If you're looking to jog your memory about how the world wandered off into the world of fiat currencies and lost its way over the last century, I highly recommend you check out this series of YouTube videos from Peruvian Bull. It's a short but dense primer on the sequence of events that led to the complete corruption of the global monetary system. Starting with the Bretton Woods agreement and moving forward through time, the series highlights the slow but methodical decay of the dollar's connection to a gold standard that inevitably led us to the point we find ourselves at today; backed into a corner by a growing mountain of debt that will never be paid back.
It's a great series to juxtapose with comments from the Commander in Chief yesterday regarding the federal debt.
Whether he realizes it or not, President Biden is lying to the American people. The US has defaulted on its debt more than once in the past and it is in the process of defaulting on the debt right now. This default isn't like the one that occurred in 1971 when Nixon ripped the world off the gold standard when countries started redeeming dollars for gold en masse when it became clear the US government had issued more dollars than the gold they had in reserves should have allowed. Yes, the US will likely not be defaulting on their debts outright in 2023. However, as we discussed last week, the US has decided to follow the path to default taken by countries like Venezuela, Argentina and Zimbabwe; debasement.
The only way Biden can ensure that the US doesn't have an outright default on its debts is by getting the Treasury to issue more bills, notes and bonds to raise cash to service the interest payments on the debt, which kicks the can down the road and exacerbates a problem that is already getting out of control. This is what is known as a soft default. You don't tell your counterparties that you're not able to or going to pay them back, you debase the money to a point where it becomes worthless and the debt does too. Not a very admirable path, but it is certainly a way to avoid a situation in which you are the one caught holding the hot potatoe and are forced to be remembered as the President who told everyone we couldn't pay them back. And this isn't a Biden problem. It is an "any president" problem. None of them will decide the admirable path of admitting we overextended ourselves.
As Peruvian Bull highlights in his series, there is no way of solving this debt problem. The US and much of the global economy has passed an event horizon that will inevitably suck the world into the black hole of currency collapse. If you look around you'll notice that the Dollar Milkshake Theory is playing out in real time as country after country gets consumed by the black hole.
Lebanon. Turkey. Argentina. Nigeria. Sri Lanka.
All have experienced hyperinflationary crises over the last few years. More will follow. Including the dollar. The seeds have already been planted. They are beginning to sprout. And there isn't anyone who is able to uproot them. The only option is exit. Thank God for bitcoin.
Thought I was going to be in bed by 9 tonight.