sunnsea

How to Protect Yourself from a Falling Dollar

Good post. There real economy has grown very little since then. 1998 is the key level for everything including real estate. All values must be restarted from there and then factored up by whatever the CPI was annually. Since inflation, except for the real estate bubble, was low, there should be about a 10% gain in value on most assets since 1998 to now.


On May 07 06:39 AM pragmattist wrote:

> Isn’t the USD already hyper-inflated relative to other currencies
> given that the notional $700 trillion derivatives market and another
> $360 trillion in credit markets are mostly dollar denominated?<br/>
>
> Depending on loss provisions based on expectations of how bad things
> will get (defaults, interest rates), those "insurance" policies in
> the notional $700 trillion derivatives market represent $15 -$60
> trillion in credit risk. That is real money, and it is evaporating
> as we type. Normal credit markets are also contracting faster than
> the Fed can print.
>
> Wouldn't the deleveraging process underway in these markets only
> deflate the USD, as the Fed can never print enough money (which by
> the way does not require a buyer) to offset the hundreds of trillions
> of USD deleveraging? Though the Fed is surely trying.
>
> Wouldn't there be a strong USD vs EUR simply because there is more
> demand for the USD to deleverage USD denominated debt than demand
> for EUR to deleverage EUR denominated debt?
>
> Doesn't the Fed have more flexibility than the ECB (endogenous QE
> only) to increase or decrease its balance sheet? Couldn't the EUR
> get stuck in inflation (if they are able to contain deflation first)
> a lot easier than the USD from quantitative easing due to that lack
> of flexibility?
>
> How can any central bank allow high inflation or stagflation? Wouldn't
> the notional $500 trillion in interest rate swaps cause a crisis
> that would make the 2008 notional $60 trillion CDS crisis look like
> child's play? Wouldn't central bankers sell their gold before they
> let that happen?
>
> It seems to me that central bankers are indeed walking a tight rope
> between 0 and 2% inflation, but the USD can only gain in relation
> to other currencies as the deleveraging process brings us back to
> 1998 levels of GDP. 1998 being the year before Clinton and Congress
> repealed the Glass-Steagall Act.