Loading ...Seemingly Unrelated
Two seemingly unrelated topics may indeed be directly tied together. One of my biggest pet peeves is hearing people, even suppossed expert economists repeat the nonsense that when countries dump dollars by selling treasuries and or using them to buy gold, those dollars are going to “come floooding back to the US” and cause hyper inflation.
That would have been possible and even likely if the US was still on the gold standard. Then(like with France and others in the late 60’s and early 70’s) the US Treasury would have had to take in those dollars and pay out gold. Which is why Nixon “temporarily” suspended convertibility.(continues to this day.)
Now, since there is no convertibility, those dollars that anyone no longer wants get taken in by anyone selling their goods and services who still perceives the dollar to have some value. That perception and the value of such dollars will both continue to decline over time, until they become worthless paper like Deutsche Marks in Weimar Germany and the many other failed fiat currencies throughout history.
They would only come back to the US if someone in the US valued them and wanted them. The Treasury could get them back if other countries wanted our Treasury Bonds. They don’t, they are selling treasuries to buy gold. So the only way they would come back to the US Treasury is if the US was selling them our gold.(Which they most likely don’t have anymore.)
That is where the seemingly unrelated topic comes in. What is the main export that the US has that most other countries still want and are willing to pay dollars for? Weapons. That is most likely why the US has been inciting and perpetuating continuous wars in Ukraine, the Mideast and everywhere else they can. To offset, at least partially, the dumping of US Treasuries and create, for at least a while longer, some demand for US dollars, so there cannot be peace.
The dopes running the country have done everything they can to destroy the dollar and the economy while at the same time fomenting wars to try and support the dollar and the part of the economy that manufacturers weapons. Complete insanity.
Plenty of dollars can come back, Chartsmaster because the Federal Reserve acts as the buyer of last resort during any liquidity crisis involving Treasuries. All Treasuries will sell. Just to whom is the question. If there are no buyers for whatever reason then the Fed picks up the slack and the dollars come home.
Dollars will return to the US because it’s the national currency. Anything sold in the US is usually sold for dollars. So, if foreigners can’t find an offshore use for them, they will be used to purchase goods or services in the US. Whether that’s gold, oil, real estate, businesses or any other thing that’s for sale. Therein lies the inflationary impulse. There are enormous amounts of dollars floating around the world. To the extent they are unwanted in world trade they will return to the US, so more dollars chasing scarce products or services etc…will increase prices.
I stated that dollars are always coming whenever foreigners want US goods. That doesn’t cause inflation. The inflation is caused when they were created. If you keep creating more currency you make each unit worth less. Dollar milkshake is nonsense when there is no convertibility. The FED doesn’t buy them they created them.
Someday “defense” contractors will demand or be coerced into being paid with something other than dollars, just as in Rome.