American

Empire

Too Costly to Maintain!

These Countries Are Quickly and Quietly Dumping the Dollar

Over the past few months, there has been a steady uptick in the number of countries dumping significant portions of their dollar holdings. This is causing many people to worry whether or not the US economy is in for a massive shock sooner, later, or somewhere in between. 

Still, although we may not know the specifics, we do have a general idea of what would happen. 

• First, Americans are going to lose the convenience of being able to use their currency just about anywhere in the world, both on a business and individual level. That’s not such a big deal on the individual level though it may cause a few hiccups for mid-sized businesses. 
• Second, interest rates will most assuredly go up. This is going to make it harder for businesses and individuals to pay back any loans they may have received to start or maintain their businesses, buy a home or car, and it will stifle economic growth and it is going to make more people hesitate to request those loans knowing that interest rates will be so high. 

DYI:  Interest rates will go up as more and more countries not only sell off our bonds but more importantly stop purchasing new debt thus ending our easy access to capital.  Our budgets will then be constrained within our ability to pay unless Congress throws caution to the wind continuing their spendthrift ways ginning up the winds of inflation.

However, I’m more positive than the author of the article.  America will remain a strong currency but no longer as a reserve currency and its ability to project power worldwide.  Empire status – and as far as I’m concerned a good thing – will by default move at least internationally back closer to our Constitutional roots.    

• Third, and perhaps the most dangerous, is the potential for widespread inflation and devaluing of the currency. Loss of world reserve status will undoubtedly lower the value of the dollar. The question, however, is whether that devaluation would occur slowly over a period of years or even decades or whether it would take place within months, weeks, or days. Obviously, the former would be preferable if the dollar does have to be unseated because it would at least allow time for Americans to brace themselves and to prepare and innovate for the coming devaluation that would gradually get worse. In some cases, American exports might even be helpful for some American exports (though not helpful in terms of wages – competing via lower living standards is a race to abject poverty). But at least a slow burn would allow for Americans “in the know” to stock up on food, attempt to pay off their debts, arm themselves, and make prudent financial decisions in anticipation.

DYI:  Once again I’m not as negative.  America has many positive traits going for her.  One is access to both the Atlantic and Pacific with a bevy of high quality ports.  Navigable rivers able to move large barge traffic over vast portions of the American landscape at very low cost.  With top quality farmlands located very close too many of our navigable rivers.  Include a built out highway system and rail system that is the envy of the world.  Do we have problems??  You bet and I address many of them on this blog but it is not time yet to count America out unless your livelihood depends on the continuance of the American Empire.

 DYI