A Dollar Standard Crisis Coming

Less available dollars, in a world of a massive dollar shortage, drives up the dollar creating a shortage both home and abroad. Money printing does not make the dollars available. They get stuck in the financial system and hoarded.

Money for the banks, no money for the debtors…

The domestic shortage of dollars means that money gets hoarded while defaults rise. And the shortage abroad means that $13tn of debt scrambles for the available dollars as world growth slows and banks are less free with capital.

Don’t forget – the $13tn short dollar positions (foreign dollar debt held mainly by a foreign corporation and investment vehicles) is the largest position ever taken in the history of global financial markets.

It can only mean a massive, uncontrolled dollar rally.

QE will not fix this. Swap lines will not fix this. A debt jubilee would fix this or multiple trillions of dollars in write-downs and defaults.

It is the dollar strength that brings to world to its nadir (just like the 1930s). It is the dollar system that is a really big problem. This eventually breaks the dollar after a super-spike as global central banks are forced to find alternatives. They are already working on digital currencies for exactly this.

Raoul Pal 
Former hedge-fund manager who founded Real Vision