US dollar will be finished in two years - brace for impact!

[ThePythonicCow]

Re: US dollar will be finished in two years - brace for impact!

What does loss of global reserve status really mean? Does it mean the world will no longer price their goods in US dollars? If that is the case, what can dollars then buy?

It doesn't mean those in the US can no longer purchase goods from other nations, even in dollars. It means that other nations may commonly choose to trade in other currencies besides the Dollar. Trade to and from the US will likely remain mostly in Dollars, while trade between say China and Brazil might be in Yuan (as is already happening.)

Perhaps like the late 1800's in the US, there could be various currencies (Dollar, Yen, Euro, Yuan, Ruble, ...) that various sellers of goods will accept and in which inter-national contracts might be written. Perhaps the Forex market will determine the relative, changing exchange rates of these currencies or perhaps some sort of IMF/BIS/World Bank agreement will provide some common SDR basis for exchange. The dollar will not disappear from the world stage; it just won't be the exclusive basis for most major international trade and contracts.

[kartius919]

Re: US dollar will be finished in two years - brace for impact!

How do you determine the exchange rate? How do you know how many yens can be exchanged into how many dollars? How do you determine the value of a yen versus the value of a dollar? It is based upon the amount of goods that can be purchased with one unit of currency as compared to another. What can you purchase using yens? What is produced in Japan. It is the decreed legal tender within Japan and the Japenese require Yen to pay their taxes. If Saudi's accept Yen in exchange for oil, then the amount of goods that can be purchased with a Yen expands and the value of the Yen thus increases. Why would Saudi accept Yens? So they can eventually buy Japanese goods.

Why do Saudi's accept dollars? There are many theories, but it is not to buy Boeing 747's or US treasury bonds. This is the power of the world reserve currency.

US dollar will still exist. I never suggested otherwise. But the value at which it is exchanged for other goods will be vastly different from it is today.

[ThePythonicCow]

Re: US dollar will be finished in two years - brace for impact!

How do you determine the exchange rate? How do you know how many yens can be exchanged into how many dollars?

To whom are you responding or addressing these questions?

[stumann]

Re: US dollar will be finished in two years - brace for impact!

"As early as July 2009, close to USD 100 billion worth of net capital fled the US (9), at the precise moment when the US was claiming to be able to attract more than USD 100 billion a month to help finance the federal deficit (not to mention the other deficits)"

"fled" as into the Russian stock market or into Virgin Island based hedge funds? hot money moves just as quickly back if people gets spooked. a change from recession to depression would only draw hot money back into the US very quickly

[due_indigence]

Re: US dollar will be finished in two years - brace for impact!

There is storytelling and there is multivariate analysis. This conforms to the former in that it jumps on an anti-hero (the dollar) and narrates him to his death. In reality events are decidedly less cinematic. The dollar will lose value in the long term relative to other countries. This is very plausible. But as to it becoming a pariah among men within 24 months, that's pretty lurid, though I'd suspect it might sell magazines or subscriptions.

[Jim Nickerson]

Re: US dollar will be finished in two years - brace for impact!

Thanks to jk for this link.

http://blogs.telegraph.co.uk/finance...ans-pritchard/

10/21/09

The dollar will still be the world’s dominant reserve currency in 2030, sharing a degree of leadership in uneasy condominium with the Chinese yuan. It will then regain much of its hegemonic status as the 21st century unfolds. It may indeed end the century even stronger than it was at the start.

The aging crisis in Asia — and indeed the outright demographic implosion in Japan and China, not to mention China’s water crisis — will soon be obvious to everybody. Talk of Oriental supremacy will start to sound overblown at first, and then preposterous.

[GRG55]

Re: US dollar will be finished in two years - brace for impact!

Thanks to jk for this link.

http://blogs.telegraph.co.uk/finance...ans-pritchard/

10/21/09

...Talk of Oriental supremacy will start to sound overblown at first, and then preposterous...

I wonder if, in the 1920s, as Great Britain was embarking on its multidecade series of currency crises, some of the upper class who were old enough to remember the halcyon late Victorian days of Empire, voiced some of the same opinions about those upstart Americans? ;)

What is preposterous is that anyone thinks they can predict, with such seeming certainty, how this century will evolve...

[touchring]

Re: US dollar will be finished in two years - brace for impact!

...Talk of Oriental supremacy will start to sound overblown at first, and then preposterous...

I wonder if, in the 1920s, as Great Britain was embarking on its multidecade series of currency crises, some of the upper class who were old enough to remember the halcyon late Victorian days of Empire, voiced some of the same opinions about those upstart Americans? ;)

What is preposterous is that anyone thinks they can predict, with such seeming certainty, how this century will evolve...

Britain then had a big ally, a former colony, the USA. Who will be USA's ally this time?

[mememonkey]

Re: US dollar will be finished in two years - brace for impact!

Britain then had a big ally, a former colony, the USA. Who will be USA's ally this time?

Federated states of Micronesia


-mememonkey

[GRG55]

Re: US dollar will be finished in two years - brace for impact!

Britain then had a big ally, a former colony, the USA. Who will be USA's ally this time?

Britain's ally ended up displacing it. Seems to me the USA and China need each other pretty badly right now...

...and "history rhymes"...:p

[touchring]

Re: US dollar will be finished in two years - brace for impact!

Britain's ally ended up displacing it. Seems to me the USA and China need each other pretty badly right now...

...and "history rhymes"...:p

I actually see Europe complementing the USA more than China does. For one, China imports commodities rather than finished products. In 15 years, they won't even need the Boeings.

What will the US export to China then?

[GRG55]

Re: US dollar will be finished in two years - brace for impact!

I actually see Europe complementing the USA more than China does. For one, China imports commodities rather than finished products. In 15 years, they won't even need the Boeings.

What will the US export to China then?

Dollars.

You'll note that at the same time as China's exports have been dropping since the onset of the credit crisis, amazingly its foreign reserves have continued to increase...

Go back into the archives and read some of EJs writings about the economic twinning of China and the USA.

[snakela]

Re: US dollar will be finished in two years - brace for impact!

I actually see Europe complementing the USA more than China does. For one, China imports commodities rather than finished products. In 15 years, they won't even need the Boeings.

What will the US export to China then?

Pornography. We've got the fake boobied blonde market locked up, son!

[charliebrown]

Re: US dollar will be finished in two years - brace for impact!

OK, what does this mean first of all regarding the exchange rate.
The article mentions 2 Dollars = 1Euro, so I guess they are forecasting,
that the EU will not keep pace with dollar printing. Assuming that all of the other currencies in the USD index do the same, we will have a USD index of around 50? Will foreigners rush to buy U.S. hard assests with there powerful Euros? Will they be afraid of USD 30? and hold off?

With the exchange rate falling will our store shelves be empty, because our products look cheap to foreigners? Will this ramp up our industry, or will off shoring still continue and anything once made here will become imported with a higher price tag? How does this effect capital flows? Will industry be able to ramp up if all the money is headed over-seas.

If everyone prints, the the USD index stays the same. Everything else goes up. Oh my brain hurts!!

[Rajiv]

Re: US dollar will be finished in two years - brace for impact!

For instance, that energy intensive agriculture supplies over 60% of the world's grains. Not exactly something to be mocked.

I hope you were not implying that the US supplies 60% of World grain production. Energy Intensive agriculture -yes probably.

Figures from World Wheat, Corn, and Rice Production, 2003

US production as a percentage of World Production

Maize 40.3 % (in first place, most of the production is used domestically in feeding hogs, or in ethanol. Very little of this production is directly consumed by the US population.)
Total World Production 637.4 Mmt

Wheat 11.6% (in third place)
Total World Production 549.4 Mmt

Rice 1.5% (11th place)
Total World Production 588.6 Mmt