Authored by John Mauldin via RealInvestmentAdvice.com,
You really need to watch this video of a recent conversation between Ray Dalio and Paul Tudor Jones. Their part is about the first 40 minutes.
In this video, Ray highlights some problematic similarities between our times and the 1930s. Both feature:
- a large wealth gap
- the absence of effective monetary policy
- a change in the world order, in this case the rise of China and the potential for trade wars/technology wars/capital wars.
He threw in a few quick comments as their time was running out, alluding to the potential for the end of the world reserve system and the collapse of fiat monetary regimes.
Maybe it was in his rush to finish as their time is drawing to a close, but it certainly sounded a more challenging tone than I have seen in his writings.
Currency Wars
It brought to mind an essay I read last week from my favorite central banker, former BIS Chief Economist William White.
He was warning about potential currency wars, aiming particularly at the US Treasury’s seeming desire for a weaker dollar. Ditto for other governments around the world. He believes this is a prescription for disaster.
One possibility is that it might lead to a disorderly end to the current dollar based regime, which is already under strain for a variety of both economic and geopolitical reasons. To destroy an old, admittedly suboptimal, regime without having prepared a replacement could prove very costly to trade and economic growth.
Perhaps even worse, conducting a currency war implies directing monetary policy to something other than domestic price stability. There ceases to be a domestic anchor to constrain the expansion of central bank balance sheets.
Should this lead to growing suspicion of all fiat currencies, especially those issued by governments with large sovereign debts, a sharp increase in inflationary expectations and interest rates might follow. How this might interact with the record high debt ratios, both public and private, that we see in the world today, is not hard to imagine.
I called Bill to ask if he thought this was going to happen. Basically, he said no, but it shouldn’t even be considered. It was his gentlemanly way of issuing a warning.
Currency devaluations against gold were part of the root cause of the Great Depression. Coupled with protectionism and tariffs, they devastated global economic growth and trade.
The Repeat of the 1930s?
Do I think it will happen in any significant way in the next few years?
It is not my highest probability scenario. But imagine a recession that brings the US deficit to $2 trillion, possibly followed by a governmental change that raises taxes and spending.
This could bring about a second “echo” recession with even higher deficits. This would force the Federal Reserve to monetize debt in order to keep interest rates from skyrocketing, thereby weakening the dollar.
Couple this with a concurrent crisis in Europe, potentially even a eurozone breakup, resulting in countries all over the world trying to weaken their currencies with the potential for higher inflation in many places.
In such a scenario, is it hard to imagine a desperate president and Congress, toward the latter part of the next decade, regardless of which party is in control, instructing the US Treasury to use its tools to weaken the dollar?
Can you say beggar thy neighbor? Can you see other countries following that path? All as debt is increasing with no realistic exit strategy except to monetize it?
* * *
New York Times best seller and renowned financial expert John Mauldin predicts an unprecedented financial crisis that could be triggered in the next five years. Most investors seem completely unaware of the relentless pressure that’s building right now. Learn more here.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
weer doomed by the FED
Bye more ovaltine
My favorite central banker is the one they hang first.
There will be no orderly end to the Dollar regime because even attempting it would signal the collapse is underway and usher it in pronto. The only possibility is a disorderly collapse.
The Fed has been monetizing debt for over a decade. It has lost control and it’s ‘tools’ are broken. Additional deficit spending is guaranteed to keep the rabble quiet for just that much longer. It’s futile to attempt any kind of real fix so none will be tried. Everything from now on is a holding action only.
The future has deflation first, followed by price inflation and then monetary inflation leading to hyper inflation. The Dollar will be suitable for wallpaper.
Monetary inflation is what got us here in the first place. We are currently in price inflation if one pays rent or buys food and otherwise lives and functions in the american wet dream. If you don’t eat or live indoors then compare the spike in prices for guns and ammo. That wasn’t caused by Obummer or fear of gun laws. My 94 ranger was just appraised at 3850.00 with a caved in driver side door. Are you kidding me? A 26 year old truck. 7 years ago I paid 500 for a very nice 92 corola with only 150.000 miles and put 50 more on it before selling it for 500.00. Try that today. We would be in hyperinflation now except for the fact that the banks receiving the Feds Fairy Godmother money are plowing it into stock buybacks and the Shale farce. When it crashes we will then officially be in depression.
The de-dollarization going on means that huge amounts of green paper are going to return to the US to purchase stuff which will drive prices higher still. As long as a large percentage of US dollars were sequestered overseas, they didn’t compete with the domestic supply.
This is all going to be a perfect storm.
Soa.
They are returning, without the shale farce and other gimmicks we would be up to our necks in dollars. The DOW valuation went from 15 trillion in 09 to 31 trillion now. It is indeed a perfect storm. Remember when Clooney said “She isn’t letting us out”? I completely agree with your comment but I think it’s reversed. Either way, getting anyone besides us diehard money followers to discuss it has been difficult.
A few months back there was mention of the term “quadrillion”, though I forget by whom and in what context. But you can bet your sweet dippy that when it starts being mentioned daily it is code for “duck, we are on the brink”.
I believe I read the term in a discussion of the unfunded debt of the country being in the neighborhood of 1/4 quadrillion. You are correct that we will be in deep do do when it becomes a regularly used term.
OTOH, people thought that when they started using the word “billion”, and then the word “trillion”…
Sen Dirksen: “The favorite sum of money is $1 billion – a billion a year for a fatter federal payroll, a billion here, a billion there.” March 8, 1962
Yep!
http://viableopposition.blogspot.com/2019/11/de-dollarization-end-of-us-dollars.html
While there may be no orderly demise of the dollar that is obvious, you can bet your ass they’re working overtime on its replacement right now. Once the majors have sufficient gold and globally signs off, they’ll pull the plug on the dollar.
Like 9-11 and the Patriot Act following weeks later; FEDCoin will magically appear out of nowhere and won’t we all be amazed at how wonderful it is that the FED saved us….again ( note: massive sarcasm at last sentence).
A crypto FED shitcoin is plausible up until someone else introduces a gold backed currency, crypto or otherwise.
The Chinese have been accumulating for a long time. No one knows how much gold they have. If they introduce a gold backed Yuan or some other currency, then that’s what becomes the target to shoot at.
A Fed shitcoin crypto has no chance in a free market. Can the Fed force its acceptance, yes. Can it maintain that force over time, no. The first player that returns to even a partial gold standard wins.
He’s not kidding – we are on the brink of a disaster greater then anyone can envision. Prepare now before it is too late to recover!
What Dalio said was very plain and should be obvious to anyone with the sense to step over a mud puddle. We have hit a wall, not 10 years from now,………….now.
https://finance.yahoo.com/video/greenwich-economic-forum-184135910.html?utm_campaign=JM-305&utm_medium=ED&utm_source=oac
“This would force the Federal Reserve to monetize debt in order to keep interest rates from skyrocketing, thereby weakening the dollar.”
In this context what exactly does he mean? Monetizing debt and weakening the dollar is what the Fed has always done. The money has always been issued as debt. It is the debt.
I scanned the linked information, but found no clarification. Maybe I’m missing something.
Never liked Mauldin’s name dropping and way of thinking. Referring to former BIS chief economist William White as his “favorite central banker” and letting us know that he called “Bill,” who had a “gentlemanly way of issuing a warning” about the economy, seem lame.
I stopped reading him years ago, way too wordy, and too clicky with the people who extend their pinky in the air while sipping their Dom Perignon and Veuve Clicquot.
Lars.
Right. Reluctant preppers interview with Rob Kirby got to the point much better.
Worldwide SDR’s have already been agreed on and we aren’t gonna be happy campers. Us Deplorables and Progs in the states will most likely be given some form of Scrip to use domestically. Maybe digital on an EBT card or in funny looking paper. If we have funds enough and wish to make a transaction outside the US we will need to buy US designated SDR’s with our nearly useless Scrip. They may delay issuing it and allow PM horders to get hungry enough to surrender their PM’s for a voucher that will later be devalued or taxed into near zero as punishment.
Far better men than me have been called crazy.
Sooooooooooooooooo, what is the play here? What am I supposed to do? I should have gone into debt up to my eyeballs?
Donkey.
For one, don’t surrender anything tangible if possible. At least not to the system, barter when possible. It’s unlikely people like us will be allowed to keep any absentee real estate as a store of wealth because we won’t be able to prevent squatting or local officials stealing it. It won’t take long for social order to break down or be broken down and those tangibles will be valuable.
My real aim of my dour comments is to catch a net surfer passing by off guard and unnerving them enough to question the accepted meme.
I’m trying to store my treasures in heaven.
FLea, check this out….
https://www.msn.com/en-us/video/news/christianity-now-most-persecuted-religion-in-the-world-report/vi-BBXwLnP
Donkey.
Right. Greens time was limited but got the figures across. 80%. We aren’t hearing anything of the Christian holocaust taking place in Africa and the Middle East. Using Mercs disguised as Muslim Militias, they are being methodically killed or sold for Labor, Sex and Child Sacrifice. Of course, Muslim opportunists contribute to it but it’s NWO funded.
In my lifetime the path downward started in 1964 or so with LBJ’s Great Society. Dummies! We thought that meant us.
I refer to it as the Not So Great Society. LBJ told his staff he was going to buy the vote of a certain demographic for the next 200 years and sure enough, they vote 90+% democrat.
Back in 2009 or so while searching for whatever truth/facts I could find on the why’s of the 2008 economic crash, I found TBP and Doug Casey.
Casey figured there were three ways to get out of the upcoming greater depression, tax it away, (how do you tax an overtaxed population more?), inflate it away, (Ain’t they doing that already?), or simply default and start over.
I assume our politicians will attempt the first two before being forced into the third. I also assume as this has been predicted for well over 12 years and the shit may not hit the fan for a few more years (Fourth Turning), when it does it will be fast and furious. Most of the rest of the world is in the same situation as America is, somebody is going to start some serious shit, and I also hope my kids and grandkids can survive the future, I’ll be canon fodder.
Some scary shit coming our way.Dsmn ,I hate thinking about it.