Tuesday, November 15, 2016

The "Dollar Reserve" Problem

While reading THIS, I remembered how relevant it is to THIS.

All things considered, inflation is the only real solution, and ... hyperinflation is really the only solution to the hyperbolic growth of dollar denominated debt.

Of course, those who truly understand Freegold already know this, it just bears a little reminding ...



  1. Jim Rickards, the Wall Street insider and advisor to central bankers, predicts the destruction of all currencies and the rise of SDRs (as a world currency) between 2018 and 2025, in his new book "Road to Ruin".

  2. I think Rickards is about the brightest bulb in the room. Thus he lights a path to the exit. The SDR solves the (Triffen) problem of a "national reserve currency", but it does not solve the "debt as wealth" dilemma. Whether or not gold is represented as an "SDR currency" is irrelevant. Gold reserves backing the SDR currencies imply the same representation.

    The question we must ask ourselves is: If all currencies are destroyed, and the SDR is a basket of destroyed currencies (USD, Yuan, Yen, Pound) then, where does the SDR find its value?

    In any event, the FX market as we know it today, will be no more.

  3. Good question and an even better thought experiment. How to preserve the "world" SDR currency when all the backing currencies are worthless? Perhaps the SDR is a finger in the dike until the gold backed world digital currency (the Phoenix) is ready for roll out. I believe Rickards would say everyone with enough chips (gold) gets a seat at the table when the world needs to negotiates a new monetary system.

  4. I believe you are on the right track Voice. The Devil is in the details but the broad brush points to a new Bretton Woods without WWIII.
    As the dollar continues to soar, and foreign holders fight over liquidity, the potential failure of derivative hedges holding the entire system together becomes more and more Titanic. Meanwhile, non-dollar commerce continues to avoid the entire mess in an alternative system not based in debt.
    "The BIS does not recognize other currencies as reserves, as they are, in themselves, a dollar product!"
    Time proves all!