Emergency Bypass

Even at today’s relatively low inflation levels, the dollar will lose about one-third of its value over the next ten years. No wonder foreign nations are increasingly joining together to by-pass it.

Tuesday, September 16^th, 2025

Bill Bonner, from Poitou, France

Auto debt is out of its lane. Carscoops:

Americans Crushed By Auto Loans As Defaults And Repossessions Surge

Many Americans love the feeling of driving a new car, but the price of that thrill is pushing household budgets to the edge. Auto loan delinquencies are spiraling, the nation now owes a staggering $1.66 trillion in auto loans, and some figures show scary similarities to the period right before the 2008 financial crash.

The feds are running into a ditch too. Our friend MN Gordon reports:

The U.S. government is on target to run a budget deficit of $2.2 trillion for FY 2025. Lower interest rates, and thus a lower net interest payment, would only reduce the deficit to around $2 trillion – a difference of just over a half percent of the total $37.5 trillion of outstanding debt. In other words, it would do exactly diddly-squat for the nation’s finances.

Debt...war? Debt...war?

US stocks are at record highs. But so far this year, the ‘defense’ segment — as measured by the Dow Jones defense stock index — is up more than twice as much as the Dow itself. Consumers may not be able to afford more autos. But the feds can afford more tanks.

And not just the US feds...they’re ‘gunning up’ in Europe even faster than the US. For the first time since WWII, largely on US urging, Europeans will spend more on ‘defense’ than America.

Back in the US, Donald Trump knows that ‘defense’ is not really what the department of that name actually does. The US faces no credible enemy it needs to defend itself against. No country has the military wherewithal to cross the mighty oceans and march on the Homeland. No country has the economic strength to create and supply a fleet that could do so.

America’s only real threat is from a missile attack. And only a fraction of the military budget is needed to provide a deterrent. The rest is spent on war...arming for it...preparing for it....and helping a lot of people get rich from it.

The Department of Defense was hypocrisy. The Department of War, alas, is reality. Firepower — a malign partnership of public and private...what Eisenhower called the ‘military-industrial complex’ — is where the money is. It has been America’s defining industry at least since the Iraq War.

But there’s more to the story. The US firepower industry depends on the post-1971 fake dollar. It was largely the firepower industry that caused the shift to fake money...and it was the fake money that allowed it to continue to expand.

Lyndon Johnson famously overspent on ‘guns and butter.’ Especially the guns...and especially in Vietnam. The banks in Vietnam were relics of the French colonial empire. So, dollars piled up in Paris. And in 1971, the shrewd finance minister at the time, Valery Giscard d’Estaing, sent a French warship to New York to collect on America’s promise to redeem those dollars at 35 dollars per ounce of gold.

That was the proximate cause of Nixon’s August 15, 1971 proclamation ‘closing the gold window’ at the Treasury department and replacing the good-as-gold dollar with a piece of paper. And since the US could ‘print’ as many pieces of paper as it wanted, it allowed politicians to approve bigger and bigger deficits and bigger and bigger ‘defense’ budgets, much of the money from which -- captured by contractors, lobbyists, politicians, and think tanks — never left the Washington DC area.

And this same dollar, that financed the huge growth in debt and firepower, also gave the US a new weapon. The Trump administration showed the world how the dollar could be used to bludgeon enemies and whip friends to keep them in line. That is what Vladimir Putin is talking about in the quote above.

Trump’s trade wars also revealed to foreign countries that depending on access to US consumers (to dollars!) was less of a sure bet than they thought.

Even when the foreigners try to comply with US desires, they can still be victims of shifting trade and immigration policies. The most recent illustration is the ICE attack on Hyundai’s Georgia plant. Hundreds of South Korean workers, who had been posted to the US to boost US manufacturing, are now back at home telling everyone how badly they were treated. Whatever else may come from it, many foreign businesses will surely think twice before locating in the US.

They must wonder too whether keeping dollars in their vaults is such a good idea. Over the last ten years, foreign dollar holdings — between inflation and currency declines — have lost as much as 40% of their value.

Even at today’s relatively low inflation levels, the dollar will lose about one-third of its value over the next ten years. No wonder foreign nations are increasingly joining together to by-pass the US...and its currency.

The new gas pipeline from Russia to China, for example, will be paid for, by the Russians, in yuan. It will establish a more-or-less permanent mutual dependency, one on the other. And in the embryonic union between Russia, China, India and Southeast Asia, the biggest consumer market in the world is waiting to be born. These producers, marketers and consumers want to do business with a reserve currency other than the US dollar.

Year to date, gold is up 40%.

More to come...

Regards,

Bill Bonner

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Market Note, by Tom Dyson

Here’s a five-year chart of the Dow. It’s fallen 38% since 2022, in what might be the quietest bear market in history. Of course, this is the Dow in terms of gold, not the dollar. We look at the stock market in terms of gold because we want to know the stock market’s real performance… in terms of hard money, not in terms of the fuzzy dollar. The stock market rallied from early April to mid-August, but lately, the trend has turned back down. Could the Dow/Gold ratio be heading below 10 soon? We’ll see...