If forty million people say a foolish thing..

'If forty million people say a foolish thing, it does not become a wise one, but the wise man is foolish to give them the lie'.

So wrote Somerset Maugham in one of his notebooks.

The phrase is often attributed to Anatole France, or abridged to 'if forty million people say a silly thing, it's still a silly thing'.

Whenever I read 'dollar' and 'safe haven' in a sentence, Maugham's phrase comes to mind.

Think about it.

Was the dollar's surge in 2008 (apprehended to some extent by Fed-sponsored dollar swap lines) due to the dollar's perceived 'safe haven' status?

Of course not.

During the darkest days of 2007 and 2008, nobody would have described the sponsor (U.S.) of the subprime (self-) immolation as a 'safe haven'.

I simplify, but only a little: the massive demand for dollars in 2008 arose because many foreigners held US paper (bonds, RMBS, etc.) funded in dollars, or fully FX-hedged - and hence, they needed to source dollars fast to either repair balance sheets, or adjust their FX hedges (lower).

They struggled to do so.

This is something my late friend, Niall Coffey, summarised neatly in October 2009: https://www.newyorkfed.org/research/current_issues/ci15-6.html

Related, perhaps overlooked point: do we really think the largest dollar exposures are voluntary?

In my experience, the world's reserve managers have long viewed their dollar exposure as a liquidity buffer; but have never thought of it as a 'safe haven' per se.

Surplus countries have to swallow deficit countries' liabilities if they wish to continue to run a surplus with them.

And the bigger the surpluses are, the harder it is for them to diversify into other similarly-sized liquidity buffers: I too like gold, but what would happen to the gold price if SAFE (or any large holder) needed to liquefy some of their gold holdings?

The screens tell us a new dollar bear market is underway.

It kicked off the day The White House dropped this:

https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/

But this endless, pointless chatter about the dollar losing its 'safe haven' status makes me wary.

To repeat, surplus countries have to swallow deficit countries' liabilities if they wish to continue to run a surplus with them.

There is still no scale liquid alternative to US capital markets.

Markets and the commentariat seem to be focussed on the asset side of foreign exposure to dollar assets.

I am surprised by how little conversation there is about the dollar liabilities held by foreigners: a reduction in foreign holdings of dollar assets can (c.f. 2008) create increased structural demand for short-dated dollars to service those dollar liabilities.

I, too have been and remain a dollar bear.

However, the more narrowly-focussed the conversation (all about dollar assets, little about dollar liabilities), the more widespread the inane conversation about 'safe haven' status the more open minded I want to be about the dollar.

If forty million people say a silly thing, it is still a silly thing.

I'll leave you with some Keynes.

Abridged Keynes:

“When the facts change, I change my mind”

Actual Keynes:

“The inactive investor who takes up an obstinate attitude about his holdings and refuses to change his opinion merely because facts and circumstances have changed is the one who in the long run comes to grievous loss”

JA

Mapping reality since 1992. Advising the world's most powerful pools of capital since 1999. Discover why they trust him: https://www.aitkenadvisors.com/contact

'If forty million people say a foolish thing, it does not become a wise one, but the wise man is foolish to give them the lie'.

So wrote Somerset Maugham in one of his notebooks.

The phrase is often attributed to Anatole France, or abridged to 'if forty million people say a silly thing, it's still a silly thing'.

Whenever I read 'dollar' and 'safe haven' in a sentence, Maugham's phrase comes to mind.

Think about it.

Was the dollar's surge in 2008 (apprehended to some extent by Fed-sponsored dollar swap lines) due to the dollar's perceived 'safe haven' status?

Of course not.

During the darkest days of 2007 and 2008, nobody would have described the sponsor (U.S.) of the subprime (self-) immolation as a 'safe haven'.

I simplify, but only a little: the massive demand for dollars in 2008 arose because many foreigners held US paper (bonds, RMBS, etc.) funded in dollars, or fully FX-hedged - and hence, they needed to source dollars fast to either repair balance sheets, or adjust their FX hedges (lower).

They struggled to do so.

This is something my late friend, Niall Coffey, summarised neatly in October 2009: https://www.newyorkfed.org/research/current_issues/ci15-6.html

Related, perhaps overlooked point: do we really think the largest dollar exposures are voluntary?

In my experience, the world's reserve managers have long viewed their dollar exposure as a liquidity buffer; but have never thought of it as a 'safe haven' per se.

Surplus countries have to swallow deficit countries' liabilities if they wish to continue to run a surplus with them.

And the bigger the surpluses are, the harder it is for them to diversify into other similarly-sized liquidity buffers: I too like gold, but what would happen to the gold price if SAFE (or any large holder) needed to liquefy some of their gold holdings?

The screens tell us a new dollar bear market is underway.

It kicked off the day The White House dropped this:

https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/

But this endless, pointless chatter about the dollar losing its 'safe haven' status makes me wary.

To repeat, surplus countries have to swallow deficit countries' liabilities if they wish to continue to run a surplus with them.

There is still no scale liquid alternative to US capital markets.

Markets and the commentariat seem to be focussed on the asset side of foreign exposure to dollar assets.

I am surprised by how little conversation there is about the dollar liabilities held by foreigners: a reduction in foreign holdings of dollar assets can (c.f. 2008) create increased structural demand for short-dated dollars to service those dollar liabilities.

I, too have been and remain a dollar bear.

However, the more narrowly-focussed the conversation (all about dollar assets, little about dollar liabilities), the more widespread the inane conversation about 'safe haven' status the more open minded I want to be about the dollar.

If forty million people say a silly thing, it is still a silly thing.

I'll leave you with some Keynes.

Abridged Keynes:

“When the facts change, I change my mind”

Actual Keynes:

“The inactive investor who takes up an obstinate attitude about his holdings and refuses to change his opinion merely because facts and circumstances have changed is the one who in the long run comes to grievous loss”

JA

Mapping reality since 1992. Advising the world's most powerful pools of capital since 1999. Discover why they trust him: https://www.aitkenadvisors.com/contact

'If forty million people say a foolish thing, it does not become a wise one, but the wise man is foolish to give them the lie'.

So wrote Somerset Maugham in one of his notebooks.

The phrase is often attributed to Anatole France, or abridged to 'if forty million people say a silly thing, it's still a silly thing'.

Whenever I read 'dollar' and 'safe haven' in a sentence, Maugham's phrase comes to mind.

Think about it.

Was the dollar's surge in 2008 (apprehended to some extent by Fed-sponsored dollar swap lines) due to the dollar's perceived 'safe haven' status?

Of course not.

During the darkest days of 2007 and 2008, nobody would have described the sponsor (U.S.) of the subprime (self-) immolation as a 'safe haven'.

I simplify, but only a little: the massive demand for dollars in 2008 arose because many foreigners held US paper (bonds, RMBS, etc.) funded in dollars, or fully FX-hedged - and hence, they needed to source dollars fast to either repair balance sheets, or adjust their FX hedges (lower).

They struggled to do so.

This is something my late friend, Niall Coffey, summarised neatly in October 2009: https://www.newyorkfed.org/research/current_issues/ci15-6.html

Related, perhaps overlooked point: do we really think the largest dollar exposures are voluntary?

In my experience, the world's reserve managers have long viewed their dollar exposure as a liquidity buffer; but have never thought of it as a 'safe haven' per se.

Surplus countries have to swallow deficit countries' liabilities if they wish to continue to run a surplus with them.

And the bigger the surpluses are, the harder it is for them to diversify into other similarly-sized liquidity buffers: I too like gold, but what would happen to the gold price if SAFE (or any large holder) needed to liquefy some of their gold holdings?

The screens tell us a new dollar bear market is underway.

It kicked off the day The White House dropped this:

https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/

But this endless, pointless chatter about the dollar losing its 'safe haven' status makes me wary.

To repeat, surplus countries have to swallow deficit countries' liabilities if they wish to continue to run a surplus with them.

There is still no scale liquid alternative to US capital markets.

Markets and the commentariat seem to be focussed on the asset side of foreign exposure to dollar assets.

I am surprised by how little conversation there is about the dollar liabilities held by foreigners: a reduction in foreign holdings of dollar assets can (c.f. 2008) create increased structural demand for short-dated dollars to service those dollar liabilities.

I, too have been and remain a dollar bear.

However, the more narrowly-focussed the conversation (all about dollar assets, little about dollar liabilities), the more widespread the inane conversation about 'safe haven' status the more open minded I want to be about the dollar.

If forty million people say a silly thing, it is still a silly thing.

I'll leave you with some Keynes.

Abridged Keynes:

“When the facts change, I change my mind”

Actual Keynes:

“The inactive investor who takes up an obstinate attitude about his holdings and refuses to change his opinion merely because facts and circumstances have changed is the one who in the long run comes to grievous loss”

JA

Mapping reality since 1992. Advising the world's most powerful pools of capital since 1999. Discover why they trust him: https://www.aitkenadvisors.com/contact

'If forty million people say a foolish thing, it does not become a wise one, but the wise man is foolish to give them the lie'.

So wrote Somerset Maugham in one of his notebooks.

The phrase is often attributed to Anatole France, or abridged to 'if forty million people say a silly thing, it's still a silly thing'.

Whenever I read 'dollar' and 'safe haven' in a sentence, Maugham's phrase comes to mind.

Think about it.

Was the dollar's surge in 2008 (apprehended to some extent by Fed-sponsored dollar swap lines) due to the dollar's perceived 'safe haven' status?

Of course not.

During the darkest days of 2007 and 2008, nobody would have described the sponsor (U.S.) of the subprime (self-) immolation as a 'safe haven'.

I simplify, but only a little: the massive demand for dollars in 2008 arose because many foreigners held US paper (bonds, RMBS, etc.) funded in dollars, or fully FX-hedged - and hence, they needed to source dollars fast to either repair balance sheets, or adjust their FX hedges (lower).

They struggled to do so.

This is something my late friend, Niall Coffey, summarised neatly in October 2009: https://www.newyorkfed.org/research/current_issues/ci15-6.html

Related, perhaps overlooked point: do we really think the largest dollar exposures are voluntary?

In my experience, the world's reserve managers have long viewed their dollar exposure as a liquidity buffer; but have never thought of it as a 'safe haven' per se.

Surplus countries have to swallow deficit countries' liabilities if they wish to continue to run a surplus with them.

And the bigger the surpluses are, the harder it is for them to diversify into other similarly-sized liquidity buffers: I too like gold, but what would happen to the gold price if SAFE (or any large holder) needed to liquefy some of their gold holdings?

The screens tell us a new dollar bear market is underway.

It kicked off the day The White House dropped this:

https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/

But this endless, pointless chatter about the dollar losing its 'safe haven' status makes me wary.

To repeat, surplus countries have to swallow deficit countries' liabilities if they wish to continue to run a surplus with them.

There is still no scale liquid alternative to US capital markets.

Markets and the commentariat seem to be focussed on the asset side of foreign exposure to dollar assets.

I am surprised by how little conversation there is about the dollar liabilities held by foreigners: a reduction in foreign holdings of dollar assets can (c.f. 2008) create increased structural demand for short-dated dollars to service those dollar liabilities.

I, too have been and remain a dollar bear.

However, the more narrowly-focussed the conversation (all about dollar assets, little about dollar liabilities), the more widespread the inane conversation about 'safe haven' status the more open minded I want to be about the dollar.

If forty million people say a silly thing, it is still a silly thing.

I'll leave you with some Keynes.

Abridged Keynes:

“When the facts change, I change my mind”

Actual Keynes:

“The inactive investor who takes up an obstinate attitude about his holdings and refuses to change his opinion merely because facts and circumstances have changed is the one who in the long run comes to grievous loss”

JA

Mapping reality since 1992. Advising the world's most powerful pools of capital since 1999. Discover why they trust him: https://www.aitkenadvisors.com/contact