The steady and continuous decline of US$

 

Meanwhile the USD could possibly go to zero..

'Debt explosion leading to the currency becoming worthless has happened in history for as long as there has been some form of money whether we talk about 3rd century Rome, 18th century France or 20th century Weimar Republic and many many more.

So here we are again, another monetary era and another guaranteed collapse as von Mises said:

“There is no means of avoiding the final collapse
of a boom brought about by credit expansion”

This disastrous borrowed prosperity, with ZERO ability to repay the surging debt, will lead to one of the three consequences below:

1. THE US$ GOES TO ZERO

2. A US DEFAULT

3. BOTH OF THE ABOVE

The most likely outcome is number 3 in my view. The dollar will go to ZERO and the US will default. The same will happen to most countries.

Many people say that the US can never default. That is of course absolute nonsense.

If a country prints worthless debt that nobody will buy in a currency that no one wants to hold, the country has definitely defaulted whatever spin they put on it.

In the next few years, not just US but all sovereign debt will only have one buyer which is the country that issues the debt. And every time a sovereign state buys its own debt, it has to issue more worthless debt that nobody will touch with a barge pole.

Printing more money to pay for previous sins has never worked and never will.

And this is how money dies, just like it has throughout history.

How can any sane person believe that with debt going up 4.5X faster than tax revenue that the debt can ever be repaid.

Even worse, with US interest payments on the debt surging from around 0% to probably 5% by 2025 the interest on the debt will climb to $2 trillion or circa 30% of the annual budget.

So with higher interest rates, higher deficits and rising inflation the scene is set for a high or hyper-inflationary period in the next few years.

So virtually every observer believes that the Fed (and ECB) will not just stop raising interest rates but pivot and lower them again.

In my view this will not happen except for possibly very short term. The 40 year interest rate downtrend finished in 2020 and the world is unlikely to see low or negative rates for many years or decades. High inflation and high rates will continue for years. But as we see in the 40 year chart of the 10 year US treasury below, there will be many corrections in the coming uptrend.

Central banks are always wrong and always behind the curve. They kept short term rates at zero or negative for over a decade. From 2009 to 2019 the balance sheets of major central banks increased by $13t. But then from Aug 2019 to 2022 an explosion in central bank debt took place, expanding their balance sheets $23t from $13t to $36t.

As with all Ponzi schemes, the current financial system will collapse too as the holders of the fake paper money realise that the money is worthless and that the emperor is totally naked.

That will be the final phase of the current monetary system with unlimited money printing as the $2.3 quadrillion debt pyramid collapses

Link to article:
https://www.zerohedge.com/markets/von-greyerz-end-dollar-goes-zero-us-defaults 

 

 Anonymous