Written by Bryan Lutz, Editor at Dollarcollapse.com:
Every Sunday morning I sit down to write a few thoughts.
Sometimes these thoughts end up being about life, other times they are on gold, geopolitical issues affecting the markets, or the economy.
Here are three thoughts for this morning:
1. Gold has become the second largest global reserve asset surpassing the Euro. But the real competition is between gold and the US Dollar.
So Central Bankers have been selling their Euros and buy something else.
For some, that has meant buying gold.
For others, that has meant buying the US dollar, but…
In any event, this year gold became the second most held reserve asset according to global Central Bank reserves.
img via Financial Times
To compare the Euro and gold, here’s what that looks like on a smaller scale.
img via Financial Times
But the real competition on the global scale is between gold and the US dollar.
That’s when we’ll know the US dollar has clearly turned the post.
Because when nations, even those inside the EU stop holding Euros as their reserve asset it shows a lack of trust.
The same goes for the US dollar.
When Central Bankers start choosing gold over the US dollar…the system must change.
2. Happy Father’s Day to all the Dads! Especially those with drawers full of flashlights.
Younger dads may not have experienced this yet.
But you will soon… 🙂
Behold, the flashlight collection:
source: 1lumen.com
There’s no need to be ashamed.
Once it gets big enough, a good collection is a source of healthy pride.
You never know when you’re gonna need one.
Or, whether you need to see further, brighter, or into those nooks and crannies of the computer tower.
So, I have no affiliate link for you.
Only a good ol’ Happy Father’s Day!
You deserve the spotlight. 🙂
3. The game the Fed has been playing with the US Dollar for the last 20 years broke in 2020. Will the same playbook really help?
The game is called “Currency Wars.”
It was first popularized by Jim Rickards in 2012 with his book called, you guessed it, ‘Currency Wars’.
The game plays like this:
Since the USD is the world reserve currency, every other currency measures their value by it.
So every time the US printed more money, they devalued their currency, which made it harder for every other country to export their goods.
That’s because their currency would now be worth more in comparison to the US dollar.
What do they do in response?
Their only option is to devalue their currency.
This is how the US dollar gets its nickname:
“King Dollar”
So, for more than the last 20 years, the Fed has been increasing the supply of US dollars.
You can see how this worked out for the 30-year US Treasury bond yield over the last 20 years.
The US Treasury bond yield trended down, while its value went up.
You’d assume it was becoming more valuable.
But it wasn’t.
The fiat delusion was piling up.
In 2020, the delusion broke when the money printer kicked into hyperdrive.
Now you can see the contrast between money supply and the 30-Year US treasury yield.
As the Fed increased interest rates, yields shot up instead of going down.
Now they’ve flatlined been going sideways for the last two years.
So we are coming to a crossroads in the next few months.
When the Fed does decide to lowers interest rates, will treasury yields react the same way they did from 2000 to 2020?
If yields decrease, the “currency war” game might get played a little bit longer, but…
If yields increase, it shows the USD is on the way out and this time really is different.
One thought on "3 Sunday Morning Thoughts – June 15 Edition"
37 trillion national debt. All the Fed is doing is rearranging the deck chairs on the Titanic. Bonds are paper. The dollar is paper. Nothing more. Yields are dependent on what the paper is worth. It’s not going to get any better unless the system changes, and it won’t. Physical gold, silver, and toilet paper. They are the real assets. Do not trust the government. Never. Ever. Trust. The. Government.