{"id":43091,"date":"2023-01-19T06:08:15","date_gmt":"2023-01-19T06:08:15","guid":{"rendered":"https:\/\/wpcompleteintel.com\/?p=43091"},"modified":"2023-05-03T03:20:43","modified_gmt":"2023-05-03T08:20:43","slug":"zero-hedge-a-country-cant-save-both-its-currency-and-its-bonds","status":"publish","type":"post","link":"https:\/\/completeintel.com\/zero-hedge-a-country-cant-save-both-its-currency-and-its-bonds\/","title":{"rendered":"Zero Hedge: A Country Can&#8217;t Save Both Its Currency And Its Bonds"},"content":{"rendered":"\n<p><em>This article was first and originally published on <a href=\"https:\/\/brucewilds.blogspot.com\/2023\/01\/a-country-cant-save-both-its-currency.html\" target=\"_blank\" rel=\"noreferrer noopener\">https:\/\/brucewilds.blogspot.com\/2023\/01\/a-country-cant-save-both-its-currency.html<\/a> and can also be found on <a href=\"https:\/\/www.zerohedge.com\/personal-finance\/country-cant-save-both-its-currency-and-its-bonds\" target=\"_blank\" rel=\"noreferrer noopener\">https:\/\/www.zerohedge.com\/personal-finance\/country-cant-save-both-its-currency-and-its-bonds<\/a><\/em><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p>I\u00a0have adopted the position that when a central bank allows its government to overspend and abuse its currency, something has to give. You could say this is one of the unwritten laws of fiat currencies. Time and time again history has proven this to be true and it is the reason many people claim gold is the only true form of money that cannot be corrupted. In a world where everything seems subject to manipulation, this claim about gold is still up for debate.\u00a0<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/assets.zerohedge.com\/s3fs-public\/styles\/inline_image_mobile\/public\/inline-images\/2023-01-11_07-51-25.jpg?itok=IkN_50dh\" alt=\"\"\/><\/figure>\n\n\n\n<p><strong>The overspending by governments coupled with inflation has really started to affect the perceived value of currencies in relation to other currencies. As these relationships break the losers are the people holding the de-valuated currency.<\/strong>&nbsp;Of course, many factors feed into how we value a currency but the crux of this article is not about whether a currency is over or undervalued but rather what a country must do to defend its value if it comes under attack.<\/p>\n\n\n\n<p>Brent Johnson of Santiago Capital is credited with coining the term the&nbsp;&#8220;Dollar Milkshake Theory.&#8221; It explains how our debt-based monetary system can cause the US Dollar to rise despite the increasing liquidity injections around the world. Whether this was a &#8220;grand master plan&#8221; or a situation that just developed over time, it is something that may bode well for the dollar. Johnson recently took part in a discussion that included subjects such as the future price of oil, housing, and the probability of a huge global huge recession.&nbsp;<\/p>\n\n\n\n<p>About\u00a028 minutes into the discussion which\u00a0<a href=\"https:\/\/www.completeintel.com\/weekahead\/300-crude-housing-japan-recession-oil\">came out in both video and transcript form here<\/a><strong><em>:<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-spotify wp-block-embed-spotify wp-embed-aspect-21-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"Spotify Embed: $300 crude, bullish housing, Japan, recession, and oil demand [The Week Ahead - 26 Dec 2022]\" style=\"border-radius: 12px\" width=\"100%\" height=\"152\" frameborder=\"0\" allowfullscreen allow=\"autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture\" loading=\"lazy\" src=\"https:\/\/open.spotify.com\/embed\/episode\/5uNQwgR5yZ9YiTQEVf5aIo?utm_source=oembed\"><\/iframe>\n<\/div><\/figure>\n\n\n\n<p>Johnson conveys what many of us see as a truth that haunts fiat currencies. This is rooted in the fact that when the value of a currency falls, a country and its central bank cannot save both its currency and its bonds. In his &#8220;slightly edited&#8221; words;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>&#8220;The problem is you cannot, and this is for every country, the US included, again, there\u2019s a progression in how it\u2019ll go, but you cannot save both the bond market and the currency market because they work at cross purposes. Whatever you do to save the bond market hurts the currency. Whatever you do to save the currency hurts the bond market. And every central bank in history has promised they won\u2019t sacrifice the currency, and every central bank in history has ultimately sacrificed the currency.<\/em><\/p>\n\n\n\n<p><em>And the reason they always choose the currency over the bond or the reason they always choose to sacrifice the currency over the bond market is for two reasons. One, the currency affects the citizens more than the government, and the bond market affects the government more than citizens. So they\u2019re going to bail themselves out before they bail the citizens out. And the second thing is if the bond market blows up and the banking system blows up, there is no longer a distribution system for the government to raise money.<\/em><\/p>\n\n\n\n<p><em>So they can\u2019t let the bond market blow up because then they can\u2019t get money anymore. And then if they can\u2019t get money, they can\u2019t operate. So this is a very long way of saying that I understand why the market moved the way it did. I think maybe in the short term it makes sense, but in the medium to long term, it doesn\u2019t make any sense to me at all. Again, kind of watch what they do, not what they say.&#8221;<\/em><\/p>\n\n\n\n<p><em>He later added &#8220;The problem, as we\u2019ve kind of figured out and found out that it\u2019s very hard to just get four for four or 5% inflation. It goes from 2% to 12% pretty quickly. They don\u2019t have as much control as they think they do, right? And the problem with four or 5% inflation, you can kind of get away with it because it\u2019s annoying and it is frustrating, but it\u2019s not totally ruining your life. But with 8, 9, 10, 12, 15, 80% inflation, that starts to ruin the pledge life, as you mentioned. And that\u2019s when they start to push back from a political perspective. And that\u2019s what central banks and governments don\u2019t want. They don\u2019t want the populace revolting&#8221;&nbsp;<\/em><\/p>\n<\/blockquote>\n\n\n\n<p>When you think about the true motivators driving this &#8220;system,&#8221; it is logical the government and central banks would throw the populace under the bus. This is about their survival. As to the question of equal pain, those in power justify taking raises to offset the impact of inflation under the idea we &#8220;need them&#8221; to steer things forward for the &#8220;greater good.&#8221;&nbsp;<\/p>\n\n\n\n<p>While Johnson&#8217;s remarks were aimed at what is most apparent in the actions of Japan, this truth is problematic to all fiat currencies. For more on the&nbsp;Dollar Milkshake Theory see;&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-embed-handler wp-block-embed-embed-handler wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"Brent Johnson Explains the Dollar Milkshake Theory\" width=\"580\" height=\"326\" src=\"https:\/\/www.youtube.com\/embed\/PWVRWUkm54M?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<p><a href=\"https:\/\/www.zerohedge.com\/s3\/files\/inline-images\/2023-01-11_07-51-25.jpg?itok=IkN_50dh\"><\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Zero Hedge featured one of the Week Ahead episodes on their own discussion about bond and the currency market. This is with Brent Johnson and the $300 crude, bullish housing, and Japan recession discussion. <\/p>\n","protected":false},"author":1,"featured_media":43093,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[66],"tags":[469,471,504,1110,1116,1249,1255,1610,1699,1761,1862,1877,2021,50,2427,2637,3255,3432,4070,4174,4461],"class_list":["post-43091","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-articles-print-web","tag-bond","tag-bond-market","tag-brent-johnson","tag-currency","tag-currency-market","tag-dollar","tag-dollar-milkshake-theory","tag-fiat-currencies","tag-forex","tag-future-price-of-oil","tag-global-recession","tag-gold","tag-housing","tag-inflation","tag-liquidity","tag-milk-shake","tag-recession-2023","tag-santiago-capital","tag-us-dollar","tag-usd","tag-zero-hedge"],"_links":{"self":[{"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/posts\/43091","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/comments?post=43091"}],"version-history":[{"count":1,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/posts\/43091\/revisions"}],"predecessor-version":[{"id":43571,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/posts\/43091\/revisions\/43571"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/media?parent=43091"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/categories?post=43091"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/completeintel.com\/wp-json\/wp\/v2\/tags?post=43091"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}