The end of the dollar
Over the centuries several currencies have taken place as the world reserve currency. Today the dollar holds this place having displaced the British Pound as the reserve currency after the Bretton Woods agreement at the end of the WW2. Previously, this status have been held by the dutch guilder, the florentine florin, the arab dinar and the Roman Denari. So, it’s only natural that as history moves forward it’s only natural that the dollar is replaced by another currency, be it in a violent or non violent way.
What is really curious about our current situation is that besides the loss of the dollars status as a reserve currency, we are living in a fiat currency system. What’s a fiat currency? Well, traditionally people and governments have used commodities (goods that everyone needs and, thus are accepted by everyone) as currencies, mostly metals (silver and gold). This keeps governments from creating money because in order for it to pay it’s employees/armies, it has got to get the gold out of the mines. On the other hand, a fiat system occurs when the currency has an intrinsic value below it’s perceived value, in other words, the paper in which a USD 100 note is printed costs way less than USD 100, meaning that the government can print money at will to pay for its employees and armies. Every fiat system in history has collapsed, even governments that adopted commodities as currencies have used currency debasement to finance itself when the money ended (for example, replacing the silver/gold in a coin/bar by another metal – a notorious example is the Roman Empire at its end).
Therefore, the end of the dollar would cause a collapse in the economy by disrupting the world economy, making central banks reserves worthless, dollar denominated debt inexpensive and, ultimately, the American government bankrupted.
End of the dollar common themes
- The Petrodollar conspiracy theory: this theory says that in exchange for Saudi Arabia denominating its oil in USD the US agreed to back the Saudi Royal family. What grants the USD reserve currency status is the impossibility to buy oil without dollars. For that reason, whenever a country tries to sell oil in another currency, the US acts and give an end to its leader either by war or by covert operations.
- Triffin’s Dilemma: In order for a currency have the reserve status, the country issuing it has to run trade deficits in order to provide its currency to the rest of the world. On the other hand, the more the country issuing the world reserve currency runs trade deficits, the less the currency has value, causing it to lose the reserve status.
- QE and US Fiscal chaos: this is also a debt collapse theme. The US government has been increasing its budget deficits since the end of the gold standard and has “printed money” after the 2008 crisis to improve the economy (program know as Quantitative Easing). People argue and fear that the government will pay its debt by printing more money and that the FED will lose its hand on monetary policy leading to a complete loss of value by the dollar.
- Currency wars: As a way to steal investments (especially manufacturing jobs) countries have incentives to keep their currencies artificially low in relationship to the dollar along with tariffs and capital controls to keep a trade surplus. When those measures are lifted, malinvestments come to light because the advantage is no longer there (but investments such as factories and roads were already made.
End of the Dollar Content list
- “Currency Wars” by James Rickards: about the “current” currency war.
- “The Death of Money” by James Rickards: The book main topic is regarding the possibility of replacing the dollar system for a system based on the IMF Special Drawing Rights as world money, giving the dollar a soft landing as it happened with the British pound.
- “The Money Bubble: what to do before it pops” by James Turk and John Rubino: short book talking about several topics. It also goes over a little bit of demographics and austrian economics.
- **Macrovoices series – “The Eurodollar University” and “The Dollar Endgame”.
The idea behind an energy collapse is an shortage of fossil fuels. Basically, oil, coal, natural gas, etc, would become more expensive dragging everything else with it. The point is not that fossil fuels will end, but that we will have to spend a major part of our wealth on fuels, leaving less room for healthcare, education, etc. We already have had spikes in oil prices and that propped up renewable energy sources, but even so, every source carries its own problems.
Common themes on energy collapse
- Biofuels and food prices: One of the major revolutions caused by fossil fuels is the fact that we no longer have to use food to supply transportation (through animals) and humans, we can dig the fuel and have all of the food to ourselves. But when oil raises too much, it becomes profitable to use food to make fuel instead of selling it to whoever wants to eat it, causing hunger in poor countries.
- Nuclear energy risk: Another alternative is nuclear energy, but it carries huge risks with memories from Chernobyl and Fukushima.
- OPEC and conspiracy theories: a common theme of discussion is that OPEC rigs the price of oil low to break competition from alternative sources and raises the price up when alternative energy main producers have gone bankrupt.
- End of Oil: There is always talks about the end of oil and we always end up discovering more reserves. But, according to this 2017 article we will run into oil problems because there has been too little investment in the sector during the last decade due to low oil prices and discoveries in this decade have been very low. On the other hand, this 2018 article claims that oil prices will keep falling because the economy will continue to slow down.
Energy collapse content list
I don’t have suggestions on this topic.
People aren’t having enough unprotected sex :). 75% of the world economy is kept on 4 places: the US, Europe, Japan and China. All of those 4 places currently suffer from low birth rates and will suffer from a diminishing population for the foreseeable future. The flagship of this trend is Japan, a deeply indebted country that has more old people than young. Europe is following the same trend and will soon accumulate huge debts due to social security. The US isn’t much different, with several pension systems very near bankruptcy. China is the place that is more far away from this reality, but will certainly suffer from a diminishing population caused by policies such as the 1 child, they will no longer be the place with plentiful cheap labor that hey were/are.
Immigration may be a solution, or not. The US have received generations of immigrants with success, but currently has a xenophobic attitude towards immigrants embodied in Donald Trumps wall. Europe have received mass of refugees from the middle east and will likely pay for it with the extinction of its culture, this article estimates that by the end of the century there will be only 22 million native Germans left. Japan couldn’t and still can’t bring enough immigrants to sustain its economy. I also doubt that China will be able to bring on immigrants, it has too much structural problems such as lack of water to attract people.
This leads to a huge deflationary environment with factories able to produce for a gigantic world population and vey few people actually able to consume, along with governments that trust on a continuous growth of GDP while the GDP shrinks (even if the GDP per capta grows, like its happening in Japan).
Demographic collapse common themes
- Social security and pension fails
- Immigration and cultural disruption
- Fourth wave theory: this is a cicles theory that claims that every 4 generations there are major world making geopolitical events, we would be currently in this period. The last one was the WW2, and previous to that the American Civil War.
- Kondratiev Waves: Russian economist with several followers that predicted economic behavior through cycles throughout centuries. It isn’t all about demography, but it does play a large role.
Demographic Collapse content
- The Next America by Paul Taylor: this book outlays changes in American demography.
- The Sale of a Lifetime by Harry Dent: I don’t like the book nor the author, but it’s a nice read for whoever is into cycles.
The world is depleting its supply of drinkable water and global warming is causing disruption both in rain patterns (and thus, making it rain outside of reserves) and agricultural lands. This will likely increase hunger and make several regions thirsty. Poor quality water also can’t be spent on agriculture, generating food shortages. I haven’t read a lot about the subject, but I think everyone should know the state of water in China and know the Cape Town case, where the agricultural sector has already lost USD 1.1 billion due to water shortages.
Debt and Malinvestment chaos
Central banks have been keeping interest rates near 0 since the 2008 crisis (and even before), this has generated a hoard of zombie companies, rising consumer and corporate debts, bubbles, etc.
Common Themes on Debt and Malinvestments
- Countries debt bubbles: basically looking at China, Europe, Japan and the US debt, compare it with their revenues and realize that it is impossible for them to pay their debts. So far those countries have been benefiting from central banks 0 interest rate policy, but they will begin to raise rates soon (US is already doing it), which will increase interest expenses…
- Quantitative Easing: The FED (US central Bank), ECB (Europe Central Bank), BoJ (Japanese Central bank) have been massively buying up assets that have sovereign debt as collateral. The BoJ have gone further and bought some ETFs (stocks), you read it correctly: the Bank of Japan is a partner of every company listed on Nikkei. Even more comical, in order to fight the currency war, Switzerland central Bank (Swiss National Bank – SNB) has bought american stocks, currently the SNB has more facebook stocks than Mark Zuckerberg. But now that the economy is solid and we are seeing “synchronized global growth” central banks want to sell those assets to return things to normal, the FED began to sell in the beginning of the year and by the beginning of 2019 all central banks will be selling those assets simultaneously (according to them, they will be able to do it without crashing the market).
- Subprime auto bubble: remember the 2008 housing bubble and the shady investment tools? Yeah, they’ve done it again with automobiles and the bubble have already popped. Now we just have to wait while the chaos spread through the rest of the economy.
- A new housing bubble: LOL! This article is from the end of 2016
- Corporate debt bubble: Companies have been surfing on cheap credit which allowed them to do stock buybacks by issuing debt. Also, there is a hoard of zombie companies that depends on cheap credit to remain out of bankruptcy.
- Chinese malinvestment: while the US+Japan+Europe are in a similar situation, China is in a completely different (but as scary) state. What most people don’t understand about china is that it is a communist country, despite its little capitalism. This results in China having a relatively “healthy” small business sector sustaining gigantic group of State Owned Enterprises (SOEs) that have its executive body occupied by friends of the Chinese Communist Party (CCP). Those SOEs are hugely indebted and have soviet levels of inefficiency. Want more bad news? The whole chinese banking system is composed of SOEs and was designed using soviet models! That’s correct, they using a soviet banking system to sustain a “capitalist” economy! Obviously, this wouldn’t go well and today the “healthy” private small business of China are living through a cheap credit bubble.
- “The coming bond market collapse: how to survive the demise of the U.S. debt market” by Mark G. Pento: I haven’t read the book yet, but I heard this interview and it caught my attention.
- “Red Capitalism: the fragile financial foundation of China’s extraordinary rise” by Carl E. Water: this is a very nice but very technical book and shows how China has been cooking its banks books and bailing out inefficient SOEs. Be ready to dig into a sea of expressions and numbers.
- China uncensored on Chinese shadow banking
- China uncensored on Anbang government intervention – insurance company worth USD 100bi that went bankrupt
- China uncensored on China’s real estate bubble
- Wall Street for Main Street on zombie companies
The main idea here is that robots will take human jobs and the only jobs left will be massaging and sexually servicing the owners of robots. A class of the super rich that own robots and the poor who don’t own robots. I think we are really far away from this scenario, but you may like to watch Humans need not apply.