Daniel Lacalle/2-19-2023
“Destroying the currency is the first sign of the decline of a nation. The rulers of the state never think that it will end because the process is slow until it suddenly accelerates with hyperinflation and the state crumbles. This happens when neither domestic nor foreign citizens will accept the state currency as a means of payment and reserve of value. It erodes slowly and the collapse happens fast.”
USAGOLD note 1: In a certain sense, Lacalle drops the ball in this analysis. He rightly argues that the dollar is the world’s reserve country, essentially by default – the best of a bad lot. Once one accepts that notion, the question becomes, “What happens to a global economy and international trading system based on a currency declining in purchasing power and perhaps someday declining in rapid fashion?” After all, one would expect the dollar to remain the best of a bad lot for some time to come.
USAGOLD note 2: Lacalle puts the onus on the US government to make the dollar a “reserve of value,” but the dollar has lost almost 90% of its purchasing power since 1971, the year the US made the dollar a fiat currency. By now, its intent is fairly clear. In the end, the dollar is likely to remain the healthiest horse in the glue factory, and investors will be left to deal with the consequences on their own.
