Andy Sutton Blog | The Global Dollar Shortage – Palisade Research | Talkmarkets
Former Chief Market Strategist for Sutton & Associates, LLC, Freelance Writer
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Andy Sutton is formerly the Chief Market Strategist for Sutton & Associates, LLC, a Registered Investment Adviser in the Commonwealth of Pennsylvania. He writes the periodic Economic and Financial Commentary “My Two ... more

The Global Dollar Shortage – Palisade Research

Date: Saturday, October 20, 2018 10:03 PM EDT

Andy’s Notes: There’s a lot here and it flies in the face of what most people believe and how they understand money. We have been discussing this as well for sometime. It has been a foregone conclusion in the minds of many that we’ll end the dollar cycle in a massive hyperinflationary spiral due to all the debt in the system. Then there is the $500 trillion in notional value of various derivatives. We wrote about this in our Petrodollar article from some weeks back that the demand for dollars internationally will contract due to countries like Russia and China cutting small deals here and there to avoid the dollar. We opined that the not-so-USFed would react by becoming hawkish and reigning in the supply of dollars to hold their value. So far, so good.

It’s a balancing act though because this means interest rates must rise as that is one way the money supply is managed. Rising interest rates have all sorts of unpleasant negative effects for economies hooked on cheap debt. Another tool at the central bank’s disposal is the reserve requirement and the multiplier. Unfortunately, the multiplier is where the money comes from for America’s economic ‘growth’. So kill that, and you kill GDP growth. To sum it up – for now – the central bank needs inflation to keep growth because of the twisted way it is measured, but too much money and the value drops. Forcing a dollar shortage internationally in this geopolitical environment is an act of lunacy, however. Obviously, the not-so-USFed would love to have its cake and eat it too, but this game can only go so far. For the record, we also think the term ’emerging markets’ is really a slap. According to US financial wizards, these countries have been emerging for the last two decades. Maybe it’s time to use proper words. America is losing the top spot it has occupied since the end of WW2. Slowly, mind you – most aren’t even paying the transition heed. It gives us no pleasure to make that statement either, but America is being killed by its own monster.

Another week and another signal flashing red to deal with. . .

The credit market – in my opinion – is indicating an inevitable ‘crunch’ coming up. And even worse – we’re seeing the global dollar shortage deepening.

Many readers know I haven’t exactly been shy about focusing on this dollar shortage problem all year – you can read more here, and here.

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