I hear many people who believe that there is no other currency out there that could supplant the US dollar as the world’s reserve currency. That may be true at this moment but in my opinion, there is growing evidence that the world does NOT need a reserve currency. I said this 5 years ago.

The evidence I am seeing starts with the BRICS where many members are already trading in local currencies. Even our traditional allies like France and Japan have been buying Chinese goods with local currencies. In the past if you wanted to buy oil or other commodities you needed to exchange your currency for US dollars to make the purchase. This led to unprecedented demand for our currency. Today, many trades are being done without the conversion to dollars but are being settled in the currencies of the trading partners. This is not just the BRICS and global south anymore- it is global.

As I have written in the past, the fact that the USA has had the world’s reserve currency has allowed us the extraordinary privilege of conjuring up cash in unbelievable amounts to buy MANY goods that we could not afford with our own production. It has allowed us to go into debts that are unparalleled in world history. Because of the demand created by needing the US dollar in almost all international trade we were able to live FAR above our means for decades.

This is important in many ways. It implies that the demand for dollars and US Treasuries is going down in an exponential way right now. The US knows it and is looking to prop up these assets with stablecoins- all backed by US Treasuries (new source of demand) and issued by private companies.

What this implies to me is that it will create demand for the treasuries and will allow for the government to fund itself for a while longer. What it further implies is that, not only will banks and the Fed be creating cash out of nowhere but so will all of the private companies that are issuing stablecoins that are “backed” by the backed by NOTHING US dollar. This is a unit of debt backed by another unit of debt. MAKE THAT UP.

The definition of inflation is an increase in the money supply. The result is an increase in prices which most people assume is INFLATION. Think inflation is bad now? Wait until many of the banks and mega companies join the conjuring up cash party.

This is one of the biggest reasons for having HARD ASSETS as at least part of your portfolio.

There are many differing viewpoints out there about where the future of our stock “markets” are headed. Those that think there is substantial upside in the short-term are probably looking at the terrible economy and expecting the Fed to lower rates. In addition, they could be looking at the stablecoin idea and figure that the additional liquidity and inflation will push up most assets- including stocks. Of course, the algorithms will buy and sell on certain numbers as well as buy or sell when certain headlines show up. This is the crack-up boom that may take place before an ultimate reconning.

In my opinion, the risk outweighs the reward here because when the SHTF there will be a majority that will be stunned at the speed and size of the drawdown and will lose FAR more than they anticipated. It appears to me we are at the end of a long 45-year credit cycle that may take decades to recover from.

Those that think the “markets” could collapse at any time are probably looking at the collapsing economy, the wars, and geopolitical problems and can see that the situation is UNSUSTAINABLE. Of course, I believe that the situation has been unsustainable since about 2010 so the timing can never be assured.

Anyway, I agree that the “markets” will crash at some point, but I have long given up trying to figure out when. I believe the signs will show up first in the bond “market” which is already signaling problems, but central bank intervention is keeping it hidden from most. The intervention is issuing debt to fund the government and then buying it back. What could go wrong?

Just about every prescription for what is ailing our economy involves deficit spending (more debt), conjuring up cash to pay for it (creating long-term inflation) and kicking the can as far down the road as we can.

My opinion is that we are near a breaking point because of all of the shenanigans that have taken place since 2008. While it seemed to many that they could do this forever the age-old truth that “There is NEVER something for nothing” is starting to play out where the inflation caused by the money creation is starting to gum up the works.

Rising yields make debt payments harder to make. Payments of debt decrease capital available to invest in creative and productive endeavors. Trillions are going each year in interest costs and unfunded liability payments. This could be the main reason our economy is stuck in the mud. Don’t think so? Look up the velocity of money. In a vibrant economy the velocity is brisk. In a dead economy the velocity is SLOW. We are at historically low levels of money velocity. (This is a measure of how fast “money” moves through the economy as it changes hands.

Because of our financial games and financial bullying around the globe the world has lost trust in the US dollar, the US overall and possibly most importantly our RULE OF LAW which seems to have been totally forgotten.

Many know that I am a proponent of hard assets and particularly gold and silver. If we were to have a major collapse in stock and bond “markets” what is the likely outcome for those assets.

My guess: Both would fall initially in a situation where “markets” are correcting uncontrollably. Gold would likely lead the way back similar to 2008 when gold fell from around $900.00 per ounce to $700.00 per ounce during the crash and was $1900.00 per ounce in 2011. Since our debts, deficits and the financial cliffs are exponentially higher than then- that rally could PALE in comparison to what may be coming. I believe silver would also recover but would likely lag because it is also an economic metal as well as a financial metal. It would likely catch up quickly as gold would probably become unaffordable for most and the move to silver would begin. This is already happening in India.

Nobody can foretell the future, but we could be on the cusp of some MAJOR changes.

BE PREPARED!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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