Tuesday, November 10, 2020

👉Citigroup and Goldman Sachs Dump the Dollar -- Inflation + Weak Dollar = Big Trouble

👉Citigroup and Goldman Sachs Dump the Dollar -- Inflation + Weak Dollar = Big Trouble Dump the dollar: Citigroup and Goldman Sachs warn! Inflation + weak dollar = big trouble The US dollar is likely to weaken further with Biden presidency, Citigroup warns. “Victory for President-Elect Biden means a return to more conventional governance. As the province of the President, it will result in a major shift in the way foreign policy is conducted. Alliance building will return. ‘Tariff threat first’ negotiating tactics will end,” the bank’s chief investment officer David Bailin, and Steven Wieting chief investment strategist and chief economist wrote in a note seen by CNBC. Goldman Sachs from its side is recommending short positions against the dollar, arguing that the risks arising from the vaccine trials and the US presidential election are skewed to the downside for the greenback. Weakness in the dollar is mistrust for American economic policies. The dollar is down to 62% of the global reserve currency from 75% years ago. This next round of stimulus should bring the total stimulus to around $10T. That's creating $10T out of thin air. How does the value of the dollar not decline precipitously? The Fed has wrecked everything in the worship of Wall Street. With all the Fed's new liquidity in the system and junk debt to levels never seen before, the assurance of historical patterns is a stretch. The dollar devaluation and inflation will conveniently come to the rescue to reduce the mountains of public debt. Yes, but that means interest rates will rise significantly. We can't borrow money at zero if the value is dropping. The drop in interest rates back near zero is the greatest single factor weakening the dollar. With interest rates below the rate of inflation, holding dollars and Treasuries are losing propositions since they can't keep up with inflation's eroding effect. The outlook for the dollar then, depends on how long interest rates will remain below the rate of inflation. And that seems to be for a very long time. The last time rates were lowered near zero, they remained there for eight years (late 2008 to late 2016). In turn, the outlook for assets priced in US Dollar : (stocks, commodities, and even Bitcoin) is once again exceptionally positive. Rates will eventually go back up under the pressure of inflation and devalued currency. Only good for gold investors! Like many assets, real and financial, commodities like gold can be used to hedge against Currency Debasement. The Dollar will decline or even collapse because of the exponentially growing US National Debt, which is currently at $27 trillion! And will be $30 Trillion on 1/20/2021 during the new president inauguration. I think the US debt is already well beyond $30 trillion. There's evidence it's many times that already. Countries are wise if they use the soon to be worthless US dollars they have in reserve to buy something tangible. The smart money boys are well aware of such realities, so they would be already reflected in the dollar. It is America's colossal debt that will bring down the dollar. Wiser minds than mine have said there are three ways to deal with the debt. 1)Cut expenses/raise taxes and try to pay it off. 2) a debt jubilee where the debt is repudiated. Or 3) inflate our way out of it. I don't think we have the political stomach to do #1. There are some real economic consequences with #2, losing reserve currency status, maybe some very unhappy countries holding our debt, etc... And #3 is like a thief in the night. Inflating the dollar will never be enough in paying the debt back because from the consumer economy perspective -- the loss in buying power and value comes out of their savings and discretionary spending. There is generally no substituting of foreign manufactured goods for domestic ones for two reasons: 1) There are almost no domestic goods produced. US manufacturing is less than 11% of the economy and less than 8% of employment - and those numbers are pre-pandemic. You can halve them now. 2) The cost of foreign goods is from 4 times to 10 times less expensive than similar produced US goods - where there are any. Other than a total collapse of the US and the global economy - do the economics of US manufacturing ever become competitive with foreign manufacturing. Centers again. I'm expecting the total collapse scenario actually. The fiscal math, and human nature, take us there. What happens during/after that is anyone's guess, but it ain't pretty. It is the real market response after printing 4-5 trillion paper dollars without any improvement in US products. We will see a crash in the stock market too. Weakening the US dollar is bad for equities simply because overseas investors will shun the dollar, there's no point to make 5% capital gain on equities then to lose it to the exchange rate, due to the weakening Dollar. That's really bad for equity market! During that last stimulus injection, corporations were expected to do stock buybacks; that is the reason we see the market indexes hanging very close to the same price for most of a trading day when the corporate welfare stops flowing, that is when the markets will start moving toward a natural valuation again. And when our money printing white house keeps diluting the value of the dollar because of the trade war with China, the only place bonds can go will be negative. If trade war keeps happening and stimulus stops for treasury bills, the dollar would probably collapse, or maybe that has been the plan all along coming from executive leadership in this country. There is absolutely no reason to buy treasury bills and bonds in this country, and it's only a matter of time before we see inflation going nuts with what I expect to be over a 33% devaluation of the American dollar by year-end. Welcome back to The Atlantis Report. You are here for your daily dose of the truth, the whole truth, and nothing but the truth. Please take a second to click the like button, as many of you have asked me where they can buy silver and gold bullion. You will find in the description box the links where I personally buy American Silver Eagle; and Silver Bars or Rounds. I highly recommend that you too, start stacking some Silver Bullion for the future. What should be kept in mind is that the Dollar Index is a measure of the Dollar's Value against a basket of other currencies. Those currencies are also getting debased by their respective sponsoring Central Banks. So the dollar, on average, is getting debased a bit faster than the average of all those other currencies; that’s the only thing a dropping Dollar Index tells you. The declining Dollar Index does not tell you how quickly the Dollar is actually declining. It could actually be declining much more (or less) quickly than the Dollar Index is declining. It depends more on whether those other Central Banks are actively debasing their own currencies or not, at any given point in time. Against real assets, the American Dollar may actually be declining even more rapidly than against the basket of currencies used in calculating the Dollar Index. Printing without any solid back up devalues the currency. So everything becomes more expensive naturally. For now, the commodities in America have not become more expensive because the goods are subsidized by the government with taxpayers' money (not the bankers). it won't be long; printing too much money out of thin air is a true recipe for disaster, something the US has been doing in the last years. The crack has already appeared in the pipe. This is why they need to pump more and more water into the pipe to maintain the pressure as the crack widens. It won't be long now. There are simply too many dollars worthless wandering around in the world. And if it comes to the point that the US has to use its Military Power to maintain the value of the Dollar, then we're no longer in the market economy system but in state-sponsored "Extortion"-- and you can be assured other powers will do exactly that same; just as the Soviet Union used to do with the Eastern European Bloc during the cold war. A weaker dollar benefits exports and exporters but raises costs for imports and importers. Since the US imports far more than it exports, this can possibly turn into a downward spiral with no exit .It benefits fossil fuel production but adds to the costs of renewables .And it encourages foreigners to sell any US investments or debts.And can lead eventually to the rest of the world abandoning the US dollar as the reserve currency . But other countries are debasing their currencies as well. Don’t forget that the Dollar Index is a measure of Relative Debasement if you like. It is not an absolute measure against some imaginary stable, fixed value. If virtually all major nations’ Central Banks are in competition to wreck their currencies, why should American money lose its WRC (World’s Reserve Currency) status? The current loss of the Dollar Index just measures the fact that the American Dollar is presently losing its value a bit more rapidly than the average of those other currencies. Soon it could be those other currencies that are being debased more quickly against the American Dollar. It’s a race to the bottom. It doesn’t mean America will get there first. A falling dollar means rising inflation. AS the dollars are falling, that means imports are going to be expensive ; in other words INFLATION. More than half of all raw materials and intermediate components for US manufacturing are imported. More than half of US crop NPK fertilizer is now imported. This means that US manufacturing goods and food will necessarily rise in price with a weaker dollar. The US services industries' prices, not so much. Consequently, service industry payrolls will not rise or have as much buying power. Net/Net - US consumers will have less to spend - most especially less discretionary income. Couple that with added consumer medical costs from a pandemic that is far from over and 20+% unemployment, and the US economy is in a downward spiral regardless of what equities do in the short term. Sooner or later, the lower-income, income value and lower consumption will impact equity markets. At some point, the FED will have to show how and who will pay off the trillions of US debt it has created .Which means increased taxes across the board from individuals to corporations. Ironically, the US export won't get any benefit from the weaker dollar, simply because most US products and services are "High Value-Added Exports," they will sell well regardless of the exchange rate of the dollar. Never before has so much fluidity been pumped into the system, so past experiences are irrelevant. The one irrefutable truism is that when you have a surplus of something, its value declines. Of course, everyone is in the same boat, so the value of all currencies will decline, ergo tangible things will become more expensive for everyone. This can't necessarily make stocks go higher if the world is tipped into a depression, but stocks represent ownership of tangible properties, so they definitely will command a higher value relative to the declining value of the dollar. The bottom line, the wind is at the back of higher stock prices. The market isn’t raging; it is the dollar that is falling. This was The Atlantis Report. Please Like. Share. Leave me a comment. Subscribe. And please take some time to subscribe to my back up channels; I do upload videos there too. You'll find the links in the description box. You will also find a PayPal link if you want to make a donation. Thank you wholeheartedly to all those of you who have donated. Stay safe and healthy friends! Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics

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