A Three Ring Circus With Kramer - Alternate Ending
Kramer: "Even when we agree (I'll have to take your word for it), I can't understand a thing you write. It's all winks and nods that only you understand. Reminds me of that Star Trek TNG episode with the aliens who speak only in references to their history. I'm a narcissistic enough writer to know the syndrome. But you've got it bad, man."
We Natter back: We agree. And this isn't all winks and nods that only I understand. There are quite a few of us who discuss it regular right here on SA. And we aren't talking Klingon. I will take the high road like Ricky Ricardo and do some 'splainin for you.
The dollar is so pervasive that everybody else can say F the dollar, but they can't. A massive flight or divestiture means hyperinflation of things denominated in dollars which the majority of global reserves, debt, commodities and transactions happen to be. Carry trade, asset mismatches, unwinds, market dislocations, global economic chaos ensues. Its like heroin, their hooked.
Looking at the other side, previously the pound and yen strengthened against their issuers will, and they had to deal with the deflationary consequences. What would happen if that happened to the dollar? So everyone sticks with the dollar.
The Fed has ignored the contracting ED eurodollar and petrodollar market, as both are out of their jurisdiction or purview. If the dollar keeps going up, which it should, contractionary economic trajectory, less petrodollars, higher eurodollar, higher dollar, the resulting squeeze is a self reinforcing loop leading to harder to service dollar debt for foreign NFC's, commodity based producers and all foreign dollar based debt. Again, carry trade, asset mismatches, unwinds, market dislocations, global economic chaos ensues.
The dollar could go through the roof. This Dec's seasonal contractions in monetary flows will be of a magnitude 3 to 6X higher than usual, resulting in a flash crash in commodities, more global carry trade unwinds and probable negative Q4 GDP. If you think oil is cheap now, or commodities have bottomed, or the SP500 sell off or the deflation of this global serial asset bubble is over, guess again.
Now moving to mass repudiation. Unless goldilocks shows up, the dollar junkies are dammed if they do and dammed if they don't. Let's just say, everybody collectively says F it, not just divest, but we can't pay our debts, we are stiffing the lenders, we are sick of the dollar, we are not paying the bill, we are all defaulting, BK bonanza. Everybody walks away from the monopoly board, flipping it because the bank ran out of money, to start a new game. Game reset.
So guess who walks away from $18 Trillion in national debt? That is the sum of years of profligate spending and the other two elephants being parked in the living room, AKA budget deficits, trade deficits or twin deficits.
If the dollar and bond junkies ever got smart and limited their dollar exposure to 20%, we would then have to deal with those three elephants and the three ring circus that has begat them. Monetary policy (serial asset bubbles, economic suppression benefiting the few), governmental policy (corrupt and irresponsible fiscal policy, budget deficits) and corporate policy (wage suppression, outsourcing to labor at the margin, trade deficits). Too many freaks, not enough circuses and we are privileged to have front row seats.
We Natter back: We agree. And this isn't all winks and nods that only I understand. There are quite a few of us who discuss it regular right here on SA. And we aren't talking Klingon. I will take the high road like Ricky Ricardo and do some 'splainin for you.
The dollar is so pervasive that everybody else can say F the dollar, but they can't. A massive flight or divestiture means hyperinflation of things denominated in dollars which the majority of global reserves, debt, commodities and transactions happen to be. Carry trade, asset mismatches, unwinds, market dislocations, global economic chaos ensues. Its like heroin, their hooked.
Looking at the other side, previously the pound and yen strengthened against their issuers will, and they had to deal with the deflationary consequences. What would happen if that happened to the dollar? So everyone sticks with the dollar.
The Fed has ignored the contracting ED eurodollar and petrodollar market, as both are out of their jurisdiction or purview. If the dollar keeps going up, which it should, contractionary economic trajectory, less petrodollars, higher eurodollar, higher dollar, the resulting squeeze is a self reinforcing loop leading to harder to service dollar debt for foreign NFC's, commodity based producers and all foreign dollar based debt. Again, carry trade, asset mismatches, unwinds, market dislocations, global economic chaos ensues.
The dollar could go through the roof. This Dec's seasonal contractions in monetary flows will be of a magnitude 3 to 6X higher than usual, resulting in a flash crash in commodities, more global carry trade unwinds and probable negative Q4 GDP. If you think oil is cheap now, or commodities have bottomed, or the SP500 sell off or the deflation of this global serial asset bubble is over, guess again.
Now moving to mass repudiation. Unless goldilocks shows up, the dollar junkies are dammed if they do and dammed if they don't. Let's just say, everybody collectively says F it, not just divest, but we can't pay our debts, we are stiffing the lenders, we are sick of the dollar, we are not paying the bill, we are all defaulting, BK bonanza. Everybody walks away from the monopoly board, flipping it because the bank ran out of money, to start a new game. Game reset.
So guess who walks away from $18 Trillion in national debt? That is the sum of years of profligate spending and the other two elephants being parked in the living room, AKA budget deficits, trade deficits or twin deficits.
If the dollar and bond junkies ever got smart and limited their dollar exposure to 20%, we would then have to deal with those three elephants and the three ring circus that has begat them. Monetary policy (serial asset bubbles, economic suppression benefiting the few), governmental policy (corrupt and irresponsible fiscal policy, budget deficits) and corporate policy (wage suppression, outsourcing to labor at the margin, trade deficits). Too many freaks, not enough circuses and we are privileged to have front row seats.
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