Catastrophizing all the wrong things
I woke up this morning to a headline from a local reporter, opining on the damage that could be done to our economy if people supported by Mike Lee don’t back down in the debt ceiling negotiations. Apparently, cutting back to the spending levels of two or three years ago would end this nation as we know it. The far left radicals love to catastrophize about the possibilities if the US doesn’t receive a new credit limit every time the administration in Washington asks for one. This reporter called it “playing chicken” with our economy.
Consequences, both short and long-term, for too much spending and an inflated US dollar
Under President Biden and the profligate spending of just about everyone in Washington D.C., inflation hit its highest level in 40 years. Despite all the experts telling us it was transitory, even they have begun admitting it’s not. It has become increasingly unaffordable to own a single-family home; food costs are up substantially and many families are forced to make uncomfortable adjustments to close the gap; gas prices shot up and became so bad last year that we’re now celebrating a drop in prices still significantly higher than 2020, even after dumping millions of gallons into the market from our Strategic Petroleum Reserve.
China has been aggressively purchasing gold for years and recently announced that they would import vast amounts of oil and gas from Gulf states and settle those transactions using their own currency, the RMB. It is clear that these efforts are a part of their strategy to unseat the US dollar as the world reserve currency. While the US is still the primary reserve currency for the world, last year saw a stunning decline.
It's getting real, guys
Over the past 20 years, nations have been seeking safer reserves as evidenced by the fact that in 2020, the dollar accounted for about 75 percent of the world’s reserve currency, dropping to 55 percent by 2021. By the end of 2022, the proportion of world reserve currency holdings in the US dollar was down to 47 percent, something “exceptional, equivalent to 10 times the average annual pace of erosion in the USD’s market share in the prior years.”
To be clear, for the US to lose its world reserve currency status would have a devastating effect on every single American and our entire economy. It would make the debt ceiling negotiations look like child’s play. Our constant money printing and weaponization of the dollar around the world gives the Chinese their best argument yet for nations to flee an increasingly worthless dollar and invest in a currency tied to a real asset - gold. This doesn’t mean there aren’t downsides to the alternatives; there certainly are. But our repeated mistakes may make those risks seem worth it for an increasing number of countries.
Who are the ones playing chicken with our economy, again?
And yet, the approved narrative is that those doing everything in their power to slow down inflation and pain for struggling American families in the short term, while re-establishing the dollar as a trustworthy medium of exchange in the long term, are the ones playing chicken with our economy? We've played that game for decades and this is where we find ourselves. Please.
