IMF "Bretton Woods Moment"

6 Replies

I don't see any way this bodes well for the U.S. Dollar

Thoughts?

https://www.imf.org/en/News/Articles/2020/10/15/sp101520-a-new-bretton-woods-moment

The dollar, like all fiat currencies is on a path to its own destruction.  This was assured in 1913 with the creation of the Fed and accelerated when Nixon took us off the gold standard in 1971.

The important question is how long will the dollar remain a viable currency?   A few years ago, I was thinking it might survive well beyond my lifetime, but with the printing of money the past 15 years, I believe I might see its destruction.  Or, at minimum, I will get to see a lot of zeros added to dollar bills, and possibly the elimination of the cent, the idea of coins. If you study economies with governments that have no monetary will power, the value of the currency quickly is diluted to nothing.

So, what is the little guy to do?   Do not keep your money in cash.  Put your money in hard assets that hold their value.  In Venezuela (where I once lived) people bought cars as a store of value.  That as a particularly unfortunate idea as cars depreciate, but they had limited options and the cars depreciated more slowly than the currency. Ironically, in the local currency of Bolivares, the value of the car went up over time.

What are the best hard assets?  Some like metals.  They do hold their value but must be sold to yield cash.   I heard about a businessman in Zimbabwe during hyperinflation.  The moment he had enough cash, he bought a goat or a cow.  The animals held their value in dollar terms and he could eat or sell their milk for short-term cash.   That seems a brilliant idea.  And, while I'm not a farmer, income producing property basically does the same thing.  

What is the best opportunity to protect yourself? In a word debt. Debt is a great hedge against the deterioration of the dollar. Even better, long-term fixed-rate debt at low interest rates. Go out and get yourself as much FNMA debt as you can and let the value of the dollar slide. Imagine buying as much property as you can at 75% LTV and then the value of that debt slides to zero while the value of the property remains. That really is about as close to a no-brainer path to wealth as you can get in this world.

OK, sounds like a campaign speech for someone that thinks government and Keynsians should run everything and decide economic policy.  If they have a success story, love to hear it.  Otherwise, I'd tell her to look at Cuba and Venezuela.

Yes, it is very troubling.

As far as bad for the dollar, so what?   You get paid rent and buy apartments in dollars.  We make look like a bargain to foreign investors and they'll drive prices of hard assets up.

Originally posted by @Greg Scott :

The dollar, like all fiat currencies is on a path to its own destruction.  This was assured in 1913 with the creation of the Fed and accelerated when Nixon took us off the gold standard in 1971.

The important question is how long will the dollar remain a viable currency?   A few years ago, I was thinking it might survive well beyond my lifetime, but with the printing of money the past 15 years, I believe I might see its destruction.  Or, at minimum, I will get to see a lot of zeros added to dollar bills, and possibly the elimination of the cent, the idea of coins. If you study economies with governments that have no monetary will power, the value of the currency quickly is diluted to nothing.

So, what is the little guy to do?   Do not keep your money in cash.  Put your money in hard assets that hold their value.  In Venezuela (where I once lived) people bought cars as a store of value.  That as a particularly unfortunate idea as cars depreciate, but they had limited options and the cars depreciated more slowly than the currency. Ironically, in the local currency of Bolivares, the value of the car went up over time.

What are the best hard assets?  Some like metals.  They do hold their value but must be sold to yield cash.   I heard about a businessman in Zimbabwe during hyperinflation.  The moment he had enough cash, he bought a goat or a cow.  The animals held their value in dollar terms and he could eat or sell their milk for short-term cash.   That seems a brilliant idea.  And, while I'm not a farmer, income producing property basically does the same thing.  

What is the best opportunity to protect yourself? In a word debt. Debt is a great hedge against the deterioration of the dollar. Even better, long-term fixed-rate debt at low interest rates. Go out and get yourself as much FNMA debt as you can and let the value of the dollar slide. Imagine buying as much property as you can at 75% LTV and then the value of that debt slides to zero while the value of the property remains. That really is about as close to a no-brainer path to wealth as you can get in this world.

WEll based on the goat analogy  seems like prime farm land to grow food and Timber land to grow trees . all renewables.. 

 

Originally posted by @Greg Scott :

The important question is how long will the dollar remain a viable currency?  

Umm, until something better comes along?  All countries are driving their currencies down since it's a short-term fix for a lot of problems for them.

As far as govt being a responsible party managing fiscal policy - You've got to be kidding.

Originally posted by @Greg Scott :

The dollar, like all fiat currencies is on a path to its own destruction.  This was assured in 1913 with the creation of the Fed and accelerated when Nixon took us off the gold standard in 1971.

The important question is how long will the dollar remain a viable currency?   A few years ago, I was thinking it might survive well beyond my lifetime, but with the printing of money the past 15 years, I believe I might see its destruction.  Or, at minimum, I will get to see a lot of zeros added to dollar bills, and possibly the elimination of the cent, the idea of coins. If you study economies with governments that have no monetary will power, the value of the currency quickly is diluted to nothing.

So, what is the little guy to do?   Do not keep your money in cash.  Put your money in hard assets that hold their value.  In Venezuela (where I once lived) people bought cars as a store of value.  That as a particularly unfortunate idea as cars depreciate, but they had limited options and the cars depreciated more slowly than the currency. Ironically, in the local currency of Bolivares, the value of the car went up over time.

What are the best hard assets?  Some like metals.  They do hold their value but must be sold to yield cash.   I heard about a businessman in Zimbabwe during hyperinflation.  The moment he had enough cash, he bought a goat or a cow.  The animals held their value in dollar terms and he could eat or sell their milk for short-term cash.   That seems a brilliant idea.  And, while I'm not a farmer, income producing property basically does the same thing.  

What is the best opportunity to protect yourself? In a word debt. Debt is a great hedge against the deterioration of the dollar. Even better, long-term fixed-rate debt at low interest rates. Go out and get yourself as much FNMA debt as you can and let the value of the dollar slide. Imagine buying as much property as you can at 75% LTV and then the value of that debt slides to zero while the value of the property remains. That really is about as close to a no-brainer path to wealth as you can get in this world.

If the dollar goes to zero the entire social order will break down. Your rental homes won't produce any income and will be seized by the occupants or the government. And will certainly not hold their value in any way.

 

Originally posted by @Anish Tolia :

If the dollar goes to zero the entire social order will break down. Your rental homes won't produce any income and will be seized by the occupants or the government. And will certainly not hold their value in any way. 


Hasn't it already started?   The dollar has already lost 97% of its value since the creation of the Federal Reserve.  There is more social unrest now than in a generation. Isn't the government eviction moratorium the equivalent of seizing your property? 

On the other hand, I disagree with the last comment because history suggest that land-holders generally survive an economic crisis better than most.