Discussion in 'Markets & Economies' started by President Trump, Jul 4, 2020.
^ that’s called inflation tax, been around for yonks
I don't think there is a single person in the world that would argue against that, everyone knows about inflation. I'm guessing the point you want to make is regarding the amount of inflation.
That's assuming the USD will remain as a forced reserve/settlement currency forever. Which it may not.
Yeah I'm just pointing out the dollar tanking for all to see.
Easiest way for the average person to notice is go buy some groceries. Even tho that's not officially measured I know.
thats not the dollar tanking you are alluding to Johnny, thats inflation.
I would say my groceries cost about 10% more today then a year ago. Clearly higher than what the government is reporting, but lower then what i would consider tanking.
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gerund or present participle: tanking
fill the tank of a vehicle with fuel.
"the cars stopped to tank up"
fail completely, especially at great financial cost.
Well it's not the vehicle one haha.
^ ok well that clears that up, the USD is not tanking. Your mind might be though.
Some of our food has gone up 30 percent or more here recently. It's pretty rediculous.
I just grabbed a few sacks, enough to fill the bottom of the cart tonight and it was 186 bucks.
Toby Keith could write a sad country song about it.
^ you guys had higher inflation during the 70s. Don't hold large amount of cash and enjoy the ride.
It hasn't stopped and could far surpass the 70s and probably will. It's just getting started here.
I'm enjoying the ride so far! Whoop whoop!
Before covid hit, in Aus, you could (easily) fill the baby seat in a supermarket trolly with $300 of items from the Coles ‘health’ section. And the baby would still fit in there.
HA HA, $100 bills singing, "how do you like me now?"
My assumption is based upon US Treasury security demand. For sure if the USD loses its "special status" then then there will be less need for USD, but that doesn't mean there will be less demand for US government bonds.
The choice for sovereign wealth, pension and insurance funds etc as well as corporate investors will be buying the bonds on offer from a sovereign nation ie the US, UK, Aus, Canada, Japan, NZ etc vs the bonds issued from the cluster-fuck European Union of Socialist States. Which nations are in the best position to honour their debt obligations, regardless of whether they have a reserve currency or not? Italy or Japan?
^ I thought you were talking about USD currency. Demand for government bonds seems irrelevant today for most countries.
I don't see any reason why demand for USD or US bonds will be any more favorable then demand for Euro or Euro debt.
Both bonds pay close to zero interest and both can't default by force. As for currency, if US loses reserve status then again i can't see why it will gain more demand. Europe has about the same GDP as America, so there is about the same amount you can buy with each currency.
I think the deciding factor is price inflation. So if America is having 5% price inflation, while Europe has 1%, then Euros would be better to hold. At least in my eyes.
I'm framing my comments in regards to the OP which was pointing toward a US default.
I disagree with your assumption regarding US and EURO bonds. Currently the ratings suggest that the risk of default from both CBs are pretty identical. Maybe it's speculation, but if for some reason the USD would lose it's peculiar position, would you not agree that this would cause quite a degree of uncertainty in global bond markets and that investors would feel more secure with holding bonds from a nation that has sovereign currency status rather than a Union of nations who have no control over their currency status?
Only one way to find out for sure what everyone will do
Maybe everyone will pile into AUD and will cause Lowe to have a heat attack.
Euro demand doesn't have to exceed dollar demand there just needs to be a drop off in demand for USD and rise in demand for other currencies.
Foreign demand for treasuries has been dropping for some time.
The Fed is trying all sorts of things but the decline could feed on itself. For example, liquidity ratios have been relaxed so that Bank holdings of treasuries now do not count in the bucket of what US banks must hold reserves against. This creates demand because Banks can hold more treasuries without holding any more reserves and receive free the yield. Who wouldn't take that deal. I'm more exposed to the USA than Australia and I have to say what I see is concerning for the USD. I hope you are right.
There's always a lag in reported data but from 2019 there's below, but if you've got more current data then please post, and the amounts are measured in millions of dollars.
The biggest holders in order are Japan, the UK, Luxembourg and The Cayman Islands. China is next I think, followed by the 53rd state Canadia which is the Australian equivalent of New Zealand.
Foreign holding as a percentage of publicly held debt was 48% in 2015, 42% in 2016, 43% in 2017, 39% in 2018.
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