Nixon Shock, The Reserve Currency Curse, And A Pending Dollar Crisis

The comments below are an edited and abridged synopsis of an article by Mike ‘Mish’ Shedlock

Many problems today, including deficit spending, trade deficits and income inequality, started in 1971. President Nixon wanted to fight the war in Vietnam, not raise taxes, and not hike interest rates to finance it.

Nixon Shock, The Reserve Currency Curse, And A Pending Dollar Crisis | BullionBuzz
Folding money in a jar on a white wooden background.

Up for discussion: The Vietnam War and the beginning of the dollar exodus; America’s currency, but the world’s problem; so much for temporary (no restraints on deficit spending); the powerful advantages of debasement; this is not 1960—Trump’s trade war is not winnable; nobody wins, but Germany and the EU hurt most in a global trade war; the failure of the London Gold Pool; beggar-thy-neighbour currency wars; forget the yuan; who really wants reserve currency status; the reserve currency curse; trade wars and currency wars; global consumers of last resort; and there’s a currency crisis coming.

“Since the dollar is still rising (thanks to European, Japanese, and Chinese tactics), it may take even bigger US deficits before something major breaks. On that score, both political parties in the US are poised to deliver increasing deficits as far as the eye can see. Meanwhile, negative interest rates are destroying the European banks. A currency crisis awaits, as the current path is not sustainable. Timing and conditions of the crisis are not knowable. It can start anywhere, but I suspect the EU, Japan or China as opposed to the US.”

“Meanwhile, I suggest holding at least some gold.”

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