The currency thing is evolving. Some say it will take years to settle out. Meanwhile, local currencies are increasingly being used in settlement. For US investors, what matters is this. When other countries don’t need to use the $US dollar --and don’t want to use the $US, because the US has abused its privilege-- then those dollars come back to the US and exacerbate our inflation problem.
Last quarter, China dumped $53B of its reserves held in US treasuries. Russia has cut its holding of treasuries as well, as are all the BRICS countries, whose GDP is now larger than the G7. When the US can’t coerce others to lend it money, it has two choices, bomb or raise rates. Either is inflationary, causing buyers of US debt to want higher yields to compensate for increased risks.
Yeah, yeah, It’s an election year, and the current gov’t is propping up financial markets rather than risk losing. But the likely winner is just more of the same. More wars. More deficit spending. More inflation. And market-enforced, higher interest rates.
The jig is up with the $US dollar. The Fed/Treasury cartel can’t print its way to prosperity.
While China and a few others have decreased their holdings, most countries have increased their nominal holdings, more than enough to offset that decrease.
For example, the UK has increased their holdings from less than $200B to over $750B. During the same time, India has gone from roughly $50B to over $200B. France has gone from $60B to over $250B. Canada has gone from $60B to over $300B.
Good catch on the trends. So the next question becomes this. How well are the economies doing for the countries buying US debt? The UK is in recession, as is Canada, Germany, and others. Who is prospering? Who does the IMF project to have the best growth rates? The US isn’t in the top five.
Yeah, I live in the US, and my assets are held in $US dollars. But that doesn’t mean I believe all will be well. It just means that I’m guessing I can survive the coming damage well enough that the effort to personally de-dollarize isn’t worth the hassle. (Current incomes are 4x current expenses. So I can absorb a lot of damage without impacting my everything-is-already-paid-for, beer-and-bait life style.)
Okay. So if you aren’t investing in fixed income denominated in US$, which fixed income are you investing in???
That nothing compared to the fed. I think the fed dumped something like $180B of US Treasuries last quarter!!! And they also dumped another $105B of agency mortgage-backed securities!