Lloyd Blankfein has got it all wrong again.
Speaking last week, the Chief Executive of Goldman Sachs (NYSE: GS) claimed that if the "fiscal cliff" of tax increases and spending cuts go into effect on January 1, the U.S. dollar would lose its reserve currency status.
As the Vampire Squid's representatives often do, Blankfein actually has it backwards.
Contrary to what Blankfein thinks, a legitimate movement to deal with the fiscal cliff would cut the federal deficit in half, make the country more or less solvent and strengthen the dollar.
However, the problem is that the fiscal cliff involves pain. And since politicians like to delay pain as long as possible, the chances are good the fiscal cliff will be postponed again.
Instead, the country will likely continue to run trillion-dollar deficits in the hopes that Ben Bernanke can finance them through even more quantitative easing. It's the only play in the Keynesian playbook.
Unfortunately, that is the policy most likely to crash the dollar -- and it's headed our way.
So what will the world look like when the dollar has crashed, and international investors and traders have lost all of their confidence in the greenback?
The truth is if that happens it won't be like anything we've seen within living memory.