Just a short set of comments this evening. They deal with the usual, "The world is going to move away from the Dollar any day now" chatter.
If it is, it sure isn't showing up in the Foreign Central Bank holdings of Treasuries that are in custody at the New York Federal Reserve.
Here is the chart.
Look folks, I am just as concerned about the US Dollar as the next guy but when I look at the competition, I see one set of assorted problems or another. What that means is that the idea that the world is going to drop the Dollar and move to some sort of as of yet undefined currency in which to conduct the bulk of its trade simply does not carry much weight with me at this time.
Could this happen - yes, it could at some point but I have no idea what it might take to make the world move en masse away from the greenback and to some other currency or basket of currencies. We have all read the stories and heard the talk for years now. The problem with the talk is that there is not yet a viable substitute. If one does arise, hopefully we will be able to see it.
For now however, the US Dollar is still moving higher against several of the majors and US Treasuries seem to be finding willing buyers, even as interest rates move lower over geopolitical uncertainty and safe haven buying.
The world - at least as foreign central banks are concerned - seem more than happy to continue buying US Treasuries. Given the size of the US national debt, that is somewhat consoling for now.
One quick look at the inflation expectations chart or TIPS spread - it continues to move lower. Those buying gold are not buying it out of fears of inflation - they are buying it over geopolitical concerns.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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Thursday, August 28, 2014
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