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Dollar Collapse And The $187 Reese’s Cup
With the House poised to pass Democrats' $1.9 trillion virus relief bill and Joe Biden set to sign the legislation by Sunday, I wanted to take a moment to reiterate how manifestly absurd it is that lawmakers and market participants continue to insist on the notion that, eventually, fiscal rectitude will have to take precedence.
To be sure, most rational people who aren't engaged in political grandstanding understand that now isn't the time to fret over "debt" and deficits. Indeed, even politica
When I reviewed everything else included in the $1.9T that was not a direct payment, I was actually pleasantly surprised to see the $3,600/$3,000 child tax credit. Parents can spend as needed in their household.
Although only for one year, if it goes well- hopefully becomes part of the baseline.
Next, if we can get basic universal healthcare coverage, as every other wealthy country has, we can get two more pillars in place to support the global position of the US and the USD. People do not believe it, but there are studies showing that universal basic healthcare actually reduce total healthcare costs.
An interesting part of this post is the difficulty of most Americans would have exchanging currencies to euro, yuan, yen, etc. It’s an interesting excercise to think about the difficulty those same Americans might have in exchanging to Bitcoin, as many people know someone who can act as a gateway.
Bitcoin would become extremely deflationary. Out of the frying pan into the fire.
Excellent per usual, H …
I just hope that unbanked West Virginia citizen continues to support Joe Manchin whom I hope is up for one more election in 2024 at age 77 …
Didn’t we already have a test run for “international emergency” last February and March when everybody in the world bought dollars? Not stocks, credit, Treasuries, bitcoin, other FX, etc. Everyone ran to US dollar. What other proof does one need?
Yes. And it always happens like that, by the way.
If so much of the world’s debts are denominated in one currency, is it even possible for that currency to “collapse”?
I guess the USD always rallies in a true crisis as the loss of trust means it’s so much harder to refinance existing USD debts, forcing asset sales.
You can tell things are changing. First the many critics of Biden on the left are being very quiet. They did not get everything, but they realize they got a lot – and more from Biden than Obama- BIden learned the lesson of Obama’s reticence. When you have the chance you go for it. Second, the GOP while not swallowing their pride and retreating are probably in for a tough time at the polls in 2022. What can they campaign on? Defense of Neanderthals? What are Americans going to rebel against. Effective vaccination distribution? Increased social welfare and health care aid. Increased competency in government? A more civil and reasonable discourse?
Identity politics. It’s basically all that’s been left for a while.
For months I’ve watched inflation jawboning, gold jawboning, political jawboning, treasury rate jawboning, pandemic stimulus jawboning — and really don’t see much to get excited about. I don’t mean to be disingenuous or take on devil advocating, but this pandemic era is a singularity event that is different, it has no precedent in history and it doesn’t link to any traditional economic rationality, models, charts or theories related to jawboning.
The spike in inflation is short term, the spike in treasury rates certainly don’t offset the yield decline that’s been in place for a decade, and if anything, all the pandemic has done is to expose things that were already weak. As with Darwinism, there will be some evolutionary changes where adaption will take course — then, poof, this singularity will fade away, as a story told by survivors.
This isn’t rocket science, it’s Darwinism — the dollar is here to stay — long live the dollar.
The “world currency” has changed in the past, and will in the future. Prior to the USD it was the Pound Sterling. It took two world war’s and the Depression to de-throne it, although there were some sign’s of it’s decline prior to 1914.
It will happen to the USD, but I don’t think we are even close at the moment. The world is probably drifting in that direction, but it take something of a totally different scale and character than a $1.9tn budget to move the scales in a meaningful way.
It is worth noting that if the USD is eclipsed as the dominant currency, it does not mean the end of the USD.
The danger is that more and more people are saying the quiet part out loud – the quiet part being that MMT is real and that dominant currency sovereignty gives unlimited printing power.
Those things are true. But the more people subscribing to that truth and publicly promoting that truth, the less likely they are to continue to be true.