Keys to Babel

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MARCH 20, 2009 3:28PM

Ditch the Dollar?

Rate: 3 Flag

dollar_chart1For years, economists, journalists and pundits have been predicting an end to the U.S. dollar as the reserve global currency. And for years, mainstream Americans and politicians have ignored the warning, presuming that the wolf-criers are simply anti-capitalist or anti-American.

But with the Fed’s most recent round of printing $1.2 trillion in ‘quantitative easing’, the only easing going on is the value of the dollar. To battle deflation, low housing prices and a crippled credit market, the Federal Reserve’s bold action will perhaps prove effective, but in the long-term might also prove the impetus to cede America’s leading superpower status.

 

America’s sugar daddy has already cautioned against the mind numbing spending spree taking place on Capitol Hill and the White House. They’ve slipped the hint—there are limits to their generosity. As long as their investments prove profitable, China will remain our loan sharks, but the minute the spending and printing begin bringing down their balance sheets, they will walk away. And so will the world.

 

Not only China has voiced concern, next week another ally plans to recommend ditching the green-back—the UN. Russia has been on the ‘ditch to dollar’ bandwagon for years and has kept up the rhetoric this week by calling for a global supercurrency.

 

From Reuters:

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

Persaud said that the United States was concerned that holding the reserve currency made it impossible to run policy, while the rest of world was also unhappy with the generally declining dollar.

“There is a moment that can be grasped for change,” he said.

“Today the Americans complain that when the world wants to save, it means a deficit. A shared (reserve) would reduce the possibility of global imbalances.”

What would the United States economy look like without the supremacy of the dollar? Hopefully, we will never know…

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The major trend of the past few moths has been for central banks all around the world to lower their official interest rates to historic lows. For years the Chinese have kept their currency artificially low by pegging the Yuan to the US Dollar. What does all this mean? Well it appears to be a global effort to devalue all currencies in an effort to stimulate economic growth. Well, what if this global devaluation of the world's currencies results only in some temporary economic growth, but the long-term result is hyper-inflation on a global scale never seen before. If that happens, then it really won't matter if the US dollar remains the world's reserve currency.
Err, it's time to ditch the entire concept of money.
Sorry about the typo. I meant "months" rather than "moths". LOL
Actually, this type of issue simply baffles me. I don't understand how a currency can be "unbacked" by anything other than financial abstractions, and still be the "go to" currency for the entire world. It confuses me.

When a dollar is worth so much gold, or silver, or whatever, I understand. When it's just this floaty, undefined thing whose value depends on unstated and incomprehensible financial laws? Nope; I'm stumped.
The economy of our country will continue spiraling down. The dollar will lose it's supremacy in the next few years. In fact, become close to worthless. There has already been predictions made of this for a very long time. Those who are invested in Gold and Silver will or have become very rich. Countries that do this will also.
Check out this video made back in 2008:
http://www.youtube.com/watch?v=FOKn7tiUMyc

When you come back here, then comment again to us. Then my question to you is: "What's your opinion?"
Thanks for all of your comments, and Eric, I did watch that YouTube video which was informative, yet, frightening. Gold and silver certainly look much more attractive than money at the moment. And the idea that our dollar is no longer backed or tied to a real and tangible commodity scares me.

I had dinner last night with an old friend, someone who works in a financial institution in Europe...I hadn't seen him for a long time because I had moved back to the states for a couple of years. Anyway, he is spooked, really spooked, because the banks are out of cash. He took a call yesterday from another bank to borrow money just to meet payroll.

I'm as far from an expert as you'll find on the economy, but, I think the dollar will continue to fall as long as the Fed's printer is in overdrive and Obama's budget remains bloated. No one seems to have the intelligence, creativity or will to tackle the problem, and although liquidity is a problem, I don't think reckless infusions of cash is a solution. But again, I'm not an expert...
The weak US dollar has helped American ag corporate interests dumping grain on foreign markets but it has hurt the American consumer, the average American worker, and increases interest in countries to receive payment in Euros. The threat of this has instigated an invasion of one country, Iraq in 2003, and precipitated an attempted coup with CIA involvement in Venezuela in 2001. Having a consortium of private bankers like the Federal Reserve, controlling the money supply should be viewed as insane by anyone who has been awake the past year.
Ah, a new Hope ... (Sanford, eh? international airport, heh. Greetings from another cracker, albeit living in Australia now.)

Well, hmmm, a run on the dollar could happen any time. Japan will likely have to divest itself of the large number of US$ reserves, as their economy is an even worse shambles.

Once those chickens come home to roost, it will signal a deluge.

The way the U.S. is going, 'turning Japanese' and have a lost decade (plus) will look like the good outcome.

Losing reserve currency status will be the next slippery slope. Thanks to Tricky Dick for setting all this in motion. And the Fed, before and after. They say consistency is a virtue, only fulfilling their charter has been an "F" grade from the beginning.
What you fail to see, is that the dollar is really improving. Obama inherited a state in shambles and has impressed us. This is the original strength o Americans: to turn quickly. You have piles of bonds that they banks claim is secured in collateral as real estate - but nobody is able to find the bearer. As long as people pay the mortgage, the US economy may survive.
To those of you that believe anything else, the US currency should have been delisted and the country administered by e.g. IMF. If you no longer trade oil (of all commodities) in say Euro - your currency is not worth anything but hopes and promises. You are worse off than e.g. Argentina and those 3rd world countries you so eagerly have pointed your finger at for overspending.
The way back is for the Americans to become productive - produce and make things of value - not just belief. Most of your most valued companies have very low substance - e.g. Microsoft. Their value is "customer loyalty". I do not use MS any more - but Linux, and what happens when more discover that this is better, cheaper and easier? So far you have protected your "home" market by tough regulations - what will happen if the WTO demands that these are removed? Then the Americans has to be better - you cannot afford to claim wages , when your productivity is 30% of other people. Create values, and listen to your president: Base decisions more on facts as opposed to...