Rollover

There is a film starring Jane Fonda from 1981 called Rollover it is, to be fair, a pretty bad movie, it is about what happens if the oil and dollar rich Arab world dumps the dollar.

The answer is, of course, a total world wide economic collapse. Which is why those claiming that all we have to do to stop Trump invading Greenland is to threaten to dump the dollar are wrong.

The world’s economy is dependent on the Dollar as a reserve currency, but that also comes with responsibility for America. It has to act as lender of last resort if it is to keep that role and all the many, many benefits it brings. Including funding its low tax economy with hundreds of billions of borrowed foreign money.

So the big question for the rest of the world is, can you undermine America’s economy and bend Trump to your will by threatening the dollar?

The answer is; quite possibly, but why would you risk it? If it goes wrong we are all screwed.

Which brings us back to Rollover the movie, where the oil rich countries plan is to rollover or renew their dollar deposits but not by the full amount every time, so quietly reducing their investments over time. It is only when the plan is exposed that the economy collapses.

But that is quite possibly what is going to happen, not because of Greenland but because of Trump. He has no intention of keeping America as the lender of last resort, he is so dumb he thinks it is a con and is totally ignorant of the fact that it is what keeps America as top dog.

So why would you continue to stake everything on the dollar and rollover your investments, or hold on to USA bonds?

Why would Denmark do that? Let alone China, India, Brazil, Russia or anyone else.

Shouldn’t they be planning for the worst, putting money into Euros, the next obvious contender for reserve currency, or gold or even sterling or the Yuan?

Not all of it, not all in one go, but slowly, carefully, secretly, by not rolling over your investments in total every time.

Well the obvious reason to not do that is that if the news leaks or anyone spots the trend, the consequences would be disastrous, as it is in the film.

But then holding on to the Dollar is not necessarily a long term investment that makes sense, there is no putting the genie back in the bottle. Trust has gone for good even if Trump will soon be an unhappy memory.

I assume central bankers are sweating blood over this scenario and many others, exchanging plans and ideas and trying to prevent the worst happening.

But betting on the permanent dominance of the dollar is no longer a sure thing, that should terrify us all, no matter how it ends.

Jonty’s Jotting

From Jonty Bloom Media Ltd

Economics, trade and Brexit, not necessarily in that order but the dog always comes first.