The BRIC Bat

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Imagine one morning you wake up to the news that the dollar has lost twenty percent of its value against the other major currencies. Throughout the day, the dollar continues to fall as governments and banks dump dollars and treasuries. By midafternoon, the news is all about emergency meetings in Washington between the White House, Congressional leaders, and the Federal Reserve. The dollar has lost half its value and treasuries are now flooding the secondary market.

By that evening the public is starting to understand what the collapse of the dollar will mean for them, so they have shut down the internet in an effort to buy gold and silver from online dealers. The next day, retail gold and silver dealers, pawn shops and coin brokers are all closed. There are rumors of jewelry shops being looted as people look for anything of intrinsic value. By the second day of the crisis, all businesses have closed as state and local government declares martial law.

This is the dream scenario of the goldbugs and doomsday types that you find lurking around websites sponsored by precious metal dealers. Since Nixon closed the gold window, these people have been predicting the demise of the dollar. Peter Schiff has made himself rich telling people the dollar is about to collapse. The reason these predictions have not happened is this will never happen. This sort of collapse is simply not possible in the modern age.

The main reason this cannot happen is the rest of the world holds trillions in treasuries and dollars in their reserves. About seventy percent of what the world has on its balance sheets is denominated in dollars. Of course, the world’s most important and most traded commodity is energy and it is traded in dollars. There can be no collapse in the dollar like this because there is a buyer for every dollar. As soon as anyone starts to dump dollars, someone is right there to buy them.

That does not mean the dollar is a permanent feature of global commerce or that it can never lose value. The dollar rises and falls like other currencies because currencies are valued relative to one another. It just means that the dollar will disappear only after a long process by which it is replaced by something else. That process will take a long time and it will happen in fits and starts. In fact, the process has already begun and yet there is no panic in the currency markets.

One part of the process is the BRICS summit last week, where Argentina, Ethiopia, Iran, Saudi Arabia, Egypt, and the United Arab Emirates were added to Brazil, Russia, India, China, and South Africa. What started out as a handy way for traders to identify emerging economies is now a loose confederation of countries promising to cooperate with one another on global matters. Most importantly, they are working to trade with one another in their home currencies, not dollars.

This is not a small thing. These countries are some of the biggest economies in the world and they have a lot of people. About 40% of the world’s population are in this group of eleven countries. Most importantly, they control about eighty percent of the world’s energy supply. If they decide to trade energy products in something other than dollars, a slow-motion version of the scenario at the start of this post will begin to take shape as the dollar loses its primary benefit.

The way things have worked for the last fifty years is you needed dollars and dollar equivalents to trade energy on global markets. The reason for that is the big oil producers only accepted dollars for payments. The Saudis led the way on this back in the 1970’s when they agreed to use only dollars in exchange for security guarantees from Washington, as well as technology assistance. If you want to buy oil it means first getting the dollars you need to buy it.

This has had an interesting effect on the dollar. Because there has always been excess demand for dollars somewhere in the world, Washington has been able to create as many dollars as it needs to maintain the domestic economy and operate a global military empire, without inflation. Since the U.S. treasury is the best collateral on earth, it has meant unlimited low interest borrowing for American governments and for global corporations doing business in dollars.

Ultra-low borrowing rates are the result of a complex form of seigniorage. This is the difference between the cost of creating money and the value of the money, Put another way, it is the profit from having the monopoly on the currency. In the old days, the king took a profit from minting coins. Since everyone in his realm had to transact using coins with his face on them, everyone had to buy his coins in order to do business with him or anyone in his realm.

In this age, the profit Washington gets from having the world’s reserve currency comes in the form of low borrowing rates and low inflation. This in turn has allowed the domestic economy to grow, despite massive borrowing. In fact, it is borrowing that has inflated the economy over the last decades. In a weird way, borrowing has become the business of America because those treasury bills are used throughout the global economy to facilitate commerce.

That is about to change, and it is already changing. When the Russians decided to accept only rubles for payment, they did so to defend their economy against the sanctions imposed by the West. When it worked and the ruble stabilized, it showed the world that there can be life after the dollar. The world needs Russia oil, gas, agricultural products and increasingly its manufactured goods. If they demand rubles as payment, then it means the world needs rubles too.

This is why BRICS is moving from a label to an organization. If the Russians can do this, then the other countries can do this as well. The West is even more dependent on China and India than they are on Russia. Brazil is a massive exporter of energy products and agricultural products. The plan by Western environmentalist to shut down all domestic farming cannot happen unless the West can make itself dependent on food imports from countries like Brazil.

By adding these six new countries, BRICS is laying the groundwork for an alternative currency to be used for international settlement. Given the makeup of the group, this will most likely start with energy. The Saudis will be the first to accept Chinese and Indian currency for payment. The Russians are already doing this with regards to oil exports to these two countries. Once the Saudis take this step, the dollar will be joined by the yuan and rupee as petro-currencies.

What this means for King Dollar is not much right now. Demand for dollars has already been declining, which is why inflation has been high the last two years. According to the Fed, inflation remains a problem and they will continue to hike interest rates in order to achieve their target goal of two percent. In other words, as the demand for dollars declines globally, the Federal Reserve will have to reduce the supply of dollars, which means borrowing rates will keep rising.

It is important to keep in mind that the countries involved in BRICS do not want the dollar to collapse or even sharply decline. The entire world economy depends on the dollar, including their own economies. What they are aiming for is a slow transition away from dollars that lets them lead the way in de-dollarization. The dollar and its goofy little brother the euro will remain major currencies in the end, just working next to other major currencies in international trade.

The big question is whether Western leaders understand what is happening and what is about to happen to their economies. In a multipolar world with multiple currencies, each currency is judged by the underlying economy, not through the clever legerdemain of Wall Street bankers. An economy that does not make things or possess natural resources is not going to have a strong currency. This does not bode well for Western economies based on services.

Then you have the elephant in the room. The global American Empire is facing a choice over the next decades. Do we fund the old age of the swelling retired class or do we spend money on the war machine. In the Republican debate, all but one was in favor of slashing Social Security to fund Ukraine. Given the racial makeup of the retired class, you can be sure the Democrats are onboard with that as well. It is not hard to see where this is heading over the next decade.

On the other end, rising interest rates mean the young will be shut out of the housing market in most of the country. New car prices have gone up 30% over the last three years and that is before the higher cost of borrowing. In other words, it will not just be old people made poorer by this process. The young, diverse, and technically deficient will also be made poorer. The cost of politicians celebrating their generosity to foreigners is about to rise as the dollar falls.


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200 thoughts on “The BRIC Bat

  1. About seventy percent of what the world has on its balance sheets is denominated in dollars.

    Nope. Not even close – foreign appetite for accumulating US government debt has been ‘unwinding’ since 2010.

    [Foreign official institutional holdings of US Treasury Securities]
    as a proportion of
    [Total (foreign) holdings]
    (i.e., as a proportion of balance sheet value), is currently a squootch over 50%.

    The rest of the world has been quietly de-dollarising for over a decade, and everyone who doesn’t look at the data regularly still thinks that the RoW is up to its neck in UST Securities.

    Still, as a share of total ‘marketable’ US debt outstanding, foreign holdings only account for ~30% (down from 54% in 2008).

    I sneakily pinched a graphic from Ned Davis Research and included it in this comment on the Ron Unz Hate Site (kek) -> https://www.unz.com/pescobar/geopolitical-chessboard-shifts-against-us-empire/#comment-6082237

  2. The flaw here is the worship of Law.
    That’s fatal.
    Also very Enlightenment, very Liberal.
    Very recent.
    (Except for the Semitic Part).
    An eternal useful myth, if it’s acknowledged in practice to be a useful myth.
    Even Catholicism has only ONE IMMACULATE CONCEPTION. The Myth of Law too many.

    The idea of Laws being some honest, impartial, just system of rules is nonsense now, and like so many founding myths always was, these were always the laws of men – what is the point of revolution then?
    To get a new legal priesthood?

    At present Fathers do not defend their children from rapists and fiendish doctors hacking off their children’s genitalia because it’s LEGAL.

    Permission to defend your children isn’t coming.
    We need no laws, we need to be men again.
    We need to be lawless, and never again bow to the yolk of lawyer priests, judges, nor their hapless pawns in Blue. < this last part is hard, this is Family.

    Then we find every copy of Blackstone and burn them all. This myth must be disgraced and Damnatio Memorae.

  3. What has been good for the global economy has not been good for the American people. This has always been true of any national currency as reserve currency. Does it serve the needs of the world or does it serve the needs of the nation? The dollar hasn’t been used, explicitly, to aid Americans for a very long time. When it is no longer reserve currency of the world that may change, or at least it will be easier for it to change.

  4. ” An economy that does not make things or possess natural resources is not going to have a strong currency. This does not bode well for Western economies based on services.”

    Exactly.

    The speed of dedollarization may depend on the U.S. economy’s productivity in supplying the things and know how the world wants. Swapping dollars is not in itself an attractive activity. If the world’s dollar surplus makes a run for home and roars like a tidal wave into the Fed, the Fed may take those zillions of dollars out of circulation with a deflationary firestorm, stabilizing the American standard of living at a much lower level than it is today with the attendant social and political brushfires and flashfloods. Mises called it the “crack up boom,” this one on an international level.

    Be that as it may, rapid dedollarization doesn’t seem all that improbable. Like the broken clock that’s right twice a day, Peter Schiff will sooner or later be proven right.

  5. The only caveat I would add to the Zman’s analysis is: War. The US is going to suffer a humiliating defeat in Ukraine. Germany has admitted publicly that they have only 20,000 high explosive artillery shells left, which is less than a week’s supply in an artillery-driven war. The reality is that the Russians could overrun all of Europe if they want to do so. They won’t do that, but the map of the Baltics could be up for renewal, and NATO will likely collapse. China will take Taiwan, likely without firing a shot.

    The financial impact of the US losing face as a global military power could collapse the dollar suddenly, rather like the French franc collapsed after Waterloo.

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    • If the Russians can’t cross the Dnieper after a year and a half, no way will they get through Poland.

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  6. BRIC+ has its problems and the dollar as reserve currency will likely not collapse any time soon. However, the maliciousness and aggressiveness of the GAE is driving more countries to seek an alternative.

    Chinese are a mercantile culture. They don’t care about mandating anal education in elementary schools, destroying am economy to help Mother Gaia defeat the Sun God or demanding selling valuable natural resources to the GAE in return for help.

    Consequently, BRIC+ will likely continue to expand and strengthen. A lot of those countries might not be natural allies but, as the GAE gets increasingly under the sway of the tribe and their deranged plans, more countries will feel the need for a counterweight.

    This of course will not sit well with the GAE which brokers no dissident. So times should get very interesting indeed.

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    • Not sure however, if that would change anything. Lot’s of end of life care is not (obvious) heroic treatment designed to prolong life against terminal illness. Like Obama let slip when discussing his affordable Healthcare Plan—‘…maybe you won’t get a hip transplant, but just pain medication and a wheelchair…’ or something to that effect.

      Careful what you wish for.

      • It isn’t a matter of what I wish for. BRICS+ is inevitable given the increased Derangement of the GAE. What isn’t inevitable is how successful or unsuccessful it will be in providing an alternative to the GAE.

  7. One small quibble: India (pop. 1.4B) is a pipsqueak trading partner.

    It has a huge domestic economy. Exports, whether of goods or services are *tiny* in the great scheme of things. USD450B in FY2022-3.

    https://en.wikipedia.org/wiki/List_of_largest_trading_partners_of_India

    China 6.3T. 14x India.

    India (like Brazil) will probably always be the Country of Tomorrow. South Indian Brahmins, Begali Brahmins, Sindhis, Parsis, Jains, some other groupings are wicked smart… but there’s just too much Dumb Fraction to carry along with them. Easier pickings in for most of these in the West.

    • Zaphod: “India (like Brazil) will probably always be the Country of Tomorrow.”

      Concerning the country of yesteryear, Tucker’s interview with Victor Orban just went live:

      https://tinyurl.com/7v7cwz6y

      We’ve gotta lotta historians [both amateur & professional] here chez Z, and, a mere century ago, Austria-Hungary was the center of the entire dadgum world.

      • Tucker/Orban is an absolutely fascinating interview.

        And just as was the case with the recent MacGregor interview, there was one forbidden word which they were prevented from speaking.

        Instead, Orban chose to use nouns such as “liberal”, “communist” and “hegemon”.

        HEGEMON: “a state or group in ascendance over others”
        https://www.thefreedictionary.com/hegemon

      • (Be great if Tucker C can interview Butler. Exploding heads will abound.)

        It was too! Patrick Leigh Fermor walked from the Hook of Holland to Constantinople beginning in 1933 (via freshly-minted Mid-Century Germany amongst others… some interesting observations here).

        His journey through Hungary is the high point of the book for me. The anger about the Treaty of Trianon and the sense of loss and nostalgia for the K.u.K is (to be trite) palpable. Poor bastards… if they’d known what was coming down the pike.

        But… happy days on Lake Balaton today (for now)… The wheel turns and turns.

        I like this Hungarian Cap & Ball channel:

        https://www.youtube.com/watch?v=KoTaKSktuyk

        Great respect for the old ways.

    • Going to shut about this now, but on a whim, looked up Thailand’s exports: USD284B in FY 2022-3. 63% of India’s effort in same year. Thailand’s population is 5% of India’s population. Do I need to compare land areas?

      India may have a domestic market with amazing potential. ***If you can get into that market and survive in it.***

      It also sits on massive chunk of the world’s refined gold — in temple treasuries and in private hands. Confiscate some of that and use it for currency backing maybe good move?

      In BRICS it brings nukes, talking head expert jabberfest ‘cred’ and crosses a potential troublemaker off China’s to-do list (they hope). I’m pretty confident that the Zhongnanhai view of the I in BRICS is “Give them lots of face so long as they don’t fuck things up for the rest of us.”

      Yeah… I’m a cynic.

  8. One thing ZMan neglected to mention is that the dollar is backed by an ultra-powerful, completely diversified, high tech economy — the American society writ large.

    It isn’t just energy that matters. It’s what’s underpinning your currency. What does Saudi Arabia have other than oil? Nothing. It’s a paper tiger. As the world transitions away from fossil fuels toward power plants, the importance of oil diminishes yearly. Where will Saudi Arabia, member of BRIC, be in 20 years? Completely or only martially marginalized? Meanwhile the U.S., the REAL economic engine, will keep chugging away, throwing out dollars in its exhaust port.

    The End. (Click on my name to come read my blog.)

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    • I think the real question to ask is where will the US (big asumption that we will still be a thing) and the wider West be in 20 years after the chickens of incredibly stupid decisions and demographic changes through uncontrolled “immigration” come home to roost. Their fluttering and clucking is getting louder by the day.

      It will be no consolation if Saudi Arabia is down at the heel if this place is gone to hell.

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      • JerseyJeffersonian: “big assumption that we will still be a thing”

        I can’t shake the feeling that the v@xxines will have the final word here.

        I hope I’m wrong, but the Depopulationists are exceptionally psychopathic, exceptionally sadistic,
        exceptionally persistent, exceptionally stubborn, exceptionally determined, and exceptionally-exceptionally well-funded.

        I hope I’m wrong; I hope that, 20 years from now, we still be a thing.

        But that’s not what muh instincts are telling me.

        I hope I’m wrong.

    • Sure.

      The only problem is that the quality of the vast majority of human capital in the US is in freefall.

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    • We are converting to a power plant model from fossil fuels? I assume you are saying that we are going to convert our automobile fleet from ICE to EEV vehicles. Even if we do have the materials required to do that, those materials are required in such abundance the cost to the project makes it unfeasible. There are other issues to compound the problem. Things like, the batteries lifetime requiring replacement and even greater amounts of materials make it even more improbable that it can be pulled off at scale.

      Then there is the fact that the project will always be reliant on fossil fuels. You will never mine, refine, smelt, produce and transport all of the copper, aluminum, stainless steal … … necessary to constantly make new batteries with battery powered vehicles. You need diesel for that.

      Maybe someday if we have nuclear powered engines. Given the effective criminalization of nuclear energy in The West, that time horizon looks very long. Now, if we decided to use liquified coal to power our ICE fleet that is perfectly doable and we could have hundreds of years longer of low cost mobility on top of the existing stocks of petroleum and natural gas which we have in massive abundance.

      Other tells that we won’t be driving Tesla’s en masse all over The West is how its emissaries are behaving in regards to the Middle East. A few months ago Pippa Malmgren went to a conference to pitch the CDBC to a room full of people. It wasn’t a room full of Americans that was televised to all Americans who should be the first group of people the government tries to convince of a change of currency. It was to a room full of oil shieks. Now, if we were going to be ditching them in the near term – say a 20 year time horizon, she and her handlers wouldn’t give two effs about selling them on using a new CDBC.

      The same is true of China, India and Russia courting Brazil and the Middle East. They wouldn’t be doing so if the energy there was becoming irrelevant. China and India are building thousands of coal plants and hundreds of nuclear plants. They don’t have plans to ditch petroleum as a result.

      Fossil fuels are essential to mobility and will be as essential 50 years from now as they are today. Of course, some technological breakthrough could change that. I am not aware of anything on the horizon that is imminent and proven outside of the lab. Duracell powered electric motors on a wheel charged by a power station with a 97% energy loss in transmission and a massive reliance on fossil fuels to get the massive quantities of materials to make, maintain and renew this new vehicle fleet doesn’t seem plausible.

      Now, maybe I am guessing wrong and you think the power plant will be creating hydrogen that will power the fleet. That idea is even more laughable than than the viability of a fleet of hundreds of millions of battery powered vehicles

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    • We consume a lot of high tech stuff, I’ll give you that. But we’ve outsourced manufacturing all over the world and we’re building an economy based on cat videos, financial thimblerigging and serving each other coffee drinks.

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  9. This lecture has been bugging me all day! That is a good thing; I suppose. Good debates blow the dust off the brain and God knows, my cranium is choked with it these days, HAR HAR HAR!!! 😂👍

    Z, I am no economist… but what bothers me is your idea that the dollar and the economy are invulnerable, over the short and even intermediate term. For me… I feel like that poor slob on the airplane through the Twilight Zone in the window seat. I’m watching the goblins on the wing tear off pieces of the plane and throwing them into the jet intakes. Everyone thinks I’m nuts.

    But… hell’s bells: our kids aren’t starting families because they can’t afford the homes and costs of living for them. If our illustrious leaders gut old age pensions while hobbling the kids with shitty pay, low employment and high taxes… what’s going to happen when you dump the boomer generation on them with expensive health care bills? It’s going to be Mutiny On The Bounty!

    The point I am trying to make is that in any system, when something just has to give… something invariably does. The list of stuff that’s been hurled into our jet engines is massive: the border crisis, welfare costs to support the refugees and illegals, foreign aid, the war on drugs, the gay crusade against our kids, the war on Christianity, the endless grift in foreign trade deals…and that is just for starters…either our economy goes down the crapper or our leaders do.

    I don’t see the status quo holding for much longer. But whadda I know?

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    • Oh, you are someone who observes, cogitates, extrapolates, and asks appropriate questions. Likely into the Void given the degradation of our society, but here you are among friends, so ask away, Filthie. Both you and we will feel a bit less crazy with each other’s companionship in our puzzlements and our worries for those for whom we care.

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  10. Harquahalla Valley! Now I remember the name. I picked up watermelons there.

    The Colorado River feeding Denver, Vegas, Phoenix, Imperial Valley (Palm Springs/Yuma), and LA is such a thin, thin thread, with Hoover Dam and Lake Mead drying up to a thimble. Good gods, look out for thirst-crazed Zoners in the future.

    • I will give you one guess as to which Oligarch has been buying up land out there………..

    • To pick a nit, the Colorado River starts west of the continental divide. It does not feed Denver. Denver and other front range communities do draw some water from various tributaries of the Colorado River via tunnel systems through the mountains, but not from the Colorado itself.

      Colorado is allocated just over 50% of the draw permitted from the upper basin states. Most of that is used by agriculture on the Western Slope, but more and more water districts in the front range are starting to look at buying out water rights on the Western Slope to permit development.

  11. Maybe some Jewish bankers can set up vaults in Saudi Arabia where the BRICS countries can settle their accounts in gold?

  12. Economics isn’t your forte, Z.

    India has already tried paying for oil in rupees to Russia. That payment option was halted as Russia didn’t know what to do with their excess rupees.

    BRICS will struggle with de-dollarization. Many of the countries joining BRICS like Iran and Argentina have weak currencies to begin with. You’d have to be a fool to ever accept Argentinian pesos considereing how often Argentina defaults.

    The BRICS remind me of a lot of foreigners in the West. They may talk like Westerners, but look closely and you’ll see the quality is almost always off.

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    • Maybe becoming bankers is giving the Russians pause. Ambition will take care of that, and maybe some Slavic negotiations going on in Ukraine presently.

    • I’m not sure why anyone downvoted you. For example China, who is supposed to be some kind of hegemon, has to gatekeep yuan to keep their own countrymen from fleeing from the currency. The state of the Yen/Dollar/Euro is bad, but it’s predictably bad. Someplace like, well, pretty much all the BRICS save possibly Brazil are libel to screw you over the first chance they get with some sort of Turkish currency scheme.

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      • Yep. All these BRICS countries have had massive devaluations in our lifetimes. When I first visited Brazil in the 80s, the currency was the Cruzeiro (now literally worthless in Reais terms), inflation ran at 10% per week and I needed a pocketful of cash notes of the highest denomination to buy a $40 (US equivalent) steak dinner.

        I was in Argentina 5 years ago. The “official” rate then was 20 pesos to the dollar – black market was 40. They just devalued the official rate to 350!

        The Rupee was 50 ten years ago and it’s 82 /$ now. So yeah, good luck to the BRICs.

        • The Brazilian currency problem was stabilized in the 90s by FHC (President Fernando Henrique Cardoso), who brought in the Real which is still used to this day and has performed credibly over the decades. FHC is one world leader I would love to meet: a prudent, unglamorous intellectual who did great things for his country and ordinary people.

    • @KingKong, “India has already tried paying for oil in rupees to Russia. That payment option was halted as Russia didn’t know what to do with their excess rupees.”

      Only because India doesn’t produce things that Russia needs, so Russia would have to get rid of the rupees some other way. Trade them to someone who needs what India produces, which is largely Help Desks and people, so far as I can tell. (Tongue in cheek. But the industries they did develop, Russia and before that the USSR also developed because they could not count on trading for it.) And the West won’t buy rupees from Russia even at a discount because, Russia! So of course no sales in rupees. But maybe someday India will develop an export that Russia needs.

      China is another story. Russia and China could do a lot of their trading in just their own currencies, exchanging fuel and food for manufactured (mostly consumer) goods and some cash of either kind, because they can spend it. And particularly if China could get semiconductor technology by merging with you know who. There is no way the West can supply them with food and fuel as cheaply as China could, if they buy from Russia. Knowing people from there and their geo-political views, I think its plausible that a merger of some sort could be worked out.

      • “Only because India doesn’t produce things that Russia needs,”

        Yes, thank you Captain Obvious. That was implicit when I said Russia didn’t know what to do with its excess rupees.

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        • Sure. What I was trying to get at is that the fact that while rupees weren’t useful, rubles are. As would be a hypothetical commodity(gold)-based common currency.

          Upshot is that the fine point you appear to be making to upbraid @Zman for his economics is at best a trivial irrelevancy. There may be more to comment on regarding his grasp of economics, but this? Not so much. Nothing in your argument supports the idea that de-dollarization is a complex process.

          Take the Greek tendency to be unable to handle their currency. Did that have any effect on the largely German-led Euro? In similar fashion, I’d think if some of the bigger players, China, Russia, maybe Saudi Arabia, were to get together on some currency which for political reasons is probably not any existing currency, it’s not too difficult to move away from the dollar.

    • India is a poor example. Only gets bandied about because everyone in the USA gets pumped with rah rah propaganda about India being the next big thing (won’t happen) and a counterbalance to china (it ain’t).

      India produces virtually zero desirable exports. It doesn’t possess vast natural resources (and couldn’t sell them to Russia even if it did… the Russians are gloriously stuffed to the gills replete with natural resources). Nobody *wants* to manufacture high tech there even if they do want to diversify away from the PRC — just too fractious a workforce, too dirty, too generally just all-talk-no do.

      The Indian smart fraction working toward geostrategic objects can make nukes and missiles and put a lander on the moon. But this says nothing about ability to produce desirable manufactured exports. We all know by now just how valuable their ‘services’ exports are :D.

      • You’re not very smart…so let me break it down a little bit more. You say India is a poor example, and yet it’s a major player in BRICS. That’s the problem at hand, in the BRICS+ coalition, India is one of the stronger partners, which is already bad news.

        When your A Team already has weak players, you’re screwed from the get go.

        • “When your A Team already has weak players, you’re screwed from the get go.”

          Maybe. Or maybe BRICS+ just treats them the same way UN (and NATO, for that matter) treat France.

        • You’re not very polite. So we’re a match made in heaven.

          I think India’s function in BRICS is partly window-dressing (Global South doncherknow?), plus haz nukes, plus helps keep it from being used as a pawn against China by the GAE.

          But it doesn’t produce much that anybody wants. Bit of rice goes to countries which can’t grow enough themselves (looking at you, Philippines) but anyone who can afford it prefers to import Thai rice anyway.

          Some pharmaceutical generics… even there many of the precursors have to be imported from China.

          Sure they make iPhones in India. But only the cheaper models and mainly because it’s mandated by government otherwise cop huge tariff wall. Nobody buying an entry-level iPhone in Indonesia, Malaysia, Thailand, Philippines, etc. wants to see ‘Manufactured in India’ on the box.

          Doesn’t make India a total hopeless case even though is obvious I’m not big fan. But high tech export powerhouse like China? I think unlikely.

          Indian politicians get a lot of valuable deflection from their own graft and incompetence mileage out of stirring Pakistan and China hatred… Will be difficult for the big strategic brains in Delhi to keep a lid on the rabble rousers. So there’s a bit of leverage for the Kagans to look into.

    • Have you looked at the demographics of gen z? Straight outta BRICS. We are fresh out of the “Westerners” that held up the currency, too.

      The US is a lot like a broken large cap company. We’ve got enough capital behind us to skate along on institutional inertia, but eventually it will be time to pay the piper.

      • Exactly… And as the US and West increasingly become “majority minority” the intellectual leadership competency will continue to decline. Yes the dollar will indeed be in trouble.

    • Argentina will quite possibly change direction should Javier Milei win the presidential election on 22 Oct. Miley has stated his intention to dollarize the economy and do away with the central bank. He also stated he wouldn’t trade with China and Brazil (“Communist countries”), both of which are more important trade partners than the USA. He won the primary, the first libertarian ever to do so and it is quite possible he will win the general election if for no other reason than his comments about the political “caste” that has governed for far too long, a sentiment strongly held by many, the young in particular. A housecleaning here is long overdue.

      I’m hosting a meeting on Saturday for choosing election monitors for our village, along with general campaign tactics for our valley.

      I’ll be the oldest person present at 77 years of age, but I have a son and three grandchildren here, so I believe I should try to help shape the nation they inherit.

  13. This is off topic but does anyone here think abolishing public schools might be a good idea? I’m not saying this from a lolbert perspective but from a view that it’s time to stop playing whack a mole with the schools.

    Also, if parents can’t self educate their kids, the kids were probably going to end up being dummies anyways

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    • Well, one positive benefit of the Internet is that it has exponentially grown the resources available to homeschoolers and made it infinitely easier for them to network and organize.

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      • As a homeschooler, I can attest. Homeschooling has become ever more sophisticated, with a huge and growing market. Fastest-growing demographic, I’ve read, is Black families: from Black nationalists who want their kids to have a more Black-centric education, to Christians worried about their kids being in the godless public school ghetto (see Hotep movement). COVID should have been the wake-up call to ALL American families in this regard.

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        • Jannie: How and why ought anyone here be concerned with or encouraged by the number of blaq nationalists homeschooling? My primary concern and motivation, outside my immediate family, is WHITE children and their future. Your use of the very vague and undefined term “American families” is a tell.

          • The more people out of the public school system – Black or White – the better. Whatever their political bent. Black kids are learning far more anti-White racism in school than they would be at home.

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    • Yes. Any person who has their child in a public school with extremely rare exceptions is dooming their child. This is particularly true of European/Heritage Americans – Americans. The public school has a codified and formalized mechanism to deconstruct your child. It is further aided by television programming.

      Any white person who cares about their children will take them out of public school and adopt a curriculum from a classical school, but hire teachers and tutors on our side. They will also throw the lightbox out of the house and strictly guard Internet access. They will discover how much fun and bonding a family can do by playing games, doing arts and crafts, playing instruments, inviting over friends

      For the education here is a great emerging resource that I can vouch for. The people doing it and behind it are committed to our heritage forming a positive identity and are highly skilled and extremely knowledgeable.
      schoolofthewest dot world (avoiding spam filter)

      For those interested in doing something, this would be a good project to contribute to in some way.

      There is a movement afoot across the US to let parent’s tax money follow the child. This is one of the most important tactical victories we can win at the state level. We should forget about presidents and put all of our political effort into getting the money to follow the child. At the same time, if we can build up things like SOTW and augment them with cross regional community networks we can funnel that money into our children and their future.

      The public schools are fully infiltrated and infiltrated with probably the nastiest most vile of the anti-white, anti-American loons. They are also ripe for disruption via state and local money-follow-the-child initiatives with a strong home-schooling home pod program with a great civic and technical curriculum and teachers and tutors who are committed to our cause.

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      • Agree that government schools are pre-prison holding/ slut/ castration factories.
        However, the solution is to not fund ANY schools.
        Allow them to be tax exempt, which will be more than enough.
        If Chicago spent nothing on education, there would be no change in outcomes (with the exception of additional “youth” crime sprees).

    • What a promising child learns in a public school in 8 years can be learned in 3 years in a motivated setting. And that’s being pessimistic. We need different tracks for different ability levels and/or interests after 8 years at the public expense. Most go to trade schools, bricklaying, welding, truck-driving, cooking, appliance repairs. The ones who can’t learn anything go on to get graduate degrees in the DIE fields and a smallish UBI check if they agree to supervised house arrest in a group setting or to prison and chemical castration if they can’t stay out of trouble.

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      • 100 thumbs up, Tom.

        I tutored my kid and discovered what a horrible job the public schools are actually doing. It just blows my mind, how much money we are flushing down the socialist commode with these parasites that pose as educators.

        If I have my way I will burn the public schools to the ground with the teachers trapped inside. Then I’ll salt the earth on which they stood!
        😡

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        • Agree, F.

          Our kid was having trouble reading in 2nd grade. I went out and got a phonics book for $10-11, and we made up some flash cards then over the summer we drilled him with it. The next year he was reading way above grade level.

          Then the school took credit for it, lol.

        • Public school teachers themselves encourage me to homeschool. And the school district is very supportive: every homeschooled child means less expenditure for them.

    • Schools should be, at worst, community wide affairs. These county-wide warehousing projects are an end unto themselves.

    • “No institution, no problem” is full lolbert. End the fed, privatize the moon, competing security forces, etc.

      We remember the actual quote because it’s the truth.

  14. “…borrowing has become the business of America…”

    So the GAE is the empire or nation of money changers.

    Internationally, the money changers are their own nation, or empire, without borders. (Caveat, it is a multicultural empire, with a founding stock.)

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  15. A gradual decline in the dollar is a wishful fantasy. This idea depends on a rational, knowledgeable , and moral leadership class which we obviously no longer possess .
    Recall the British Empire on which “the sun never sets”. When the pound “lost” to the dollar, the Empire quickly, quickly fell apart.
    Like Hemingway’s definition of bankruptcy- first it is slowly happening, then all of a sudden.
    The world economic “leaders” see that our country is more concerned with certain flags flying than supporting the dollar. These people are not stupid, nor do they have any reason any longer to be afraid of the US.

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    • The U.S. supplanting the Brits was really a one-off when you think about it. If there was just ocean between Europe and Asia they’d probably still be going strong, but the end of their empire was telegraphed by WWI at the latest when New World fanatics came to their “rescue”. There’s nothing very close at the moment; China could have the global reserve currency for 1000s of years but never did. Even currencies based around energy are not the be-all-end-all since crappy American energy production is largely an own-goal that could be remediated at any time.

      • Yes, the Deepwater Horizon spill set oil drilling in the Gulf back a generation. There’s plenty of oil left out there in due time.

    • There’s no way Britain could have held onto its empire once India was done, with all the latter’s manpower. India was ready for independence in the early 20th century, and if they’d not been given it Britain would have been forced to fight a massive, costly war – like the American Revolution but against hundreds of millions.

  16. I just don’t see the BRICS being able to hold it together long-term. One power is going to want to be top dog. Russia or China? And will a more powerful Brazil (with its own severe internal problems) be willing or able to go along? South Africa is already a basket case, worse than any American ghetto. Even if dollar collapsed tomorrow and the world reverted to a gold-backed BRICmark, pretty sure cracks would quickly appear in the façade of unity.

    • “One power is going to want to be top dog.”

      Based on what? US can’t play nicely with others, but why does that mean everyone else is like that?

      My sneaking suspicion is that to a large degree, our perceptions of others’ motivations are strongly influenced by not only the indoctrination we all received from whatever source growing up, plus projection of our own proclivities. For example, I know any number of businesses who are perfectly happy with the niche they have carved out, and don’t feel the need to drive the rest out of business.

      It might be that politicians are politicians the world over. But maybe it’s not.

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      • A desire to be number one in some fashion is an inherent part of the human condition.

        • Not generally. There are a lot of people who by their own actions demonstrate no more ambition than to be the most beer-swilling couch potato in their circle of friends.

          For most people, just being the guy that people come to when they can’t figure out how to get the bottling line running, or raising a family into healthy, happy adults, is a sufficient point of pride.

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          • True, but there is a minority of Napoleons who want to be top dog at all costs. They know most people will not stand in their way – only the other Napoleons, or coalitions of decent but desperate Saxons.

      • My sneaking suspicion is that when all’s said and done, long after I’m gone, people will remember that, on balance, the Anglo-Americans were pretty decent in their prime. On par with the Persians, or so.

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        • Agree, with “in their prime” being the key phrase. It’s one thing to be pushed around by William Gladstone or Dean Acheson, another by Victoria Nuland or Madeline Albright.

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  17. There is also the sea change in interest rates in the dollar system. At 0% rates, borrowing was free and asset inflation, due to demand from all those massive numbers of free borrowed dollars, bid everything up. Now, at 5% rates, it costs you 5% to 10% per year, just to sit tight on your borrowed money, all other things equal. Savings yields a nominal 5%, so the demand for other assets from the holders of saved (not borrowed) dollars slows down. Asset prices fall. The system realigns. Borrowers, other than the forever low-rate fixed home mortgage holders, and who can afford the payments, are screwed. But the high base rates do hold up the dollar internationally, and encourage our external holders of dollar debt to stay put. The realignment from 0% rates to 5% rates disrupts the system. The big guys can ride it out. Aggressive small players on the wrong side of the trade get the shaft. Assets change hands in favor of the big guys. Wash, rinse, repeat, until the tumbrils roll.

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  18. Personally I don’t like the hype around the BRICS transition from a unipolar to a multi-polar world, because I think it is just more smoke-and-mirrors for the masses. At issue ultimately isn’t whether the world is based on the dollar, but who owns the central banks of the world. For BRICS hypers, please answers a couple basic questions:

    1) Why does Russia have Elvira Nabiullina, an extreme globohomo puppet, as the head of their central bank? Why was she renominated for the position after she sent $400 billion to get seized by the west at the start of the Not-War?
    2) Why did Brazil “elect” Lula in a sham rigged election by globohomo, only for Lula to announce immediately that Brazil would begin to de-dollarize?
    3) Why does Alex Soros, who just took over Daddy’s empire, do Instagram posts like this where he basically calls for America’s destruction? https://www.instagram.com/p/BEwgmuxKccI/

    The answer is that the Rothschilds and their allies own the central banks of the world, and that going from a “unipolar” to a “multipolar” world would result in a much poorer America, but no changes on the fundamental structure for who owns and controls society.

    – NF

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    • I have thought about that and I have wondered if the multipolar thing is a scam. But there are things that don’t fit. Why isn’t Purin and Xi not promoting homo ideology? Why are not promoting globalism?

  19. “Washington has been able to create as many dollars as it needs to maintain the domestic economy and operate a global military empire, without inflation.”

    Inflation has been a feature of life for at least my entire life. The 70s, the 2000s and now the last couple years being exceptionally high. The inflation of the 2000s was very high, but rarely acknowledged. At the turn of the century, the Dollar was trading at over 100 and was around 71 or so in 2007. It’s gone back up as measured by the rubber ruler of the Dollar index.

    “On the other end, rising interest rates mean the young will be shut out of the housing market in most of the country”

    There is a lot of RE held by Boomers. I don’t know when the peak deaths will occur (supposedly 2044), but I would assume a lot of this housing stock will end up on the market. Also, it’s hard for me to imagine that the average house will be beyond the means of the average buyer over any significant period of time. Too high a price will also affect rents. If people cannot afford the rents, the RE will be sold. Nobody wants an investment property vacant.

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    • > Also, it’s hard for me to imagine that the average house will be beyond the means of the average buyer over any significant period of time. Too high a price will also affect rents.

      They seem to be employing the Canada strategy of importing mass amounts of people to buy said houses, or foreign investors.

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      • Yes. They want to Vancouverize all of American real estate.

        The dollars and inflation will crash back on shore by wealthy Chinese, Indians … … buying up homes.

        Every time I see Zeihan or Krugman smirk and propose their ponzi schemes I yelch. More bodies means more demand to buy more homes, refrigerators, toasters, cars and TVs.

        How? Well, by the US borrowing ever greater sums of money. Why? So the usurers who have lent too much don’t have to eat their losses.

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        • The main difference is that the US is being flooded with dirt poor Cholos, and the Vancouver real estate market that priced out the local European-Canadians was driven by rich ex-pat Hong Kong Chinese.

    • Why invest in moldering old houses when I can build tenements in their spot, or just pack ’em 10 to a room in those moldering old houses with squatter tents on the lawn?

      I don’t think family-community formation is the idea here.

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  20. “There can be no collapse in the dollar like this because there is a buyer for every dollar. As soon as anyone starts to dump dollars, someone is right there to buy them.”

    Not necessarily. Or the buyer might be willing to buy the dollar only at a cheaper rate. This is what drives currencies up and down over the medium and long term (I’m discounting the machinations of parasite speculators like Soros and his ilk). The demise of the dollar won’t be overnight but it will happen.

    “Because there has always been excess demand for dollars somewhere in the world,”

    From the early ’70s onwards, demand for the dollar was created at the point of a gun. When the USD was delinked from gold, the Middle eastern petrostates were told to accept only dollars. Or else. Thus was born the petrodollar that allowed foreigner-financed trade and fiscal deficits. But now that gun has gone. Saudi and the other Middle Eastern states are no longer intimidated.

    “Since the U.S. treasury is the best collateral on earth.”

    Once upon a time. Not today and indeed not for many years past. Even several years ago Michael Hudson was referring to “hot potato dollars” — you want to unload your dollars on some other poor sucker.

    “According to the Fed, inflation remains a problem and they will continue to hike interest rates in order to achieve their target goal of two percent. In other words, as the demand for dollars declines globally, the Federal Reserve will have to reduce the supply of dollars, which means borrowing rates will keep rising.”

    The ostensible reason is combating inflation. The real reason is probably that new Treasuries have to be made appetising to buyers — unless the US government wants to completely buys its own Treasuries (it’s already buying a chunk of them). The problem is that even at higher rates of interest US debt remains unappetising because real inflation — not the bullshit number the government releases — is higher than the interest rate. In other words you are losing purchasing power by holding dollars and dollar-denominated paper.

    The problem for the US government is that in terms of its appetite for debt, it’s a junkie. The empire can’t survive without continued massive — and increasing — amounts of borrowing.

    The real size of the US economy is a mystery to me. The figures for GDP are just more smoke and mirrors. The USA is an emaciated junkie addicted to war and debt.

    What time frame the process of collapse will take place over I can’t predict. But as Ugo Bardi argues in his, “The Seneca Effect”, collapse tends to be rather sudden and seemingly comes out of the blue for most people.

    White people need to be seriously thinking about how they’re going to cope over the next several years. It’s going to be a testing time.

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    • That’s the wild card, people think a currency collapse will bring about a political collapse but if anything happens it would be the opposite.

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  21. When you combine this dynamic with the mass immigration, the plan starts to make a lot more sense. The natives expected to grow up in a world similar to that of their parents, where they had good jobs, a stable economy, peaceful neighborhoods, and were able to afford to build wealth over the course of their lives. The country could certainly afford all these things, even today. Obviously, the extent to which they got each of these ebbed and flowed over the years (the 70s were a bad time for the economy and urban crime, mass layoffs amid the deindustrialization of the 80s, etc.), but in general this held true. So it makes sense that the natives are getting mad. We’re paying increasingly high social security taxes to pay the pensions of a richer generation, and can’t even afford to pay for a house to build up the wealth that they did. The student loan situation is out of control and apparently unfixable, because universities are an entrenched leftist institution. Etc. We all know the problems.

    So how do the politicians fix this, certainly not by actually working to deliver these things to the natives. They fix it by replacing the natives with immigrants from third world basketcases. The people coming here don’t expect anything to work. They expect their politicians to be thieves, and be completely unaccountable to anyone. They expect that they will be selling churros on a sidewalk to feed their family. They expect rampant crime in their neighborhood and a police force that won’t help them when they call. So they come here, they get all these things, they don’t complain, the elites keep stealing more and more of the nation’s wealth. These two agendas just line up perfectly.

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    • The only thing I’d add to your otherwise excellent scenario. I don’t know the percentages, but a lot of foreigners here legal or otherwise work and send some earnings to the family back home. Yes, they’d like to import their extended family to live the better life here. But until that happens, even what seems a menial sum to us in USA will buy a big relative boost in the standard of living of the median family in the third world. From Juan’s or Maria’s perspective, even if they live on the margins of society, they are still well-off by the employment and benefits available here that don’t exist in the mother country. Are they illegals? No big deal; worst that’ll happen is they are flown back to their place of origin at no cost to them.

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      • Worked with a guy once who was a dishwasher from Pueblo, Not sure whether he was illegal. He said he came from a family of agricultural laborers who earned on average $50 for a 40-hour week in Mexico (this was in 2015 btw).

      • Richard (“Wretchard”) Fernandez grew up barefoot in the post WWll ruins of Manila.

        On his first trip to the US, his New York cabbie asked him, “So how do you like our slums, eh?”

        He looked around, wide-eyed, and said, “What slums?”

        These 3rds laugh, send half their money home to build a mansionette, and put all their gals to work harvesting welfare.

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      • I suspect the foreign remittances are also set up to benefit a couple of constituencies. The banks make vast sums as the clearing house. Mayorkas made his entire case for more invaders on the fact that, “our foreign partners in the international community”, benefit from the remittances. I think it is used by the GAE as another lever to get cooperation.

        I don’t know if you guys remember Chalmers Johnson. He passed on around 2010. He was a great historian who wrote a trilogy on the GAE. That coupled with a couple of doomers like Z mentioned wrote a book called, “Empire of Debt.”

        Between them what emerges is a picture of a very bizarre imperial arrangement. It looks from the picture they paint like the vassals emerge as the winners along with a tiny kleptocrat class ala Joe Biden, Obama the Clintons … …

        One factor not discussed today is the affect the revolution is having on the US military. They must have a grand plan in place for the other side of the astounding purge that is taking place.

        Equipment and tech is important but personnel will always and forever be most important. If the lynchpin of one’s hegemony is force, then destabilizing its kinetic core seems a major misstep.

        Time will tell.

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    • “We’re paying increasingly high social security taxes to pay the pensions of a richer generation”

      But that is not true. With the exception of a 2 year(?) reduction, the rate has been steady at 12.4% since 1993. You can look it up. For example, https://www.ssa.gov/oact/progdata/oasdiRates.html

      Tail end boomers (first full year’s earnings after college is ’85) got a couple years at the low, low rate of 11.4%, and by the time Clinton was inaugurated it rose to what it has been ever since, 12.4%

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      • Incidentally, @Mycale, I upvoted your post. It’s just important that in the litany of problems we keep things factual.

        Or maybe not. Emotionalism works for left. Maybe we should give it a try. Can’t work any worse than rationalism has.

      • Two things, one if you make over $140k or so, you have indeed gotten a stealth social security tax hike, because the taxable max is pegged to inflation. The government can now seize an much larger share of your money than it could even three years ago, especially if your salary has not increased alongside that inflation rate, which it has not according to the data (somewhat different story for lower incomes, and of course all their income is subject to the tax).

        Two, and I know I specified “social security tax” there, but we are indeed all paying for the pensions of well-off people at this stage, especially as cities and states struggle to find enough revenue to pay for the pensions of the public unions that they bought off to get elected. “oh, well, that’s just the blue places, screw them”, you might say – not really. A huge chunk of the Brandon stimulus was just payola to those areas to try to kick that can down the road for a while, and that is something we are all paying for, as that stimulus was completely unnecessary and a major factor in the inflation we have been dealing with and continue to deal with.

        • Good points. Supposedly the increase in the SS cap was tied to CPI. Never really checked. Been above the limit most of my life, so no idea. I do know that I will never get back anywhere close to what I put in, even if I live to 100, let alone any interest on it.

          The second, about blue states and government unions, preach it! I live a few hours outside Chicago, and people around me have been just short of screaming to anyone who will listen that the Chicago Machine should not be allowed anywhere near DC, and then later that Pence should be thrown into the North Atlantic so Trump could pick a real running mate. Yet here we are…

  22. I think this is a good well reasoned approach, but I might add two points that are not given enough weight in discussing currency wars. Maybe I missed it in the analysis, in which case, please forgive me.

    1. We must view the entire GAE situation, not just the economists’ ledgers here. Zman had two sentences in the piece that hinted, but did not flesh out completely. The War Machine. We have been a major global aggressor since WW2 and will continue to ‘project power’ and further the dollar with military action. Granted the discussions around sanction avoidance hint at this in an economic sense, but the GAE will overthrow any government then can, fight proxy wars on multiple fronts, and generally act like the mafia in a protection racket. Violence must be accounted for in the general calculations.

    2. This is more conspiratorial, but the discussions about CBDC’s happening and the general trends of globalization – who’s to say that it’s not all engineered to collapse everything possible to move to a ‘one world digital currency’? Didn’t the powerful banking families create panics and chaos to set the stage for the Federal Reserve? Aren’t bubbles propped up by predatory investors to crash a stock price and swoop in to buy at pennies on the dollar?

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    • 100% accurate, both the panic history and the asset scalping.

      So, let’s say they succeed, but only succeed halfway. They succed only enough to break things, like with covid. The schmidt’s gonna be wild.

  23. The global BRICS movement also looks like an ‘insurance policy’ against any future US gov’t attempts of arm-wrangling in the form of sanctions when pursuing geopolitical aims.

    After seeing Russia get deplatformed from the global financial system, who can blame them?

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    • Both Russia and China have basic financial messaging systems in place. Technically, they are better than the SWIFT system, but they are still limited in terms of adoption and functionality. Both are working to close the gap. Once BRICS member banks are able to transact with one another over these new systems, trading energy in local currencies becomes a reality. That is when financial sanctions cease to be a weapon Washington can use. That is why adding the Saudis to the mix is such a big deal.

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      • Changing the subject a tad: Have you seen current news decrying how the Saudis are dealing with the problem of would-be African migrants illegally entering their territory? While perhaps somwhat, um, distasteful to Western sensibilities, I confess the measures are, similar to their prevailing treatment of thieves, highly effective.

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        • Arabs don’t care about Africans, they just do not care, how the Saudis keep Africans out of their country is something white libs care about, Asians don’t care, Indians don’t care, Persians don’t care

          White people are still the Worlds biggest suckers, by a long way

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      • This.

        It might involve creating new stand-alone BRICS state-sponsored banks (*) with zero correspondent relationships with US Banks or any banks at all which have US correspondents. Then (short of overt US military threats or action) everything should be sanction and seizure proof.

        Given the hubristic imperial over-reach of late-stage GAE, one wonders whether it will be necessary to set up a totally separate physical transaction network. Can imagine one stray IP packet getting routed through (say) Guam and the US using this as an excuse to stick its paw in the honey jar or extend jurisdiction through some freshly invented legal fiction.

        * there has to be some real opacity built-in because at some point the proceeds of this non-dollar trade may well want to later travel through the legacy banking system where the Usual Suspects will promptly call this ‘laundering’ and attempt to grab it.

  24. This is one of the more sanguinary visions of how the currency wars will go down. It’s a pretty good first-order analysis and I would agree with much of it except for one caveat.

    I don’t think it’s possible to introduce a major alternative currency over a long time frame and have an entirely smooth transition. Things will start to break in unpredictable ways, governments will react foolishly, and events will start happening very fast. We’re in a bit of a Thucydides Trap with the BRICS. They may not desire instability, but I’m not sure how they can avoid it.

    This does not mean that the Goldbug scenario will play out, but one way or another we need to de-financialize the domestic economy. The domestic dollar that ordinary people use is really quite a different animal from the Eurodollar system which lubricates global trade, and it is unfair to force them into the same definition.

    Perhaps we should just let the BRICS Bank take over Eurodollar trading. I’m only half kidding.

    • “The domestic dollar that ordinary people use is really quite a different animal from the Eurodollar system which lubricates global trade, and it is unfair to force them into the same definition.”

      The Eurodollar system is beyond the reach of US regulators and nobody really even knows how large it is. That said, in a fractional reserve banking system, making reserves more expensive (raising Fed Funds rate) tends to contract the system. But they’re all the same dollars.

      • Capt. Willard and I.D., I strongly recommend you read Tom Luongo on this subject, his theory being that Powell is raising rates with the intent of draining offshore dollars formerly controlled by the EU, and eventually stabilizing the dollar in the U S.

        • Indeed, Auld Mark. I have read Tom Luongo on this subject and I think he’s right. Powell is a very different kind of central banker from Greenspan, Bernanke, and Yellen. I think he’s going to keep hiking. He’s one of the rare bright spots in the otherwise thoroughly corrupt American ruling establishment.

        • Thanks! I have. I think constraining the Eurodollar market is one of Powell’s objectives.

    • “… the Goldbug scenario…”

      The goldbug aspect is sort of mentioned in hindsight by Z-man, but never elaborated fully upon. There is a move afoot to go to a cashless society. Some societies are basically already there, but they are small and perhaps not indicative of what will occur in a large 1st world totalitarian society, you know—like the USA.

      Precious metals is not an investment, but rather a hedge against fiat currency problems and now increasingly our brave new cashless world.

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    • If people can’t afford to buy a home something will happen.

      1. Home prices drop until people can afford to buy them–this happened in the past.

      2. Big financial outfits, like BlackRock, can afford to buy houses and rent them out–there are signs of this happening now. Then you get a country of rent-slaves, unable to accumulate real estate wealth which has been the main source of stability for the middle class.

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      • This has been mentioned in previous days, but multigenerational families of immigrants can afford them. The ones next door have 7 cars in the driveway and 1 on the street.

    • Jack Boniface: And the Daily Mail joins in (funny – as if it was all coordinated somehow) in labeling the kids whose parents help buy first homes as “nepo” babies. To their credit, almost all the commenters note that parents helping establish their children has always been a thing. But this attempt to disparage something that is foundational in the Bible (1 Timothy 5:8) is not new. Blaq ‘academics’ have been screeching about the inequity of wypipo leaving money and/or houses to their children for years now. That’s what my husband is working for now – to help our sons not start out behind the debt 8 ball.

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  25. “the dollar will disappear only after a long process by which it is replaced by something else. That process will take a long time and it will happen in fits and starts.”

    As always, I’m dumb about this stuff, but demolition is quick and dirty, while building takes time.

    “In a weird way, borrowing has become the business of America because those treasury bills are used throughout the global economy to facilitate commerce.”

    This why, when she goes, I think she’ll go fast. If the petrodollar was ‘created’ 50 years ago, we’ve been enjoying at least 25 years of more-or-less free money, and alternatives to the dollar are beginning to prove themselves, I wouldn’t give it long before the ride gets very bumpy.

    Again, dumb, and I’ve been thinking un-sustainability and collapse since I graduated high school, but the viable alternative is what’s been missing.

    “What they are aiming for is a slow transition away from dollars that lets them lead the way in de-dollarization.”

    This would be quite a trick to pull off. As the dollar declines, the cost of imports rises. The American market for imports shrinks, while the incentive for American domestic production grows— or am I missing something? Don’t these countries fall into the same trap of creating a domestic consumer market, while the US becomes a cheap exporter? And given the US’ vast agricultural lands and energy reserves, doesn’t that favor America’s fortunes in another generation or two?

    Lots of assumptions there, of course, but if the people making policy have half a brain, they should be playing along with a gradual decline— desperately trying to make it happen— instead of trying to settle ancient grudges while they can and risking disaster.

    Time for new management!

    15
    • A gradual decline would be the best outcome for us. We couldn’t afford empire and foreign adventures and best of all it might lessen our actractiveness to our brown and yellow visitors. We may be able to bring the country back to the time before Lincoln screwed everything up.

      I don’t think it will work that way because the elite now is both crazy and stupid but it’s nnice to dream. The actual outcome will probably be much worse and bloodier.

      18
    • Well, the BRICS and other foreign governments dont want to see dedollarization while they still hold lots of dollars. They want to sell the house, THEN burn it down.

    • Mostly agreed, @Paintersforms. The only bit I have trouble with is how the US is going to end up producing their own consumer goods. There are at least three major problems to overcome.

      First, we’ve got to get a lot of capital investment going to get the industrial base up to where it would need to be. That takes time. Time that an increasingly crappy time preference population won’t allow, and certainly won’t allow the tax breaks needed for said capital investment.

      Second, its going to be hard enough to cut the regulatory state sufficiently, though as @Zman notes the destruction of Germany’s economy is helping there. You can deal with regulators more easily than you can trying to run your business without energy.

      And third, we have to do something about the runaway courts. Now that people worldwide have accepted that juries are going to give away massive awards for things that should have had the plaintiffs sitting in the corner wearing dunce caps, investing in American companies is kind of like playing chicken with a freight train. And I don’t see them relinquishing the power, nor do I think it plausible that somehow American juries will suddenly become virtuous.

      I do hope @Zman is wrong, that it all comes apart faster than he thinks. I think with a rapid fall there’s likely less suffering under the curve. The more of it that happens while those who still remember how to garden and maintain machinery and repair houses are still alive, the quicker we can bounce back.

  26. I’ve been of the opinion that dedollarization will happen sooner than most believe simply because both the incentive to dedollarize and the desire to dedollarize are widespread. Granted, it’s bad even for BRICS to dedollarize too quickly, but be that as it may, they really, really want to dedollarize. So they will. It will still be a process of years, but how many? It was only 8 years ago that BOM came down the escalator. Seems like yesterday. And look how much the world has changed in that time.

    As this process accelerates, the basic laws of economics, which had been suspended for a long time in AINO, will make themselves felt once again. Already happening, it seems.

    I can’t prove it but I have the suspicion that propping up the stock market has been a regime priority for a long time and I wonder how much longer that will be able to continue. There have been crashes in recent decades but generally with relatively quick recoveries. “Just stay invested.” In the 1940s nobody said “just stay invested.” They had learned differently the hard way. We know from that period that a 20 year long bear market in stocks can happen. We see it more recently in Japan.

    14
    • It makes sense. You have piles of money and you don’t produce things. What to do? Invest, become a banker. Gamble instead of working. Capitalism!

      16
      • “I can’t prove it but I have the suspicion that propping up the stock market has been a regime priority for a long time”

        Sorry, forgot the quote!

  27. The higher interest rates eventually will break something. That’s the argument for treasuries. The capital structure of most corporations depends on low interest rates so when the “lag effect” of the ’20-’22 stimmie checks plays out, we’ll be in for a nasty recession and the dominoes will start to tumble. Then the Fed will lower short-term rates in the face of businesses laying off workers and longer duration instruments will follow suit in a stampede to safety. Just my opinion.

  28. Speaking of currencies . . . I’d be interested to hear what Zman and members of his commentariat have to say about central bank digital currencies (CBDC). Is a CBDC even feasible in the near-future without twenty-seven or so other noteworthy occurrences happening first? There’s a lot of paranoia about a possible CBDC, as if such a new medium of exchange will enable the globalist jetsetter douche bags to claim further control over the masses — particularly if CBDC is combined with a universal basic income (UBI). Some folks believe that a common man’s digital bucks/UBI will be subject to reduction or even forfeiture if that common man engages in speech or conduct that conflicts with certain sacrosanct establishment narratives. Is such fear justified?

    • They can already debank you and/or decline your digital transactions. They don’t need CBDC for that. So I think the fear of CBDC is somewhat overblown. We are already there. It’s just a question of the will of the regime to use that and how common that action will be.

      23
      • Cash provides anonymity. It is the basis of an entire industry that “washes” drug funds to Cartels. Knowledge of economic transfers is *power*, perhaps the only really power. Prior to recent technological advances, a cashless society was impossible, it is now inevitable—albeit time to implementation is arguable.

        I’d even argue the move to a cashless society has been going on for many decades now, perhaps unknowingly, but happening steadily. After WWII we stopped using high denominational currency—$10K, 1K, and $500 notes gone. Credit and debit cards are now ubiquitous. Even those without credit and on welfare get EBT cards.

        We are slowly being groomed to use electronic transfer for everything. Checking accounts are becoming rarer and being charged for. There is a rise in “cashless” businesses, and those that still do make it inconvenient to use cash transactions in preference to “tapping your card”.

        It will be a simple matter for the government to reduce (again) the largest currency denomination in circulation, say only $20 notes—making digital transfers even more desirable. Think it can’t happen, look up India’s efforts—and they are still third world in their general monetary system.

        • How the eff they gonna pay illegals if they can’t pay ’em cash?

          I think our smarties are going to try cbdc, but they haven’t thought it through. Whiffling their own fumes, again.

          Maybe, the dusky invaders will the the first to riot, and then revolute.

          Or, will cbdc’s be another “whites only” thing? Enslaving the Whites is the ultimate goal.

          • My part-time Filipina maid happily accepts cash, FPS (instantly available online bank transfer), regular bank transfer, Alipay wallet transfer, WeChat Pay wallet transfer, Octopus Card (dig wallet too) top-up, doubtless transfer to several other digital wallets connected to remittance services, plus precious metals (she can live in hope).

            Water finds a way downhill. Immigrants (illegal or not) always find a way to move money. You may hate to hear this but they’re often more canny and agilely-adaptive about these things than Legacy Americans who are a bit more bovine in their acceptance of the Way Things Are Done Here.

          • Zaphod, yep hence the usefulness of an “alternative” currency, like gold and silver. The illegals should not be allowed to have “all the fun”. 😉

        • Ah… but the USA is 4th World as far as domestic payment systems go 😛

          Ground-level financial infrastructure doesn’t have to work very well. Just needs to be good enough to farm the cattle/peasantry. If there’s creakiness and inefficiencies and delays and floats… well that’s just gravy for the connected, too.

    • Under CBDC, the feds will easily know when you make a donation to a bad person like Z Man. For me, that is reason enough to oppose CBDC.

      22
  29. > Given the racial makeup of the retired class, you can be sure the Democrats are onboard with that as well. It is not hard to see where this is heading over the next decade.

    There has been a “soft” euthanasia in this country for some time. A lot of nursing home workers, as a matter of course, give their occupants too much morphine to give that extra nudge into the next life. My father saw this happen with my grandmother.

    As health care prices spiral out of control, we’re going to see hospice workers take this from subtle to in-your-face, and the good ones who don’t go along will be driven out. Don’t think the law will help you either.

    That being said, there does need to be a drastic change in end-of-life care, as the costs of major surgeries on someone to give them a couple extra months is simply not tenable, and the last six months is the driver of a huge amount of health care costs. That being said, the bureaucracy will ensure they cut costs in the most monstrous way possible.

    24
    • My brother is a family practice MD in a rural area. He had a patient in her mid-nineties with dementia, multiple major medical problems, and less than six months to live. Another MD convinced the family to install a pacemaker in the old lady for a nice FAT Medicare payment.

      My brother hunted said MD down in the hospital and popped him in the mouth. Yeah, he got in a LOT of trouble for that.

      38
    • Interesting thought–is there a medical insurance plan that offers ONLY diagnostic and then hospice coverage? At my point in life if I am diagnosed with anything serious, I will simply avoid any treatment until my symptoms are severe enough to warrant hospice care, then it’s morphia and ice cream all the way down.

      12
      • Government picks up Hospice care. There are stipulations, like a prognosis of limited life, but the government is more than happy to send you on your way. Not sure if there are better or worse hospice care facilities, but I’ve been involved with such several times with family in my long life and all have been more than acceptable to me. It’s a growing business and America’s answer to European euthanasia. But don’t fool yourself, it *is* euthanasia—just a bit slower time scale.

    • I thought hospice *was* morphine care. Easing ’em along. Was for my mum.

      If we had the UK’s NICE system, they just take their water and food away. Real demons, they are.

      • Nice big fat turbo syringe driver of morphine.

        ‘Tis a consummation
        Devoutly to be wished

        Once one reaches that time with certain ailments.

        Comes a point where many cannot swallow even thickened water… then it’s cruelty to force them to drink. That being said, you just know that the NHS would have used the Liverpool Care (sic) Pathway to off inconvenient oldies ‘clogging’ up wards and inconveniencing the nursing staff and management’s metrics.

    • Chet: Thank you for handling a somewhat delicate but vitally important topic in palatable way; I would have just pissed everyone off. Not advocating mass euthanasia, but as you note, the extreme measures and exorbitant cost of end – of – life care must change. If an individual family wishes to spend $500 grand to give grandma the chance at 2 more years of dementia, more power to them – as long as they foot the bill themselves. As a society this is unsustainable and suicidal.

      11
    • The Canadians are leading the way on this.

      “‘Disturbing’: Experts troubled by Canada’s euthanasia laws”
      apnews.Scum/article/covid-science-health-toronto-7c631558a457188d2bd2b5cfd360a867
      If you replace the Scum with com it should work.
      Is you got rid of all the scum from AP News, of course, the place would be empty.

  30. Gotta say Z, you’re looking buff in your T Shirt ad. Kinda the “Younger Bruce Willis / IndyCar driver Tony Kanaan” look. 👍

    Then you have the elephant in the room. The global American Empire is facing a choice over the next decades. Do we fund the old age of the swelling retired class or do we spend money on the war machine.

    Or we could go a third way: Onshore industry we sent to the Perfidious Chinee, take time to build up a robust industrial sector, reinstate energy extraction and production at home, enforce our borders, and start being self sufficient.

    Yeah, who am I kidding? We’re boned aren’t we? 😞

    40
    • No, we’re “boned” if we can’t summon the will to change. If we treat this like we do war—as an existential threat, then we could reverse the process/direction of deindustrialization within a generation. After which we’d be on a self sustaining track. Problem is we are no longer the nation we once were. In a multi-racial society, democracy can’t work to produce a general economic policy to the general benefit of the whole nation. The squabbling of competing (racial) interests among the populace prevents such.

      12
      • That’s why you overthrow monarchy to install democracy.

        Money, not heritage, becomes the cord tying the nation together. Your identity is reduced to your consumer brand.

  31. In re: Gold

    Some wag on the internet noted that just as all discussions are subject to Godwin’s Law (longer the thread continues, eventually someone will invoke mustache man and his political apparatus)….

    The longer any “conservative” host is online/on air, the discussion/advertising of how GOLD is the best long term investment becomes inevitable.

    23
    • I’ll say this about gold, it does hold value. If you dig up a bar of gold from a thousand years ago it still has value. Will you be able to say the same thing about a hundred dollar bill a thousand years from now? I don’t get it, but then I don’t get a lot of things. To me a currency backed by a basket of commodities makes more sense than one backed a yellow metal.

      15
      0
      • Yellow metal can be used to buy your commodity basket where competing fiat currency can not. Central banks still know this and are buying it whenever the price is right.

        Bitcoin and other digital replacement efforts are still in their infancy and have numerous birthing problems, but stem from the same basis as the desire for yellow metal. I’m sure digital currency will fit a need, but it will never be to replace yellow metal, which I can carry about. For example, I can easily carry my entire net worth—converted to yellow metal—upon my person.

      • Backing currency with something tangible sounds pretty good, but I’m glad I’m not the one who has to develop and regulate such a scheme in a fair way. The redemption problem alone is daunting.

        In any case, fiat currency is backed sufficiently by the demands of taxation. You need dollars to remit to the State, or guys with guns come to your house. Thus, ongoing demand for dollars on the low end is assured. As for the high end, dollars are backed by their value as a points score vs other rich people. Studies have shown that many people who are rich enough to live in luxury and ease keep on striving simply to run up that score and be richer than the next rich guy.

    • 10 seconds of thinking about the logistics of gold prove how scammy are these people.

      – Imagine paying with gold bars. Can I buy my gold minted in coins?
      – Given the weight of owning real metal these people store it for you, sure way to lose it when the electricity goes away and there is maybe a piece of paper that says you own “Birch” gold. Anyway, do they store it for free?
      – So now assume I have solved the logistics and have a vault in my home a la Italian Job with gold coins. Again, how do I pay for real stuff with that if no one else has my coins, how do I get paid for my services and goods?

      Ready to move all your 401k to gold and dogecoin?

      4
      1
      • 500 oz’s of gold is approx $1M. That’s not so unwieldy it can be carried on a person in an emergency. When small denominations of currency needed for exchange, then one uses small coins or gram bars. More likely, silver coins.

        This is historical, so there is good reason to believe such can easily occur once again. Indeed, such was the case in most all the world less than 100 years ago, before governments decided to pull the greatest scam ever on their people—fiat currency!

        Your scenario is one of all or none, gold or fiat. I say use both and let the best “man” win.

        7
        1
      • Curious Monkey: If you don’t hold it, you don’t own it. Paper shares of ‘gold funds’ are as solid as all the lost bitcoin. Gold depositories are safe and secure – until the next bit of social unrest or power outage or hacker attack. And you truly believe they will somehow leave 401ks alone over the next 10 years or until the next economic crisis, whenever it may occur? They’ve been eyeing 401ks for some time now, and I fully expect such money to be ‘nationalized’ and redistributed within my lifetime.

        • This is not an out of this world suspicion. Government takeover of 401k’s has been discussed by eminent economists—not simply government hacks.

          There are precedents.

          Argentina used to have bank accounts denominated in US dollars and also accounts denominated in pesos. One weekend, the government changed all the dollar denominated accounts to pesos and took the dollars. The dollars were converted at the then national exchange rate at the time. Within 6 weeks or so, the government let the peso “float” and the folks previously holding dollars took a 50% or so haircut since their pesos bought less than 50% of before.

          FDR outlawed the holding of gold. All folks turning their gold in got the current exchange rate of $20 to the once. A few weeks (months?) later he moved the official exchange rate to $35.

          Similarly, folks not having their gold in their personal possession can expect confiscation from those firms purporting to hold their gold—that’s the big problem with converting 40ll’s to gold. You can’t by law hold the gold, hence easy confiscation.

  32. Well I got a yellow one, so now I’m probably on a list somewhere. 2 requests:
    Can we get some masculine colors, I prefer medium to dark grey cause it doesnt show food spills so much.
    And if you got any Z hoodies sitting around I’d injur for one.

    • Rit fabric die will turn white into whatever color you like. I use it all the time. A few bucks at Michaels and and a few minutes in the sink. Hell, I have even used it to tie-dye.

  33. The US has plenty of natural resources but doesn’t make much of anything anymore, largely thanks to libtards, envirotards, and wall(street)tards. Hey, but Gaia will be so pleased with our efforts, she’ll shower us with love and affection and we’ll all live happily ever after in our inclusive, diverse utopia – LOL.

    25
  34. No, the petrodollar didn’t allow the Feds to spend money “without inflation.”..There was massive inflation in the ’70s, and steady inflation afterward…The cost of tuition at the University I attended is up by a factor of 20, and gold by a factor of 60…More stable commodities like gasoline are only up 10-15x….What this might tell us is that losing the petrodollar while continuing to spend like mad will lead to ruinous inflation, possibly hyperinflation…

    • The 1970’s was before the petro-dollar and the before the Palace Accords and the Louvre Accords. The currency arrangements were a response to the chaos of the 1970’s.

      • All fiat currencies ultimately collapse. Not one has survived in the entire history of mankind. Experts told us that the Titanic and Britannic were unsinkable, and the bones of their crews and passengers contradict them silently on the ocean floor.

        Debt based value is nothing. The debtor as to agree to pay and comply with the terms and conditions of the debt and repay accordingly. All he has to do is renege on the debt as Nazi Germany did… and the old game is over and a new one begins.

        70% of the world is aligning in the BRICS because they can’t afford to do business with Globohomo. We are going to need massive changes just to avoid becoming a third world country ourselves. The fix is the same as it always is with western civilizations: get the jews and the bandits out of our finances, tie our currency to gold, re-institute fair market practices, and start proseuting and punishing cheaters and thieves. The world is begging for a fair, honest place to trade. The fact that they are looking to Russia and China for that should tell us something about ourselves.

        But whadda I know? I am not an economist.

        23
        • “ All he has to do is renege on the debt as Nazi Germany did… and the old game is over and a new one begins.”

          An interesting note here is that Germany used a two tier monetary system (IIRC). There were Reich Marks and then Gold Reich Marks. The Treaty of Versailles had reparations demanded to be paid in Gold Reich Marks. I assume the allies were no fools as to the problems with fiat currency—even then.

          • Not so sure about that myself, C. The Russians never paid back one thin dime for all the material and munitions they received from the lend/lease program. FDR waged holy war on the gold bugs during the New Deal. With guys like that running our economies… is it any wonder the world ended up in flames?

            I am not an economist, my eyes glaze over when the experts speak. All I do know for sure on this stuff, is that when the economy dives… the experts are looking around foolishly the same way I am.

  35. Thanks for this. I catch a lot of flak for saying the dollar isn’t going anywhere, anytime soon. Nor do Russia, China or India want it to go anywhere.

    It can’t for the reasons that you laid out as well the fact that there’s more dollar-denominated debt outside the US than inside. That alone will keep demand for the dollar steady for a long time.

    Btw, if the use of the dollar did decline too quickly, it would be catastrophic because the demand for dollars from debtors would remain the same, so if fewer dollars are floating around, the dollar would increase in value. This would lead to defaults, which would lead to fewer dollars circulating, more defaults until the whole eurodollar system imploded. That wouldn’t be good for anyone.

    What seems more up for grabs is less the dollar as the main global currency and more treasuries as the main global asset. Treasuries are key, not the dollar. Yes, they are intertwined, but the demand for treasuries could fall without the dollar collapsing and that’s what would make a lot of trouble for GAE.

    Finally, while the dollar being the global reserve currency has been wonderful for the big three Ws – Washington, Wall Street and Walmart – it’s been terrible for America’s industrial base and blue-collar workers. We have to run trade deficits and those deficits will be with countries that use a lot of energy, i.e., manufacturing countries, which crushes our manufacturing sector.

    This is why no other country, especially China, wants their currency to take over for the dollar. They all understand Triffin’s Dilemma all too well.

    17
    • Citizen, I have a quibble. Foreign dollar-denominated debt is not a fixed issue. E.g. debts from China Developer 1 to India Manufacturer A are denominated in dollars as a convenience, an expediency. Especially with the tendency of corporate debt to roll over into new debt frequently, I see no reason why we should expect those foreigner-to-foreigner transactions to continue in USD, and ditto no reason that old debts will not be renegotiated or paid off with new non-USD transactions. The foreign USD denominated debt is going to go away silently and swiftly (assuming a BRICS, yuan or rupee takes the stage as the OP predicts), and the worse the dollar supply situation, the faster it will go. Except for US tax liabilities, if your “dollar crunch” happened, the non US parties would almost surely just novate their deals into a non-USD currency (and probably with a little poke from their national government’s pointy end to avoid depressions).

      3
      1
      • There’s probably $10 Trillion of dollar-denominated debt outside the US. This will not get paid off or refinanced into non-dollar debt anytime soon.

      • As the captain noted, there’s a lot dollar debt out. It will not just disappear anytime soon.

        Also, there are reasons that non-US businesses borrow (and non-US banks lend) in dollars and not the local currency or other currencies. First, the interest rate is much lower. Second, you avoid currencies fluctuations.

        What other currency gives you that? The Yuan. The Rupee. No way.

        What is the alternative? That’s the problem for the BRICS. They can rightfully hate the system and work to create alternatives, but until that happens, they will use the dollar.

        Remember, these are private businesses and banks. They are not being forced to use the dollar. They choose to use the dollar. That should tell people something.

        China has capital controls, so it’s out. No one wants rupees. The ruble is a tiny currency.

        I’m a businessman in Vietnam and want to expand my shoe factory. I don’t want to use my local currency because the interest rate is crazy high. What currency do I use to take out debt? There’s one answer right now, the dollar.

    • “What seems more up for grabs is less the dollar as the main global currency and more treasuries as the main global asset. Treasuries are key, not the dollar. Yes, they are intertwined, but the demand for treasuries could fall without the dollar collapsing and that’s what would make a lot of trouble for GAE.”

      At the margin, maybe a little. But unless they’re going to run the Eurodollar system on ever-increasing leverage with ever-decreasing collateral/reserves (actual US Treasuries or $ bank reserves), Treasury demand will grow along with the growth in the Eurodollar system.

      One guy’s debt is another guy’s asset. When the dust settles, someone has to develop an alternative to the dollar that people are willing to hold as safe, reserve assets. I cannot see this happening in my lifetime. But buying some gold for your kids cannot be a terrible idea.

      • Another aspect of this is the fact that the Western financial model is mostly rent-seeking. These highly complex financial instruments that are backed by treasuries are mostly a way to get paid off the work of others. Russia selling oil to India in rupees through a private banking network removes these transactions from that rent-seeking system we call Western finance.

        In the end, an economy is the sum of human capital employed in making things, fixing things, inventing things and pulling things from the ground. Dudes in expensive suits making bets with one another is not economic activity. It is parasitism.

        38
        • Absolutely. When I say the dollar isn’t going anywhere anytime soon, I don’t mean that it’s not going at all. As someone once said, the US banking system is a squid wrapped around the global economy sucking it dry.

          The RoW knows that they pay rent for the use of dollar system. Perhaps that made sense when the U.S. made sure that the sea and financial lanes were safe and easy to use. But, now, we’re no longer doing that; indeed, we’re making them less safe.

          Eventually, the RoW will find a less onerous system, but it will take time.

        • Lowering the societal cost of financial intermediation – the aggregate rate difference between lending and borrowing – is a useful activity and a hallmark of an advanced economy. You need some dudes in suits to do this, unfortunately.

          But obviously, we are way past this point and there are plenty of parasites. The trick in the future is to figure out how to achieve the objective without being dominated by a class of parasites.

      • Yeah, agree. But you can see that’s what the BRICS are trying to do. But, you’re right, the dollar and treasuries are still pretty much tied at the hip.

        The BRICS seem to be trying to get gold into the mix as a reserve asset/collateral, but it would still be used to get dollars. Would replacing treasuries for gold work? I have my doubts.

        However, yes, the Eurodollar system is a terrifying inverted pyramid with treasuries/bank reserves at the bottom. Reducing the number of treasuries in the system would make an already insanely leveraged system even more leveraged.

        In my simple understanding, what the BRICS are trying to do is create a version of Keyne’s bancor. That’s a very tall task.

          • It’s why Keynes settled on gold instead of a basket of commodities. It was more stable. Regardless, it’s monumental task in the best of times, but with the US undermining it at every turn, it will be even more difficult.

            Not impossible, however. But don’t look for anything real for a very long time.

    • While I agree in broad strokes, @Citizen, “Btw, if the use of the dollar did decline too quickly, it would be catastrophic because the demand for dollars from debtors would remain the same, so if fewer dollars are floating around, the dollar would increase in value” isn’t quite how it should unwind.

      What @Zman is talking about is simply a reduction in the amount of “dollars” sloshing around between when someone sells a good, and when that good is delivered. The point of a petrodollar is that you have weeks of float while the oil is crossing the ocean. Those “dollars” are tied up until the tanker is unloaded, and likely longer than that, because the tank farm will have to float for a while, and the refinery, clear up until the local gas station. It won’t affect anything domestic — barring collapse, stuff will still be priced in dollars. But there would not be as big of a demand for dollars, as some of float will be in rubles, some in yen, etc.

      So as “dollars” return stateside, there are more of them, and the same number of goods. It’s inflationary, not deflationary. Debtors will be more able to pay off their notes, and the creditors will be the ones taking it in the shorts to the extent that the Federal Reserve doesn’t reduce it’s treasury holdings.

      The fly in the ointment is that the creditors are all “too big to fail”. Darn you, Bush! Darn you to heck!

  36. “On the other end, rising interest rates mean the young will be shut out of the housing market in most of the country.”

    Or the price or real estate falls. As interest rates rise the price drops. If the price drops (looking at you commercial real estate) the value of the asset on the bank that provided the financing drops. Now you have a banking problem.

    11
    • Boomers seem to be clinging to their homes. We talked to one on our street this summer who was going to sell and just decided she couldn’t do it yet. Cash buyers turning them into rentals is the worse case scenario for this property turnover.

      14
      • Everyone is clinging to their homes. See Wolf B below. If you move, at 7.5 plus (and that’s only going up, sports fans) you take a 33% cut in value/equity/size/quality. So if you are looking to downsize and lose all your equity and keep paying the same P&Int&Ins, then you have options. The only people not getting vulgarly violated are the banks, realtors, and heirs.

        13
        • Exactly. You have to live somewhere, why move—especially if you “own” your house. Of course, that is not true for everyone and particularly poignant when one retires and the expenses of ownership can no longer be met—regardless of “ownership”.

          • Until your the old fogie trapped into what has become a ghetto, and you can’t sell at any price.

            And heck yes, I’m scrabbling to keep each piece of family property I can grab, and not to rent them out to strangers.

            Wait- idea! Family buyer’s groups.

          • Alzaebo, not as weird an idea as you think. Many economists talk of creative loving arrangements for future families. One could be that mom and pop sell and buy a house with their children of sufficient size for all. The parents financing the bulk and the children picking up the rest including loan payment and support of facilities. When the parents die, the home goes to the children. I’ve seen this myself more than once.

    • Yes, rising interest rates should make housing prices decrease. With borrowers, since it’s all about the payments, a $500,000 house at 3 percent (30 year fixed) is a $2,100 monthly payment. For the same $2,100 payment at 7.5 percent, the price of the house would be $300,000.

    • McLeod: sure, maybe the land speculators, Blackrock, and the international banks (and the senators they own) will get the losses instead of the white middle class getting BOHICA’d. You think the financial and real estate markets are a Fair Game??? What color is the sky on the planet you are from?

  37. Sanctions avoidance and outright theft of deposits in Western banks are the primary drivers. Most of the world is sick of American bullying.

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    • You also have to figure in that every other country’s leadership is seeing the Free Money that Sodom on the Potomac rakes in, and they want a slice for themselves. Bringing seignorage back home lines the pockets of the home country’s rulers.

  38. When Rome fell, the emerging serf class lived longer, healthier lives becuase plantations were healthier than cities.

    When Muslims overran the Levant, they were welcomed becuase war had bankrupted Byzantium and Persia. The lower taxes were incentive enough to submit to Islam.

    I think about these things a lot.

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    • Much overdue land reform has been the spark that has set of many a revolution over the millennia.

      But we’re not substance farmers anymore, and home ownership isn’t a reasonable proxy. People might want homes, but no one wants 40 acres and a mule, then be forced to feed themselves and pay their taxes based on what they can grow on it.

      They’ll never be another revolution in the US: we’ve never had a peasant class demanding land, and the aristocratic class (Virginia and surrounding southern states) was wiped off the map in the War Between the States.

      • I had to laugh: no, we are not substance farmers. We grow nothing of substance, just seed oils and cash crops to be processed into Twinkies and Spam.

      • I’ve read only 2% of people in the US are doing agriculture. Most of that isn’t even family farms, it’s big ag. I don’t think there are any subsistence farmers in the US.

        I heard on “The China Show” that the Chinese government has gone all Mao Zedong and are centrally planning what is to be grown and where. That agents of the state are destroying crops if they are not the centrally planned crops that are supposed to be in those plots. They did show footage of this happening. They are also claiming bankers are being required to read Xis writings and then produce reports on what they learned. This, just in time for the banking crisis.

        I take those clowns with a grain of salt, but they do tend to back their claims up with official CCP headlines.

        Good times indeed.

        • Not a follower of Chinese policy, but I’d wager the CCP are concerned that their farmers not fall prey to world economics and begin to grow “cash” crops which would require subsequent imports of useful food products from outside the country to feed the ordinary Chinese citizen.

          Here’s an AZ example of sorts. Turns out one of our largest agricultural users of water (very much in demand in the Southwest) is Saudi Arabia. They (or their contracted AZ farms) grow “alfalfa” (highly water intensive) which is harvested and shipped over the Saudi land to feed their animals.

          Obviously they are taking advantage of our lax laws and water allocations to farms. But really, is anyone saying this is the best and highest use of or land and water resources—especially in a time of mega-draought?

        • Here is AZ we don’t go the way of the CCP and guess what—one of the largest water users are farms that grow alfalfa for shipment to Saudi Arabia to feed their animals. This occurs in a time of “mega-drought” in the Southwest, and of course our lax laws wrt agricultural use of water!

          Perhaps the CCP is actually doing something in the best interest of the country and preventing farmers from growing cash crops for export, while ignoring the basic food requirements of the rest of the populace?

          No supporter of the CCP, but I’d delve into the story further before condemning the action.

          • Duplicate post (sort of) since my original post disappeared and was deemed lost after literally hours of non-appearance—regardless of the time stamps.

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