Everybody Is Wrong About The Dollar
It's been a minute since we talked econ, so let's dive into the most mystifying topic: The Dollar, and the (somewhat) optimistic future of the US.
Intro
I have been OOL on the market the past few months. Why dial in when I have no skin in the funny lines game? When I have no inclination to do anything with the information? That’s for high IQ eggheads who do that for a living to worry about. They have the MBA, I don’t. I just have a very odd addiction that comes and goes like my own addiction to tobacco. Sometimes it’s nice to go through a pack or a pipe or a cigar, and sometimes the thought of smoking brings a deep sickness to my stomach. Is that weird? It’s not even a hyperactivity or short attention span thing. It’s just a fixation.
My fixation on the market, the broader global economy, and the dollar-funding market is fed by a simple quandary I had years ago, that has since been solved: what is money (and why has it changed so much overtime)? I’m sure that is how many others are led into this very contradictory, schizophrenic maze that has no end. But even though much of my confusion with economics has been remedied, and therefore my interest has waned down to the mean, the insanity (and potential breakdown) of the dollar still keeps me entertained.
And that’s what I was chewing the cud on today: where are we in terms of the geopolitical future of the dollar, the broader economy, and the ramifications of a seemingly polarizing world?
The Right-Wing Has Some Economic Misconceptions
There is no doubt that everything is accelerating these days - the news cycle, price instability, social unrest, tyrannical narrative control (of all kinds), and a seeming hastened move towards integration of society into an equalized blob. This has a troubling effect on many well-intentioned and intelligent thinkers’ judgement about the future of the world in such a large degree that they make decisions and declare big predictions that will lead others astray. In a hectic time, all people seem to listen to is an authoritative voice - even if it’s stupid. I am no Nostradamus, but I do have a quiet voice in the back of my head that always keeps me skeptical of people’s observations about geopolitical future. Obviously we can throw out what the mainstream media has to say, but that’s never where the honest, well-intentioned, and well-informed ideas come from. It’s from the underground.
It is the underground that I wish to aim some of my skepticism. In specific, the general right-wing. From Alex Jones to the Blaze to TPUSA to PragerU to the DR. It isn’t that they are entirely wrong, nor is it that what I have to be skeptical of means that I’m right. I consider myself right-wing, and I am not trying to be David French. I just don’t like hopping on a bandwagon that has a cracked wheel. What it means is there are factors that many people simply wish to ignore because it doesn’t fit certain fantasies, potential exciting futures, immanentizing the eschaton, or even an agenda which they would like to push.
A large issue is the opportunistic accusations they make against government being “reckless spenders” and “pushing up inflation” and that the dollar is on a downward spiral. It comes from their knee-jerk orthodox allegiant devotion to certain economic schools of thought (normally the Austrian School). It is all well and good to accuse “leftist politicians” of deficit spending and somehow draw the conclusion that that causes inflation. It doesn’t. Inflation is caused by a direction injection of cash (spending power, whether electronic or physical) into the real economy. Commercial banks do this (the vast majority of the time), and not the Fed, the Treasury, or any other government institution with the arguable exceptions of welfare programs. In simple terms, Bank of America does this, not Jerome Powell or Janet Yellen.
In the case of China, Europe, and especially Japan, inflation has never originated from government spending. In fact, it seems to have absolutely no impact, and all economies have faced deep disinflationary or deflationary paradigms because of it. The only way a nation, especially one as prosperous and spend-happy as the US, is to have a constant injection of money plus a populace eager to spend (and not save or pay down already-existing debt). This is good when the population uses that money productively (though, “productively” is a nebulous adverb).
Money is created by banks (through loaning). It’s quite literally as simple as that (for the sake of brevity). This is where much of the right-wing gets lost because it likes playing the blame game and tying one line to another and saying that it is correlated is a very convenient way of proving a point - a point that is false. Why should you be concerned about economic ramifications in the first place? That isn’t your goal. It’s like a side-goal that gets you extra polemical points - who cares?
Anyway, that’s not the only issue. Because of the complete misunderstanding of how money works - oh, and the mistaken assumption of QE being inflationary rather than deflationary or uninfluential (which I explain here and here) - the right is so dominated by the myth that central banking is somehow an implicit evil, that government spending is always or almost always inefficient, that efficiency is even good in the first place, etc. Ironically, this is how they play exactly into the myth that the Federal Reserve and other central banks have some kind of magical influence over the bond market or broader economy.
Instead of viewing the current medium-term paradigm of dollar inflation as something reminiscent to that of the early 1950s which had all the same ingredients (and only lasted two or three years), they view it as the new normal and that it will last at least a decade. It’s a doom and gloom mindset that bunker-building, ammo-hoarding libertarians have.
It’s Alive!
Ironically, a lot of their manufactured indignance is simple counter-signaling to the left. In the end, neither side really embody an entire truth. They’re both working with half-truths and engage endlessly in the same dialectic without coming to the full realization that maybe trying to understand the place of government, and the concept of money, isn’t completely orthodox. I mean, Austrian Schoolers will openly say economics is the dismal science, yet turn around and preach from the book of Mises (Human Action).
What they should be doing is understanding the nature of money as it functions today. Specifically, the money that is the new gold standard (at least since 1971, but more accurately since about 1945 ). The dollar is not some currency vying for power and equal to other currencies that is enforced by treaties and accords and fancy meetings. It’s like a pitbull among chihuahuas, not an alpha chihuahua that has to ritually enforce its own power. The chihuahuas know the pitbull is in charge. This is a giant misconception of dissidents, that somehow because of “muh culture is downstream from law” that money isn’t something organic and budding. They see the dollar as the petrodollar, enforced by contracts, rather than the eurodollar, enforced by demand. The US dollar has constantly been in demand as the world reserve currency, which is why in times of economic malaise, there is giant demand for dollars. Nations and corporations borrow in dollars, from foreign banks, for the sake of trading with other nations and corporations. This is what has led to the conception of eurodollars - dollars which are outside of the regulatory reach of the Fed, SEC, etc - that are loaned out by foreign banks based on the LIBOR rate. Whole nations have their currency backed by the dollar, as in, they need dollars to create currency. In order to be made whole in this world, you need dollars! In order to trade within it, and work alongside other big dogs, you’ve gotta play the same game they’re playing. You can’t just bring your own chips to the table. You have to pay for the House’s chips! There’s no other way, and if you wish to eject yourself from the system, you will be closed off from the entire world and shunned!
This is where many people’s views of geopolitics completely crashes down - they have no understanding how melded to the dollar the entire world’s economy is. It isn’t something that is just solved via some contract or treaty. The nature of money isn’t that easy!
This misconception is dangerous. It completely taints many people’s worldviews, as much of their views are like tendrils growing from the original fungi spores of their economic misconceptions.
Due to this, they seem to think, along with their views of US bureaucracies and institutions being on the verge, that somehow the integrity of our government and society is near fatal collapse, and that the rest of the world will eke out modest yet more powerful futures. Others think that the US is just as on the verge as Europe or China. It’s a childish view to think that somehow societies just fall independent of others and that others do just fine. That’s not what happens, especially in a world so tied together - tied together by the US dollar. Societies are organic. They aren’t some video game or simulation. The nature of the dollar is the same way.
This minimization of the US’s power, and the strength of the dollar, is where the future predictions of many a right-winger becomes very shallow. Not to say the majority, but a large chunk seem to actually think an alliance between China and Russia will make the US swoon (when we literally have infinite money that is in perpetual demand). The US is in a much better position than even Britain was at its height because we have a fiat currency that doesn’t have to be backed by a gold that could lead to the US’s fall if other nations get more gold than it. It literally will always have more than others, and others are literally in shorter and shorter supply of dollars. You have to view the US dollar as gold, not as just some other rinky-dink fiat.
In the case of Russia, they are in a position of either no return, western-sponsored regime change, or playing footsie until they fall to their knees and beg for us to come back. I am not here to predict the future of Russia concretely, but nothing looks good for them, and treating them as a real contender for becoming an equal challenger to the US is a real stretch. China has more likelihood being they have the infrastructure, vigor, functional bureaucracies, and brains, but I wouldn’t hold my breath on them. China is too busy sitting on a fence with one toe on the “we are great and mighty” side and their entire foot on the side of “we want to play ball and be the US’s friend.” It’s just the latter is covert, and the former is extremely overt. It doesn’t change their position. You can’t obey the myth of progress without having room to expand. The US has all the room, and everybody else is in the hole.
Which is what bring us to the myth of deficits, which I explain here. Many people really enjoy bringing up government deficits, but all government deficits do are:
Give people makework.
Create Bonds AKA Treasuries (essential to the financial economy especially as the global economy slows down).
For the most part, deficit spending is just a long way to the bottom. Not some imminent crisis that must be stopped before muh dollar crashes. Bro, debts mean nothing to the government - once again, especially the US. All it does is create a totalizing state wherein there can be no private contender. This is neither good nor bad, it just is. It is the nature of the technological society.
Listen, I am not a math whiz. I am just pointing things out for what they are using very basic metrics and observations. If you want the hefty stuff, then I definitely recommend Deer Point Macro and Jeff Snider. I’m just a spiritual messenger.
So, where are we then?
Well, a very interesting spot. We’re in a tough spot, to say the least. Inflation is petering off (say what you want, I don’t deal in the short-term, kiddo lolol), dollar demand is clearly there:
US literally bailed out Switzerland today LMAO ^
But there is the situation of LIBOR rates rising which implies lessening dollar demand. However, we can clearly see this exact situation in the early 2000s, 2008, and 2019, and what happened? We sunk to lower rates, lower global economic growth, and record levels of dollar demand by foreign nations and domestic commercial banks. Obviously, after each time, there was a recession, but that’s my point. The US ekes out of each recession much better than everyone else, while everyone else has less reassurance and more catabolism.
It’s quite clear that the system was supposed to break in 2008, and it didn’t. It didn’t in the late 2010s, nor even in 2020. And the band plays Waltzing Matilda. What is going to convince people that some insane event isn’t enough to crack this system - a system that falls further and further into dollar demand and economic efficiency? Seems like wishful thinking to me…
It’s funny, because the system has only become more fixated on creating dollar demand with rules like this that created artificial demand for US government securities for money market funds so that they could remain stable (albeit, lower yielding, obviously). And with nations that deficit spend… need a bailout… where are they going to go? Do I need to point at the screenshot again lol:
Okay, to sum things up:
The US has a lot more strength and relevance than the right gives to it.
The dollar has a lot more strength and relevance than the right gives to it.
The “GAE” (Global American Empire, for the fortunately uninitiated) is not going anywhere, and only increases in relevance to the ROW as the ROW needs bailouts.
China and Russia are not super secret scary bad guys who got one up on “the west.”
Europe is fucked.
Deficit spending is not some extremely inflationary thing that is super bad and is going to destroy the dollar.
The national debt will not increase to some spooky number and explode. Wanna try me? lol
Central banking is not some implicit evil, and if you are such a dumbass that your economic opinion is simply “it only good when me and good boys do it” then I have a bridge to sell you.
Ya wanna know what the future looks like? What most of history looked like. Economic malaise (AKA economic stability). As Thomas777 says - the 20th century was an anomaly that cannot be recreated. That statement firmly reflects much of my own views of how I view the future. It isn’t going to be some electric boogaloo of 1890-1990. We are in a period of returning to the mean, and returning to the mean takes decades, if not hundreds of years.
Look, my buddy Planetologist, as does this nerd (I mean that affectionately), think the fall of certain PTB will happen more rapidly than expected. I am in no stern disagreement with that sentiment. It’s actually quite obvious how accelerated everything is becoming. It’s just, in the grand scheme of things, the fall of the (euro)dollar empire is not something that just happens overnight. It is too convenient of a system that has plenty of life left in it. Sure, it might mean a lot of implicit debt slavery that gets worse and worse until people are indentured servants (they are already, it’s called student debt). I just don’t think this is something that will collapse so rapidly, not only because of the course of history, but because it is in absolutely no one’s interest to see this system collapse. Not Russia’s. Not China’s. Not Europe’s. Not Japan’s. Not Americans’. If that is something you wish to see, then you’re essentially a Stirnerite, and I literally have nothing in common with you.
The long drawn-out malaise as the global economy’s carcass decays is a better allegorical comparison, as all entities within this system don’t want war or a violent fall if they can’t help it (and they can), and wrongdoers (within the machine) like Russia will face the full brunt of the totalizing system’s force. It doesn’t mean other systems will not gain legitimacy as the bloating of this system created an information processing glitch that amplifies with time. It is quite clear that other entities, systems, governments-in-exile will perform just fine under the radar. One thing you pencil-necks could learn is that not everything needs to be a contract or treaty for it to be true. De jure becomes almost completely worthless as de facto changes constantly.
So in closing, I just want y’all to take a minute before you throw huge platitudes about how the evil GAE cabal must be destroyed or is in a freefall collapse already. It is not that easy, and you’d be surprised by how wrong you are. As Jack mentioned recently, it isn’t so bad being a minority, and might actually be better for us to function in such a way. I know he was referring to whites, but that’s my broad point - it’s fine that things suck and are so catabolic. Ride the tides and do good. Getting stuck in the headspace of how bad malaise and collapse are is the mindset of someone bored and procrastinating. Get up and do something more cool with your time. If all you do is sit and ferment, your mind and heart will spoil, and your ability to make the decaying world more beautiful will decompose with it.
“Freedom’s just another word for nothing left to lose.”
Kris Kristofferson, Me and Bobby McGee (1971)
Big brain content. For those seeking knowledge and hindsight, and something better than the usual rw commentary of imminent greekish collapse porn, here you go.