In the world of international trade, you have to pay for your imports with exports. If you don't, your currency takes a hit and becomes less valuable.

That can't be true because the US has been running massive trade deficits year after year with no adverse consequences to their currency.

The dollar has been the exception to the rule, and there will come a time, most likely sooner rather than later, when the currency will pay for its years of trade deficits. Thanks to its status as the world reserve currency, foreigners have been accepting our worthless US dollars for their manufactured goods. US dollars and bonds have enjoyed the position of a perceived safe-haven asset, but they are far from safe.



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The emperor is naked

Soon, foreigners will realize the emperor has no clothes. They will see the dollar for what it is, and will no longer trust it as a currency. They'll notice they've been accepting worthless dollars and will start demanding legitimate exports in trade. It seems to me that this is when the US dollar will collapse. At the time of this collapse, anyone who earns a wage in dollars, has savings in dollars, gets a pension denominated in dollars, or receives other payments in dollars, will see a significant decrease in their standard of living.

The US has massive debts.

Officially, it is about $20 trillion, which is an unthinkably large number. However, using Generally Accepted Account Principals (GAAP) the actual debt is closer to $210 trillion. With a population of 320 million people, that puts the per-person debt at $656,250 for every man, woman, and child.

Since only 60% of the population is employed, that puts the per-working-person debt at $1,093,750. That is over a million dollars in debt for every single person who's employed!

There are two ways out of the debt: The honest way (default), or the dishonest/politically expedient way (inflation).

A default would be much less painful for the economy, but it is a nightmare for any politician. Imagine a politician telling people they are unable to pay citizens their promised pensions, Medicare, and Social Security. There'd be hell to pay. They'd be out of a job before they could blink.

Inflation is the coward's way out. It is the easier way politically, but the far more painful way for the economy. It is the route politicians will take because they can "print" dollars to pay their debts (think interest on bonds, Medicare, Medicaid, pensions, and Social Security).

When they add massive amounts of dollars to the currency supply, the result is more currency units chasing the same number of goods in the economy, thus forcing prices up. The will come a day when your social security check only buys half of the things it used to buy.

The government and government-controlled media will blame the rapidly-rising prices on anyone but themselves. It's the Russians, the greedy capitalists, Bitcoin, the evil business owners. People will then blame whomever the media tells them is at fault.

Considering the massive trade deficits of the US, combined with the government's colossal, I firmly believe that we will see a significant collapse in the dollar.

Follow me @shenenanigator to see my next post, where you'll find out what I'm doing to protect myself from this imminent collapse.