Let me know if you heard this one: the USD is dying.
That is conventional wisdom in some circles. Unfortunately, it is hyberhole as well as being wrong. The USD is the world's reserve currency, backed by the largest economy, and part of the most financialized economy in history.
Many feel that the United States will lose this status and I would agree with this sentiment. There are some challenges to that happening, which can be overcome but might take time.
The first is that China is the likely candidate. That economy will surpass the United States, probably within the next 10 years. Thus, it will have the largest economy in the world and should pull away from the U.S. by having a larger growth rate.
This is a similar situation to what happened when the United States took over Britain and the Pound as the reserve currency. To start the U.S. economy eclipsed Britain so this mirrors it.
However, there was something else that took place. The United States banking system became more advanced than that in Britain. It was this point that gave the U.S. the lead. Most major projects started to turn to U.S. banks, something that still holds true today.
China is in an interesting situation on this point. Right now, few trust the Chinese banking system. The secrecy that takes place does not endear confidence on an international scale. Over time, we will likely see this change especially as China further integrates Hong Kong into the equation.
All of this is going to play out over the next decade. There is, however, something that extends even longer term.
The United States economy is an overly financialized one. We never have see anything like this in the history of the world. Part of the problem with the advanced banking system is they just keep creating, basically new forms of debt. This has meant there is a lot of paper out there.
While it is likely that a lot of this will end up in default, not all of it will. And that is the built in protection for the USD.
In short, there are trillions of dollars in debt out there where repayment will be made in dollars. It is part of the contract and will take place over the next 30 years. In fact, the US would be smart to offer out 40 or 50 year bonds to ensure the longevity of its currency.
Looking back at the British Pound, the country lost its lead by 1920 but, 30 years later, more than half the money around the world were Pounds.
The recent crash in March saw something interesting. There was a resounding announcement by the trading community what they feel safety is: the USD. This will not always be the case but it was for now. Even with all the money printing the last few months, there is still a shortage of USD around the world.
We obviously will see the move from fiat currency at some point. However, it is important to remember that not all fiat is created equal. The USD is much different than, say, the Venezuelan Bolivar. In fact, the same is true for the USD and the Euro. They are world's apart.
So while we will see the impact of the USD diminishing, it will be a long time before we see the USD disappear.
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I used to think that Gregory Mannarino was a nutjob for suggesting that the Federal Reserve was intentionally trying to destroy the USD so that it could hyperinflate and use the Dollars that it creates to buy up real assets and take over everything.
And then the Fed started scooping up all kinds of assets, ballooning its balance sheet.
Okay, he still looks like a nutjob (look at those eyes, does the man ever sleep?), but I’m no longer as convinced that he actually is one.
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I think USD will go bust to be exchanged to a digital dollar to force all money to be exchanged and illegitimate money incapable of doing so. Meaning less dollars to bring the USD back up. It's a conspiracy but a USD provides stability and something I don't think the world is ready to lose.
China is not a candidate at all in my opinion. I respectfully disagree, mainly because they do not list their currency on global exchanges and most modern countries all believe it's manipulated by their government. The only ones who think China's currency is strong is the people being targeted by their censorship.
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Do you know anything about a coin (physical change) shortage in America. I always see signs in the grocery store. It's weird.
In any case, USD can't die unless the community disappears.
Fat chance... it can weaken but it can't die.
If you just read one side of the story
it is easy to repeat this referendum
against the dollar.
When ?this is another chapter in the book of the world.
In the meantime it is fiat currency
and it is wise to use it for its purpose.
Trade it to earn more. What goes up must come down, so does #USD.
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USD will stay here for many years as the blockchain technology and cryptocurrencies don't have coverage all over the world. It will move in that direction, but it will take some time.
I am waiting to see the first country which will adopt cryptocurrency.
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I also think that there are other things to take into account, first of all is that we still need to be confident about other country's currency as you said (I'm not investing more than what I would feel confortable losing in China) and secondly that the USD has been being the world'w currency even after many downward just luke 2001 and 2008, so this might be another one just like before
Really nice post!
Disagree, it is just math, patterns, and fractals. The Dollar is on borrowed time and is currently pushing the longest status of world reserve currency. they last 90-105 years long. I am in the camp the world reserve status is lost within the next 7 years.
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The fed is printing 1 trillion dollars daily for the overnight markets, buying up corp bonds, and on top of that the US economy is in the toilet. Anyone with any type of wealth worth saving are buying real estate, stocks, gold/silver, and crypto.
Is the USD dying? Yes but before it goes. Other fiat will go first. As far as the government selling bonds. Who's buying? Other countries no longer buying our bonds and some of them have been dumping them onto the market for years now. That only leaves our companies to buy up the bonds with CEOs clueless about inflation and deflation. The smart CEOs are already buying gold/silver and crypto.
Personally, I have already started to build my hedge against the USD.
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There is a big difference between easing and adding liquidity.
The Fed is not printing $1 trillion daily for the over night markets. It is injecting $1 trillion, money that is recoups the next day.
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Yeah it will technically be a long time before the USD disappear. I already feel that China of course have come a long way and might be in the running to dispose US but then like you said only a few trusts them as the secrecy is just too much.
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