Higher Interest Rates??

 U.S Dollar’s

Death

Don’t Bet on It!

TUESDAY, AUGUST 18, 2020

The Empire Will Strike Back: Dollar Supremacy Is the Fed's Imperial Mandate

CHARLES HUGH SMITH

Judging by the headlines and pundit chatter, the U.S. dollar is about to slide directly to zero. This sense of certitude is interesting, given that no empire prospered by devaluing its currency. Rather, devaluing the currency is a sure path to dissolution and collapse of the empire. This dynamic--devaluation leads to decline and collapse--is not exactly a secret.

Taking it one step further, those predicting the collapse of the U.S. dollar are predicting that not only will the Empire choose suicide, so will the billionaires because what will their fortunes be worth if the USD goes to zero?

The USD-is-dead crowd also seems to overlook the inconvenient fact that all the other issuers of fiat currency are busy debauching their currencies, too by the same mechanisms: the endless digital printing of new currency, distributed to already-insanely-wealthy financiers and corporations. (Debt-serfs can "save themselves" by borrowing more, heh.)

Now that this one-off emergency response has done its job, the Fed has to switch back to defending the dollar's value. The clueless punditry is absolutely certain that the Fed is going to drive bond yields to zero or even below. The reason why this is clueless is the punditry are only looking at the secondary mandates of the Fed and ignoring its Prime Directive: maintain USD supremacy.

Pushing rates negative and flooding the global economy with USD is a sure way to reduce scarcity and demand, so those are not going to happen.

Rather, U.S. yields will start rising--maybe in fits and starts, but they will start moving up longer term. And the Fed isn't going to over-supply the global economy with dollars; they're going to start limiting the excess issuance, not publicly but behind closed doors.

Scarcity and demand will both rise, dragging the dollar higher. Don't bother asking why or how, just watch the yields click higher despite every financial pundit pounding the table for zero or even negative yields. Yields may dip and weave from month to month, but watch the trend.

DYI:  Now that the basic domestic response to the staged faked plandemic is mostly over [economically speaking] the Fed’s will allow interest rates to rise thus stabilizing the U.S. dollar.  This is not only to maintain dollar supremacy it is so that the Fed’s will have room to drop rates when the next crisis occurs.

Deflationary forces are abundant not just domestically but internationally as well.  This will have a dampening effect on interest rates not just on U.S. rates but world wide first world countries.  With that said our next crises whether more COVID nonsense or especially a stock market crash, the Fed’s will drop rates once again.  I believe there will be one last hurrah for the bond bull market of a lifetime.  The ten year Treasury bond could very easily go negative especially if the economy and stock market were to crash.  After that has passed I’ll be in Smith’s – [he wrote the article] – camp for rates to slowly – requiring months and years – to move upwards.

Till Next Time

DYI