[quote=DWCAP]I dont buy it. Dollar will be around for a long long time. And it will be a major player for a long time too.
Every country out there wants to export their way back to health. China, the big international heaththrob, has built its economy to export. They link their currency to the Dollar so even though we are falling, they are falling too. Unpeg that and China would get creamed. Wal-Mart/Target prices would shoot up, US consumption of nearly everything would fall (less money to spend after buying necessities will affect everything we buy), and their exports would plummet. They have a very large population to support, and that population needs jobs.
Europe and Japan are no different. Even Toyota is loosing money and crying uncle from the yen exchange rate. Arn’t they suppose to the role model for our crappy us automakers? A plunging dollar would just make that worse, and drag all of Japan down with it.
Plus remember that huge percentages of our ‘Asian’ imports are finished goods. They imported Austrailian iron ore and Middle east oil and south asian plastic pieces and …. to make all those things they send to us. They stop sending to us, they stop buying from them, and that ends the ‘non-US consumer’ thoeory of how we will get out of this.
I agree that internationally leaders are unhappy with the dollar. They need a ‘strong dollar’ to support their politically popular and economically powerful export engines. However, they also dont have a choice in the matter. Europe is PISSED at their exchange rate, and if it gets too much worse will intervine to lower it. China’s currency doesnt float, nuf said till it does. Japan is going into a population, currency, and dept crisis all at the same time. They are more Fraked than we are. Who else is there?
People are stuck with the dollar, and that is just the way it will be for a lot longer than 2010. Just like China is buying treasuries (a loosing proposition right now IMO) they are stuck with the dollar because their PTB are getting rich off the trade system we have. They wont change and risk their fortunes and political systems for their own countries long term good. And the system and power base we have now is priced in ‘strong dollars’.[/quote]
DWCAP: I respect your position. And one of us is either going to be very right or very wrong in 6 months (or less).
Just to be clear: are you saying that the dollar will remain the world’s reserve currency for many years to come? Or just through the end of 2010? If the latter, then we MAY be in some agreement, although I think Fall of 2010 will be the drop dead date for the buck. The way things are currently heading, however, it could happen a lot faster than that. Anyway, just wanted to be clear on how you see things.
As for China, the Eurozone and the others who are pissed…I would say this: don’t underestimate the tolerance of other countries for short tame pain in exchange for long term gain and freedom.
One of my favorite finance bloggers likened the current dilemma of our “pissed” neighbors as follows: they are trapped in a small room with the U.S., and the U.S. is going to eventually implode and take all of them out unless they take the U.S. out first. Each one of our neighbors is armed with a grenade. They know that when they throw their grenades at the U.S. they will get seriously injured – or even maimed – so the task before them is to move as close to the edge of the room and as near to the exit as they possibly can in the hopes of only losing an arm, a leg or getting their ass horribly singed. As the target of ALL the grenades, the U.S. will be FUBAR. However, the grenade-carrying coalition has something going for them that we don’t: they don’t hate each other as much as they hate us, and they are making a commitment to carry their battered brethren – bloody and maimed – out the door. No one expects to escape unscathed. But they know that once they get out of that room alive – however they manage to get out – they can nurse each other back to health. They will close the door behind them, free from the baggage that has trapped them for years.
I think if you really had a truthful moment with yourself and asked yourself what YOU would do if trapped in that room with the U.S., you would make the same decision. It’s not a safe choice, but it is the ONLY choice if you hope to rid yourself of a horrible, cancerous, vampire squid-sucking behemoth, start over and build a healthy future for your country.
I think the position that you are taking is one that the U.S. has been taking for decades (“It’s our dollar, but it’s your problem”), and the bluff has worked nicely for a long, long time. The problem for the U.S. is that our neighbors are in such pain that they are about to call our bluff – consequences be damned. This is the desperate act of someone who realizthat es one road surely leads to death, but the other road MAY not lead to death. So they opt for the latter.
