Saturday, April 19, 2014
Death of the dollar:
In the two charts below you can clearly see the how the dollar performed as George Bush took the US national debt from 5 trillion to 10 trillion in 8 years. The Economy crashed and the dollar crashed with it.
Since then Obama's added another 7 trillion. During this time - and five years into a "recovery" the dollar has been bouncing off the bottom of its range.
But all of this time, the US has enjoyed the privilege of having world commerce settled in dollars. So everybody - Euorpe. China. Russia. India. Brazil. The Middle East, has had to buy all this debt in order to have dollars to settle trade.
This is the very basis of American Exceptionalism. We have been the exception in that nobody else has been able to use their currency to settle international trade.
Now China, Russia, India, Brazil, and South Africa - as well as Iran are making a concerted and aggressive push to cut the dollar out of international trade. (See the previous post.)
Meanwhile our debt is still skyrocketing. But soon we won't be able to count on the rest of the world bailing us out by buying it in whatever quantities we wish to sell it.
In fact, imagine if the BRICS nations who hold nearly 5 trillion dollars of our debt, become net sellers? What then?
Well, look at the dollar index below and imagine how much lower it could go.
Then imagine what our risk markets will look like.
Then imagine what our debt markets will look like.
Then imagine what our economy will look like.