With each passing day bringing us closer to the end of the world's reserve currency, and everyone coming up with their soapbox theories about what happens tomorrow and the day after, perhaps the best way to analyze the future is by looking at the past, which is what Grant Williams has done in his latest TTMYGH letter. It begins: "What exactly IS ‘The Dollar’? There are currently 47 countries or territories that use the ‘dollar’ as their currency, from the obvious names such as the United States, Australia and Canada to the more esoteric such as Suriname, Tuvalu and Guyana, but where did the word ‘dollar’ come from?" Williams proceeds to analyze the full history of the greenback, and its primary function, to provide an alternative to gold, as the defacto world currency. The truth is that every time the dollar appeared like it was on the verge of irrelevance, a gold standard of some form was reestablished, however briefly. We are now at one such crossroads. Yet only fools know for a fact what will happen hours from now, let alone years. Which is why as Williams concludes, " Whatever happens from here, there are a few of things of which we can be quite certain" :
- To paraphrase Winston Churchill’s quote about America: Governments will always do the right thing - after they’ve run out of every possible way to avoid doing so
- The can will be kicked down the road until we run out of road - and into a brick wall
- The ultimate judge of the success (or otherwise) of every political decision made since Lehman Brothers went to the wall is shiny, yellow and costs about $1,500/oz
"So what exactly IS the dollar?" Read on form some answers.
Things that make you go Hmmm: June 9 (pdf)