On the New Global Economic Order

DRIGGS, IDAHO – They’re telling us what they’re going to do. All we have to do is listen…

Last week, Treasury Secretary Janet Yellen made an important statement. The message is clear. They’re going to devalue the dollar…

More below. But first…

Last Days in Driggs

Greetings from our mountain village…

Yesterday was the final day of ski season. Here’s Penny (8) skiing her last run, dressed as a unicorn…

The whole town came out to celebrate the end of winter. This man juggles and skis at the same time…

This man was snowboarding in shorts…

And everyone had a good time. Here is our last family ski picture of the winter…

Dollar Debasement

Turning back to the dollar…

For the past two years, we’ve been laying out a very simple thesis. That is, the U.S. government is broke and the only (politically) realistic way forward is for the government to “soft default” on its debt.

I call it a soft default because I don’t think Washington will renege on its debts on a nominal basis. Instead, it will pay back its debts with “watered down” dollars from inflation.

Paying creditors back with devalued dollars is still a default. It’s just a much more subtle way to default than a hard default.

If our thesis is correct, this strategy will see them lift inflation while controlling the yield curve on U.S. Treasuries. This will require a giant expansion of the Federal Reserve’s balance sheet and a debasement of the entire paper money system that revolves around the dollar.

A New Bretton Woods

On Monday, Janet Yellen gave her first major address as Treasury Secretary… to the Chicago Council on Global Affairs.

“As I prepare,” she concluded her speech, “to meet with my colleagues from around the world this week at the IMF and World Bank Spring Meetings, I find myself thinking back to the policymakers who gathered in Bretton Woods a year before I was born to define our post-war order.

“Though it was a different time, I empathize with the enormous weight they faced; the pressure to come together after a global catastrophe in building an enduring and interconnected system aimed at promoting peace and prosperity throughout the world.

“Our current juncture is no less significant – what we do in the coming months and years will have profound impacts on the trajectory of our country and on the global economic order.”

They’re telling us exactly what they’re going to do. They’re going to change the dollar-based financial system.

Yellen is even comparing her upcoming meetings to the Bretton Woods Conference of 1944. (At that conference, world leaders established the monetary system we have today, with the dollar as the global currency.)

Are you listening?

– Tom Dyson

P.S. I think there could be major unintended consequences to this policy. For example, they want higher inflation… But will they be able to control inflation once they’ve summoned it? They assume they can, but I’m not sure.

My strategy remains the same: to get our life savings to safety and as far away from the financial system as possible. Physical gold is the safest place I know.

Like what you’re reading? Send your thoughts to [email protected].

Praise for Kate and Tom… a book suggestion… and concern for the Dyson family’s London trip…

Reader comment: Heard they are going full totalitarian mode, i.e., locking down everything and everybody. You can’t even leave unless you have a good excuse. Hotel California = Hotel UK!! Personally, I wouldn’t risk it after what I heard.

Reader comment: I enjoy reading about your family’s adventures. Your kids are getting a world-class education and will be able to deal with anything they face as adults. So kudos to you and your wife for having the courage to chart your own unique course.

Reader comment: I love what you write and am green with envy with what you are doing! Keep doing it for as long as you enjoy the rewards it brings! A very pertinent underscore for both you and your family (and everyone!) is risk.

About 10 years ago, I read Risk: the Science & Politics of Fear by Dan Gardner. It’s a fascinating/enlightening read which I would highly recommend. I feel sure it will resonate as much with you as it has for me. I’m a Brit, live in London, am largely invested in precious metals/crypto, and am steadily working towards escape from “normal life,” via a circumnavigation.

Thank you for your investment insights.

Tom’s note: As always, thanks for writing in! We read every note you send us, even if we don’t respond right away in these Postcards.

Please keep your comments and questions coming at [email protected], and I’ll do my best to answer them in a future Friday mailbag edition.