US dollar- the ultimate new shitcoin

My thought about the dollar

Back in the day in America, currency was backed by something… They had the gold standard. For every dollar note you took to the Federal Reserve in America, they would give you an equivalent amount of gold. Then they moved from that to the Bretton Woods system, where they said they will not exactly show you how much gold they have but every other country’s currency across the world will maintain a peg to the dollar. The dollar in turn will have a peg with the gold… I think it used to be $1 with some number of ounces, . Then, Bretton Woods went away

When Richard Nixon was in power, and America had two issues on both ends — they were fighting a war in Vietnam and trying to send somebody to space… this was around 1971, and they really needed money. They said if we have to back whatever we have with some semblance of gold in our Federal Reserve, we won’t have the money required to spend on these expeditions and events. So Nixon said that we will take our country off the gold standard, and that it will be a free trading market. He said that our currency’s value will be based on supply and demand and how people traded internationally. Ever since then, America has been unscrupulously printing money without anything backing it. In the ’90s, they were printing — by printing, I mean printing out of thin air — as much as half a trillion dollars a year.

Earlier, they were printing something like a trillion dollars a year. Last year has been a severe outlier where in one year alone, they have printed four or five trillion dollars a year.

Now, one has to think about supply-demand economics. So much supply for currency with no backing should weaken the currency? It’s a much more complicated story than that… The reason that the dollar maintains an artificial level of stability is because people like us, in India, China, all of us who export a lot of services and goods to America, we benefit disproportionately from having our rupee artificially deleveraged or artificially depreciate… The problem is a lot more stark for China. They export a lot of goods to America and get paid in US dollars. Now they do not carry the dollar back into China, because that would appreciate their own currency. They buy US debt with the money so they don’t have to take it back onshore to China. That, and many other countries behaving like that, has created the dollar that we have today. It’s artificially inflated. It works for many, many key stakeholders and the dollar retains the value that it has today.

All this being said, what they have created by printing excessive money is debt. And last year they were already struggling to service that debt, and were in turn printing more currency to pay that debt… I personally think that someday the chickens will come home to roost… I don’t know if you guys remember this, but George Soros, a very popular fund manager, went after the pound. Till then, nobody thought the British pound could be challenged. But he actually did break its back and he was able to significantly benefit from a large correction in the pound. Something like that will happen to the dollar. Increasing yields will reduce the time before something like this could happen

Until then countries are going to take advantage of this.