Thursday, January 14, 2016

Jim Rickards: The Dollar Shortage

Yesterday we looked at the 'Danger of the Super Dollar' article which recently appeared on the OMFIF web site. Today we can follow up that article with a review of Jim Rickards latest article he calls 'The Dollar Shortage'. Taken together these articles provide powerful analysis which supports the idea that the surge in strength of the US dollar is becoming a problem for the global financial system that will have to be resolved. 

Here is a link to the full article by Jim Rickards (which requires you to provide an email address to access). Below are some quotes from a summary of this article as they appeared on Kitco recently.


"Instead of focusing on China and the struggling equity markets, one best-selling author turned his attention to a bigger issue, which he refers to as “the dollar shortage.”
Since 2009 there has been far more dollar-denominated debt created than dollars. There are not enough dollars to go around. The losses will be enormous,” warned Jim Rickards, author of Currency Wars and The Death of Money, in his latest blog post for West Shore Funds Monday. 
“We are closer to the stage (last seen in September 2008) where ‘everybody wants her money back.’ When that happens, there’s never enough money,” he said.
According to Rickards, every dollar that has been printed by the Federal Reserve has created a new 20-fold amount of debt.
“McKinsey Global Institute estimates that global debt increased by $57 trillion from 2007 to 2014. Not all of this debt is denominated in dollars; some is in yen, euros or yuan. Still, the dollar debt overhang is enormous,” he said.

Rickards explained that debt is only manageable if it can be rolled over into new debt, or paid off with profits; however, under current market conditions -- “growth depression” and with a “technical recession looming” – servicing debt is problematic."     . . . . .
My added comments: I highly recommend that readers here go ahead and sign up to read this full article by Jim. It's one of the best I have seen to explain this key problem we now have with a US dollar that is too high for those around the world who have taken on too much US dollar denominated debt. I suggest reading this article combined with the article we published yesterday. They go well together.
Jim only requires an email address to read the article free and you will continue to get his ongoing commentary free as well if you want to.
Added note: If you want to see what all this looks like on charts from a technical analysis view, this is a pretty good write up for that.

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