{"id":59094,"date":"2021-08-22T07:47:23","date_gmt":"2021-08-22T12:47:23","guid":{"rendered":"https:\/\/olduvai.ca\/?p=59094"},"modified":"2021-08-22T07:47:23","modified_gmt":"2021-08-22T12:47:23","slug":"the-dollars-debt-trap","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=59094","title":{"rendered":"The dollar\u2019s debt trap"},"content":{"rendered":"
\n
\n
\n

The dollar\u2019s debt trap<\/a><\/h3>\n
On the fiftieth anniversary of the Nixon Shock, this article explains why fiat currencies have become joined at the hip to financial asset values. And why with increasing inevitability they are about to descend into the next financial crisis together.<\/div>\n<\/div>\n<\/div>\n<\/section>\n
\n
\nI start by defining the currencies we use as money and how they originate. I show why they are no more than the counterpart of assets on central bank and commercial bank balance sheets. Including bonds and other financial issues emanating from the US Government, the individual states, with the private sector and with broad money supply, dollar debt totals roughly $100 trillion, to which we can add shadow banking liabilities realistically estimated at a further $30 trillion.<\/p>\n

This gives us an idea of the scale of the threat to asset values and banking posed by higher interest rates, which are now all but certain. The prospect of contracting financial asset values is potentially far worse than in any post-war financial crisis, because the valuation base for them starts at zero and even negative interest rates in the case of Europe and Japan.<\/p>\n

I focus on the dollar because it is everyone\u2019s reserve currency and I show why a significant bear market in financial asset values is likely to take down the dollar with it, and therefore, in that event, threatens the survival of all other fiat currencies.<\/p>\n

Introduction<\/strong><\/p>\n

Dickensian attitudes to debt (Annual income twenty pounds, annual expenditure twenty pounds ought and six, misery) reflected the discipline of sound money and the threat of the workhouse. It was an attitude to debt that carried on even to the 1960s. But the financial world changed forever in 1971 when post-war monetary stability ended with the Nixon shock, exactly fifty years ago.
\n\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The dollar\u2019s debt trap On the fiftieth anniversary of the Nixon Shock, this article explains why fiat currencies have become joined at the hip to financial asset values. And why with increasing inevitability they are about to descend into the next financial crisis together. I start by defining the currencies we use as money and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[7772,9172,195,309,1183,5829,538,839],"class_list":["post-59094","post","type-post","status-publish","format-standard","hentry","category-economics","tag-alasdair-macleod","tag-bretton-woods-agreement","tag-debt","tag-fiat-currency","tag-gold-standard","tag-goldmoney","tag-money-printing","tag-us-dollar"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/59094","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=59094"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/59094\/revisions"}],"predecessor-version":[{"id":59095,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/59094\/revisions\/59095"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=59094"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=59094"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=59094"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}