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You know, I would rather just say, you know what, I'm just going to prepare for the collapse and and if we get away with it one more time, well, I'll have to ride it out one more time. So, if there is a huge recession, if the US dollar goes down during that recession, I agree with you. If the US dollar goes up during a big US recession, that's probably going to be very problematic for the rest of the world.
Obviously, if I am a foreign shoe manufacturer, if I think the dollar is going to go down, I want to borrow dollars because when I repay them back, they they won't be worth as much. I mean, I want to do that. I mean, the world when you borrow in a currency, you're hoping that currency loses value so that when you pay it back, it's it's less.
The the problem is going to be the lenders. See, right now, people want to loan US dollars because they have confidence in the dollar. Well, what happens when they lose that confidence? It's going to be the lenders that don't want to make dollar loans. People are always going to want to borrow in a currency they think is going to go down.
They're just not going to want to lend in it. And that's going to be a big problem for the US government because we are the world's biggest borrower. We have to borrow from everybody. And if people don't want to lend us, and I don't think they will, not at an interest rate that we can afford to pay.
More and more of our enormous deficits are going to be financed by the Fed. I mean, the Fed's going to have no choice, politically speaking, but to crank up the printing presses. So for all this talk about quantitative tightening, they are getting ready for another round of quantitative easing because that is the only way to politically finance $3 trillion deficits or whatever they are.
I mean, and we have these huge deficits supposedly. We have this great economy and we still have $3 trillion deficits. Where are they going to go in the next recession? 5 trillion, 6 trillion. And where is the government going to get all that money? They're not going to raise taxes on the middle class.
They're not going to cut Social Security or Medicare. So, the Fed is going to have to print up all that money. We're going to have to print far more money in the future than we have in the past. And we're not going to get foreign central banks to to do our dirty work. The Japanese, the Chinese, the Saudis, whoever, they are not going to buy up US treasuries.
The Fed is going to be the buyer of only resort. They're not going to want them because I I think they're still able to get away with the transitory narrative. They're still saying that what we're seeing is COVID related. It's Putin related and and and and so they're acting as if nothing has changed.
There is a point in time where the public is not going to buy those excuses anymore. And you know, you do still have some, you know, some old school central bankers in Germany in the Bundesbank. you know, these guys, they just can't keep quiet and watch the euro become the Portuguese, you know, escoo or the the the the Italian lera.
They they it's supposed to be the Deutsch mark. So, at some point, you know, something is going to have to change there. And look, what I think it's going to take for the dollar to really sell off is either one or two things are going to have to happen. either the Fed is going to have to come clean and admit that the US economy is not as strong as it thought and therefore it's not going to be able to be as aggressive as it claimed when it comes to inflation fighting and it may even try to say that the weakness in the economy means that we don't have to fight as hard because inflation is simply going to come down as a function of the weak in the economy because Powell kept saying that you know the economy is super hot it's overheating ing and it's this red-hot economy that is causing inflation.
Now, that's not true, but that's what the Fed claims. And so, the Fed will have at least an excuse initially to adopt a less hawkish or more dovish uh you know, forward guidance in the face of all this mounting evidence that the economy is either headed to a recession or already in a recession. Uh so either that's going to happen, the Fed comes clean or the markets begin to frontr run that, you know, capitulation and start to realize that that's going to happen even before the Fed acknowledge it.
The markets start to realize, wait a minute, you know, this economy is a mess. We're in recession or we're going to soon be in recession. So the Fed is never going to be able to follow through with the rate hikes that have already been baked into this cake. And I think the reason that we've seen this strength in the dollar is because everybody has been bracing for, you know, this epic inflation battle where the Fed was going to, you know, go Paul Vulkar on inflation and the consequences be damned.
Uh, you know, who cares? We're going to we're going to bring put this inflation genie back in the bottle. We're going to go back down to 2%. And so just the way the markets believed the Fed when the Fed said there was no inflation. In fact, they said there wasn't enough inflation. And then when they said, "Oh, don't worry about the rise.
It's transitory." Now that they've admitted it wasn't transitory, the markets still believe the Fed, for some reason, the Fed credibility is still there. And the markets believe the Fed is committed to fighting inflation. Now, I don't I think they're going to give up that fight the minute they realize how weak the economy is because I think all of their tough talk is predicated on the economy being strong enough to withstand the rate hikes or the quantitative tightening.
But when they realize that's not the case, they're going to reverse. And so, either the Fed is going to tell that to the markets or the markets are going to figure it out. And that's when the dollar really starts to fall. But what I think is the nail in the dollar's coffin is when the Fed turns its attention to the economy and starts to stimulate the economy even though inflation has not returned to 2%.
And in fact, I believe that the next recession will be a catalyst for an acceleration of inflation as the Fed uh prints more money to try to prop up the economy. And we're going to get the economy falling at the same time inflation is rising. And that means unemployment is also going to be picking up dramatically.
You know, Fed, the pal was talking about how we had this great labor market, the greatest he's ever seen. That's a great contrarian indicator that the labor market is about to fall out of bed and we're about to see a big problem. So, I think the same thing with the Fed. They think this labor market is so strong, it's an accident waiting to happen.
And so when we get that, when we get recession and rising inflation at the same time, maybe unemployment and rec and inflation both go into the double digits. 10% unemployment, 10% inflation. When the markets get a whiff of that, I mean, that's it. I mean, the dollar is going to get killed in that type of economic environment.
So, first of all, the dollar hasn't collapsed yet, but it's been on the brink several times, but it almost collapsed in 1987. It almost collapsed in 2008. So, it it's been, you know, near death and then it's, you know, revived. And so, the question is the next time the dollar falls the way it did in ' 87 or 2008, what if it keeps falling?
What if there isn't a miracle to save it? You know, that that's what my thought is, is that how can you press your luck? Because I agree with what Brent is saying in that I'm right inevitably, but the timetable is difficult to tell. What if the imminent threat or not maybe a threat is that the dollar goes up before it goes down?
Because in the long run, cross at play, right? But here's the thing. How do you know when you've arrived at the long run? Because you can always say it's a problem in the long run. It's a problem in the long run. So that means eventually you're in the long run. Except when you're in the long run, you still don't know you're there, right?
You still say the same thing. It's a problem eventually. So at some point somebody who thinks it's a problem in the future is going to be surprised because they've arrived at the future, right? There is no more pancaking cuz that because I'm sure it's not going to be we're going to get to the point where it's a crisis and then all the people who have said, "Hey, it's only a problem in the long run." They're not going to suddenly say, "Yep, it's a problem right now." They're not going to know it's a problem until it's a crisis.
So, it's going to have to happen. So, the question is, can we do it again? You know, the enormity knowing that every time we have to go back to QE, we have to do it bigger than the time before, you know, and it it because the problem is so much bigger, right? We have a much bigger drug problem, so we need more drugs.
Can the US get away with it yet again given how big the numbers already are, how large the deficits are, how large the Fed's balance sheet is, how screwed up the economy is, can we up the Annie again and expect the rest of the world, given all the problems that the rest of the world has, to finance it again, to step up to the plate and loan the US enough money to let us get away with it one more time?
I I mean I just don't want to make that bet. I mean I realize yes that's the trend. We've been able to get away with it all this time. So let's you know just roll the dice and assume that it happens again. But knowing that eventually it has to collapse. You know I would rather just say you know what I'm just going to prepare for the collapse and and if we get away with it one more time well I'll have to ride it out one more time.
Uh, I've done it several times before, but you know, I I would rather be prepared for the endgame because that's the only thing I'm sure of. The path, it's difficult. What would get me to change my mind? I don't think I can change my mind because I know I'm right. But it's possible that Brent is right and that before the dollar crashes, it has another big rise.
Now, let's say all of a sudden the dollar crashes and now this country doesn't sell us its stuff anymore. The stuff stays there. Well, somebody in that country is going to buy that stuff. They're not going to just, you know, drop it into the bottom of the Pacific Ocean. The stuff's going to get sold.
It's just that it's going to be somebody in that country that's going to get it instead of someone in America. Now, the people in America that used to get all this stuff, we're not going to get that stuff anymore. We're just going to have our dollars. But what are we going to buy with those dollars?
Nothing. Because they don't have any value. So, I would rather have a bunch of stuff that I can use that makes my life better than more paper that I can't use and doesn't do anything to make my life better. I mean, the countries that get to keep their stuff are going to be in much better shape than America that gets to keep its waterflows
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