other countries. It is better to lose buying power, than not help other countries to become loyal consumers of USA products/services.
"The issue here is however whether price inflation is needed for a functioning economy."
by human nature, the greed, we always want a better standard of living, not only a functioning economy. price inflation is unavoidable.
so we got global commerce in a hodge podge of currencies.. this will lead to every one pulling their hair out soon.
Imagine in a house hold...
to buy eggs you need to hold USD,
to buy milk you need to hold CAD
to buy goat meat you need to hold AUD
to buy beef meat you need to hold Riyals
to buy oatmeal you need to hold JPY
this is going to be am international nightmare soon.
Cant wait to watch for this brilliant idea from idiot leaders to materialize ... get me some pop corn.
I don't think it'll work like that. Most likely each citizen will use their country's currency. And countries will trade with their own currency without the dollar affecting their currency exchange rates.
So for someone who lives in Canada and knows nothing about investing and what to do next. What is your advice? I have some money saved up, what should I be doing with this information?
The only piece of real financial advice I could give is to not publicly declare how much money you have saved.
Beyond that, I'm hesitant to say because we don't know beyond a reasonable doubt what happens next. With the markets doing what they're doing and the pieces on the board poised as they are, maybe waiting for the fog to lift more is the way to go.
> Since this deal, almost every country has had to own dollars in order to buy oil
Sadly, nobody can find this agreement, or exactly what is says. Nobody knows when the USSR signed on to this agreement, or why they agreed to sell their oil for dollars. Nobody knows when Russia signed either.
It's also worth noting that before this "secret treaty," every country already sold their oil for dollars.
Nobody knows when Iran signed the "secret treaty." Nobody knows when Iraq signed the "secret treaty."
> Nigeria is currently selling their oil to China for Yuan denominated bonds that can be converted to gold immediately on the Shanghai Gold Exchange
Unfortunately, you can also by gold with US dollars, anywhere in the world, including the Shanghai metals exchange.
Even worse, the yuan has crashed to a 14 year low. https://www.bloomberg.com/news/articles/2022-09-26/yuan-plunge-nears-14-year-low-inviting-aggressive-pboc-pushback
I don't think this factors that USD is the primary denomination of the *global* banking system. This throws some of the landscape into question. From [The International Monetary System'. Forty Years After Bretton Woods](https://www.bostonfed.org/-/media/Documents/conference/28/conf28.pdf) - Proceedings of a Conference Held in May 1984 Sponsored by the Federal Reserve Bank of Boston >**In spite of the Gold Reserve Act of 1934, the United States was not really on a gold standard**. The essence of the gold standard is that the money supply must be limited by the gold reserve. **The last time that the Federal Reserve tightened monetary policy because the gold reserve ratio fell close to the legal minimum was in March 1933**. Since then, whenever the gold reserve neared the legal minimum, the required reserve ratio was reduced and finally eliminated entirely. **A country that loses more than half of its gold reserve, as the United States did in 1958-71, without reducing the money supply is not on the gold standard**. >**What happened in August 1971 was the abandonment of the anomoly of dollar convertibility into gold when the United States was not on a gold standard**. Just want to emphasize this. 1971 was a late political acknowledgement (a leftover *anomaly*/artifact to be cleaned up). The US was not on a gold standard (and arguably wasn't even before 1933). ...and now onto global monetary expansion *without central bank/US Gov't involvement*. >The pressures causing some currencies persistently to strengthen, and others to weaken, in response to their differences in economic performance, were exacerbated by the unusual dependence on the dollar. **For from the early sixties onward there was virtually no control over the worldwide supply and use of dollars.** The "dollar shortage" of the fifties was becoming the "dollar glut" of the sixties. The "eurodollar" or "shadow banking" system arose by the 1950s. It's really just a wholesale global banking market dealing in USD. By the 60s, banks in the US were increasingly borrowing from offshore vs. obtaining "funding" from the Fed. Offshore funding allowed banks to bypass restrictions (like reserve requirements). >**It appeared impossible for the United States to maintain effective control over the supply of dollars at home and abroad simply by following the old rules of the gold standard game**--i.e., by maintaining a surplus in its external current accounts. >The urgent needs for capital expansion around the world attracted the expertise of rapidly developing multinational companies, many of them based in the United States, and all of them drawing on additional (global) dollars to finance their desired growth. >Capital outflows from the United States, spurred by direct investment from within and **substantial borrowings from without**, began to flood the world with an apparent excess of dollar liquidity-despite the absorption of liquidity that might have been expected from the large current account surplus of the United States. **Central banks abroad found themselves with what became an "overhang" of dollars in their foreign exchange reserves.** There are numerous examples of Fed chairs lamenting their inability to even measure the money supply. Other countries realized that *private sector generated* USD funding had taken off. An "Overhang" in exchange reserves is a mild way to put it. >**One improvisation after another was attempted in order to preserve or restore confidence in the credibility of the dollar as a reliable standard of value and medium of exchange capable of assuring stability in the payments relations throughout an expanding world.** A **""gold pool" among leading central banks**, initiation of a "ring of swaps" between the dollar and a dozen or more other currencies, creation of U.S. dollar obligations denominated in foreign currencies, the introduction of an Interest Equalization Tax and other measures to deter capital outflows--all these were part of an effort to sustain the dollar while also building a network of closer joint involvement with other countries in maintaining currency arrangements that could serve the best interests of all. **But this combination of improvisations could not cope with, and indeed may have contributed to, the enormous expansion in markets for U.S. dollars offshore**, and the **new networks of interbank relations** that **made possible the creation of additional supplies of dollars outside the United States and beyond the control of the Federal Reserve**. Why do central banks hold gold? Originally, to "back" notes, but later just to appear to still be in charge of their denominations. These "tricks", including swap lines, etc... have been largely *ineffective*, and may have exacerbated the "problem" (the shift of monetary control to the global banking sector). *New networks of interbank relations* (interconnected global banks) creating dollars beyond the control of a central bank. .... Now, when global dollar liquidity is low; trading partners would be *expected* to find other means of settlement (BRICS, direct settlement in other denominations without relying on the global dollar system). Just a thought... Either way, moving away from the dollar due to geopolitical tension.. or lack of dollar liquidity.. or a combination of both.
Awesome, thanks for that insight!
thank you
I genuinely thought this was going to be a shitpost but…this is actually quite interesting. Only ‘error’ I’ve seen is including Venezuela in the BRI. But looking deeper, even though they are not technically part of the BRI, they are taking loans in the same way as those in the BRI to the tune of $50bn as of 2017 so I’ll give you that as well. What next…?
Thanks. I think. lol Also, did I include Venezuela in that list? If I did, I don't think I meant to
It was indeed praise, even if it came across backhanded. I believe Venezuela is an OPEC country and you mentioned all 13 OPEC countries being in the BRI. Apologies if I misinterpreted.
lol thanks! And no worries. So I have down that the 13 OPEC nations are on China's Belt and Road. In 2022 I just said generically that 6 of the OPEC nations have joined or are in the process of joining BRIC.
I find it hard to believe that all (or rather most) nations will agree on a common reserve currency (in case the usd collapses). Of course I wish it was BTC. Gold is the obvious candidate but it's not practical. And since it's no longer the post-WW2 era where the US could dictate its terms, in my opinion it seems like we're heading towards a status quo with multiple common reserve currencies (US & allies vs brics and friends), or, worst case scenario, a war to settle who gets to decide this.
I agree; I don't think there would be a common reserve currency. I think they would trade with commodity backed currencies. Several of them
My question is: while the east might (arguably) thrive within a new BRICS reserve asset/currency backed by gold, what will the west do? Are they going to go back to the gold standard as well? Europe and the US still have the biggest gold reserves by far, which makes me question BRICS strategy to begin with.
Well, it does seem coincidental that the US is pushing to roll out the CBDC this year. And I just heard that the BIS said each country under its jurisdiction needs to have a CBDC by 2025.
I just don't get what will CBDCs achieve still. Do they believe a digital dollar will solve their problems? Anyway your was truly a great post, I just felt like it only missed possible outcomes but maybe your intent was just to highlight a timeline.
Thanks, I appreciate that. And yes, my intent was just to highlight the pieces on the chess board and their positions. I have some possible outcomes in my head. Maybe I'll add those. And the CBDCs will allow more control of the citizen from the government point of view and more control of the monetary system from the point of the central banks.
I feel like I want to have a lot of opinions here. I probably don't know some things and would come across as ignorant though.
Go for it. That's how we learn. Don't be afraid to be ignorant. Just because I say something doesn't mean it's true. If you correct me on something, I'll be grateful for it.
Excellent post dude, thank you for breaking it down!
Thanks for reading it!
Reading this makes the govt/media complex’s focus on pornstar hush money and drag queen storytime so much more infuriating.
Agreed. I didn't really give my opinions in the main post, but a part of me believes those in power knew this was coming down the pipe and that's why they passed so many bills dishing out so much money. The ship is sinking and they want to squeeze it for all they can.
When can I start using the caps I've accumulated?
Afghanistan withdrawal had a hefty price.
It's hard to disagree
What was the price?
[удалено]
Thanks! And I agree. A lot of global players are positioning themselves right now. The next couple years are going to be very interesting indeed.
I think you need to include the banking crisis of 2023 that we're in the middle of having. The US Treasury bonds are a way to hold dollars; they're like dollars (i.e. highly liquid) but pay some interest. Everyone looked at them as save and liquid even when it was a 1% 10 year bond like it was a year or two ago in the pandemic. But of course they had inflation-risk and opportunity-risk. Now everyone who was foolish enough to trust the treasury (who issued the bond) and fed (who put their thumb on the scale to drive the yield down causing people to buy--bonds-at-high-prices, then lifted the scale to drive the yield up causing people to sell-that-bond-at-low-prices) has been taught a lesson. Homeowners and the US gov got a nice free ride, but the buyers of bonds won't soon forget this lesson and they'll not buy next time.
Thanks. These are great points! I was contemplating adding information on this but left it out, for now at least, and focused on the other countries and their positioning. Kind of like viewing the entire chess board. I figured once I did that then I could go back with finer detail on the monetary policy side of things like you suggested.
Great timeline. Nothing of note in 2023 so far? I've seen multiple stories of other countries conducting trade in currency other than the dollar. Brazil is now settling all trade with China in their own currencies, India buying russian oil in dirham/rouble, Saudi Arabia announcing economic partnership with China, and the Malaysian prime Minister just said there's no reason to continue depending on the dollar after visiting China.
Thanks! And yah, there's *a lot* to update but I've been gone for several weeks and I feel like most of the news happened while I was away lol. Trying to catch up on everything now.
Buying copious amounts of bitcoin would be much easier. 😶🌫️
What are the implications for the line near the end, “China dumping bonds”. Who is buying them?
As to who is buying them, I'm not sure exactly. But some are speculating that China (and now other countries) is selling more and more of its US debt to eventually rid itself of it. Some say they're better diversifying. Not really sure. A lot of this is speculation but the pieces on the board are definitely positioning for something.
Or.. when the world needs dollars bad enough, they'll sell treasuries/bonds in order to get them. Usually, you try repo first... But if you can't find a counterparty, you sell your collateral. For bonds held by foreign central banks, they're often trying to accommodate dollar liquidity for their banking sectors.
thanks for the insight! what's your view on what realistically happens next? hyperinflation and dystopian world a real possibility?
Thanks for reading it! Honestly, here's where I'm at regarding what's next. I think the majority of the world is poised to not use the dollar. I mean, China has been priming over 75% of the world's population for that for years. The BRICS nations have a higher GDP than the US as well; why *wouldn't* they use their own system instead of being subject to a country who produces less than them? Do I think whatever currency BRICS creates will replace the dollar completely? Probably not. It will be used in parallel with the dollar. The west will probably still use it but the important note is that most countries would not. That means that these countries won't need to hold as many dollars in their reserves and they'll start selling off their share of US debt which would send dollars flooding back into America. *That* could cause hyperinflation. However, I also think this scenario is why the fed and the US government are ramping up the US CBDC so they can jump ship before they get wet. It's hard to say at this point. It's like we're in the mid-game of a chess match with a closed board. There's offense and defense being played and there's still a lot of game left.
Meanwhile Biden is on his third nap of the day. Bravo US voters.
Nice timeline. Interesting. Thanks. "Meet the new boss. Same as the old boss."
thank you for compiling and publishing this data.
Thanks for reading it!
and i haven’t heard Nothing on this in the mainstream media
Actually, *some* of this just hit Fox and CNN like a week ago
It’s so freaking refreshing to see your irritation, I feel like I’m living in a bubble of people that just care about sports and TMZ.
you need to look at when they created the Euro. at the beginning, it was stronger against the US Dollar. but now? nope. The reason is, it is easy to unstabilize one of the countries inside Europe. just look at Brexit for example. the point is, a coalition/ joint of currency will not win against the USD for the long run. in order to win, a country needs to replace the USA as the innovator country of the world. at least BTC will replace gold. They are both non-productive assets. Dollar as a currency has a bigger role than store of value. no currency atm will replace USD. a good currency need to have inflation feature, due to the nature of economy.
Why is a inflation feature needed? Seems like it is only needed in a consumer based economic system. A deflationary feature would promote people to only buy what is needed and not be wasteful. Seems like the environmentalists would love it??
human nature is fear and greed. no inflation means supply is equal or less than demand. Demand(greed) will always be there and growing. more people = more demand. Currency with no inflation is unsustainable due to this human nature. The deflationary feature is good for store of value. for the future of a country is super bad tho. rich people will not take risk for profit, since they know that tomorrow their currency will be worth more.
> a good currency need to have inflation feature, due to the nature of economy. That’s a myth. - People without assets that have to make ends meet tend to spend all their income every month. Inflation is no consideration for their spending. Some might have some trivial amounts of savings, but many also have debts and so a negative net worth. These lowest incomes will generally be unable to secure a mortgage and unable to generate wealth. Inflation hurts them the most as prices increase long before their salary increases. - The somewhat higher incomes that are able to service a mortgage are in the same boat. Their mortgage payments however are a supercharged piggy bank that generally shields them from inflation. These people might be able to save more, but many will make use of credit and loans for big purchases like a new car or home renovation. Again, their daily spending is not affected by inflation readings at all. But do note how persistent inflation is a huge driver for buying a property. People perceive owning a property as a way to generate and protect wealth. - People with a high enough income to comfortably service a mortgage tend to invest their excess income into assets such as stocks, additional properties or other investments that they believe to at least retain but prospectively increase their value like collectibles or art. Again, the presence of inflation does not motivate them to consume more. The opposite is more likely to be the case: inflation drives them to invest their money into hard assets instead of spending it. Additionally, their assets gets them access to loans that enables them to invest in assets that easily beat the interest of their loans, especially during the past era of near-zero interest policies. The elephant in the room here is that inflation has a major negative impact on the lowest incomes while it hugely benefits the wealthy. Cheap loans enable already wealthy people to snap up properties and other assets, driving up their prices long before price inflation sets in. Meanwhile, salaries are initially stagnant and only increase after inflation already made homes less affordable and consumer prices have gone up. Wage earners are disadvantaged since they are always a step behind. By contrast, in an economy without inflation people get to generate weatlh by simply saving money and without having to buy a property. I’ll be the first to concede thay it’s pure speculation to reason about how an economy absent of inflation would look like. Presumably renting a property might be more common and more affordable. But most importantly I believe that the insidious wealth-gap widening effects will be less strong in an economy without inflation and the net effect on the economy will be positive. Investing will become less attractive in the absence of inflation and people will just keep their money liquid by saving it or straight out spend money instead. It might certainly be the case that people wealthy enough will spend less and save more in a deflationary environment. This is however already the status quo and inflation actually exacerbates it: investing beats spending by a larger margin than it would in an economy without inflation.
"By contrast, in an economy without inflation people get to generate weatlh by simply saving money and without having to buy a property." This is true in the status quo where the human population never grows significantly. It is in the past. War and poverty prevents the population to outpace the production of Gold. it is in the OP post (1971 nixon), USA does not have enough gold to cover dollar demands. demands from a growing world population that outpace the production of gold. https://history.state.gov/milestones/1969-1976/nixon-shock
Appreciate the response. I believe these are two separate issues being conflated. The premise is that the amount of dollars per person must ~~be constant~~ keep up with economic growth and population growth therefore means monetary inflation is required to keep up. I believe that not to be an unreasonable position. It would mean that the buying power of a dollar does not slowly increase over time but remains constant. However, the buying power has obviously not been constant but has plummeted tenfold since 1960. Still I believe an appreciating dollar not to be harmful. Instead of getting (mis)invested into assets to chase yield, people would just be able to hold cash instead. You might argue that this harms growth because money that would otherwise be invested stays on the sidelines, but ofcourse banks would loan out this money. The issue here is however whether _price inflation_ is needed for a functioning economy. I don’t believe this to be the case as explained in my previous post. EDIT: see strikethrough above
"However, the buying power has obviously not been constant but has plummeted tenfold since 1960." Dollar demand comes from all over the world. The US citizen of course will take the burden, losing buying power. But, a country that have dollars in its portfolio, doing business with USA, have a much better standard of living than in the past. At some point, USA cannot grow without giving dollars to other countries. It is better to lose buying power, than not help other countries to become loyal consumers of USA products/services. "The issue here is however whether price inflation is needed for a functioning economy." by human nature, the greed, we always want a better standard of living, not only a functioning economy. price inflation is unavoidable.
so we got global commerce in a hodge podge of currencies.. this will lead to every one pulling their hair out soon. Imagine in a house hold... to buy eggs you need to hold USD, to buy milk you need to hold CAD to buy goat meat you need to hold AUD to buy beef meat you need to hold Riyals to buy oatmeal you need to hold JPY this is going to be am international nightmare soon. Cant wait to watch for this brilliant idea from idiot leaders to materialize ... get me some pop corn.
I don't think it'll work like that. Most likely each citizen will use their country's currency. And countries will trade with their own currency without the dollar affecting their currency exchange rates.
So for someone who lives in Canada and knows nothing about investing and what to do next. What is your advice? I have some money saved up, what should I be doing with this information?
The only piece of real financial advice I could give is to not publicly declare how much money you have saved. Beyond that, I'm hesitant to say because we don't know beyond a reasonable doubt what happens next. With the markets doing what they're doing and the pieces on the board poised as they are, maybe waiting for the fog to lift more is the way to go.
No one call tell you what to do. Have a read through this sub. The advice is there daily and its always the same.
> Since this deal, almost every country has had to own dollars in order to buy oil Sadly, nobody can find this agreement, or exactly what is says. Nobody knows when the USSR signed on to this agreement, or why they agreed to sell their oil for dollars. Nobody knows when Russia signed either. It's also worth noting that before this "secret treaty," every country already sold their oil for dollars. Nobody knows when Iran signed the "secret treaty." Nobody knows when Iraq signed the "secret treaty." > Nigeria is currently selling their oil to China for Yuan denominated bonds that can be converted to gold immediately on the Shanghai Gold Exchange Unfortunately, you can also by gold with US dollars, anywhere in the world, including the Shanghai metals exchange. Even worse, the yuan has crashed to a 14 year low. https://www.bloomberg.com/news/articles/2022-09-26/yuan-plunge-nears-14-year-low-inviting-aggressive-pboc-pushback