Only 8 days ago we met in this dark corner of the Internet to make you freaks aware of the fact that the Lebanese government and its central bank declared bankruptcy after a multi-year long struggle to keep their banking system afloat. We meet here today to make you freaks aware of the fact that another nation-state, Sri Lanka, has declared bankruptcy and made creditors aware that it is unable to service its outstanding debt payments.
Sri Lanka, being heavily dependent on tourism, suffered massively during the COVID lockdowns and its problems are being exacerbated by the compounding supply chain issues steming from that failed central planning experiment and the war between Russia and Ukraine. This morning, the Sri Lankan government decided they have to spend their money on commodities to feed their population instead of their debt payments to foreign creditors. An incredibly sad situation for any group of people to find themselves in and an incredibly sad indictment of the status quo of monetary economics in our modern times. Due to the fact that the world runs on a fiat standard, every central bank and nation-state is mathematically doomed to meet their fate in bankruptcy court.
What we're seeing play out now is something we've discussed many times in this rag; the weakest free float fiat currencies in the world are failing first. Many may sit there and think, "Who cares if the Sri Lankan rupee fails? It's the Sri Lakan rupee." However, this is how the end game plays out. The weakest die first. And every weak currency that dies leaves behind a smaller pool of currencies that are doomed to the same fate. The Sri Lakan rupee may have been the weakest currency today, but at some point in the future we'll wake up to discover that the euro was the weakest currency to fail on a particular day. We'll wake up to find that the dollar found itself alone in the ring against something like bitcoin and ultimately faltered because it was the weakest currency at that particular point in time.
You may be able to dismiss the Sri Lakan and Lebanese governments defaulting on their debt as nothing more than a nothingburger. But I urge you to recognize it as a leading indicator of things to come for the rest of the fiat currencies on the planet. Lebanon and Sri Lanka were two of the first to fall. Failure is climbling up the ladder and it will reach your fiat currency in due time. When that eventually happens, you better have a contingency plan.
It's only Tuesday?