I will be amazed if the USD is still the currency reserve by December of this year.
Sometime between the end of June and the end of December, reserve currency status will be de-facto ended. The USD will then devalue by 80%.
Yes, 80%! This is because the debt-per-taxpayer on the current debt comes to about 24,000 a year. The highest conceivable level of personal taxation that can go into repaying that is ~ 10%, so the average wage must rise to 240,000 a year. Which is a ~ five fold increase from todays average wage of 45000 USD.
Do not be in (USD) cash after June 30th. If you are then at some point you will be wiped out.
Note that a lot of our US Debt bonds are short term bonds. We got a better interest rate that way. As they roll over, our debt will climb way higher.
For the thread: I fix upon June 30th because that is when QE2 is slated to end: the markets have already priced in QE2 ending on that date.
Only it will not end. The US will not have sold assets nor meaningfully addressed its spending by that date - because Obama is still President. Therefore QE2 MUST carry on under some guise or other.
Nobody will buy treasury bills under a QE_infinity regime, and the interest rate cannot be significantly increased without geometrically increasing debt service payments. So the current high (70%) takeup of bills by the Fed will move towards 100%.
Once QE_infinity begins: Foreign Governments will look for ways to distance themselves from use of USD as a reserve - not because they hate America, but out of simple self-preservation.
The timing of how quickly that happens is pretty much a guess. I think it will happen between June and December. Others give it a year or so. But for all we know the currency will begin to de-reserve and de-value on the 4th July.