Im not trying to be alarmist about a dollar collapse.
I’ve said multi times on this forum that the gold bugs who predict these things should be taken with a very large grain of salt
But if Kamala Harris is as communist or marxist as is often said do you not thing that large holders of US T bonds are not going to at least start worrying about that?
The bond market takes political risk very seriously
@Johnscott31 I don’t know the bod market at all.
But what you said is true: If Harris starts going loco, T bond holders might get worried.
That makes sense. If you’ve got a low risk 10-year note, you’re avoiding risk as much as possible. And if this new liberal administration is seen as risky, I could understand how the bond market could be affected.
It all comes down to the bond market mate. How else do the US get to maintain the lifestyle and spending they do?
All due to the good will of overseas US bond holders that’s how
If bond purchases slow then less dollar buying, interest rates rise and you cant pay your debts.
That’s a simplistic view of course, there are other factors
But it’s like an avalanche, it only takes one small bit of snow to start it off and all hell can break loose.
Much of this depends on how marxist Kamala really is - maybe that’s an over reaction from the right
Also the Senate are likely to hinder all policies.
Finally there is the fact many of these doomsday predictions just don’t come true - or have not yet.
Remember in the final days of Rome, the citizens were carrying on as normal, decadently and corrupt
They had no idea that the Germanic barbarians were outside
Also take a look at Sterling, that too was world reserve currency but was usurped by the dollar - the Brits on the street had no idea.
As humans we always think the future will continue like the past, but there is always a day of reckoning.
Like I said I’m always wary of dollar collapse predictions but if there ever was a time some of those stars are starting to align it is now. Not
That’s thinking with a political mind only - a beginner must learn to think as the market does.
A foreigner (the market) will lend the US money (buy bonds say) with one primary motive - profit.
As for USD - the primary motive is the same - return - the likely direction of interest rates etc.
So @Yassine11 you can see how political thinking or bias can cloud a persons judgement and cause them to make calls.
Larry Williams called trading ‘a thinking man’s game’ (he would have meant to include women since his daughter was also trading) - good question 
There are serious potential risks to corporate profit levels if the Democrats gain either greater control of the US’s governance or a more leftist president or serious leftist influence over Biden. A leftist government in the US also has implications in foreign affairs.
I’m glad to see Trump leaving but that’s because I think he was an inept president. None of the potential changes beyond that though are good for global democratic capitalism.
You think my mind is clouded with political bias?
Hmm
It adds to the political risk for large investors - not suggesting I’m making my trading decisions on it
The fact is a marxist government (if that’s the way Democrats go) is NOT bullish for dollar
Tell that to Ray Dalio.
And if you research what he has said about the Changing World Order, it’s something to think about.
He’s not a dummy.
He understands the international financial system and how global liquidity works.
Mike
I think you guys are missing what is going on in the Democrat party, You have the Technocrats who Biden is part of, then you have the Progressives ( Bernie Sanders ) which are not really progressive but a rebranding of the old Soviet Union style of Communism. Think of the Technocrats as the novel Brave New World, Think of the Progressives as the controlling government from the novel 1984
Those of us who Vote Republican are voting for Freedom and against the Technocrats/Progressives, think of us as the character John Savage from the before mention Brave New World
That is this Americans view of American politics in a nutshell
Will the U.S. dollar be low this week?
The Dow almost always does better under a Democrat president so that may continue.
The S&P 500 is heavily influenced by the FAANGs, and a Democrat president with a Republican senate would likely be their preferred outcome.
You are giving way too much credit to what an administration can do. Also, the checks-and-balances structure of the government system leans more toward gridlock rather than progress.
Four (or even eight) years is a drop in a bucket and is not enough time to overcome the inertia of the status quo. Actors with vested interests will fight and protect the status quo.
The SDR is not a viable substitute. The value of the SDR is calculated from a weighted basket of major currencies, including the U.S. dollar, the euro, Japanese yen, Chinese yuan, and British pound.
USD makes up almost 42%. So if the dollar collapses, so will your SDR.
Also, the other currencies are all fiat currencies themselves. And with all of them under central banks who are also “printing” and expanding currency supply, it won’t solve your problem.
The other currencies would collapse in value before the USD does, so most likely, holders of SDRs would be converting to all USDs, instead of the other way around.
Lastly, and probably most importantly, SDRs are maintained by the IMF. On paper, this is a supranational organization but as a construct of the Bretton Woods system, let’s not be delusional who really runs it…the U.S.
Dalio is warning about the U.S. dollar’s future as global reserve currency. He did not say it that it WOULD collapse. He’s also mentioned that there aren’t any good alternatives:
There’s not yet a good alternative in the form of a currency … Because the three major reserve currencies all have the same basic problem …
The dollar has been the global reserve currency for decades. It’s not just going to lose its status all of a sudden. It’s way too embedded in the system (which is by design).
Of course, there are various actors that are trying to change the current international financial system (like China) , but with the USD as its largest export, it’s not like the U.S. is just going to sit there and allow it to happen.
Dalio also has large Chinese investors in his funds and has capita/investments in China so there could be bias in his statements to try and convince the market to reallocate portions of their capital to non-dollar based assets and into yuan–based assets. Without full disclosure of Bridgewater’s holdings and its relationships, we’re in the dark regrading potential conflict of interests.
Panda…
Don’t get me wrong, you have made some very good points. I am not disagreeing with you on these things…
Sure. No one can dispute that.
But, all I’m saying is this.
Just because the way the world has been for a long time (a hundred years or so since the GBP was the top dog), doesn’t mean it’ll always be this way.
It’s a new world. Welcome to the year 2000. With the advent of the computer. Times are different than any other in recent history.
All I’m saying is, you can’t be too short sighted to think that things can’t change quicker than they used to.
The catalyst that made the USD overtake the GBP back in the day was WWII. This country dominated and led the world out of from under that tyranny back then.
Edit----
1945 is when the USD took over the GBP as the worlds currency.
All I’m saying is that some kind of catalyst could take down the USD.
Like coronovirus. Which leads to helicopter money. Leading to some very bad consequences of low interest rates. Etc…
Sure. At the moment, nothing is appealing. We just do what we do. Use Dollars.
Will there be consequences for the amount of debt we are jacking up?
Is the credibility of our country gonna continue? (In which our USD is based off of)
Compared to everyone else, sure, we just might be playing the same game. Maybe we are not as credible as we used to be.
I don’t know.
In today’s world, who’s to say that Bitcoin won’t emerge as the preferred method of currency.
No one knows what’s gonna happen in the future.
And no one can say that something WON’T happen in the future either.
Just some of my thoughts to you @TradingPanda Panda.
Mike
Here’s an excerpt from Ray Dalio’s The Changing World Order.
A new world order typically begins after radical changes in how things work within countries (i.e., via some form of revolution) and between countries (typically some form of war). They change in big ways who has wealth and power and the approaches used to get wealth and power. For example in 1945, when the latest world order began, the US and its capitalist and democratic allies squared off against the communist and autocratic approaches of the Soviet Union and its allies. As we saw from studying the Dutch and British empires, capitalism was key to these countries’ successes but also contributed to their failures. It was successful because the pursuit of profit motivated people, and the competitive process of allocating capital and profit making directed resources relatively efficiently to what people wanted enough to pay for. In this system those who allocated efficiently profited, which led to them gaining more resources, while those who couldn’t allocate well died economically.
Lol - we are in the beginner section so was highlighting how we must diverge our bias from the market’s.
Thinking over on the blank side of the chart - good chance early in the week USD selling (vs Eur) then more guys on board - then they’ll get squeezed.
It’s the following week when normality returns - the volatility is good for day traders.
The S&P has just taken out my TP - has gapped up - so no shock there - lots of time Friday to take up a position.
USD has gapped down - likewise as expected - no trade there because it’s currency - now let’s see how many pile into the short side early.
This sounds like you are trying to convince yourself not me. At a guess you voted Democrat eh?
But seriously I don’t disagree with much of what you say but situations can change.
The only one reason checks and balances are still there is because the Republicans won the Senate.
So yes it’s likely gridlock, which is probably the most bullish thing for the dollar.
Your right, not much is going to happen in the next four years except a further erosion in the perception of the US to ‘lead the world’.
Should the Dems ever control both houses, we know already from past comments they will pack the court, and push much harder to the left.
It’s just possible they pulled off the biggest election fraud in history (not a debate I want to get into for being accused of wearing a tin foil hat)
Add to this a blatant bias in the media, polling organisations, and intelligence agencies and it does bring into question the whole checks and balances thesis.
You should read some books on Trotsky, Lenin and the Bolshiviek revolution - some of the tactics employed by the liberal and urban progressives are straight out the Trotsky play book.
Already AOC is screaming the Dems should move further to the left.
All I am saying is if the Dems do move further to the left, it will bring into question their responsibility when it comes to being custodians of the worlds reserve currency.
It could (not will ) have a huge bearing on the way large investors rate political risk and the ‘safest asset in the world - US T bonds’.
As a ‘former’ gold bug I know just how often the ‘dollar collapse’ thesis gets bounded around - and it never happens.
I cringe when I hear the gold going to da moon projections - so I’m not some dollar bear crazy
Really it all comes down to things going forward politically in the US which from a traders perspective will be fascinating
What is happening today?? The biological war unleashed by China in the form of COVID 19 has seen just about evey western nation"s economies brought to their knees.
China has taken advantage of a number of small nations through it’s belt and road initiatiive that sees these small nations borrow large sums of money off China to finance projects only to default on payments of those projects allowing China to confiscate assets in lieu of payment.
China sees this as a way of gaining critical infrastructure and a foot in the door of a number of areas within the Pacific Islands, Africa, South America and subcontinent.
They have taken over Hong Kong and has changed Hong Kong from a democratic capitalist society to be now part of communist China. Next step will be Tiawan. They are sabre rattling with India and bullying Vietnam and Cambodia out of their lawful fishing waters. They also menace any foriegn ship that enters into the disputed waters of the South China sea.
China are now engaged in cancelling free trade agreements with Australia as a way of punishing that country for daring to challenge China over the origin of COVID 19.
China is a major threat to world peace and prosperity and you can be guaranteed that Biden government will not stand up to this China threat.
The squad want to destroy capitalism and install socialism in the USA. That is what several members have openly stated. If China is allowed to continue on there way the squad may get what they want sooner rather than later.
China is financially in the box seat whan it comes to the world economy and you can be assured that they will not hesitate to use their financial strength as leverage to gain control and domination over the world super powers of the USA and the Euro.
Cheers
Blackduck
I’m a panda, I don’t affiliate with any political parties. Most politicians are the same. Their one and only true ideology is do what is in their self-interest to stay in office.
Yes, exactly, situations can change, but unless we’re talking about timeframe of decades, this situation isn’t changing anytime soon.
Again, where will the capital flow? What asset(s) can absorb such size?
There are structural reasons why the Dems are moving “further to the left”. And it’s not just the U.S., but in lots of other countries as well. Which goes back to all major central banks increasing their balance sheets (and will continue to do so).
When all central banks are “printing”, given the U.S. hegemony, it will not be USD that will be collapsing. And if it does collapse, it will spike upward first, while other currencies collapse, since the world will probably be falling apart.
The financial system is global, viewing the USD just from what’s happening in US politics is too myopic.
Fully agree that money has to flow somewhere. I have no idea where that will be - but flow somewhere it will, should investors see the US as a risk.
Right now it does seem unthinkable that foreigners would have the cheek to question Uncle buck - and like I said depends on how fiscally irresponsible a hard left government becomes.
Who says we need a world reserve currency anyway?
China, Russia and Iran are already paying for oil in other currencies beside dollars - I’m sure China would love a world where the Yuan is more dominant.
The trend away from the dollar will only get stronger and that’s even before a reckless Kamala Harris government is taken into account.
Maybe the money flows into bitcoin, maybe gold, maybe just a basket of currency. Gold or bitcoin are not likely to become accepted mediums of exchange, but ARE likely to be viewed as excellent stores of value away from central bank and government irresponsibility.
As for timeframe - sure it will take time but a decade goes quick in the financial markets.
Even if US dollar does retain it’s status (it does not have a divine right to do so) the financial world in ten years is not likely to look anything like it does now
Mmmmm the most famous bear in China. Should we take this to mean whilst you don’t have any affiliation with western political parties you perhaps have a soft spot for the Chinese regime
Blackduck