Any investment has risks and rewards, but holding currency notes is increasingly has become a major risk item. More so in the case of US Dollar. You can opt to mitigate it by including different currencies in your basket.
Yet this does not lower the risk you are taking because
US Dollar investment is too large. Well! It is all about leveraging on multiple
currencies in a basket on the one hand and America forestalling any perceived value
loss on the other. Simply
stated, the US Dollar is becoming a hot potato in the hands of astute investors.
Let me give few highlights of the internal weaknesses of the US Dollar in light
of the fear of geoeconomics catastrophe if and when the Dollar balloon bursts
Like every paper currency USD is a fiat money and the true nature of the fiat money animal is, it is not even worth the paper on it is printed. Since 1970s America printed whale of currency notes consequent to the Dollar Security Agreement she entered into with Saudi Arabia. In exchange for security, Saudis agreed to price their oil exports exclusively in US Dollar, creating a new monster known as Petrodollar. Moreover, Nixon removed convertibility of USD to gold effectively giving free hand for the US Treasury to accelerate the printing of currency notes, without any back to back security!
Furthermore, America has 33.17 Trillion US Dollar federal debt with an economy of US$ 27.36 Trillion of GDP. This figure is for the year 2023. This works up to 123%. Sounds OK. But this ignores the private debt that works to about 17.29 Trillion. Dollar denominated global debt is above 65 Trillion. Supporting this level the ideal currency circulation must be about 10% withdrawal rate must be in and around mere 1.15 Trillion. Right now the Dollar currency circulation is about 2.33 Trillion in nominal value.
What about shadow banking? The missing link of shadow banking is guesstimated to be around 34.2 Trillion. Money laundering & Narco trade output is variably estimated as high as Two Trillion in US Dollars. I have not included this figure on my calculation above due to obvious reasons.
If the global investment & trading community decides to sell their US Dollars in exchange for gold or other currencies, America would not be able to absorb the incoming quantum of US Dollar in currency form.
The repercussion in geoeconomics would shatter the global economic fabric and it would shutter the geoeconomics standing of America as a Super Power!
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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