Currency in circulation Vs. Gold/Stocks

Currency in circulation tends to be a good predictor of where gold and stocks go.

USD is losing reserve currency status

The U.S. dollar is losing its status, dropping to 59% allocation.

Q2 2020 COFER Update

The latest Q2 2020 COFER numbers show that the U.S. dollar has lost some reserve currency status.

USD Reserve Currency Status Is Strengthening (COFER)

The USD is not going away soon according to latest COFER.

Net International Investment Position (NIIP) Vs. Currency

The NIIP in essence shows the balance sheet of a country.

A negative NIIP figure indicates that a foreign nation owns more of the domestic nation's assets than the domestic nation does of foreign assets, thus making it a debtor nation. The current account balance correlates to the change in NIIP.

The largest debtor nation in the world is the U.S.A. The negative NIIP of the U.S. is around 50% of GDP. The largest creditor nation in the world is Japan, followed by Germany and China.

2015:

 

2020:

2021:

2022:

2023:

On top of that, Turkey and Mexico have a lot of dollar denominated debt.

The U.S. has incurred a lot of liabilities and less assets since the 2008 crisis. 

The BEA shows quarterly updates on the NIIP.

Because the U.S. owns less foreign assets, as opposed to foreigners owning U.S. assets, the U.S. debtor nation will benefit from a lower U.S. dollar. When the U.S. dollar drops, this will increase the NIIP. When the U.S. dollar gets stronger, then the NIIP will get worse. That's why the U.S. will want a weaker currency.

Data for Germany.

QE is going to be Big

So this is a visualization of the Fed balance sheet.

Currency in circulation is always going up and stands at $1.8 trillion. So the Fed has been decreasing its assets on the balance sheet and thereby decreasing reserves, which stand at $1.4 trillion. The amount of these reserves is too low and gave symptoms of liquidity problems.

These liquidity problems came from large and small domestic U.S. banks. We also know specifically that it was JP Morgan.

 

So now the Fed needs to increase its balance sheet to increase reserves again. And on top of that it needs to keep pace with the increasing amount of currency in circulation.

Currency in circulation at $1.8 trillion:

 

Reserves at $1.4 trillion: