Darrell

The End of U.S. Financial Domination

The question should be: who holds dollars? My understanding is that over 50% of the dollar supply is held by foreign central banks, foreign savers and investors and foreign institutions.

The dollar is accepted as legal tender is most countries. In this content the dollar has value. I can go to almost any country in the world and use my dollars to buy goods, services and/or assets; the seller in turn will exchange their dollars for their own currency.

The country’s central bank is left holding the dollar, which they reinvest in incoming producing assets. Sovereign Wealth Funds are simply a national vehicle for investing surplus dollars and other currencies into wealth producing assets. These wealth producing assets will generate goods, services and/or assets that will be exchanged for currencies.

If one listens to our policy makers one thinks that this is a never ending circle that is raising the standard of living of the poor and downtrodden. The argument that one is exchanging something (goods, services, assets) for nothing (currencies) doesn’t hold water with them.

They respond that economies are operating in a globalized economic environment and currencies are simply a medium of exchange to make the process work effectively. Currencies are governed by treaties and treaties can be changed to accommodate changing conditions.

Because globalization is a new economic force, market forces have not yet worked through the system. These market forces will correct and strengthen the globalize economy not ruined it.

The policy makers say that people of economic doom are simply ignoramus’s who don’t understand how the system works.