The End game for the USD?
Zoltan pozsar, (the true brains behind the Federal Reserve) came out with an in depth report December 9th outlining how next week could be the financial systems version of Y2K. We've all heard of the liquidity crisis expanding within the Repo market. But can this actually lead to the death of the USD?
The Federal Reserve will come in print as much money as they need to, to make sure that they keep the rates down. He references a speech by Ben Bernanke in 2002 suggesting that in the future, If we have a lack of liquidity in the financial markets the United States could just fix interest rates meaning on the 3-month the one-year the 10-year the 30-year. They would impose a target rate and they would not allow interest the rate to go above that. How would they do that? They would print and Print and print to buy every single treasury or every single t-bill necessary to make sure that that happens. This would expand the Federal Reserve balance sheet from 4 trillion to 6 trillion to 10 trillion to 20 Billion dollars, it would be the Buzz Lightyear balance sheet to infinity and beyond.
This would put tremendous amount of pressure on the dollar and it would have to go down in order for the FED to stop the infinity and beyond balance sheet. Why is that? Because at a certain point, once the dollar gets down low enough, other countries will be able to afford to come in and actually buy treasuries. Right now they can't afford to buy that many treasuries because the dollar is so high. Let's use Mexico and the United States as an example right now. The peso is 19 to 1 meaning. You need 19 Mexican pesos to buy one u.s. Dollar. Well, if we got to a point where the dollar went down far enough for you to only need one Mexican peso to buy one United States dollar, then the government of that country would then be able to afford to come in and buy a lot more treasuries than they are right now. This would put a bid on the treasuries and decrease the amount of money that the FED would have to print to keep those interest rates low. You might be wondering why Japan has been doing it forever, but you have to look at the demand for a specific government's debt. And in the case of Japan they have a 30% savings rate, so they don't need as much external demand for their debt because they can Finance it internally. Meaning their own population can buy that where the United States are savings rate is maybe three or four percent. So we just cannot fund that internally we have to go externally. T
That's what puts us at the mercy of all of these countries and buyers outside of the United States. This is the end game! Basically the FED has to expand its balance sheet until it can push the dollar down far enough to where it's a atractive for foreign entities to buy our debt. So next week is the Y2K moment. Make sure you're watching on December 31st, and we'll see if the FED has to come in on a permanent basis and inject even more liquidity into the market. We will see if Zoltan is right and if they do that will be the Catalyst that will be the beginning of the dollar collapse. It's going to be very interesting to see how that plays out for more information like this check out this content right here and I will see you on the next video and next week for the financials.