Visiting a currency crisis

In my time trading forex, I never really stopped to consider the physicality of it all. We're dealing with real money here. Most of it is paper mind you, but it's physical nonetheless. And it's being exchanged for goods and services. People are collecting it, spending it, or simply wishing for it. In general more people understand and are involved in the stock markets, but honestly the currency markets play a much more vital role in there lives.

Now despite the dollar gloom and doom, we're in luck that our currency is one of many fiat currencies trending to zero. Since the rates change at any time, we're not always winning that race (here's to hoping the dollar comes in last, cheers). We can look to our European friends to find several examples of failed currencies, not only within my lifetime, but also my trading lifetime. The Turkish lira, and the Icelandic krona to name a couple. I remember watching the bid price on kronas blow up live. What a crazy day that was! However, I was not in Iceland at the time, nor invested in the currency. What happened on the ground when the paper became worthless? What did people do?

This past week I got to experience the fragile beginnings of such an event. Visiting Hungary let me see and touch the bills that may one day be worthless or otherwise replaced. Hungary has never quite recovered from the 2008 financial crisis and the pain is getting worse. Having accepted one IMF bailout, they find themselves asking for another.

So what did the country look like? The bars certainly seemed full. The streets still busy and the restaurants still serving food. Yet there were rallies and protests in front of the parliament building, and whispers on the streets. Currency was leaving the country and locals talked of moving money to nearby Austria and other foreign banks. The feeling in the air was a nervous laughter, ripe with anticipation of knowing what must come, while still hoping it wouldn't.

So what does the collapse of the dollar look like? What will history say? I can imagine a similar story when the time comes.

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