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A Crash in the Dollar Is Coming
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- re_dmitriy 6y ago#gold! ;)
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- anovikov 6y agobullshit. is dollar overvalued? purchasing power index of the U.S. is equal to most other developed countries. https://www.indexmundi.com/facts/indicators/PA.NUS.PPPC.RF/rankings https://www.indexmundi.com/facts/indicators/PA.NUS.PPPC.RF/r...
- mcfly1985 6y agoRight - but this neglects the fact that the US has printed an enormous amount of dollars to finance an incredible amount of spending. So sure - the purchasing power is on par with other countries, but those other countries haven't had the luxury of printing trillions to finance themselves.
- anovikov 6y agoThey had. Japan printed a lot more in terms of GDP. In fact U.S. debt is pretty much average looking for the developed world.
- headmelted 6y agoMaybe. The article's whole argument centres on whether the US' place in the world is waining or not. That isn't really the point. The dollar is the world's currency because it's the most stable of a bad bunch of options. For another currency to displace it, that currency would presumably need to be seen as more stable than the dollar at that time (and probably by quite a bit to elicit wide change). What would replace the dollar? The yuan, euro and pound all have a history of fiddling whenever it suits the government of the day, so why switch from the dollar? "Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before." The US economy is driven by it's companies, who enjoy lucrative tax arrangements and a lot of leeway relative to other jurisdictions. Google, Amazon, Facebook, Apple and Microsoft are going nowhere, and neither is anyone downstream from them. They aren't going to get a better deal based on tax or red tape anywhere in the world.
- admax88q 6y agoWhat fiddling has been done to the euro?
- kylegordon 6y agoI wonder if the poster was referring to Quantitative Easing, but the Federal Reserve has been doing that as well.
- headmelted 6y agoYes, I was referring to QE, which is much more disruptive in the eurozone than in the US, even at lower volumes. In the US, you have a central bank that is tasked with protecting the economy of the country, and the central bank is responsible for the money supply. Same in the UK and almost anywhere else. In Europe, the central bank is tasked with protecting the economies of 19 different countries who each have divergent tax and expenditure strategies (some markedly so), meaning the currency is subject to the fluctuations caused by any number of those states getting into difficulty at any time, which happens frequently.
- admax88q 6y agoIs there any data backing this that shows the Euro is less stable than the USD? It seems like it would be a fine choice for a reserve currency to replace USD, if USD goes to shit. Remember it doesn't have to be better than the USD ever was, it just has to be better than the USD now.
- oblio 6y agoGreece crashing barely budged the Euro, though.
- woodpanel 6y agoSeeing the ongoing cases in front of the european nations supreme courts [1], the ongoing debates within EU-nations and between them, about in which direction to steer the currency or about what country benefits the most: alledgedly always the one country a political camp of another country hates the most. Just think about matching the world-views of far-right Greek parties with far-right German ones and you'll see that the Euro has plenty potential for future "fiddling". [1] https://www.nzz.ch/wirtschaft/nach-ezb-urteil-bundesbank-sieht-handlungsbedarf-beim-ezb-rat-ld.1557427 https://www.nzz.ch/wirtschaft/nach-ezb-urteil-bundesbank-sie...
- techbio 6y agoPaywalled, try: https://www.yahoo.com/news/crash-dollar-coming-210024166.html https://www.yahoo.com/news/crash-dollar-coming-210024166.htm...
- mcfly1985 6y agoAs someone who's lived through significant inflation in his lifetime, American's are ill prepared. In my experience, the government will do everything possible to hide the fact that inflation is even happening. "Official measures" of inflation won't begin to capture the problem until the damage is already done. People buying debt at these absurdly low interest rates have, quite frankly, lost their minds. There's not many options to protect yourself either. Stocks? Maybe, but a lot of companies will go bankrupt. Gold? Maybe - but if you're investing in paper gold it likely won't be there when you need it...if you're attempting to hold physical it can be easily stolen. Preparing for this the second time in my life, I'm opting for Bitcoin and real estate (with nice fixed-rate mortgage debt to purchase). Fingers crossed...
- ra1n85 6y agoWhat did you experience the last time significant inflation occurred? Did you observe any early indicators then on that you're looking out for now?
- mcfly1985 6y agoLuckily I was young and didn't have much to lose. We didn't experience hyperinflation, maybe something like 40-50% change in prices. I was hourly at the time but it took a while before I felt like my purchasing power was back to being on-par with what it was prior. When people started to feel prices were rising, everyone ran out to buy electronics -- tvs, stereos, anything. The hope was they'd be able to re-sell them at a good price. I've learned that inflation is uneven - it doesn't uniformly increase prices everywhere. In the US I just watch the charts of M1.
- WC3w6pXxgGd 6y ago> People buying debt at these absurdly low interest rates have, quite frankly, lost their minds. Isn't buying taking out a mortgage putting you into debt?
- kolbe 6y agoAnother way to think of it (sadly) is that companies that are over-levered can do well, since their income stream is in real value, but their debts are in dollars. If you want to cynically think America is kleptocracy for the elite, and the elite are heavily invested into over-levered companies managed by PE firms, then you might even expect this to happen for their sake.
- ilamont 6y agoNot identified in Roach's scenario are the beneficiaries of the coming crash of the dollar. Judging by his regular criticism of U.S. trade and foreign policy in publications such as People's Daily, Global Times, and Beijing Review, that would be China.
- mytailorisrich 6y agoThe US would lose, and so would those who hold dollars or dollar debt. China would also lose. But that would weaken the dollar's position and thus lead to an increase in the use of other currencies, and in that aspect China and the EU would gain.
- 34679 6y agoDo people actually believe that you can create trillions of new dollars without that having an impact on the value of each dollar?
- api 6y agoIt can if other processes are effectively destroying dollars at a similar rate. Modern economies are credit economies with the majority of money in circulation being multiples of M1. If there's a credit crunch, vast amounts of money can be thrown into the fire very quickly. The Fed thinks we are having or are about to have a 2008-like deflationary credit crunch. If they're right, then we will not see massive inflation. If they're wrong, we may.
- 34679 6y agoIn your example, it still devalues the currency. The devaluation is just offset by other factors.
- fallat 6y agoOf course, why not? It's magic money. Top players will price things in such a way that inflation is still consistent so that their own money is still worth something.
- rb808 6y agoThe biggest problem with the dollar is America's ruthless crackdown on dollar transactions, examining everyone and criminalizing those who break the rules. That isn't bad, the problem is you never know who's going to be in the bad box. Iran, Cuba had agreements with Obama administration and trade was opening up then a few years later you go to jail for making dollar payments with Iran see Huawei exec. Places like Indonesia, Saudi, Turkey, Argentina, Egypt are sometimes friends then suddenly enemies. I dont know why they will continue to want to hold dollars. I think if we see another 10 years of the Euro holding together and/or some good crypto currency dollar will fade.
- rossdavidh 6y agoThere is, no doubt, a dollar crash coming at some point in the future. That's kind of like saying a recession is coming; always true, but without know when, it's not to useful. I have read articles saying that the dollar's days of special status are ending, for at least 20 years now. Someday it will be true. Don't bet on it being soon. Given that none of oil, bitcoin, euro, yen, yuan, etc. seem to be skyrocketing in (dollar-denominated) price, it doesn't seem like the current environment is any different in this respect. Gold is the only store of value that seems to be going up in dollar terms in a major way. I don't doubt that gold is a good store of value, but I don't think (for logistical reasons) it will displace the dollar any time soon. Someday, it will be true. Is this the time? I suppose it could be. But we keep hearing this, every few years for decades now.
- _aleph2c_ 6y agoHere are the other articles the author has written for Bloomberg: https://www.bloomberg.com/opinion/authors/ANXbd-tdHWs/stephen-s-roach https://www.bloomberg.com/opinion/authors/ANXbd-tdHWs/stephe... From this list, you can see a theme in his messaging.
- Werewolf255 6y agoThanks for that link, I found the OP pretty specious and wanted to see what else the author had been up to.
- bdcravens 6y agoI assume you mean the article/author, and not the person on HN who submitted the article? OP is understood to refer to the latter.
- mancerayder 6y agoHe was the chief economist of Morgan Stanley and his speciality is China. Why is he necessarily a paid operative of one thing or another (that's the absolute implication here). People can believe things. And anyway that's the point of argumentation, right, to have a back-and-forth of ideas? You did see he had an argument with facts, that can be proved or disproven, right?
- ilamont 6y agoNot just Bloomberg. Stephen Roach: US has basic misunderstanding of how tariffs work (http://en.people.cn/n3/2019/0619/c90000-9589454.html http://en.people.cn/n3/2019/0619/c90000-9589454.html) In the rush to demonise China over trade, the West has failed to give Beijing enough credit for its green leadership (https://www.scmp.com/comment/opinion/article/3030079/rush-demonise-china-over-trade-west-has-failed-give-beijing-enough https://www.scmp.com/comment/opinion/article/3030079/rush-de...) Dismantling global supply chains would deny a coronavirus-torn world collaborative opportunities (http://www.bjreview.com.cn/Opinion/202004/t20200429_800202522.html http://www.bjreview.com.cn/Opinion/202004/t20200429_80020252...) Yale’s Stephen Roach questions why Huawei has been ‘singled out’ for sanctions violation (https://www.cnbc.com/2018/12/14/stephen-roach-asks-why-us-singled-out-huawei-for-sanctions-violations.html https://www.cnbc.com/2018/12/14/stephen-roach-asks-why-us-si...)
- mark_l_watson 6y agoOf course the crash in the dollar is coming, but no one knows when. I read a good book on the subject "Dedollarization" a few months ago which I recommend both as an interesting read and also because the authors' analysis seemed right on. If I were entering into a betting pool with friends, I would bet on it either happening soon (like this fall) because of our political and covid-19 situation but if we get through the near future without a dollar crash, then I would bet on about 5 years from now. Interesting times, my friends, interesting times.
- robjan 6y agoWhat do you suspect would replace the US dollar?
- mark_l_watson 6y agoA basket of currencies, that would also include the dollar.
- tuna-piano 6y agoThe expansion of the Fed's balance sheet is just extraordinary... given the news coverage in other areas, this seems like a huge piece missing from public discourse. https://fred.stlouisfed.org/series/BOGMBASE https://fred.stlouisfed.org/series/BOGMBASE While the gigantic increases in monetary base in the 2008 crisis didn't cause inflation, I (as a layperson) don't know that is too relevant. In 2008 there was a huge decrease in monetary velocity, meaning the total money supply didn't jolt up. Today, this seems very different, with a gigantic jolt in the M2 measure of money supply. https://fred.stlouisfed.org/series/M2 https://fred.stlouisfed.org/series/M2 Quite scary to me to build this crisis before the previous crisis was unwound.
- bravo22 6y ago2008 monetary expansion did cause inflation, in all asset classes.
- hakesdev 6y agoYes the fed's balance sheet has inflated, but it has inflated at the same time as dollars have stopped flowing out of the United States through trade and tourism. The global economy needs dollars: - 84% of all non-domestic debt globally is US Dollar debt. - Around $100trn of global debts are denominated in US Dollars. This creates a tremendous demand for dollars, and if they aren't flowing through trade and tourism, dollars will need to be purchased on the spot market or missed debt payments will make these foreign cos go BK. US Fed's monetary base inflation is different from the ECB and Japanese Fed in that the world will sop up basically all of the money it prints. In order for the US Fed to have the same impact on inflation, they need to print multiples of what the ECB and Japanese Fed print. I agree in the end the dollar will come, I just think we will have a dollar bull rally before then. See this thread from Raoul Pal: https://threadreaderapp.com/thread/1264224744271945728.html?refreshed=yes https://threadreaderapp.com/thread/1264224744271945728.html?...
- Havoc 6y agoSo where to move the money? EU? China? Australia?
- op03 6y agoI buy toblerone bars.
- nine_zeros 6y agoThere is no alternative. Really, all other currencies are just trailing the US dollar as the world leader in printing. However, yes, the world is sick of using the dollar only. If another viable alternative shows up and erodes only 10-20% of global transactions, the US dollar will decline rapidly. The only way I can see this happening today is with Euro growing balls to buy oil in euros only or island nations around China using Chinese yuan.
- hendzen 6y agoOverly simplistic view that misses out on a lot of nuances about who in the US benefits and who is harmed by the dollar system. For a much better essay see here: https://phenomenalworld.org/analysis/the-class-politics-of-the-dollar-system https://phenomenalworld.org/analysis/the-class-politics-of-t...
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- mohamedattahri 6y agoOne thing this op-ed is not mentioning and that is becoming a stronger motivator for many countries to find an alternative global currency is the abusive use of economic sanctions that started with the Obama administration, and almost spiraled out of control under Trump. If any bank wants to transact with dollars inside or outside the US, it needs to either open "an account" with the federal reserve, or work with a bank which has one as an intermediary. If a company ignores sanctions put in place by the US against another country, industry, company or people, their bank is liable, and can have its license to transact with dollars suspended, essentially cutting it off from the global economy. Back when the US believed in multilateralism and concentration with its allies, sanctions were perceived more positively that they are today in the America first and alone era.
- tomato2juice 6y agoThe article focuses on "savings", but much of the impactful forces were already in play. This article was discussed previously and had much more valuable insight: https://www.lynalden.com/global-dollar-short-squeeze/ https://www.lynalden.com/global-dollar-short-squeeze/ Nit pick: > Look no further than the Trump administration. Protectionist trade policies, withdrawal from the architectural pillars of globalization such as the Paris Agreement on Climate, Trans-Pacific Partnership, World Health Organization and traditional Atlantic alliances TPP was the worst example to throw in there. It was a horrible proposal, that both parties hated, and both presidential candidates said they would withdraw from. Either the author was trying to just make it look worse, or had zero clue about the mulit-year TPP debate.
- el_don_almighty 6y agoThe US is engaged in a modern version of Mutually Assured Destruction (MAD) game theory using using national debt backed in USD instead of nuclear weapons. Any strategic move against the dollar by another currency endangers the value of the country's economy because they hold so much US debt. Try to screw with the US and you will be destroyed faster because of the way debt markets work Can China move their Yuan into a premier position by lowering the dollar? NO WAY. The minute their US denominated debt value reduces, their economy goes bust In the end, as long as the US has the most distributed debt, the biggest bombs, and the most aircraft carriers, the dollar stands supreme and will even survive the marginalization of petrol.
- rossdavidh 6y ago"If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem." - J. Paul Getty In this situation, China would be the bank? Not, I should add, a long-term stable situation; sooner or later the bank will have a liquidity problem, and then you have a problem when you need more cash. But it probably does keep the U.S. and China from rushing as headlong into enmity.
- neonate 6y agohttps://archive.vn/NIw0L https://archive.vn/NIw0L
- aritraghosh007 6y agoSomewhat true. The dollar's place as the world currency today stems from not just its stability and negligible political volatility but also the key role the US plays in keeping the world trade (most importantly oil) efficient with its gargantuan deployment of armed forces around major trade routes. There has been a significant shift in the latter policies in the last 4 years that is bound to cause some reverberations as we step into the next decade.
- WC3w6pXxgGd 6y agoDo I understand the arguments for the crash? Yes. Have I have been hearing about this for 30+ years without it happening? Yes. Until the world loses faith in the military and economic might of the United States, this is not going to happen.