The Next Dollar Problem Has Just Arrived

It is not for no reason that cryptos are roaring, and precious metals are playing catch-up. In the last month there have been developments that point to a new phase of accelerating monetary inflation for the dollar, and fiat money is only just beginning to be exchanged for these inflation hedges at an increasing pace.

Hyper-inflation of the dollar is now becoming obvious to a growing cohort of investors. It is driven by factors on both sides of bank balance sheets, with evidence that large depositors are reducing their term deposits and increasing their instant access checking accounts. This appears to be behind the increase in M1 money supply fuelled out of a shift from the M2 statistic, which includes savings deposits.

It amounts to a hidden run against bank balance sheets. Meanwhile, increasing supply chain problems against a background of covid lockdowns are leading to the withdrawal of bank credit from non-financial businesses, potentially imploding bank balance sheets as a bank credit contracts.

Foreign support for both the dollar and dollar-denominated fixed interest assets are being withdrawn, which is sure to lead to rising bond yields and dollar interest rates in the New Year, undermining the equity market bubble.

Money by Dmitry Demidko is licensed under Unsplash

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