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Joined: 01/16/2004 Posts: 36149
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Thank you Farragut, you expressed my long held concerns about the future of

American currency. The national debt is too large ever to be repaid. ( $83,000 per U.S. citizen).
Under the Biden administration it could sky rocket further. ( Not that it wouldn't under Trump.)
There must be a time of reckoning, right? And that reckoning should be in the form of drastic devaluation of the U.S. dollar. Other nations and people will not invest in Treasuries because they don't trust them.
But, I have been saying this for the past twenty years, and the dollar hasn't cratered. During the current pandemic there has been a drop off in bidders at the Open Market auctions, but that is explained for other, one-time, reasons. From a recent Brookings news release on this point:

"As one of the world’s most heavily traded assets, Treasuries should have been easy to sell. But a lot of other market participants were trying to sell amid the uncertainty about COVID-19: asset managers were seeking to raise cash to meet redemptions; foreign central banks were selling Treasuries to acquire dollars to manage capital outflows and exchange rates; banks needed to fund draws on their revolving corporate credit facilities; and investors were selling to rebalance their portfolios after the sharp fall in equity prices."

So, the lack of current interest in Treasury auctions can be explained as a one-time phenomenon. MMT is concerning because of its vast expenditures, but there is no radical indication that it has impacted confidence in the dollar. It also has apparently propped up the equities market. The mortgage market is experiencing an historic boom thanks to the Fed purchasing almost all newly issued government MBS. What happens when that spigot is turned off? I hate to think about it.

But, whether the dollar is threatened as the World's reserve currency, I am just not sure. It would seem a possibility. But what will replace it, the Wan? The Euro? History shows that when uncertain foreign capital seeks safety and liquidity it seeks the dollar. Not because it is not backed by anything, but because of the unknowns of other foreign currencies. Its the best of several bad options. The U.S. dollar loses about 3% in value each year. But how do other currencies fair, and for how long?
I am beginning to think that no amount of irresponsible government spending, nor no amount of growing annual deficits has any major effect on the confidence in the dollar. Perhaps, because of the vastness of the market. I don't know. It just doesn't seem to be vulnerable to the amount of U.S. debt. ( Not that U.S. citizens should not be concerned.)

[Post edited by at 10/29/2020 2:46PM]

(In response to this post by farragut)

Posted: 10/29/2020 at 2:19PM


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Current Thread:
Big changes ahead for the US Dollar? -- farragut 10/29/2020 12:18PM
  Here comes the Yuan. ;) ** -- AcousticHoo 10/29/2020 11:06PM
  A penny is worth more than a penny...... ** -- Zhoo 10/29/2020 10:26PM
  So all my $3 bills are no good? ** -- Hoodaddy22 10/29/2020 5:54PM
  Question: Why do they call them emerging markets? -- eric cartman 10/29/2020 4:23PM
  Emerging markets -- farragut 10/29/2020 4:50PM
  I think he means this .... -- 1994Wahoo 10/29/2020 1:25PM
  OK, I going to have to watch that ** -- GoochlandHoo 10/29/2020 2:27PM
  Apologies -- farragut 10/29/2020 1:17PM
  Should have adopted the $2 dollar bill decades ago. -- HOOGATORB 10/29/2020 12:33PM
  What's a realistic replacement? ** -- carolinawahoo 10/29/2020 12:26PM
  Im long in hookers and blow ** -- U235 10/29/2020 4:19PM
  The Big Mac ** -- GoochlandHoo 10/29/2020 2:03PM
  Not so much a replacement, but -- farragut 10/29/2020 12:48PM

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