Currency Reset

I guess your house value? Anything that can’t be produced or reproduced quickly.
 
Whatever a "currency reset" might be, if a currency changes value then it will take more or less of that currency to buy something, depending on whether its value went down or its value went up. That is why, for example, that a dollar that is depreciating (as ours has been) will now buy fewer euros than it would in the past. It really has very little to do with what is being bought and sold.
 
If we look at a currency chart, the US$ is still above its average value over the past 2 decades Real Broad Dollar Index

IMG_0492.jpeg
 
lawman said:
Can you elaborate?
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I’m still not clear what you mean by “currency reset”. An explanation would help.

The chart shows the value of the US$ against other major currencies. Up means the $$ is stronger. We can see the trend since 2007, the $ has been steadily getting stronger.
 
lawman said:
In the event of a currency reset what, other than metals will increase in value most?
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If you are speaking in terms of a massive repricing of the dollar downward, then perhaps google AI's answer about "What assets did well during the Weimar hyperinflation" might help:
Assets that preserved wealth during the 1919–1923 Weimar hyperinflation were primarily tangible "hard" assets, including gold, silver, real estate, and foreign currencies. Stocks also performed well in nominal terms as companies acquired capital goods, while debtors benefited by repaying loans with worthless paper marks.
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It was also a good time to be a debtor, as long as 1) your debt wasn't in foreign currency, 2) your debt wasn't inflation adjusted and 3) your debt wasn't repayable in terms of gold/silver.

However, rules are rules...until they aren't. So, for example, the gubmint could decide that magically all debt is inflation adjusted. Or magically decide that your land isn't your land.

Hey, I hold a good slug of precious metals and those who produce them. If that becomes *wildly successful* (not just a 4x on silver as an example) due to a currency reset - well, let me just say that nobody will be a winner, including me.
 
I also disagree with fallacy of comparing one Fiat (USD) with other Fiats out there.

As for on the ground reality - $39 Trillions in Debt and no political spine to control the debt (debt increasing $1.5T/yr now), Government will be forced to print lot of new money in different ways, on continuous basis. Until things snap.

As for other countries, many countries are waking up to the fact that:
"A man shouldn't have to work hard for a dollar that some other man can just print".
 
Someone here will correct me but I've read that China and Japan have stopped buying our bonds and are now loading up on gold just as our big banks are doing setting the stage to replace the dollar...Seems like there is a reasonable chance we will see hyper inflation at best or the replacement of the dollar at worst.
 
lawman said:
Someone here will correct me but I've read that China and Japan have stopped buying our bonds and are now loading up on gold just as our big banks are doing setting the stage to replace the dollar...Seems like there is a reasonable chance we will see hyper inflation at best or the replacement of the dollar at worst.
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China has mostly stopped buying UST. I think Japan is still buying it but Japan of today is a much smaller economy than of 1980s/90s or early 2000.
There aren't many countries out there who are willing (or have the capacity) to absorb amount of new Debt printed by US/EU economies.

Gold at $5k and Silver at $100 is reflecting the exhausted interest in absorbing more US debt. Because US Debt is increasing full speed ahead. With no end in sight.
 
If they do like India did and suddenly announce that all USD have to be converted to New-USD where 1 New-USD = 10 USD, they probably will not bother with coins.

So if you hoard nickels:

1. Your nickel is still 1/20 New-USD for a 10x gain.

2. It becomes legal to melt nickels to get the copper and nickel and they trade like 90% silver coins.

3. Nothing happens and you still have $0.05 legal tender.

Of course you need to factor in the cost of reinforcing your floors to support all those nickels, but you probably already had to do that when they started sagging from the weight of all the ammo :)
 
lawman said:
Someone here will correct me but I've read that China and Japan have stopped buying our bonds and are now loading up on gold just as our big banks are doing setting the stage to replace the dollar...Seems like there is a reasonable chance we will see hyper inflation at best or the replacement of the dollar at worst.
Click to expand...

New US debt instruments are sold at auction, and the pricing reflects the competitive marketplace for debt. People willing to buy debt can either buy US treasuries, or the debt of other countries, or states, or municipalities, or corporations, or individuals.

The most recent auction of 10 year Treasury notes had about $2.55 in demand for every $1 offered, and the rate was about 4.173%. (*) That tells me that there is enough trust in the US government's ability to repay the debt, at least over the next ten years. Perhaps not from China or Japan, but collectively from somewhere.

I don't look at Treasury auction data often, but when I do the results have been similar to the above.

I don't see any real similarity between historical examples of hyperinflation and the current state of the US. Inflation in the US right now is a bit under 3%.

(*) Today's Auction Results — TreasuryDirect
 
^^^
Yup. Treasury yields (prices) have been range-bound ever since the Inflation Reduction Act in 2022. Not really seeing much impact from all this purported lack of demand.
 
yhoomajor said:
I also disagree with fallacy of comparing one Fiat (USD) with other Fiats out there.

As for on the ground reality - $39 Trillions in Debt and no political spine to control the debt (debt increasing $1.5T/yr now), Government will be forced to print lot of new money in different ways, on continuous basis. Until things snap.

As for other countries, many countries are waking up to the fact that:
"A man shouldn't have to work hard for a dollar that some other man can just print".
Click to expand...
I'm no expert, but I think most Fiat currencies outside the USA are in as bad (or worse) shape as the USD.
 
yhoomajor said:
China has mostly stopped buying UST.
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They haven’t, and can’t stop buying $UST. In December they bought a record amount, over $100B. See this noisy chart by Brad Setset, an expert of global capital flow. The blue line is monthly Chinese purchases of $UST. The Central Bank of China is not increasing its holdings, that job is now being done by the Chinese state owned banks.

They have a trade surplus of $1T and refuse to let that money back into their economy, so the only way they can prevent their own currency from appreciating is to buy US$ along with some Euros and Yen.

We have a trade deficit of $1T. By all rights the US$ should be steadily losing value. It isn’t, not because it’s strong, but because other countries are refusing to allow their own currencies to appreciate. They want to continue exporting, they need to keep their own currencies weak, and the easiest way to do that is by buying and holding $UST.
IMG_0493.jpeg
 
A real global currency reset wouldn’t be some secret switch that gets flipped. It would look a lot like every other reset in history: the system breaks, and something else replaces it because there’s no choice.


We’ve seen this before. The gold standard fell apart during WWI because governments couldn’t fund wars and stay tied to hard money. Bretton Woods came out of WWII because Europe was broke and the U.S. had the gold, so the dollar became the anchor by default. That system didn’t fail because of bad intentions—it failed because U.S. deficits and foreign dollar claims eventually overwhelmed the gold backing. Nixon closing the gold window in 1971 was basically an admission that the math no longer worked.


What we’ve had since then isn’t a “stable” system so much as a workaround. Currencies float, but the dollar still sits at the center, backed by U.S. economic power and later reinforced by the petrodollar. That setup has let the U.S. run huge trade and budget deficits while importing cheap goods and exporting inflation. It keeps the dollar stronger than it probably should be, which benefits U.S. consumers and hurts balance elsewhere.


Every reset shifts who eats the pain. Gold holders did well in the 1930s. Dollar holders benefited after Bretton Woods. Since the 1970s, the U.S. consumer has been the winner, while exporting countries piled up massive dollar reserves that are harder and harder to use without destabilizing the system.


If a reset happened today, it would almost certainly mean the dollar losing real value—probably through inflation or some kind of debt restructuring rather than a clean announcement. That would mean higher import prices and lower purchasing power in the U.S., and some relief for exporters like China in terms of import costs. But it also means those countries would be taking losses on the dollar reserves they’ve spent decades accumulating.


The big takeaway from history is that resets don’t happen because everyone agrees it’s time. They happen because the system stops functioning. No major country actually wants to pull the trigger, because a reset just moves the pain around—it doesn’t make it disappear.


If history is any guide, the next system won’t be fair or elegant. It’ll just reflect who controls real things—energy, food, manufacturing—once trust in financial promises starts to crack.
 
"If history is any guide, the next system won’t be fair or elegant. It’ll just reflect who controls real things—energy, food, manufacturing—once trust in financial promises starts to crack."

You make a good point. With AI coming it might be that electricity will be the new gold. And, of course, people will need food.
 
Running_Man said:
A real global currency reset wouldn’t be some secret switch that gets flipped. It would look a lot like every other reset in history: the system breaks, and something else replaces it because there’s no choice.


We’ve seen this before. The gold standard fell apart during WWI because governments couldn’t fund wars and stay tied to hard money. Bretton Woods came out of WWII because Europe was broke and the U.S. had the gold, so the dollar became the anchor by default. That system didn’t fail because of bad intentions—it failed because U.S. deficits and foreign dollar claims eventually overwhelmed the gold backing. Nixon closing the gold window in 1971 was basically an admission that the math no longer worked.


What we’ve had since then isn’t a “stable” system so much as a workaround. Currencies float, but the dollar still sits at the center, backed by U.S. economic power and later reinforced by the petrodollar. That setup has let the U.S. run huge trade and budget deficits while importing cheap goods and exporting inflation. It keeps the dollar stronger than it probably should be, which benefits U.S. consumers and hurts balance elsewhere.


Every reset shifts who eats the pain. Gold holders did well in the 1930s. Dollar holders benefited after Bretton Woods. Since the 1970s, the U.S. consumer has been the winner, while exporting countries piled up massive dollar reserves that are harder and harder to use without destabilizing the system.


If a reset happened today, it would almost certainly mean the dollar losing real value—probably through inflation or some kind of debt restructuring rather than a clean announcement. That would mean higher import prices and lower purchasing power in the U.S., and some relief for exporters like China in terms of import costs. But it also means those countries would be taking losses on the dollar reserves they’ve spent decades accumulating.


The big takeaway from history is that resets don’t happen because everyone agrees it’s time. They happen because the system stops functioning. No major country actually wants to pull the trigger, because a reset just moves the pain around—it doesn’t make it disappear.


If history is any guide, the next system won’t be fair or elegant. It’ll just reflect who controls real things—energy, food, manufacturing—once trust in financial promises starts to crack.
Click to expand...
So do you feel that government and high grade corporate bonds are still safer than equities or not or not?
 
With the dollar weakening I've been moving money to international. Quality, small cap value (not growth) and emerging markets. Currently 28% of portfolio.

SGENX has been performing very well as the dollar weakens. Should be positioned well defensively for a weakening dollar with good sized allocations in gold, international and emerging markets.
SGENX.png
 
dobig said:
SGENX has been performing very well as the dollar weakens. Should be positioned well defensively for a weakening dollar with good sized allocations in gold, international and emerging markets.
Click to expand...
FWIW I would not consider SGENX simply based on its exorbitant expense ratio of 1.10% after also charging a load (!). It has been a long time since I even looked at a fund that was that rapacious.

We hold VTWAX (aka VT), where we pay 0.09% expense ratio and (IIRC) are about 45% international. (I think this holding is similar to SGENX but could not find the data to verify this. "Typically, the fund allocates at least 40% of its net assets to foreign investments ... " per Zacks)
 
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