Clarmond: The Virus Exposed That Treasury Collateral Is Anything But Stable
My father’s dark brown attache case, with its light, soft suede interior, lay invitingly open on his bed. The case was filled with intriguing goodies for a 10yr old to examine. There were files and photos of building sites (he was an engineer), a cluster of pens and a case of well sharpened Staedtler pencils, his passport, current and old stapled together and a multitude of colourful bank notes that I took out and spread out on the bed, making a pile of each kind. There were super large French Francs, small Deutsche Marks, crisp Japanese Yen, grimy UAE dirhams, grand looking British Pounds, AMEX travellers’ cheques, but the largest stack was of inky green US Dollars.
As I finished my piles, my father, who was watching, motioned me to bring the globe from his desk. “Can you match the notes to the countries on the globe.” I nodded and started from Japan, making my way to the United States. Putting his hand on the world he said – “you can pay for things with these notes – pointing to the francs, marks, yens, pounds – only in their own country, but these” – pointing to the dollars – “you can pay for anything….everywhere” “Wow”, as I held up the Dollar, “this is magic money;” he flashed a brief smile. “Yes, now put it all back in the briefcase.” Magic money……I was hooked.
Over the last four weeks this ‘hook’ has felt more like black magic and all my previous crises (1987, 1998, 2001, 2008) have felt as if rolled into this last month. Perhaps we all need a step back from the daily market fury and see what this pandemic has exposed. In January and February we all saw the events in Wuhan and the cruise ship in Yokohama; the market shrugged. But abruptly in March the virus mattered. Why?
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