“The ability to purchase foreign goods and companies using resources conjured out of thin air was the exorbitant privilege of which French Finance Minister Valéry Giscard d’Estaing so vociferously complained.”
– Barry Eichengreen on the U.S. dollar’s “Exorbitant Privilege”
All the 2022 forecasts I’ve sifted through over the past few weeks can be summed up in a single word.
Inflation… supply chains… technology… cryptocurrencies… commodities… sigh. Where’s the drama? Where’s the excitement? I always liked how my mentor Bill Bonner used to paraphrase Frederic Bastiat: It’s not what you see that changes the market or helps you make money; it’s what you don’t see.
The pandemic itself and the subsequent policy response are good examples. In January 2020, the world had long-since forgotten the Spanish Flu and no one was forecasting a lockdown of the global economy… that would have been an epic forecast. Who knew we’d still be dealing with both 48 months later?
And yet, 103 years ago, when the Spanish variant was having its way with humans, we experienced a very similar set of mischief from politicians and the “barbarians of specialization.”
My friend and colleague in London, Nick O’connor, forecasts rioting in the streets of Paris sometime this year… an end to Macron’s presidency and the demise of Angela Merkel’s policies in Germany. Both would be a blow to the elite globalist agenda. But Mr. O’connor also quickly adds there isn’t any firm justification behind his prediction.
And that’s really the point. Forecasting is a fickle business at best. We con ourselves into thinking we know what the new year will bring… every year. Anyone can say what they think will happen. Whether you should pay attention or not depends on who the speaker is and what they’re basing their analysis on.
Juan Enriquez, a Wiggin Sessions alum, makes it clear he never makes forecasts; he simply tries to understand the trends afoot today. The right number-crunching might not lead to an exciting prognostication, but it can shine a light on the best places to put your money.
Consider these forecasts for the U.S. dollar and other currencies… at odds with most of our commentary.
Thanks to inflation, those green pieces of paper in your wallet don’t buy as much as they used to. But if you exchange those greenbacks for paper issued by other governments, you’ll likely get more of the other currency.
In 2021, the U.S. dollar index — which measures the dollar’s exchange rate against a basket of currencies — rose 3.8%… a significant move in the Forex world. The trend is largely expected to continue in 2022.
James M. Mason of Seeking Alpha tells us, “the U.S. dollar should continue to rise in value in foreign exchange markets.” The folks at Currency.com agree, writing there are ”plenty of reasons for optimism when it comes to the US dollar.”
Our Jim Rickards is on the bandwagon. During the Six Predictions Summit, he said, “one of the things that’s going to happen is the dollar is going to continue to get stronger.”
But while Seeking Alpha and Currency.com spend most of their time focusing on the U.S. relationship with Europe, Jim pins his prediction on worsening problems in China.
He believes the nation is undergoing a “slow motion but very severe financial collapse.” China needs the rest of the world to keep buying its goods if it wants to avoid a financial disaster. To do that, Jim says, “China’s going to have to devalue their currency.”
It may sound antithetical to his usual views, given how much money the U.S. government is borrowing, printing and spending. Jim admits, “we got a lot of problems in the United States, no question about it.” But the rest of the world is just as dependent on fiat money as we are… and in general, they are in even more dire straits.
“We’re in one of those ‘King Dollar’ stages,” Jim says. He recommends calls on dollar index funds and puts on Chinese ETFs.
They might not be the most exciting options you can buy… but Jim’s long history of correct predictions makes us think they could be quite lucrative.
Tomorrow, we’ll dig into more forecasts you can put your money on.
Follow your bliss,
Founder, The Financial Reserve