| > The conclusion I'm left with is that the balance sheet is largely irrelevant until the demand for US Dollar decreases. I agree if I change this to: the conclusion I'm left with is that the balance sheet is largely irrelevant (towards any inflationary terms) until the demand for US Dollar denominated debt decreases and is followed by increasing money supply without the increase in debt (government $ denom, corporate $ denom, and individual $ denom on net) and without increasing derivatives notional outstanding on that debt. > The real question in my mind is exactly what would cause that to occur? When intl banks get more comfortable with issuing debt (secured and unsecured) in non USD terms, I then would expect demand for USD fall as well so long the US maintains a trade deficit. With the sunset of LIBOR in 2021, I expect things to pick up more on this front (Not everyone thinks SOFR is sufficient or lacks collateral to participate to the degree they currently need), though that's not stopping banks and OTC market making entities in various derivatives that extend credit in some form, including the use of cryptocurrencies. A big problem with EM's is a lack of acceptable collateral backing the debt (arguably, this is the issue with the current global monetary system), investors wouldn't mind argentinian debt if they could have those debts backed by sufficient collateral in the event of default (sans the IMF bailout assumption of course, though some creditors continue to get hosed every time the default). |