Diary

Let the run on the dollar begin

It’s hard to believe that the ChiComs weren’t hip to this before now, but I see from this morning’s Telegraph that they’re finally speaking out publicly. “Cheng Siwei, former vice-chairman of the Standing Committee” is quoted

“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.

Do we all get that? The biggest holder of foreign debt, $2,000,000,000,000 worth according to this story, is going to try to slip away from the dollar while no one’s looking. What Turbo Tax Timmy is doing is printing dollars to buy up Treasuries. Meaning, he’s printing money, which has no intrinsic value other than what you can get someone to trade you for it … that is, it’s basically a piece of paper, to buy up an asset which at least gives the appearance of having value since at least in theory the Fed will redeem it for dollars. That it just printed. You can see the problem here. You do that enough, pretty soon even the appearance of value is gone. Inflation is absolutely inevitable. Given the size of the pile of green backs they have to pump out of the Treasury, we’re talking Weimar Republic. Probably not Zimbabwe, but Weimar no doubt.

“He who goes borrowing, goes sorrowing,” said Mr Cheng.

It was a quote from US founding father Benjamin Franklin.

I’m sure The One will be quoting Franklin on thrift and responsibility at length next week in his speech to the “skulls full of mush.”