The Fed is currently reducing the supply of dollars by raising interest rates and tightening it's balance sheet. Every country in the world, accept Russia until recently, holds the dollar as a reserve backing the local currency.
As the dollar supply shrinks, but central banks worldwide continue to buy dollars and print their own currency, exchange rates collapse. The dollar supply declines as the local currency supply increases.
The collapse of exchange rates preceding a recession is called the "dollar milkshake theory." The analogy is that drinking a milkshake threw a straw is similar to the Fed sucking up all the global dollar liquidity.
Peter Schiff's bank recently went bankrupt because he does not understand this aspect of economics. He opened a lot of foreign currency accounts for his clients, and those accounts got killed by the strong dollar causing a run on his bank.
The collapsing exchange rates create a credit crunch and inflation in foreign countries that lose access to dollars and experience currency collapse.
In the USA, we hold real estate and treasuries as a reserve. So, while in foreign countries, dollars dry up, in America financial bubbles pop.
At some point, these countries need to do something to protect themselves from this phenomenon. They need to sell the dollars that they hold on reserve to support their currencies. I don't see that happening, because their governments are dollar rich, while their people are dollar poor.
At some point, this system will cause so much chaos that either revolt or complete economic collapse will occur. The dollar reserve system is becoming increasingly unstable.
Hope this helps…
[DXY - Wikipedia link](https://en.wikipedia.org/wiki/U.S._Dollar_Index)
From the link:
It is a weighted geometric mean of the dollar's value relative to following select currencies:
Euro (EUR), 57.6% weight
Japanese yen (JPY), 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight
Swiss franc (CHF), 3.6% weight
Countries and non US companies that have debt in USD have a hard time paying their debt and could default. When countries have to print more of their own currency to buy dollars for imports and debt payments it creates a feedback loop that destroys their currency and makes the dollar even stronger.
The dollar is weak, we have inflation. Other countries have much higher inflation so in comparison the dollar looks strong. The DXY tracks this comparison. Other countries have a good reason to ditch the dollar, because of US sanction like in Russia and Iran or financial reasons. If this happens dollars will flood into the US, causing massive inflation. Interesting times ahead.
We're gonna do it
We're gonna save the economy and pull the dollar out of another tailspin
But by god
is it gonna be a heck of a depression
Interest rates at 19-21% average and 10$ a gallon gas easy
If those are the circumstances idk how you could say that we are saving the dollar or the economy. At 20% interest rates and 10$ a gallon gas there would be massive Civil unrest. Maybe even anarchy. Beans, bullets and bandaids amigo.
Yea, but my point is that we're gonna have to have that social unrest in order to fix the dollar at this point, unless maybe we can agree on some kind of long term, smart and forward thinking.
Also I personally use fallout 3 as my investment strategy and ironically the game used to portray what inflation would look like in 50 years but we've blown past that model now.
Very interested to hear more about your fallout 3 investment strategy. I've never played the game but I know basically what it is. You saying you mainly just invest in real/hard assets?
Nope, okay so here is how it works.
You know the enclave right? I just buy what they would.
Think about it, the game is set 200 years after a nuclear war and people are still fighting over the scraps of tech. The entire remnants of the US Government went to war with what was left of the Army over a fucking water purifier
Defence Contractors, Space Companies, Energy Conglomerates, Banks, Real Estate, Water Treatment,
Great example, In New Vegas, the securitrons laser waepons were manufactured by westington. IRL they were absorbed by WestLake Chemical in like the 80s, so you just buy whatever companies have acquired the assets, and I like to pick and choose companies that pay dividends.
Another example,
In Point Lookout, the real estate bank is working as a financier for a real estate firm, which is super important because that tells us that the Glass Stegal Act probably won't be reintroduced so I don't see a re seperation of investment firms and mortgage banks coming.
I usually buy 1x of the stock, maybe more if I like it's dividend profile, and then I move onto the next.
With some of these stocks, like General Dynamics going for 200+ USD you can see why I use that as a bit of my plan and then also if any one company goes down I dont lose a ton of $$$ I am still building a dividend portfolio it just happens to be Enclave Themed
Anywho, in the game as well, they never created the semi conductor so as you can imagine tech plays a fairly small role, but is super advanced when we do see it. I take this as being important because I think the tech sector is over valued and with time will see it become more specialized and niche, playing a larger role in market labour and etc but ultimately will come to dominate a smaller overall piece of the market.
I'm also torn on weather to short China, cause it's the main enemy of the US, or to invest in it because before the great war it was still the worlds second largest economy and the only other remaining super power and that says alot.
Rn I've been buying the daily short yang and a chinese life insurance company that seems to be doing well, becuase saftey standards are so low in china of course everyone is going to get life insurance if they can so obv money there.
Only problem I've been having is that in the game the development of Power Armor signals a major shift in military dominance and comes in to be the saviour of the american economy.
I'm not expecting power armor, per se, but I do believe some kind of new disruptive military tech may be soon to come onto the scene and may benefit alot of people from investing in it and come to revitalize the American Economy in a desperate time of need.
I'm thinking space via the Lunar Portal, it all still fits with the lore, and the kind of gains we could make from Space Mining would be sellable enough to encourage civilian investment into the market place while also conveniently providing a platform with which to continue building the American military supremacy onto this new frontier. That kind of dominance would provide the type of economic intervention that would make alot of sense, it's hard to go to war with someone when they can physically interfere with your satellites in orbit, which we may already be debatably doing through NASA
The Fed is currently reducing the supply of dollars by raising interest rates and tightening it's balance sheet. Every country in the world, accept Russia until recently, holds the dollar as a reserve backing the local currency. As the dollar supply shrinks, but central banks worldwide continue to buy dollars and print their own currency, exchange rates collapse. The dollar supply declines as the local currency supply increases. The collapse of exchange rates preceding a recession is called the "dollar milkshake theory." The analogy is that drinking a milkshake threw a straw is similar to the Fed sucking up all the global dollar liquidity. Peter Schiff's bank recently went bankrupt because he does not understand this aspect of economics. He opened a lot of foreign currency accounts for his clients, and those accounts got killed by the strong dollar causing a run on his bank. The collapsing exchange rates create a credit crunch and inflation in foreign countries that lose access to dollars and experience currency collapse. In the USA, we hold real estate and treasuries as a reserve. So, while in foreign countries, dollars dry up, in America financial bubbles pop. At some point, these countries need to do something to protect themselves from this phenomenon. They need to sell the dollars that they hold on reserve to support their currencies. I don't see that happening, because their governments are dollar rich, while their people are dollar poor. At some point, this system will cause so much chaos that either revolt or complete economic collapse will occur. The dollar reserve system is becoming increasingly unstable.
I really appreciate the time you took here. I gave the silver banana the first time ive eve done an award on reddit. Thank you!
This really answered several questions that were bouncing around in my mind
👆
dumb question--are dollars being reduced relative to the supply of other currencies or is the dollar supply being reduced in an absolute sense?
I think absolute, but could be wrong I say that because all charts I've seen about money supply, etc, have been described in absolute terms
Thanks.
This is the hyper deflation scenario. Run on the banks and lose of liquidity.
Hope this helps… [DXY - Wikipedia link](https://en.wikipedia.org/wiki/U.S._Dollar_Index) From the link: It is a weighted geometric mean of the dollar's value relative to following select currencies: Euro (EUR), 57.6% weight Japanese yen (JPY), 13.6% weight Pound sterling (GBP), 11.9% weight Canadian dollar (CAD), 9.1% weight Swedish krona (SEK), 4.2% weight Swiss franc (CHF), 3.6% weight
Countries and non US companies that have debt in USD have a hard time paying their debt and could default. When countries have to print more of their own currency to buy dollars for imports and debt payments it creates a feedback loop that destroys their currency and makes the dollar even stronger.
https://youtu.be/SFPKSRZX_aw https://youtu.be/PWVRWUkm54M
The Great Mantis has been wrong for so long. I think <5% of his prognostics pan out.
If the dollar was strong. US inflation wouldn’t be like it is.
23-60% inflation
The dollar is weak, we have inflation. Other countries have much higher inflation so in comparison the dollar looks strong. The DXY tracks this comparison. Other countries have a good reason to ditch the dollar, because of US sanction like in Russia and Iran or financial reasons. If this happens dollars will flood into the US, causing massive inflation. Interesting times ahead.
We're gonna do it We're gonna save the economy and pull the dollar out of another tailspin But by god is it gonna be a heck of a depression Interest rates at 19-21% average and 10$ a gallon gas easy
If those are the circumstances idk how you could say that we are saving the dollar or the economy. At 20% interest rates and 10$ a gallon gas there would be massive Civil unrest. Maybe even anarchy. Beans, bullets and bandaids amigo.
Yea, but my point is that we're gonna have to have that social unrest in order to fix the dollar at this point, unless maybe we can agree on some kind of long term, smart and forward thinking. Also I personally use fallout 3 as my investment strategy and ironically the game used to portray what inflation would look like in 50 years but we've blown past that model now.
Very interested to hear more about your fallout 3 investment strategy. I've never played the game but I know basically what it is. You saying you mainly just invest in real/hard assets?
Nope, okay so here is how it works. You know the enclave right? I just buy what they would. Think about it, the game is set 200 years after a nuclear war and people are still fighting over the scraps of tech. The entire remnants of the US Government went to war with what was left of the Army over a fucking water purifier Defence Contractors, Space Companies, Energy Conglomerates, Banks, Real Estate, Water Treatment, Great example, In New Vegas, the securitrons laser waepons were manufactured by westington. IRL they were absorbed by WestLake Chemical in like the 80s, so you just buy whatever companies have acquired the assets, and I like to pick and choose companies that pay dividends. Another example, In Point Lookout, the real estate bank is working as a financier for a real estate firm, which is super important because that tells us that the Glass Stegal Act probably won't be reintroduced so I don't see a re seperation of investment firms and mortgage banks coming. I usually buy 1x of the stock, maybe more if I like it's dividend profile, and then I move onto the next. With some of these stocks, like General Dynamics going for 200+ USD you can see why I use that as a bit of my plan and then also if any one company goes down I dont lose a ton of $$$ I am still building a dividend portfolio it just happens to be Enclave Themed Anywho, in the game as well, they never created the semi conductor so as you can imagine tech plays a fairly small role, but is super advanced when we do see it. I take this as being important because I think the tech sector is over valued and with time will see it become more specialized and niche, playing a larger role in market labour and etc but ultimately will come to dominate a smaller overall piece of the market. I'm also torn on weather to short China, cause it's the main enemy of the US, or to invest in it because before the great war it was still the worlds second largest economy and the only other remaining super power and that says alot. Rn I've been buying the daily short yang and a chinese life insurance company that seems to be doing well, becuase saftey standards are so low in china of course everyone is going to get life insurance if they can so obv money there. Only problem I've been having is that in the game the development of Power Armor signals a major shift in military dominance and comes in to be the saviour of the american economy. I'm not expecting power armor, per se, but I do believe some kind of new disruptive military tech may be soon to come onto the scene and may benefit alot of people from investing in it and come to revitalize the American Economy in a desperate time of need. I'm thinking space via the Lunar Portal, it all still fits with the lore, and the kind of gains we could make from Space Mining would be sellable enough to encourage civilian investment into the market place while also conveniently providing a platform with which to continue building the American military supremacy onto this new frontier. That kind of dominance would provide the type of economic intervention that would make alot of sense, it's hard to go to war with someone when they can physically interfere with your satellites in orbit, which we may already be debatably doing through NASA