BG, I quite like the LEAP analyses, even though they use quite...

BG, I quite like the LEAP analyses, even though they use quite armaggedon-ish language.

I think the flow of events will be:

1. Nobody buying new or rolled over US treasuries (because exporting countries no longer have surpluses), therefore US has to print money to buy most debt. This is effective default.

2. US debt default leads to US effectively forfeiting reserve currency role. More countries conduct bilateral arrangements.

3. China cuts Yuan link to US dollar, as more and more countries seek to distance themselves from US monetization morass.

3. Countries are less willing to conduct deals with US companies in US dollars, preferring instead Euros, or their own currencies.

4. US can no longer borrow internationally in $US at a reasonable rate.

5. US government realizes that the jig is up, also realizes that they still have by far the world's largest gold reserves and instruct that the gold price be allowed to rise.

6. $US, courtesy of the new-and-improved value of its gold reserves, is seen to have more substance than previously.

As to the timing of this? Who knows? If I had to guess, I'd say: 1 has already started; 2 will happen this year; 3 has started but will pick up pace after 2; 4 sometime in 2010; 5 by 2011-2012.