The Fed's inability to implement policy that is effective beyond a very short period of time is something we've talked about often in this rag. However, with today's "historic" Fed meeting in which Jerome Powell announced that the Fed will be anchoring rates around the zero-bound for the foreseeable future, printing more money, and attempting to overshoot their 2% inflation target it seems like as good a day as ever to take a step back and explain the decades long slow drip towards utter ineffectiveness. We've ended up in a situation in which the Fed must get itself out of the debt trap it has put itself in by creating new debt to inflate away the old debt. Another way to put it, the Fed is attempting to devalue the dollar faster than other central banks and governments are devaluing their currencies to keep the party going and maintain the dollar's status as global reserve currency. It has to flood the world with dollars.
Believe it or not, this endgame was predicted in the 1960s by an economist, Robert Triffin. Today's actions by the Fed are logical if you understand the nature of a reality in which the world uses a particular national currency as the global reserve currency. For the nation that has conned the world into thinking their currency is fit to be the global reserve currency, they must flood the world with that currency, sending their current account balance completely off kilter. In the process of doing this, the nation with the reserve currency hollows out its local manufacturing base and shift its supply chains to far off lands. Shifting manufacturing off shore is a great way to flood the rest of the world with your currency. You have foreigners make your goods and then force them to allow you to purchase them with your currency.
If you take a look at America today, it is pretty evident that we have played out the dilemma that Robert Triffin laid out to a tee. The world is awash in dollars and we don't make anything but unhealthy weak people, shitty music, remade movies, fragile financial derivates, and contrived problems in America anymore. Even worse, it's looking like Triffin's dilemma is about to run its course. Moving our manufacturing base across the world and leaving our middle class behind has socially destroyed America. People seem pretty pissed off at the moment if you haven't noticed. On top of that, outsiders are beginning to lose faith in the Fed's ability to maintain stability of the dollar. Most countries have stopped buying US Treasuries and opting to stack gold bullion instead. It sucks to see and it hurts to admit it, but this is the state of the US Dollar.
The only thing we can hope to do is learn that having a national currency act as the world reserve currency is incredibly dumb for all involved. It ensures a slow death for the country behind the reserve currency and subjects everyone else to the financial will of that country for an extended period of time. Our only hope is to move to an apolitical currency controlled by no one but can be accessed by anyone. This will make it so the reserve currency isn't weaponized and converting in and out of currencies is made a thing of the past.
Our only hope is Bitcoin. The sooner people realize this the better.
Fix the money, fix the world.
Writing with the Sun in my eyes. Champion.