Thursday, September 11, 2014

The Clearing View

So it appears that the USG "strategy" of monetary self destruction (sanctioning key members of an emerging currency bloc) finds a certain method in its madness.

- the strategy is to de-dollarize -Indeed, as both FOFOA, and Jared Bernstein have inferred, the USG may be strategically and intentionally disincentivizing the key driver of dollar reserve status - namely international dollar settlement usage. And may be doing so for the express purpose of global de-dollarization, in order to "reduce the burden of dollar reserve status".

There is an interesting dot to connect to this theory - the 2011 Kyle Bass video interview in which he relates questioning a "senior member of the Obama administration" as to how we grow exports without nominal wage deflation?

Perhaps it was Bernstein who then replied, "Oh, we're just going to kill the dollar."

We had always accepted that the strategy of inflating away government debt was a key USG monetary policy. That was never opaque - but some did marvel at the dollar's resilience as a reserve currency through it all.

And, we had accepted that the U$ exorbitant privilege had afforded both the political and civil classes such advantages that no burden it might create would ever be too great to bear.

But the privilege of a country's debt being held as a global wealth reserve asset was always known to be an experiment with a finite life-span. Perhaps the USG can now begin to promote a certain recognition that the burden placed upon the middle class backbone of a nation grows greater as the life-span of that experiment approaches its final days. Maybe they'll even begin to let the real employment numbers make their case. In fact, they seem to be.

When viewed through the "clean float" lens, we can see that counter-intuitive policy actions intended to "inflate gradually, if possible" were merely a measure to buy time. And now that we have exhausted the last of the policy tools available to the central banks, the aim now is to orchestrate change by means of the hammer (which is not to say that QE was by any means a scalpel).

The hammer of course being the increasing geopolitical clumsiness we now witness, in varying degrees of shock and awe, which would normally be seen as an embarrassment in diplomatic circles, if there even was such a thing as "normal" anymore.

More propaganda, weeks from now, will surely affirm the direction of policy. So I will let the matter lie still for now, to settle a bit upon the palette, until the meme becomes more obvious.

Until then, may I suggest a chilled bottle of French red ale to clarify the senses?

I understand that quite a large shipment of Gavroche just arrived at the cellar entrance - they say the price of imported French and Belgian ales is set to rise.

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