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I've said it a thousand times.

We will NEVER pay off our debt. We can't.

We owe roughly 1/3 - 1/4 of the entire existing worldwide money supply.

And we won't default.

My best bet is war wherein we refuse to pay money to combatant countries, thereby canceling that portion of our debt.

And we will most likely agree to help defend our allies in return for cancellation of the debt we owe them.

The other option, inflating ourselves out of it, seems to be an incredibly drastic move that I don't think a politician of any persuasion would want to entertain. Nobody wants to create a second Great depression.

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We are 100% going to inflate it away and that has been in-process for some time.

Tariffs and restructuring global trade are an opening act, not the end game.

Every time I hear this argument I never hear a logical argument of what will replace the dollar. You can talk Gold or Bitcoin but too many countries won't go for that. China doesn't even let the Yuan be traded outside of China on any real scale because the money flies out of the country because their financial situation makes us look like super responsible stewards of financial discourse. The Euro? lol, Europe is becoming an afterthought on the economic world stage more every year. Anyone that thinks BRICS is anything but an alliance of corrupt nations that all will screw each other (and do) at every opportunity isn't paying attention.

We are the tallest midget. We also have the only real global military and especially Navy that can project power anywhere. We have by far the most attractive consumer market by a mile. We have the best farmland and natural resources by a mile. We have the best ports in the world and more of them. We have more navigable rivers than the rest of the world combined. We are basically impossible to invade. In short no matter how dumb we are it's really, really hard to screw it up and there is no one there to take our spot.

We have lots of problems and the debt and monetary policy sucks. Still it's good to be the king.

ASI is gonna make this look like a quaint worry.

This thread or one similar comes around every 4-6 months …. It will go to sleep till this summer then it will pop up again.

fullback44 said:

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This thread or one similar comes around every 4-6 months …. It will go to sleep till this summer then it will pop up again.

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This is correct. I almost posted the same thing instead of playing my role in this cycle's thread. This topic is predictable and the pattern is predictable within the thread. Some of us think the sky is falling any day now with the dollar being replaced by something, anything as long as it's not the dollar. Some people understand the world has no other option but to use the USD, that all other currencies are in worse shape and nobody but us can project naval power sufficient to make sure trade actually happens. It's complete when AE's latest sock tells us Bitcoin will take over without even a hint of understanding of how absurd a notion that is given how the global economy is managed.

Lol, China set their reputation back 25 years with Covid. Good luck with that, Xi.

LOYAL AG said:

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It's not our ability to wage war. It's the Navy. Trade has always been about the ability to protect trade vessels on the open seas. Post WWII nobody could do that for themselves so we did it for everyone and we still do. If we stop doing it trade ends with the first ship that's stolen in transit by either Somali pirates or a rival nation. Trade exists because we say it does. If nations stop trading the way we want them to there's no guarantee for them that we won't be that rival nation. It just is what it is.

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I will take the US stealing a commercial transport ship because we don't like the shipping countries' monetary policy under things that will never, ever happen, for $1000, Alex.

1) The only good argument is that the $ is changing from the ONLY reserve currency to the most important of a number of reserve currencies. That has already happening, is continuing to go down that road, will not likely stop if our government keeps wasting so much money, but will not topple us as the most important currency unless the global situation changes by quite a lot.

2) Argentina has every bit of the natural resources that the US has. Geographically, we are almost identical. The parallels are striking.

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Triffin's paradox would say that a global reserve currency can provide 2 of the following but not all 3 for the issuer

Capital mobility
monetary autonomy
exchange rate management

You can't do all three.

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This is not the Triffin paradox. It is the Trillema or impossible Trinity as coined by John Marcus Fleming and Robert Mundell.

The Triffin Paradox notes that the country issuing the global reserve currency has to run consistent trade deficits to to supply currency to global markets which in turn weakens the currency and collapses the reserve currency system. That is the paradox.

His research attempted to show the inherent conflict in short term domestic economic management and longer term global currency policy.

But you are very correct that China's approach to currency management is subject to the impossible trinity and makes it inherently unsuitable for any global reserve currency role. It manage capital flows tightly to maintain pegs.

In the lens of the Triffin paradox, the CCP is scared that angry mobs will tear it all down so they opt for internally focused and short term domestic economic priorities at the expense of any global reserve currency role.

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Every time I hear this argument I never hear a logical argument of what will replace the dollar.

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This is the core of it all. I had to do a lot of work in Eastern Europe in at one point and met a lot of treasury and central bank folks. This was in the wake of the Credit Crisis when US Government Debt was being downgraded and we looked like the great assh#les of the global economy and China was an island of stability hosting the Summer Olympics and growing like a weed.

The subject of alternate reserve currencies came up a lot, and to a one they all laughed and said there zero chance that they would trust Brussels or Beijing as a credible alternative.

The only proposed replacement that is taken seriously is the SDR concept but it is managed by the IMF and most countries end up in hock to them and therefore don't trust the group.

https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr

BusterAg said:

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LOYAL AG said:

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It's not our ability to wage war. It's the Navy. Trade has always been about the ability to protect trade vessels on the open seas. Post WWII nobody could do that for themselves so we did it for everyone and we still do. If we stop doing it trade ends with the first ship that's stolen in transit by either Somali pirates or a rival nation. Trade exists because we say it does. If nations stop trading the way we want them to there's no guarantee for them that we won't be that rival nation. It just is what it is.

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I will take the US stealing a commercial transport ship because we don't like the shipping countries' monetary policy under things that will never, ever happen, for $1000, Alex.

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Of course not. Until it does. All of human history says the at at some point we will become hostile to a rival nation and that hostility will range somewhere between no longer protecting their vessels to outright intercepting them. We did it last month with a Venezuelan oil tanker.

You're right

I don't want to get this TOO political, because I consider this an economic issue. I also know this board's general stance. With your experience, do you see Trump's top-down economic approach (considering all of his ideas voiced publicly, the execution being viewed as slap shot, and the resulting uncertainty) moving the needle negatively in any material way?

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I don't want to get this TOO political, because I consider this an issue economic. I also know this board's general stance. With your experience, do you see Trump's top-down economic approach (considering all of his ideas voiced publicly, the execution being viewed as slap shot, and the resulting uncertainty) moving the needle negatively in any material way?

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The American economy is a huge Battleship and can withstand a lot of direct shots so over the short term I do not see a whole lot of real stress. The stuff that got the American economy in hot water in the later 20th century was a product of decades and decades of poor legal structures and Washington policy.

If the US keeps at this for 20-30 years? Then yes, there will be real costs just like there was in the 70s and 80s.

But Trumponomics is likely to vanish quickly initially through the checks and balances yanking the Executive Branch's constitutional leash. Trump is polling badly on the economy as well, mostly on the affordability issue so even if we have another GOP operator in the White House they will kick folks like Stephen Miran and Peter Navarro to the curb and opportunistic enablers like Rubio and Bessent get to act in a conventional manner once more.

My two cents.

Windy City Ag said:

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Quote:

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I don't want to get this TOO political, because I consider this an issue economic. I also know this board's general stance. With your experience, do you see Trump's top-down economic approach (considering all of his ideas voiced publicly, the execution being viewed as slap shot, and the resulting uncertainty) moving the needle negatively in any material way?

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The American economy is a huge Battleship and can withstand a lot of direct shots so over the short term I do not see a whole lot of real stress. The stuff that got the American economy in hot water in the later 20th century was a product of decades and decades of poor legal structures and Washington policy.

If the US keeps at this for 20-30 years? Then yes, there will be real costs just like there was in the 70s and 80s.

But Trumponomics is likely to vanish quickly initially through the checks and balances yanking the Executive Branch's constitutional leash. Trump is polling badly on the economy as well, mostly on the affordability issue so even if we have another GOP operator in the White House they will kick folks like Stephen Miran and Peter Navarro to the curb and opportunistic enablers like Rubio and Bessent get to act in a conventional manner once more.

My two cents.

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Trump is just drifting the battleship. Can only do it once

What do / did you do for a living? Impressive post.

Just updated my spreadsheet on who not to argue with about certain subjects.

Very good, thank you. I see it similarly, which is why my biggest concern with Trump has always been his future impact on future presidents. Politically, he's almost can't miss. A decent chunk of his supporters are "in" in. Economically, 2-3 more presidents that communicate and operate like this, and if the pendulum keeps swinging to R and D, and we are going to have a real issue.

BusterAg said:

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1) The only good argument is that the $ is changing from the ONLY reserve currency to the most important of a number of reserve currencies. That has already happening, is continuing to go down that road, will not likely stop if our government keeps wasting so much money, but will not topple us as the most important currency unless the global situation changes by quite a lot.

2) Argentina has every bit of the natural resources that the US has. Geographically, we are almost identical. The parallels are striking.

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The multiple currency argument has merit but we weren't truly the only currency already. There will continue to be more options to trade in for countries than in the past. I just don't see anyone replacing us as at the top anytime soon.

Argentina has a fraction of our oil reserves though they have some promising shale. They do have some similarities in geography but they don't have the ports, the natural protection, navigable rivers, certainly the military, and they are about 1/40th our GDP. Elon Musk is worth more than Argentina. Milei is doing a great job there but they have a LONG way to go just to be a significant player. It is definitely one of the countries with the most natural potential though even if it is a fraction of the US.

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What do / did you do for a living? Impressive post.

Just updated my spreadsheet on who not to argue with about certain subjects.

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Initially I did lots of quant research and structured investment stuff initially here in the States and then overseas for both asset managers and the large financial data and ratings vendors. We sold a lot of that stuff to huge insurers and banks and we were absolutely walloped by the Credit Crisis when nearly all of our customers were facing insolvency. I was shuffled into a global biz dev role back at our American HQ in the office of the CEO and that is what got me out on the road in both developed and emerging markets where we were buying or partnering with local outfits and engaging a lot with regulators and customers.

I had done my grad studies at UChicago (hence my handle), which is great for the quant stuff but as everyone knows legendary on the macro side. They were great about letting you take courses outside the core stats, modeling and financial theory tracks so I dove deep into the macro stuff there. It was a great time.

Milton Friedman came back one last time on his 90th birthday and we all watched Ben Bernanke, then just a Fed governor, give a great speech honoring the man. I took courses from Robert Fogel, Gary Becker, and Richard Thaler among others . . ..the one guy I strangely avoided was Eugene Fama which was closest to my career focus.

This guy has some great data to understand the employment picture and what Trump is doing:

During Trump's 1st year in office (Jan '25 to Jan '26), native-born employment rose 840k while the number of foreign-born workers employed fell 97k: pic.twitter.com/bb2wbXkOGD

— E.J. Antoni, Ph.D. (@RealEJAntoni) February 11, 2026

Job growth in Jan came almost entirely from full-time jobs w/ only about 5% of the monthly increase in employment coming from part-time work; it's very positive to see people getting good paying full-time jobs w/ benefits and not just gig work: pic.twitter.com/zcArTghV3v

— E.J. Antoni, Ph.D. (@RealEJAntoni) February 11, 2026

The average American's weekly paycheck, adjusted for inflation, shrunk 4.0% under Biden, but is now estimated to have surged 2.0% during Trump's first year back at the helm - this is how you address the affordability crisis left by the last administration: pic.twitter.com/9z6Gv8bp47

— E.J. Antoni, Ph.D. (@RealEJAntoni) February 11, 2026

The current plan is one, wait for the civilizational collapse that is coming for China very soon and two, inflate the currency to buy time.

Either the new world order that is coming with the collapse of globalism will allow for a fundamental economic rearrangement that addresses the issue before inflation causes the whole thing to collapse, or inflation will cause the whole thing to collapse. The idea that somehow we're ever "getting out of debt" under the current system was always magical thinking from people who don't understand how modern global economies and debt function. It wasn't just that it wouldn't happen, it's that it couldn't. It's literally impossible with the system we have in place.

Thank you for this response.

Unfortunately, my interest in economics came too late for me, and I was well into my 30s before I discovered the art.

Hearing your background sounds like a fever dream to 2026 BusterAg, something like an econ version of Almost Famous.

BusterAg said:

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Thank you for this response.

Unfortunately, my interest in economics came too late for me, and I was well into my 30s before I discovered the art.

Hearing your background sounds like a fever dream to 2026 BusterAg, something like an econ version of Almost Famous.

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lol. I read that post the same way. "Wow, that sounds like a cool career path!" To play Devils advocate doing this stuff as a hobby keeps it fun.

LOYAL AG said:

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BusterAg said:

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Thank you for this response.

Unfortunately, my interest in economics came too late for me, and I was well into my 30s before I discovered the art.

Hearing your background sounds like a fever dream to 2026 BusterAg, something like an econ version of Almost Famous.

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lol. I read that post the same way. "Wow, that sounds like a cool career path!" To play Devils advocate doing this stuff as a hobby keeps it fun.

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There is some truth to that.

Being the CFO of a tech start-up sound like a lot of fun until you have to stay up until midnight running payroll by yourself and struggling against Quickbooks new crappy AI interface.

Creating and maintaining giant quant macro models to sell data to investment managers is not likely to be a super-exciting daily grind. Everyone has to pay their dues.

"The claim that the rally signals the death of fiat collapses even faster. A glance at investment-grade bond prices immediately contradicts it. If confidence in currency were breaking down, capital would be fleeing fixed income in favor of equities, commodities, or tangible assets. Instead, demand for high yield bonds is rising, pushing prices higher.
That is not a rejection of fiat - it is renewed demand for it. Precious metals may be rallying, but the bond market makes clear that this is about risk aversion, not currency debasement."

-Fabian Wintersberger, Bloomberg

This was a quote today on Makong Money with Charles Payne on Fox Business that was show with a graph of US high yield corporate index.

I don't have access to Bloomberg to find the article and I am not a premium subscriber so I can't post the picture.

Thoughts?

Posted this in another one of the ... "are you prepared?!" doomer threads...

I think gold will rise and the dollar will rise vs other flats. I think golds spike is foreigners preserving optionality into the dollar rather than lack of faith in the dollar.

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"Dollar is cooked" assumes the gold move is about imminent USD collapse. I don't think that's the right read.

The USD is still the dominant fiat. Most of the world still wants dollars. The issue isn't rejection it's access.

If you think of the dollar system structurally: force is the floor, credibility is the ceiling. The U.S. hasn't lost the floor. But repeated unwillingness to self-limit has eroded credibility, lowering the ceiling. That matters just not in the way collapse narratives suggest.

My base case is a fragmented, regionally focused global economy where many actors want USD exposure but can't reliably hold it.

That includes:
Countries under sanctions or sanction risk
Countries with capital controls
Countries whose reserves are politically vulnerable
Domestic savers trapped in closed financial systems

China is a clean example: strict capital controls, weak domestic growth, property stress, limited legal diversification, rising geopolitical risk.

In that environment, gold becomes the bridge, not the destination; portable, liquid, politically acceptable, outside the banking system, no counterparty risk.

Weaponizing the dollar infrastructure (SWIFT, reserves, settlement rails) especially after Ukraine normalized the idea that access is conditional. That didn't kill the dollar. It increased demand for a neutral buffer around it.

For Americans, gold is about preserving purchasing power until it's converted back into USD.
For non-USD actors, gold preserves the optionality to transact in dollars at all (or some currency other than their own).

Rising gold doesn't mean the dollar failed. It means the dollar is powerful and increasingly selective.

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This makes sense to me. Thank you.

The dollar doom posts are my favorite. We are paying over $1T interest on our on our debt. Social security, Medicare, Medicaid, and other mandatory spending make up 75% of the federal budget. Add on discretionary spending and the deficit is massive. We can't fund all of this without continuing to issue new debt. At the same time, we are having to continually refinance debt at rates higher than it was issued at. That means the interest on the debt will continue to grow.

This all keeps going until something breaks. And when it breaks, you're going to see something we've never experienced.. rising yield deflation. Where the dollar gains strength due to money being sucked out of the system at the same time that nobody is willing to accept our debt without demanding much higher rates.

Not if. When.

We will print until printing reduces the dollar to ashes. All fiats pegged to the dollar will be ashes well before the dollar, but it's all headed to the same ash heap. That's what fiats do and there is a long historical record to support this phenomenon. Human behavior really hasn't changed all that much.

Sims uses a floor and ceiling analogy; ceiling representing credibility of the fiat. Credibility in fiats fails when the public begins to disagree on value. Primarily, where would we see this public disagreement in the value of the dollar take place; the grocery store, insurance, fuel, wages, every day living costs. The sentiment is usually, "I can't seem to make my dollar stretch as far. People begin cutting non-essentials, making substitutions, looking for clearance sales and bargains. When those measures fail, desperation sets in.

The focus usually shifts to political leadership for answers; often the very people who created the problems leading to a declining fiat. Politicians will offer a number of solutions; all usually worse than the problem. In the last few years, CBDC's, tokenization, BTC, stable coins, etc...are all "perceived" solutions to a failing fiat. Really, those are just the next iteration of fiat to fail, providing a new misery for the people.

Credibility is going to have to be re-established in our fiat. We'll need to back our money with "something" to give it credibility again. There is a long list of commodities, which nearly every country will use to back their fiats. Whatever that commodity happens to be, will provide a floor for access to markets.

That's how I see things.

Heineken-Ashi said:

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The dollar doom posts are my favorite. We are paying over $1T interest on our on our debt. Social security, Medicare, Medicaid, and other mandatory spending make up 75% of the federal budget. Add on discretionary spending and the deficit is massive. We can't fund all of this without continuing to issue new debt. At the same time, we are having to continually refinance debt at rates higher than it was issued at. That means the interest on the debt will continue to grow.

This all keeps going until something breaks. And when it breaks, you're going to see something we've never experienced.. rising yield deflation. Where the dollar gains strength due to money being sucked out of the system at the same time that nobody is willing to accept our debt without demanding much higher rates.

Not if. When.

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I think they are the poster of the posts favorite too since they argue a position that is pretty much unanimously agreed upon by serious people. It is in fact when, not if. Everyone should love a post wherein everyone else agrees with them.

The issue I take with the posts is their connection between current events and the progress through which we've traveled to the end game. That's where opinions vary widely and where most of the pushback is.

When those posters receive that pushback, their typical reply is to further support the position that fiat will fail which, again, is almost unanimously shared by serious people.