Trader: ‘The Path For All Fiat Currencies Is Clear’

By Kevin Muir of “The Macro Tourist” fame; reposted here with permission Over the Christmas break, the guys at MacroVoices created a special series about the future of the US dollar. It was supposed to be a bulls versus bears debate, but a problem became quickly apparent when all the participants found themselves agreeing, that over the long run, the US dollar was headed lower. They simply disagreed about the path. Alhambra Investment Partner’s Jeff Snider believed the structural pr
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7 thoughts on “Trader: ‘The Path For All Fiat Currencies Is Clear’

  1. 4.5% inflation for 15 yrs. cannot happen in a vacuum, to inflate away our current debt. Will Social Security payments stay the same for those 15 our debt will not increase along with the inflation? Interest rates won’t reflect 4.5% inflation once it becomes baked into the cake? Isn’t one criteria for a currency that it be a store of value, at least for a reasonable period of time, maybe for however long it takes for person to go from retirement to death? Fiat currencies are just a bad idea. Creating them is an understandable path to go down, but has never and will never work in the long run. Kinda wish I had lived my entire life in the sweet spot “short run”.

    1. I was with you until “Fiat currencies are just a bad idea”. So what else in the would work in economy as large and complex as we have now? Please don’t say gold, the idea of people worshiping their little pile of yellow metal makes me physically ill. Maybe crypto’s will work by that will take a couple of decades to shake out.

      1. The problem with backing a currency with a commodity such as gold is that it’s inherently deflationary when the supply of the commodity grows less than the real growth of the economy, thus restraining growth. It’d be the same for crypto in a case like bitcoin, which is capped at whatever number it is, putting aside the additional issue of whether it has any real value.

        There can be an honest fiat currency, at least for awhile until the government becomes overextended, corrupt and makes promises it cannot possibly keep. Obviously there are other requirements for a national currency to function as a global reserve, such as how the dollar worked for a few decades and others before it. I can think of two candidate countries rising on the horizon, but it’ll be a gradual and lengthy process not complete until the 2030’s. Both have been the largest and richest nations in the world previously for many centuries, so their re-ascendance will be a return to the norm and IMHO the likeliest outcome.

        As for thoughts that make you ill, that should be especially so the IMF / SDR.

  2. Of course, gold in the sense of gold coins is not workable. Actually, fiat currencies WOULD work if there was a restraint on the supply of them. I’ll let you dream up a system where you could trust gov’ts made up of greedy humans to use restraint or even stick to laws made before they came to power. The good ‘ol USA certainly hasn’t been able to play by its own rules throughout our history. Unfortunately, knowing what doesn’t work isn’t a guarantee for knowing what will work.

  3. Yep, absolutely. Because it’s the crisis knee-jerk reaction, right or wrong… We can argue that all day but you gotta park somewhere. And to do so you need liquidity. That means liquid treasuries in dollars for institutional size, which at the end of the day is the great price determinant.

    Nobody cares about that now cuz liquidity everywhere is abundant and volatility is non-existent. But eventually sometime that’ll exactly reverse!

  4. Don’t you think it wouldn’t be more correct to solve the $ problems in the US. Less spending, more intelligent investments, getting the people to do more and intelligent work.

  5. “MacroVoices couldn’t find a single bull to make the US dollar bull argument”

    Here’s one. A fund/money mgr who recently appeared with the MacroVoices’ friends at Realvision.
    Watchable and even amusing for a financial video and you needn’t be a pro to understand it.

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