So sit on my dollars or buy film to fill my fridge? 🙂
Marcelo
Marcelo,
One thing that has to be remembered: when economies collapse the first thing that is done is currencies are manipulated, devalued and debased. This can be performed by dropping interest rates or revaluing the currency.
I'm close to retirement so I have to consider the worse case, and there are two extremely bad outcomes under a full blown economic war: China could launch their "Nuclear Weapon" and sell some or all of the U.S. Treasuries (Bonds) that would kinda destroy the market for them.
This would prevent our government from operating since we borrow money to fund our government. Also our banking system would collapse, and so would other markets. This is not the U.S. devaluing or debasing their currency, but this is China taking down and destroying the U.S. economy.
Of course China would have to absorb huge loses, but realize they have a massive stockpile of bonds to basically kill the U.S. economy and can be used as a weapon, a deadly weapon. I say the U.S. is in a very bad space and vulnerable. Most Americans don't know it.
A while back China did sell some bonds to punish the U.S. over some other trade policy. They only released a tad, and the effect was it immediate: it took down the markets and there was a massive sell-off. This happened under George W. Bush when he was President.
So imagine a country with enough U.S. Bonds that they could create a U.S. recession on demand. The U.S. could be literally choked by its own debt.
Another Chinese weapon is that their government could devalue their currency which has been "pegged" as undervalued in relation to the U.S. dollar. I expect China to do this first before using their "Nuclear Weapon." Pretty much China takes a loss on the devaluation, but gains the upper hand by being able to maintain a competitive advantage. This is like in a game of Chess: a forced move.
The advantages of the U.S. is that it is the largest economy, an import economy, and that it has the dollar, but that dollar in the above example because of debt is a liability and weakness.
If I can say that Europe is tied to Germany's export economy for prosperity, and that China is also an export economy that is the second largest, I say in the squeeze between the U.S. and China, Europe will suffer greatly as collateral damage. Perhaps the worse off will be developing countries that supply raw materials to the developed world.
This is a very-very dangerous game to play. I don't think Trump is much of a Chess player, I don't think he can think three or more moves ahead.
Sorry if talking the "end-game" is unplesent. Film prices are the least of my worries. In this game everyone looses.
Cal
