The most dangerous time since the Civil War

[Galen]

(01-12-2018, 08:34 PM)Kinser79 Wrote: I don't know that a formal default would even be necessary.  Simply removing the oil-dollar link would suffice in constraining governmental spending.  Europeans don't need dollars except to buy oil and things from other people who also want to buy oil.  The Japanese don't need dollars except to buy oil and buy things from other people who want to buy oil.  The same is true of the Chinese, and every other people on the planet.

Thus, if just a few major oil exporters unlink their oil to the dollar, or accept other forms of payment (say Yen or Euro or gold or bitcoin or anything else) then the petrodollar is inevitably weakened.  Should this happen in a death by a thousand cuts it could take as long as 20 years to happen (which would fit nicely with my Mega-Crisis saeculum theory) and by which time US bonds backed up by the FED printing press would essentially be downgraded to junk status.

Nixon closing the gold window in 1971 was and never has been acknowledged as a default but it was.  The Boomers here were alive and probably had and still have no idea what it all meant.  In fact, the law fixing the price of gold at about $40 per oz is still on the books but the market feels rather differently about it.  It looks like China is introducing a yuan-gold backed oil futures contract which may do the job ending the dollar hegemony since redeeming the contracts in gold takes trust in the yuan out of the equation.

The real question is will DC accept the and of Pax Americana and given recent behavior the answer would appear to be no.  In that case an attempt will be made to inflate the debt away given Trump's Goldman-Sachs appointments to the Fed board.  I do not expect the government to admit to defaulting when it does default.