
A Crash in the Dollar Is Coming - mancerayder
https://www.bloomberg.com/opinion/articles/2020-06-08/a-crash-in-the-dollar-is-coming
======
headmelted
Maybe.

The article's whole argument centres on whether the US' place in the world is
waining or not. That isn't really the point. The dollar is the world's
currency because it's the most _stable_ of a bad bunch of options. For another
currency to displace it, that currency would presumably need to be seen as
_more_ stable than the dollar at that time (and probably by quite a bit to
elicit wide change).

What would replace the dollar? The yuan, euro and pound all have a history of
fiddling whenever it suits the government of the day, so why switch from the
dollar?

"Already stressed by the impact of the Covid-19 pandemic, U.S. living
standards are about to be squeezed as never before."

The US economy is driven by it's companies, who enjoy lucrative tax
arrangements and a lot of leeway relative to other jurisdictions. Google,
Amazon, Facebook, Apple and Microsoft are going nowhere, and neither is anyone
downstream from them. They aren't going to get a better deal based on tax _or_
red tape anywhere in the world.

~~~
admax88q
What fiddling has been done to the euro?

~~~
headmelted
Seriously?

[https://www.forbes.com/sites/isabeltogoh/2019/09/12/what-
to-...](https://www.forbes.com/sites/isabeltogoh/2019/09/12/what-to-expect-
from-the-european-central-bank-decision/#2a4fd91b3df9)

[https://www.intereconomics.eu/contents/year/2016/number/4/ar...](https://www.intereconomics.eu/contents/year/2016/number/4/article/quantitative-
easing-in-the-eurozone-a-one-year-assessment.html)

[https://www.investopedia.com/articles/investing/070115/under...](https://www.investopedia.com/articles/investing/070115/understanding-
downfall-greeces-economy.asp)

~~~
joshuaissac
The Forbes and Intereconomics articles are both about quantitative easing
(QE), which is also performed by the US Federal Reserve.[1][2] In your
original post, you had implied that the euro was being manipulated in a way
that the US dollar is not, so QE is not enough.

The Investopedia link is about Greece, and it does not even mention QE, let
alone any other type of currency manipulation.

1\.
[https://www.ft.com/content/11b338a2-6d0c-11ea-89df-41bea0557...](https://www.ft.com/content/11b338a2-6d0c-11ea-89df-41bea055720b)

2\. [https://www.fool.com/investing/2020/03/23/federal-reserve-
pl...](https://www.fool.com/investing/2020/03/23/federal-reserve-pledges-
unlimited-quantitative-eas.aspx)

~~~
headmelted
I don't want to repost a reply from elsewhere in the thread but as it's
directly relevant:

Yes, I was referring to QE, which is much more disruptive in the eurozone than
in the US, even at lower volumes. In the US, you have a central bank that is
tasked with protecting the economy of the country, and the central bank is
responsible for the money supply. Same in the UK and almost anywhere else. In
Europe, the central bank is tasked with protecting the economies of 19
different countries who each have divergent tax and expenditure strategies
(some markedly so), meaning the currency is subject to the fluctuations caused
by any number of those states getting into difficulty at any time, which
happens frequently.

------
_aleph2c_
Here are the other articles the author has written for Bloomberg:
[https://www.bloomberg.com/opinion/authors/ANXbd-
tdHWs/stephe...](https://www.bloomberg.com/opinion/authors/ANXbd-
tdHWs/stephen-s-roach) From this list, you can see a theme in his messaging.

~~~
Werewolf255
Thanks for that link, I found the OP pretty specious and wanted to see what
else the author had been up to.

~~~
mancerayder
He was the chief economist of Morgan Stanley and his speciality is China. Why
is he necessarily a paid operative of one thing or another (that's the
absolute implication here). People can believe things. And anyway that's the
point of argumentation, right, to have a back-and-forth of ideas? You did see
he had an argument with facts, that can be proved or disproven, right?

------
rossdavidh
There is, no doubt, a dollar crash coming at some point in the future. That's
kind of like saying a recession is coming; always true, but without know when,
it's not to useful. I have read articles saying that the dollar's days of
special status are ending, for at least 20 years now. Someday it will be true.
Don't bet on it being soon.

Given that none of oil, bitcoin, euro, yen, yuan, etc. seem to be skyrocketing
in (dollar-denominated) price, it doesn't seem like the current environment is
any different in this respect. Gold is the only store of value that seems to
be going up in dollar terms in a major way. I don't doubt that gold is a good
store of value, but I don't think (for logistical reasons) it will displace
the dollar any time soon.

Someday, it will be true. Is this the time? I suppose it could be. But we keep
hearing this, every few years for decades now.

------
ilamont
Not identified in Roach's scenario are the beneficiaries of the coming crash
of the dollar. Judging by his regular criticism of U.S. trade and foreign
policy in publications such as People's Daily, Global Times, and Beijing
Review, that would be China.

~~~
mytailorisrich
The US would lose, and so would those who hold dollars or dollar debt. China
would also lose.

But that would weaken the dollar's position and thus lead to an increase in
the use of other currencies, and in that aspect China and the EU would gain.

------
el_don_almighty
The US is engaged in a modern version of Mutually Assured Destruction (MAD)
game theory using using national debt backed in USD instead of nuclear
weapons. Any strategic move against the dollar by another currency endangers
the value of the country's economy because they hold so much US debt. Try to
screw with the US and you will be destroyed faster because of the way debt
markets work

Can China move their Yuan into a premier position by lowering the dollar? NO
WAY. The minute their US denominated debt value reduces, their economy goes
bust

In the end, as long as the US has the most distributed debt, the biggest
bombs, and the most aircraft carriers, the dollar stands supreme and will even
survive the marginalization of petrol.

~~~
rossdavidh
"If you owe the bank $100 that's your problem. If you owe the bank $100
million, that's the bank's problem." \- J. Paul Getty

In this situation, China would be the bank? Not, I should add, a long-term
stable situation; sooner or later the bank will have a liquidity problem, and
then you have a problem when you need more cash. But it probably does keep the
U.S. and China from rushing as headlong into enmity.

------
hendzen
Overly simplistic view that misses out on a lot of nuances about who in the US
benefits and who is harmed by the dollar system. For a much better essay see
here: [https://phenomenalworld.org/analysis/the-class-politics-
of-t...](https://phenomenalworld.org/analysis/the-class-politics-of-the-
dollar-system)

------
mcfly1985
As someone who's lived through significant inflation in his lifetime,
American's are ill prepared. In my experience, the government will do
everything possible to hide the fact that inflation is even happening.
"Official measures" of inflation won't begin to capture the problem until the
damage is already done. People buying debt at these absurdly low interest
rates have, quite frankly, lost their minds.

There's not many options to protect yourself either. Stocks? Maybe, but a lot
of companies will go bankrupt. Gold? Maybe - but if you're investing in paper
gold it likely won't be there when you need it...if you're attempting to hold
physical it can be easily stolen.

Preparing for this the second time in my life, I'm opting for Bitcoin and real
estate (with nice fixed-rate mortgage debt to purchase). Fingers crossed...

~~~
mgr86
> People buying debt at these absurdly low interest rates have, quite frankly,
> lost their minds.

how does this jive with

> I'm opting for...and real estate (with nice fixed-rate mortgage debt to
> purchase)

Honestly, I don't have a finical background. But isn't a mortgage just buying
debt that is slowly paid off. I don't think real estate is a terrible
strategy, but it does not always raise in value. 2008 was a reminder of that
for a lot of people.

~~~
mcfly1985
People buying debt are the people buying bonds. Would you lend 100k to someone
for 30 years at 3.25%? If you do, I think you're foolish.

However, if you're borrowing 100k from someone at 3.25% for 30 years you'll
likely be very happy you did.

~~~
mgr86
Thanks for the answer. That appears to be a logical answer.

------
tuna-piano
The expansion of the Fed's balance sheet is just extraordinary... given the
news coverage in other areas, this seems like a huge piece missing from public
discourse.

[https://fred.stlouisfed.org/series/BOGMBASE](https://fred.stlouisfed.org/series/BOGMBASE)

While the gigantic increases in monetary base in the 2008 crisis didn't cause
inflation, I (as a layperson) don't know that is too relevant. In 2008 there
was a huge decrease in monetary velocity, meaning the total money supply
didn't jolt up.

Today, this seems very different, with a gigantic jolt in the M2 measure of
money supply.

[https://fred.stlouisfed.org/series/M2](https://fred.stlouisfed.org/series/M2)

Quite scary to me to build this crisis before the previous crisis was unwound.

~~~
hakesdev
Yes the fed's balance sheet has inflated, but it has inflated at the same time
as dollars have stopped flowing out of the United States through trade and
tourism.

The global economy needs dollars:

\- 84% of all non-domestic debt globally is US Dollar debt. \- Around $100trn
of global debts are denominated in US Dollars.

This creates a tremendous demand for dollars, and if they aren't flowing
through trade and tourism, dollars will need to be purchased on the spot
market or missed debt payments will make these foreign cos go BK.

US Fed's monetary base inflation is different from the ECB and Japanese Fed in
that the world will sop up basically all of the money it prints. In order for
the US Fed to have the same impact on inflation, they need to print multiples
of what the ECB and Japanese Fed print.

I agree in the end the dollar will come, I just think we will have a dollar
bull rally before then.

See this thread from Raoul Pal:
[https://threadreaderapp.com/thread/1264224744271945728.html?...](https://threadreaderapp.com/thread/1264224744271945728.html?refreshed=yes)

------
mark_l_watson
Of course the crash in the dollar is coming, but no one knows when. I read a
good book on the subject "Dedollarization" a few months ago which I recommend
both as an interesting read and also because the authors' analysis seemed
right on.

If I were entering into a betting pool with friends, I would bet on it either
happening soon (like this fall) because of our political and covid-19
situation but if we get through the near future without a dollar crash, then I
would bet on about 5 years from now.

Interesting times, my friends, interesting times.

~~~
robjan
What do you suspect would replace the US dollar?

~~~
mark_l_watson
A basket of currencies, that would also include the dollar.

------
aritraghosh007
Somewhat true. The dollar's place as the world currency today stems from not
just its stability and negligible political volatility but also the key role
the US plays in keeping the world trade (most importantly oil) efficient with
its gargantuan deployment of armed forces around major trade routes. There has
been a significant shift in the latter policies in the last 4 years that is
bound to cause some reverberations as we step into the next decade.

------
nine_zeros
There is no alternative. Really, all other currencies are just trailing the US
dollar as the world leader in printing.

However, yes, the world is sick of using the dollar only. If another viable
alternative shows up and erodes only 10-20% of global transactions, the US
dollar will decline rapidly.

The only way I can see this happening today is with Euro growing balls to buy
oil in euros only or island nations around China using Chinese yuan.

------
34679
Do people actually believe that you can create trillions of new dollars
without that having an impact on the value of each dollar?

~~~
api
It can if other processes are effectively destroying dollars at a similar
rate. Modern economies are credit economies with the majority of money in
circulation being multiples of M1. If there's a credit crunch, vast amounts of
money can be thrown into the fire very quickly.

The Fed thinks we are having or are about to have a 2008-like deflationary
credit crunch. If they're right, then we will not see massive inflation. If
they're wrong, we may.

~~~
34679
In your example, it still devalues the currency. The devaluation is just
offset by other factors.

------
anovikov
bullshit. is dollar overvalued? purchasing power index of the U.S. is equal to
most other developed countries.

[https://www.indexmundi.com/facts/indicators/PA.NUS.PPPC.RF/r...](https://www.indexmundi.com/facts/indicators/PA.NUS.PPPC.RF/rankings)

~~~
mcfly1985
Right - but this neglects the fact that the US has printed an enormous amount
of dollars to finance an incredible amount of spending. So sure - the
purchasing power is on par with other countries, but those other countries
haven't had the luxury of printing trillions to finance themselves.

~~~
anovikov
They had. Japan printed a lot more in terms of GDP. In fact U.S. debt is
pretty much average looking for the developed world.

------
rb808
The biggest problem with the dollar is America's ruthless crackdown on dollar
transactions, examining everyone and criminalizing those who break the rules.

That isn't bad, the problem is you never know who's going to be in the bad
box. Iran, Cuba had agreements with Obama administration and trade was opening
up then a few years later you go to jail for making dollar payments with Iran
see Huawei exec. Places like Indonesia, Saudi, Turkey, Argentina, Egypt are
sometimes friends then suddenly enemies. I dont know why they will continue to
want to hold dollars. I think if we see another 10 years of the Euro holding
together and/or some good crypto currency dollar will fade.

------
tomato2juice
The article focuses on "savings", but much of the impactful forces were
already in play. This article was discussed previously and had much more
valuable insight: [https://www.lynalden.com/global-dollar-short-
squeeze/](https://www.lynalden.com/global-dollar-short-squeeze/)

Nit pick:

> Look no further than the Trump administration. Protectionist trade policies,
> withdrawal from the architectural pillars of globalization such as the Paris
> Agreement on Climate, Trans-Pacific Partnership, World Health Organization
> and traditional Atlantic alliances

TPP was the worst example to throw in there. It was a horrible proposal, that
both parties hated, and both presidential candidates said they would withdraw
from. Either the author was trying to just make it look worse, or had zero
clue about the mulit-year TPP debate.

------
neonate
[https://archive.vn/NIw0L](https://archive.vn/NIw0L)

------
mohamedattahri
One thing this op-ed is not mentioning and that is becoming a stronger
motivator for many countries to find an alternative global currency is the
abusive use of economic sanctions that started with the Obama administration,
and almost spiraled out of control under Trump.

If any bank wants to transact with dollars inside or outside the US, it needs
to either open "an account" with the federal reserve, or work with a bank
which has one as an intermediary. If a company ignores sanctions put in place
by the US against another country, industry, company or people, their bank is
liable, and can have its license to transact with dollars suspended,
essentially cutting it off from the global economy.

Back when the US believed in multilateralism and concentration with its
allies, sanctions were perceived more positively that they are today in the
America first and alone era.

------
Havoc
So where to move the money? EU? China? Australia?

~~~
op03
I buy toblerone bars.

------
techbio
Paywalled, try:

[https://www.yahoo.com/news/crash-dollar-
coming-210024166.htm...](https://www.yahoo.com/news/crash-dollar-
coming-210024166.html)

