This is a rough draft of a post I'm writing to give a counter argument to the dollar crash narrative. Feedback appreciated and may incorporate into final draft/whiteboard vid. Pls overlook layout, grammatical, spelling errors. thx

The Dollar Crash Paradox

Introduction

The main argument for the dollar crashing (losing 50%+ of its value vs other currencies) is a decreasing demand because foreign entities will “dump dollars.” This is also one of the main talking points for those who believe the US will lose reserve status within the next 10 years.

In my view this argument doesn’t take into account the way the current monetary system is structured. Incidentally, the structure I’m referring to is why headline CPI in the US can go up to 9.1%, government debt can increase from approximately 22 trillion in 2019 to 34 trillion today, deficits can explode, foreign central banks/governments can “dedollarize,” and the dollar can not only appreciate in value vs other currencies but can maintain or increase market share in terms of use by global commercial banks and non bank entities.

Please notice how USD reserves held by global central banks have decreased while the use with banks (using FX transactions as a proxy) has stayed constant. I believe the latter, what non government/central bank entities are doing, is far more important in determining the dominant global currency.
Monetary Mechanics

Let’s start by recognizing an undebatable fact, banks create dollars by lending them into existence, they don’t lend dollars that already exist. This is a crucial distinction to make. Why?

Because when a loan is created it creates “money” and when the loan is paid off it destroys “money,” therefore the amount of money in the system is mostly dependent on the rate at which loans are created and paid off. This is especially true for the dollar offshore because such a small percentage are in the form of currency. Conversely, if a dollar that was printed (hard currency) is lent or paid back, the transaction doesn’t impact the money supply.

We also have to understand the number of dollars is always less than the principal plus interest (not enough money to pay off debt), so either velocity has to be high or more loans/dollars need to be created to avoid defaults. Additionally, if velocity decreases, or is low, more loans/dollars then otherwise would’ve been needed, have to be created to compensate for the lack of circulation of the dollars that currently exists, or the entities that owe the dollars will have to sell assets (often other currencies) to make the debt payments. More on that later.

Dedollarize Narrative

The argument is foreign entities are going to start transacting in other currencies decreasing the demand for dollars, therefore the dollar value relative to other currencies will decrease. If dollar value goes down this will incentivize other foreign entities to “dump dollars” and it becomes a vicious downward cycle. All those dollars flood back into the US causing extreme domestic inflation which makes the dollar even less attractive to foreigners and the doom loop is exacerbated.

What makes this narrative so enticing, to the point of it going “viral,” is it makes sense, the same way the Sun rotating around the earth makes sense because you can see the Sun moving during the day. The problem is the monetary system, like the solar system was during the time of Copernicus, is not only complex but very often counterintuitive. Therefore to properly assess the “dollar crash” we need a monetary telescope (shout out Steve Keen) which is simply a balance sheet(s).

Aggregate Balance Sheet

Assume there’s $50 trillion total outside the US, said another way, the aggregate balance sheet has $50 trillion in dollar cash assets.

Those $50 trillion were lent into existing so the aggregate balance sheet outside the US would also have $50 trillion of dollar denominated debt as an offsetting liability. (more considering interest but we'll just focus on principal to keep it simple)

According to the Fed, CBDCs are already illegal.

Instead of making new laws that don’t address the problem, let’s focus on enforcing the current laws that do.

@RonDeSantisFL @SenTedCruz @RepThomasMassie @ThomasEWoods @BobMurphyEcon @mises I think there’s some confusion around what a CBDC is.

It means individuals and non bank entities have an account at the Fed…that’s it.

If it’s illegal for any entity other than a bank to have an account with the Fed, by definition, CBDCs are illegal.👇

Let me attempt to articulate the view of most #Bitcoin Maxis.

Throughout time, something we've seen over & over again is governments/kings/rulers debasing money. And when they debase money this usually leads to a collapse in society.

More recently we've seen this play out in 👇 the US, especially since the creation of the Federal Reserve. The government, with the help of the Fed, has printed money consistently, because the supply of money increases this creates inflation (price increases).

Constant inflation is a hidden tax because it steals 👇