The most dangerous time since the Civil War

[Kinser79]

(01-13-2018, 04:21 AM)Galen Wrote: 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.

A failure to understand what Nixon did with closing the gold window is not limited to Boomers. By and large I think most people not versed in economic theory fail to understand what he did. Indeed it is possible that Nixon himself didn't understand what he was doing. In my view Nixon made two very grave mistakes...1. He closed the gold window, 2. he made tapes of his skullduggery in the West Wing. Neither are excusable in my view. And I like Nixon, though that could be because his immediate predecessor was warmongering racist, and the two who followed him were utter morons.

Dying empires rarely accept their fate with grace. There will almost certainly be an attempt to inflate away debt. It might work on the domestic population but foreigners are under no obligation to accept paper for real money that they laid out. The only reason that the petrodollar works is because oil is sold in USD and everyone needs oil. Boomers have a tendency to forget that a barrel of oil has more than gasoline or diesel fuel in it. It has asphalt for paving and waterproofing, the base resins used in making plastics, precursors for fertilizers and pesticides. Indeed as I've pointed out elsewhere, even turning the entire car fleet over to electrics would not end oil dependence. It takes seven barrels of oil to produce the plastics that would be used in these electric cars.

(01-13-2018, 07:41 AM)David Horn Wrote: The USD is as powerful as it is because it's reliable.  Everyone needs a reserve currency to have for trade and a store of value.  Eventually, it may be the Renmimbi rather than the USD, but not now or soon.

The reserve of choice for the past several thousand years has been gold and suplimented with silver. The use of a fiat currency as reserves is an adoration of those economic norms. If the Chinese manage to make RMB fully convertable to gold the USD will lose that "reliability" over night. But then again fiat currencies are reliable in only one thing...failing eventually.