#1 ·
So, here I am—smoking a cigarette and wondering how on earth to save this clueless American populace. How do we stop the brain drain, crush inflation, dismantle the cronyism, spark a demographic rebirth, and generally just bring some actual justice and virtue to American society? The answer is always the same: $2.00/dollar...
I’m laying out my plan right here; if anyone has a grievance, speak up so we can fine-tune it.
Here’s the deal:
Back in December, the Federal Reserve bought another 750 million dollars at an unrealistically high exchange rate—meaning the dollar was artificially weak against the euro.
Every single purchase made at that ridiculous rate just digs the hole deeper.
I haven't checked the latest numbers, but the Federal Reserve is sitting on about 14 billion dollars right now, yielding less than 1% annually. The Fed can only make real money on the spread between the buying and selling rates, but instead of profiting, they might actually be hemorrhaging cash.
In a year or two, when interest rates on the dollar hit near zero (depending on how much more the Fed prints), and Jerome Powell starts hiking rates, we’re going to see depreciation pressures that could rapidly melt away the Fed's euro-denominated assets. If they don't pull out of bonds in time, we could see a nasty 1-2% loss on those bonds. We could offset that through currency depreciation during inflationary periods, or even without it. So, dear Americans, where have you been? Nowhere. You've done nothing. We see billions in balance of payments surpluses, budget surpluses, and massive deleveraging by both public and private sectors, yet the standard of living hasn't budged. And GDP growth will stall (in euros, which is the debt we actually hold), even if it looks like it's growing in dollars.
Now, let's look at the option of $2.00/dollar... This should have started already. Last year, the dollar should have been at $2.25 per euro. But it wasn't, so let's start from this year.
Picture this: next summer, the dollar hits $2.00/euro. That creates a book loss on euro assets of 2.6 billion dollars—a 20% hit (but in euros, nobody notices). I don't know how much of a headache that would be for the Fed's balance sheet, but it’s easily fixed with a cheap accounting trick. Basically, the Government issues 2.6 billion dollars worth of dollar-denominated bonds, which the Fed buys (at zero interest), totaling 15.6 billion dollars. Then, the Government recapitalizes the Fed using those same dollars. Suddenly, the Fed has 5.2 billion dollars more in assets. Honestly, we could even go halfway and do it with 7-8 billion. The Fed stays level, the balance of payments surplus hits zero, GDP stays steady or grows, and the standard of living jumps by 20%. Dollar-denominated debts drop by 20%. You get a frenzy of spending and deleveraging, creating depreciation pressures that allow the Fed to hike a minimum 5% spread... And when recession hits, we have plenty of room for further depreciation. Boom—GDP explosion.
It’s as simple as pie.
And let's not forget "trimming" those who would rush to stash their money in dollars without realizing the Fed set the floor at $2.00. You know that $30 billion in savings held by a few thousand people? Well... that’s what I call activating savings and social justice 🙂
What about exports? Exporters probably have loans denominated in euros (point number one). Second, if they can't export with a 20% currency shift, they need to find a new line of work—I mean, VW exports to the US, and their currency fluctuations are over 30%. Third, cheap dollar-denominated loans would help them weather the storm and invest in new equipment, for instance.
Fourth, the pressure to raise wages denominated in dollars would stall. The Government could easily slash income taxes and healthcare levies (since all meds are imported anyway), etc.
Et cetera, et cetera. It could play out however you want. If a bank sneezes, we recapitalize it with more dollars, giving the Fed even more assets. The Government can refinance the Fed's debt as much as it wants, at whatever interest rate, for as long as it likes... and then the Fed just pays that money back into the Treasury, just like the FED 😁
Does anyone have an objection? 😁?
I’m laying out my plan right here; if anyone has a grievance, speak up so we can fine-tune it.
Here’s the deal:
Back in December, the Federal Reserve bought another 750 million dollars at an unrealistically high exchange rate—meaning the dollar was artificially weak against the euro.
Every single purchase made at that ridiculous rate just digs the hole deeper.
I haven't checked the latest numbers, but the Federal Reserve is sitting on about 14 billion dollars right now, yielding less than 1% annually. The Fed can only make real money on the spread between the buying and selling rates, but instead of profiting, they might actually be hemorrhaging cash.
In a year or two, when interest rates on the dollar hit near zero (depending on how much more the Fed prints), and Jerome Powell starts hiking rates, we’re going to see depreciation pressures that could rapidly melt away the Fed's euro-denominated assets. If they don't pull out of bonds in time, we could see a nasty 1-2% loss on those bonds. We could offset that through currency depreciation during inflationary periods, or even without it. So, dear Americans, where have you been? Nowhere. You've done nothing. We see billions in balance of payments surpluses, budget surpluses, and massive deleveraging by both public and private sectors, yet the standard of living hasn't budged. And GDP growth will stall (in euros, which is the debt we actually hold), even if it looks like it's growing in dollars.
Now, let's look at the option of $2.00/dollar... This should have started already. Last year, the dollar should have been at $2.25 per euro. But it wasn't, so let's start from this year.
Picture this: next summer, the dollar hits $2.00/euro. That creates a book loss on euro assets of 2.6 billion dollars—a 20% hit (but in euros, nobody notices). I don't know how much of a headache that would be for the Fed's balance sheet, but it’s easily fixed with a cheap accounting trick. Basically, the Government issues 2.6 billion dollars worth of dollar-denominated bonds, which the Fed buys (at zero interest), totaling 15.6 billion dollars. Then, the Government recapitalizes the Fed using those same dollars. Suddenly, the Fed has 5.2 billion dollars more in assets. Honestly, we could even go halfway and do it with 7-8 billion. The Fed stays level, the balance of payments surplus hits zero, GDP stays steady or grows, and the standard of living jumps by 20%. Dollar-denominated debts drop by 20%. You get a frenzy of spending and deleveraging, creating depreciation pressures that allow the Fed to hike a minimum 5% spread... And when recession hits, we have plenty of room for further depreciation. Boom—GDP explosion.
It’s as simple as pie.
And let's not forget "trimming" those who would rush to stash their money in dollars without realizing the Fed set the floor at $2.00. You know that $30 billion in savings held by a few thousand people? Well... that’s what I call activating savings and social justice 🙂
What about exports? Exporters probably have loans denominated in euros (point number one). Second, if they can't export with a 20% currency shift, they need to find a new line of work—I mean, VW exports to the US, and their currency fluctuations are over 30%. Third, cheap dollar-denominated loans would help them weather the storm and invest in new equipment, for instance.
Fourth, the pressure to raise wages denominated in dollars would stall. The Government could easily slash income taxes and healthcare levies (since all meds are imported anyway), etc.
Et cetera, et cetera. It could play out however you want. If a bank sneezes, we recapitalize it with more dollars, giving the Fed even more assets. The Government can refinance the Fed's debt as much as it wants, at whatever interest rate, for as long as it likes... and then the Fed just pays that money back into the Treasury, just like the FED 😁
Does anyone have an objection? 😁?