Grain in the Bin - John Duvenaud
Two years ago you had to have your assets in stocks or real estate. Cash was for dummies that didn’t know how to grow wealth.
Then the 2008 crash. Cash became a valuable way to hold assets. A lot better, for sure, than plummeting stocks and real estate. Every investor wanted to be in cash, the more liquid the better and, best of all, American dollars.
The American dollar soared in 2007-08, far beyond where fundamentals suggested. The amount of wealth held in liquid US dollars and debt reached $8 trillion. Everybody was in US dollars.
A month ago the American Fed printed $300 billion, to buy American Treasuries. This week they announced the printing of a further $1.75 trillion.
The issuer of American dollars is resolving the American governemnt budget and trade deficits and bailout obligations by printing dollars.
Holders of paper currencies around the world, specifically American dollars, are reacting by moving them into hard assets. The flood of assets into American dollars, and every other currency, is reversing. Money is moving to tangibles like real estate, stocks and commodities.
One large player in this game is China. They are investing money that used to go into US Treasuries into iron ore, copper, soybeans and canola. One part of their diversification is that they are rebuilding the grain reserves held until 2000 when China joined the World Trade Organization. On the assumption that they would be able to buy grain on international markets they got rid of their reserves just in time to face the 2007 grain shortage and $10 corn and $15 soybeans.
Holders of cash are converting to commodities. The money flowing into tangibles is enormous. Funds were sitting in cash on the sidelines and waiting for a signal to get long. That they have done. That is where the buying pressure is originating from across the entire commodity complex.
Potential inflation is a further consideration in holding some of your assets in commodities. Deflation is still generally underway as deleverging continues with debt-strapped businesses. However the governments of most western countries are printing money with abandon, trying to address numerous economic and social problems. Deflation is going to turn into inflation at some point as the huge increase in the number of dollars chases the same resources.
Grain is going to trade for more dollars per bushel.
Two years ago you had to have your assets in stocks or real estate. Cash was for dummies that didn’t know how to grow wealth.
Then the 2008 crash. Cash became a valuable way to hold assets. A lot better, for sure, than plummeting stocks and real estate. Every investor wanted to be in cash, the more liquid the better and, best of all, American dollars.
The American dollar soared in 2007-08, far beyond where fundamentals suggested. The amount of wealth held in liquid US dollars and debt reached $8 trillion. Everybody was in US dollars.
A month ago the American Fed printed $300 billion, to buy American Treasuries. This week they announced the printing of a further $1.75 trillion.
The issuer of American dollars is resolving the American governemnt budget and trade deficits and bailout obligations by printing dollars.
Holders of paper currencies around the world, specifically American dollars, are reacting by moving them into hard assets. The flood of assets into American dollars, and every other currency, is reversing. Money is moving to tangibles like real estate, stocks and commodities.
One large player in this game is China. They are investing money that used to go into US Treasuries into iron ore, copper, soybeans and canola. One part of their diversification is that they are rebuilding the grain reserves held until 2000 when China joined the World Trade Organization. On the assumption that they would be able to buy grain on international markets they got rid of their reserves just in time to face the 2007 grain shortage and $10 corn and $15 soybeans.
Holders of cash are converting to commodities. The money flowing into tangibles is enormous. Funds were sitting in cash on the sidelines and waiting for a signal to get long. That they have done. That is where the buying pressure is originating from across the entire commodity complex.
Potential inflation is a further consideration in holding some of your assets in commodities. Deflation is still generally underway as deleverging continues with debt-strapped businesses. However the governments of most western countries are printing money with abandon, trying to address numerous economic and social problems. Deflation is going to turn into inflation at some point as the huge increase in the number of dollars chases the same resources.
Grain is going to trade for more dollars per bushel.
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