11 October 2022
Looks like the American Order and the dollar world economy is breaking. Firstly since America came off the golden standard and began building a seemingly unlimited debt pile, currently 31 trillion USD. And secondly from the use of its reserve currency for political purposes in the form of sanctions. What does this suggest for preserving your wealth?
Reviewing the American Order since it was set up after the last war, it looks like things went okay until the 70s, when they had to drop the gold backing for their currency. Fact was, the Fed couldn't have honoured a run on the dollar, and anyway with 80% of world trade, specially in energy, in dollars, they didn't need gold anymore for investor confidence. So now America could borrow and print to their hearts' content and the capital markets and corporate credit were flush.
But the sheer chutzpah of what has happened since is breathtaking, because look: America has borrowed money from the rest of the world ever since Nixon's speech in 1971, and printed dollars to pay the interest and to buy all the things that they no longer bothered to manufacture.
So that was a really good deal for the States. The rest of the world were happy too as they got mostly prosperity, especially when China was admitted shortly after, they got safe navigation on the high seas, open borders for
free trade and the FTAs behind.
This is globalisation, which is cheap commodities being shipped around and built up, in long supply chains, eventually turning up on Amazon as iPhones etc. (But at the same time de-industrialising America and creating a knowledge economy founded in high-tech, and the stock markets and associated financial derivatives, that left a few very rich and most in poverty and modern slavery.)
So everyone that mattered (sic) was doing really well, making money, and that money was stored safely in the world's reserve currency, in Fort Knox if you prefer ...where the gold used to be once upon a time haha.
So that was audacious move number one: use your naval power to dominate the shipping lanes and give everyone paper money, protection and services; in exchange for goods and real, hard, assets.
But then things started to hot up, what with the financial crises in 1997 and 2008, and there were rumblings in the empire ... and how did America respond?
By stirring up chaos and bombing anyone who objected to their world domination. As an aside, note that America is a sea power, perfectly safe at home with oceans West and East and Canada and Mexico as neighbours. Contrast with Russia, a land power with 1,500 kilometers of difficult-to-defend borders making up its western flank.
But here's chutzpah number two. They've started putting sanctions on the money they'd been printing and dishing out so freely and even confiscating the foreign reserves of other countries ... this is a real cheek! And now it's coming back and it's biting them in the bum with this proxy war in Ukraine.
So anyway, for those who can free their minds from this perpetual drizzle of propaganda, here's an otherwise accurate article describing the current planetary suffering:
https://www.theguardian.com/commentisfree/2022/oct/09/observer-view-global-escalation-russias-war-ukraine
Looking beyond that article, we can see very well that the current fiat currencies have a remaining lifespan of maybe 18 months to 2 years max, before they are burnt up in inflation and money printing, despite high interest rates and Fed pivots and public spending cuts. Everyone will be selling the Eurodollar and Americans' PPP will crash. Further attempts to sow chaos and divide-and-rule, both abroad and at home, will not work anymore - there'll be real military and civilian pushbacks, new alliances and currencies, bonds and equities will tank, the people in western democracies will defy their gov.ts' increasingly fascistic controls and revolt against highly contentious austerity programs.
How can the decline and collapse of the American Order be reversed? What needs to be done? Or maybe it is too late - the lead rooves on your houses will melt, there'll be rain thunder and hurricane, the fields will fill with locusts...but the rest of the day will be bright with sunny spells? Or maybe in the abscence of a capable rising power, we are entering a divided or multipolar world - what does this mean for peace, prosperity and our way of life?
So here's the thing: given these two failure points, of the financial system itself, and from sanctions and potentially WW3, if you were certain that the dollar and the euro and the pound would be wiped out by inflation and panic selling in the next couple of years, where would you want to have your assets?
That's my question today.
