America will suffer, but the rest of the world will do worse:
America will suffer, but the rest of the world will do worse.
Their king dollar is wreaking havoc on the world.
Countries are going bankrupt.
Sri Lanka is already there.
Many more will follow.
Currencies will hyperinflate.
People will lose everything.
Slowly we’ll start to see more countries turn like Venezuela.
That’s a scary world.
Debt levels are too high everywhere.
Everyone printed money after COVID.
The Americans just raised rates more quickly.
Europe’s interest rate is still at less than one percent.
They can’t go any higher or literally bankrupt the Eurozone.
The Euro is at par with the dollar meaning the dollar went up and Euro went down.
Their energy crisis is not going away.
We’ve been lucky so far with a warm winter, but it will get worse.
Japan is running into currency problems.
They can’t maintain yield curve control.
Soon they’re going to have to start buying their currency to defend it.
Who has one of the largest US treasury holdings in the world?
The Japanese.
What happens when they buy their currency?
They sell treasury assets to buy Japanese Yen thereby spiking bond prices.
Disastrous for American and global bond markets.
Also means the price is more attractive and money flows out of the stock market.
There’s lots of pain to come.
Nicolas Nassim Taleb talked about it in a panel interview with Bloomberg.
Listen to him.
He’s been around the block.
He knows how these things work.
How we’ve been in La La Land because of money printing for 15 years.
Zero rates.
Continuous QE.
The money printer always running.
It made rich people wildly richer.
On paper.
And further distorted the difference between the haves and have-nots.
That’s an unproductive world.
That’s a world on a powder keg waiting to explode.
This has happened in history before.
Taleb’s partner at Universa, Mark Spitznagel, wrote an essay to his investors saying how this time was similar to the 1920s with likely similar consequences to come.
Quick aside - his book, Safe Haven - Investing for Financial Storms - is a fantastic read (notes here).
It basically walks through his epic strategy to bleed a little every day but win every time there’s a massive tail event. He outperforms every other fund using math and probability and walks through that in his book.
If I was a money manager right now, I’d be loading up on volatility and these tail risk-type funds.
I’ve been writing this for years.
We have a huge debt problem that we can’t deal with.
When inflation was ravaging through the world with rates at 0% and the US treasury was buying $120 billion dollars worth of bonds, I knew we had a problem.
Getting out of this problem will be bad for so many people.
Currency crises. Revolutions. Protectionism. De-globalization. War.
This is what’s to come for the world.
America will suffer, but the rest of the world will do worse.
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