The Global Dollar Shortage is Here – And It’s Becoming A Big Problem

The credit market – in my opinion – is indicating an inevitable ‘crunch’ coming up. And even worse – we’re seeing the global dollar shortage deepening.

I think this may be the trigger that kicks off a brutal, worldwide, financial crisis.

Don’t forget – a dollar shortage is synonymous with disappearing liquidity. Which means we can expect more violent and sudden market crashes to occur – just like we saw over the last two weeks.

Stock markets (and bond markets) around the world took big losses. The only thing that really outperformed was gold.

Corporations worldwide borrowing dollars for business operations. And even ordinary citizens with mortgages and credit cards (which are mostly driven by LIBOR) will face higher interest payments.

Both corporate and non-corporate business loans and commercial mortgages are about half tied to LIBOR. . . To put this in perspective, a 35-basis point increase could raise business loan interest costs by $21 billion. So, with yields rising – both on the short end and the long end of the curve – this could hurt the business sector. Which means the stock market. . . Just look at the stocks with high-floating rate debts (adjustable interest) having under-performed the S&P 500 when borrowing costs rose…”

 
So – I know the idea of a dollar shortage sounds strange to many. Especially because of how much the Fed’s printed since 2008.
 
But the problem is – the world created much more debt than the Fed’s created dollars. 
 
Putting this into perspective – for every dollar that’s been printed – there’s roughly 20 times the amount of debt outstanding. 
 
And most of that debt ended up abroad. Like in the Emerging Markets.
 
And everything was fine – as long as the Fed was easing and inflation was low. . .
 
But since late December 2015 – the Fed’s been tightening. And if you look at both those charts above you, can even see that’s when borrowing costs started trending higher.
 
Now with all this Fed tightening, soaring U.S. deficits, a stronger dollar, and higher rates – servicing all this outstanding debt is becoming impossible. . .

This is going to cause an evaporation of dollar liquidity – making the markets extremely fragile… And since then – the evaporation of dollars has only worsened. The Treasury needs more dollars than ever as deficits continue soaring to levels not seen since 2008… The Fed’s ramping up their Quantitative Tightening (sucking dollars out of the banking system). This is pulling out as much as $50 billion dollars a month (or $600 billion a year) … Also – because of the Trump Tax Cuts – we’ve seen corporations take their cash piles back home. This suddenly yanked dollars out of foreign banks that were once ‘Tax Havens’. . .”
 
So – thanks for Econ 101 teaching us supply and demand – the constantly shrinking pool of dollars is making the dollar’s value appreciate. And that means dollar-denominated debts are becoming harder to service.

https://www.zerohedge.com/blogs/Palisade%20Research

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SideNote: This is nothing new that hasn't already been talked about by a few others, like Jim Rogers. Who has been saying for many years, we will see the mother of all bubbles in the dollar as merging markets collapse. And then the dollar will be the finally fiat currency to collapse, at that point in time, we will see the mother of all bubbles grow to the other extreme, Gold skyrockets to the moon. My only question is, will we already be in a all electronic currency, at that time, that won't allow Joe-Six-Pac to buy physical PMs ???

GRIM REALITY