Thread by @mortymer001

@OdiousDebt In sixties the USA has realized that it can no more be the surplus economy it used to be after WW2. After Vietnam the amount of $s outside in rsrvs portfolios were too large to honour.
It was decided that instead of aiming to ctrl US to have highest surplus and leadership they..

@OdiousDebt decided that US will ctrl surpluses of other nations. U S went off the gold in 71, to oil backing.
For 50yrs it was possible to have "deficits without tears".
Aka:
“The Dollar is our currency, but it is your problem“ – John Connolly, US Secretary to the Treasury – 1971.

@OdiousDebt As a result the US had a competitive advantage of free energy printing.
The higher the oil was (but not breaking the demand) the better as their position vis-a-vis trade competitors was better, no?
(Reason why US has invested in shales lately - expecting crash of $ as rsrv ...

@OdiousDebt underwriting the monetary system.
50yrs of sweet deal when (investment) water was flowing upward, less developed nations financed most advanced nation, thwy were sending their hard earned moneis in exchange for $ Treasuries, to create reserve buffers, instability in oil markets

@OdiousDebt has always brought them uncertainty of investments so no country was able to develop. The US had inflow of brains as well, opening financial markets and created most competitive economy on back of 3rd world nations.

@OdiousDebt The system could work only when real rates are above zero, else other reserves like gold start to offer increased attractiveness.
In the yr 2000 the €-system was launched. The ESCB has stopped supporting $ with its surpluses.
Those famous PIIGS imbalances were instead created..

@OdiousDebt The China was brought in and supplied USA with needed surpluses to run it's deficit addiction.
Oil was again hiked up. The Euro area was loosing competitiveness yet most did not see that it is their relative high energy cost causing that (EU largest Energy importer).

@OdiousDebt What now?
Markets crashed. There is no country, no economic zone which will put US deficits over their own internal spending.
Markets have no feelings. The US is in precarious situation. The $ shortage is pushing the $ up while there is no way to keep the system rolling as the..

@OdiousDebt ..world economy has evaporated beyond repair.
Central bank's main priority is financial stability. They were buying time yet the time has arrived when they are forced to support their domestic economies. The CB cooperation may be unofficially dead.

@OdiousDebt So when in past the USA printed in excess they were exporting inflation. Other CBs had no choice but to mop that excess printing and called them "$ reserves". In 2014 the official segment was replaced with private entities buying Treasuries to support the magical Sampo mill.

@OdiousDebt (Analogy to old Finnish story about a hand mill which was printing value - en.m.wikipedia.org/wiki/Sampo).
Somehow I so find that story fascinating as it is one of earliest examples of accounting books imbalances.

@OdiousDebt All now needs to run in reverse, those old $, they are returning home. Each nation now must tap on their reserves. All in one time. Yet USA will be unable to honour its obligations.
Note how 1T of printing turns in 2T, to 6Trillion today!