The net present value of government debt in the US (including unfunded liabilities like Military Pensions, Government pensions, Social Security, Medicaid, etc) is over 150 trillion dollars.
The value of all private net worth in the US - including real estate, stocks, bonds, hard assets, is around 150 trillion dollars.
But government debt is growing at a much faster rate than the value of private assets.
In a globalized world - for all its problems - the inflationary fallout from first world economies fueled by debt financing is masked by complex supply lines that source materials and labor from all over the globe. This masks incipient inflation.
When you reverse globalization before addressing the debt problem you unleash a rabid inflation that destroys the value of all paper currencies.
The world powers are left with two options.
1) they can simply default on their debt. This would lead to dramatic economic collapse.
2) they can inflate away the the net present value of thei debt obligations while continuing to honor the nominal value. This results in what is now being called the DEBASEMENT TRADE.
When every country must address their debt problems by debasing their currency the only winner is the value of Monetary Metals. Primarily this is GOLD. Though it would seem the Chinese are attempting to add Silver to their monetary reserves.
The US has a unique problem/privilege in that we have the resereve currency - which means that large global commodity trades - like oil - are settled in US dollars. Thus everyone needs dollars to settle trades and they park excess dollars in our debt thus subsidizing our debt keeping our rates low, and limiting our inflation.
But as the world deglobalizex and the US scrambles to inflate away our debt, the rest of the globe stops settling their commodity trades in dollars. And they stop buying our debt. Our rates rise, our inflation soars. We have compounded this problem and vastly accelerated the Dedollarizaition trade by weaponizing our currency and our economy. And as we militarize our global relationships and become an increasing military threat this again accelerates the global move away from the dollar as a settlement currency.
Now, dollar permabulls like the Dollar Milkshake crowd will point out - correctly - that over 70 percent of global debt is denominated in US dollars - so everyone needs dollars to refinance their debt. This is true - and irreversible. But you can need to refinance dollar denominated debt and still shun the dollar as an instrument to settle international trade.
Thus the dollar stops being useful as a reserve currency and acts solely as a short term debt instrument with no yield. This is preceisely how it is viewed by the central banks of the world.
Obvioulsy this is complex if you are trading the value of the US dollar vs other paper currencies.
But the direction of this reserve currency dedollarization trade is not complex.
It is measured in the price of gold.
Because gold is the only other tier one Basel reserve asset besides the US dollar.
The price of gold has now become the barrometer of the health of the global paper reserve currency: the US dollar.
Now, as an investor you have two options.
1) you view this dedollarization debasement trade as a temporary phenomenon that will reverse over time.
2) you view this dedollarization debasement trade as a trend that will continue until the primary global reserve currency is once again Gold - as it had been for all of human history until 1971.
Obviously these two scenarios require a vastly different investment philosophy.
Choose.
If you choose option 2 there's not a lot of time left to organize a portfolio that will benefit from this scenario.
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