Chris B

In Search of the Next Reserve Currency

sr9web,

If military might is the foundation of currency values, then what explains the rising value of the yen? Did the EU become militarily stronger in the first 7 years of this decade and then suddenly decline in the last few months? How about the Australian dollar which seems to rise and fall with the value of the mining commodities the Aussies produce rather than with their military capability?

Also, what military capacity would the US have if our oil was cut off by Venezuela, Saudi Arabia, and Russia? Airplanes, tanks, all but a few ships - forget about it.

The dollar has a lot going for it, including economic size, established regulation and laws, historical stability, and liquidity. However, it is nonetheless issued by a government that could not survive a day without borrowing from China and OPEC, whose current debt is spiralling out of control, whose future liabilities make an eventual 50% tax hike or currency devaluation inevitable (guess which is more likely), and whose country produces relatively little for export to the world compared to what it consumes from the world. Those are facts - not nationalistic currency-hating, and every other currency also has some flaw on my list of desirable attributes. That's why I suggest it would be wise to hedge. The assumptions of the past no longer hold true.



On Nov 28 11:34 AM sr9web wrote:

> The premise of this article is absurd. What is the world going to
> use... the Ruble? The Peso? The Loonie? The Euro?
>
> The Dollar is the most important currency because only the USA had
> global power and a strong military.
>
> Unless and until USA becomes weaker in total the the next best currency,
> things won't change.
>
> It won't be the Yen - no military might. It won't the Swiss Franc
> - not enough in circulation. It won't be the Yuan - too much risk,
> political and economic.
>
> So now we are goiong to use "a basket of curency"...?
>
> Sounds like a currency CDO - what a great idea, NOT!