> The United States now has loose fiscal policy and loose monetary policy.
This is the key takeaway from this article. This will spell doom for the US consumer's purchasing power, it makes sense to own foreign currencies, gold, and foreign stocks. Getting out of dollar denominated assets before the dollar crashes is key.
You can't look at one nation's currency in isolation.
Since other nations are simultaneously loosening in a competitive devaluation, buying foreign currencies and equities won't necessarily protect you.
I've yet to see a step by step explanation of how the dollar is supposed to crash. While there are many hyperbolic and hand-wavy theories getting passed around, none that I've seen acknowledge the role of other nations or of second-order effects.
I agree it's prudent to own some gold and Bitcoin in case the bottom falls out, but the probability of hyperinflation seems pretty low to me even if the Federal Reserve prints a few trillion dollars during a crisis.
See, this assumes that free trade is the norm and autarky isn’t. We are all supposedly interdependent it is said, but it could very easily become a scenario where everyone closes their economies.
Heck, they’re already doing that now with COVID-19. Then there’s no need for the dollar as a reserve currency. Not saying this will happen but it is a possibility. The real test is if Trump will impose tariffs on foreign oil. Other countries may retaliate on other goods and it quickly spirals from free trade to autarky.
Gold and bitcoin (and other cryptocurrency) seem like the only rational way out to me. I never asked for my dollars to be diluted like this and I feel powerless watching it happen before my eyes.
Not really. Look at what happened in 2008. The Fed's LSAPs significantly increased the money supply with no feedthrough to inflation or a weaker dollar. The inflation process is much more complicated than laypeople tend to think. Weaker labor unions, wealth inequality, trade, demographic factors, etc. all contribute to the weakening of the linkage between increases in the money supply and the inflation rate/dollar strength.
One of the reasons for the monetary stimulus is that in a crisis, everyone wants dollars. Which is why the dollar continues to strengthen despite all of those efforts. Additionally, significant portions of the stimulus (repo, dollar swap lines, etc.) are unwound naturally and automatically as the crisis abates. So it's not like the money sticks around to weaken the currency.
Also, increasing bank reserves from monetary policy doesn't tend to increase lending one-for-one as banks have not been reserve constrained in a long time. Lending is dominated by capital requirements and risk tolerance. So asset purchases lead to increased reserve levels, which strengthens financial conditions and increases lending (and thus Main Street consumption and investment) somewhat, but it's not like $2 trillion of monetary stimulus => $2 trillion of ketchup bought off the shelf.
It does spell doom, but the problem is the whole timing thing. Since you can't predict the future, I think it makes sense to not get out of dollar denominated assets, but simply not go 100% in on it.
This is the key takeaway from this article. This will spell doom for the US consumer's purchasing power, it makes sense to own foreign currencies, gold, and foreign stocks. Getting out of dollar denominated assets before the dollar crashes is key.