I will keep this short because every time I write about economic issues on this site I am greeted by a rousing chorus of crickets.
But I wish to take a minute to say that we might be in very big trouble. I know, I know, everyone says this, long term if we continue spending we are in big trouble. Although undoubtedly true, that’s not what I am saying here. I think we might be in big trouble right now. Big trouble.
Our currency is under incredible pressure right now. Incredible pressure. While we argue over the debt ceiling, some really bad things are afoot.
First, we continue to monetize our debt. And…As your heard, the S&P has downgraded the US. No great surprise there, probably should have been done a while ago, but it puts additional pressure on us. And…
China is preparing to dump a lotta lotta dollars (2 trillion) in a effort to move away from the dollar. And…
There is continuing pressure to move away from the US Dollar as a reserve currency.
If this happens, we are dead meat. Dead meat. $5 gasoline will be the good old days.
Because of our irresponsible handling of the currency that underpins the world’s financial system, we are at the brink of having our advantage taken away. This would mean a large, possibly out of control, devaluation of our dollar and make the high prices of today look like “the good old days!”
Special drawing rights are an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies.
- Another Reuters article shows that the IMF supports replacing the U.S. dollar with their special drawing right as the world’s reserve currency.
- There is yet another article, again on Reuters, that shows a Chinese press release that states that the current five-year communist plan calls for the Chinese yuan to be a world reserve currency in 2011.
In the past few months, the Chinese have been trading with Latin America, Asian countries, Russia and settling their trades in their own currencies. That means as Russia sends oil, gas, etc. to China they are paid in yuan rather than dollars.
Two weeks ago, China also started trading with India and bypassing the use of the dollar. This creates less demand for the dollar as our supply of dollars is increasing at a very high rate and is forcing the price lower.
With all of the unrest in the Middle East, soaring oil and commodity prices (all things that make the dollar rise in value because it creates more demand) the dollar has fallen. This is a horrible sign for our future purchasing power here in the U.S.
We are having our attention diverted from this monstrous issue. In the next few months this could be THE issue that can change our way of life.
Change our way of life is right. If we lose this advantage, we are toast people. Toast. Our currency becomes worthless. Toast, I say. And I don’t see how we can avoid it.