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Is the Dollar REALLY Losing Its Reserve Currency Status … If So, What Will REPLACE It?

George Washington's picture




 

Yes, The Dollar Is Losing Its Status as Reserve Currency

The average life expectancy for a fiat currency is less than 40 years.

But what about “reserve currencies”, like the U.S. dollar?

JP Morgan noted last year that “reserve currencies” have a limited shelf-life:http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/10/Reserve%20Currency%20Status.png

As the table shows, U.S. reserve status has already lasted as long as Portugal and the Netherland’s reigns.  It won’t happen tomorrow, or next week … but the end of the dollar’s rein is coming nonetheless, and China and many other countries are calling for a new reserve currency.

Remember, China is entering into more and more major deals with other countries to settle trades in Yuans, instead of dollars.  This includes the European Union (the world’s largest economy).

And China is quietly becoming a gold superpower, and China has long been rumored to be converting the Yuan to a gold-backed currency.

Why China Doesn’t Want the Yuan to Become the Reserve Currency

But a switch to a totally-different system – say, a gold-backed yuan – would cause enormous disruption and chaos. China – which has been a long-term planner for thousands of years – doesn’t want such a sudden change.

Moreover, housing the world’s reserve currency is a huge burden, as well as a privilege.  Venture Magazine notes:

The inherent burden of housing the world’s reserve currency is that the U.S. must continue to run a balance of payment deficit to meet the growing demand. However, it was this outstanding external debt that caused investors to lose confidence in the value of the reserve assets.

Michael Pettis – the well-known American economist teaching at  Peking University in Beijing – explains:

A world without the dollar would mean faster growth and less debt for the United States, though at the expense of slower growth for parts of the rest of the world, especially Asia.

 

***

 

When foreigners actively buy dollar assets they force down the value of their currency against the dollar. U.S. manufacturers are thus penalized by the overvalued dollar and so must reduce production and fire American workers. The only way to prevent unemployment from rising then is for the United States to increase domestic demand — and with it domestic employment — by running up public or private debt. But, of course, an increase in debt is the same as a reduction in savings. If a rise in foreign savings is passed on to the United States by foreign accumulation of dollar assets, in other words, U.S. savings must decline. There is no other possibility.

 

***

 

By definition, any increase in net foreign purchases of U.S. dollar assets must be accompanied by an equivalent increase in the U.S. current account deficit. This is a well-known accounting identity found in every macroeconomics textbook. So if foreign central banks increase their currency intervention by buying more dollars, their trade surpluses necessarily rise along with the U.S. trade deficit. But if foreign purchases of dollar assets really result in lower U.S. interest rates, then it should hold that the higher a country’s current account deficit, the lower its interest rate should be.

 

Why? Because of the balancing effect: The net amount of foreign purchases of U.S. government bonds and other U.S. dollar assets is exactly equal to the current account deficit. More net foreign purchases is exactly the same as a wider trade deficit (or, more technically, a wider current account deficit).

 

So do bigger trade deficits really mean lower interest rates? Clearly not. The opposite is in fact far more likely to be true. Countries with balanced trade or trade surpluses tend to enjoy lower interest rates on average than countries with large current account deficits — which are handicapped by slower growth and higher debt.

 

The United States, it turns out, does not need foreign purchases of government bonds to keep interest rates low any more than it needs a large trade deficit to keep interest rates low. Unless the United States were starved for capital, savings and investment would balance just as easily without a trade deficit as with one.

 

***

 

Only the U.S. economy and financial system are large enough, open enough, and flexible enough to accommodate large trade deficits. But that badge of honor comes at a real cost to the long-term growth of the domestic economy and its ability to manage debt levels.

For the reasons outlined by Pettis, China – which has the world’s 2nd biggest economy (or 1st … depending on the measure used)  – doesn’t want the burden of housing the world’s reserve currency.

As such, China is pushing for a basket of currencies to replace the dollar as reserve currency.

Indeed, China – as well as Russia, the U.N. and many other countries and agencies – have called for the “SDR” to become the new reserve currency.  SDR stands for “Special Drawing Rights”, and it is a basket of 4 currencies – the US dollar,  Euro, British pound, and Japanese yen – administered by the International Monetary Fund.

Jim Rickards – one of the leading authorities on currency, having briefed the CIA, Pentagon and Congress on currency issues – says:

China is not buying gold to create a new gold standard; rather it is aiming to make the Yuan more attractive, with the end result of being included in a basket of currencies, referred to as the Special Drawing Rate (SDR). He added that there is a move to make the SDR the new global reserve currency.

 

“Everybody knows that the U.S. dollar’s days are numbered but there is no really currency to take its place except for the SDR,” he said.

 

“What the world is trying to do is move to the SDR and China is fine with that.”

Rickards added that China’s goal of being in an SDR basket is the best of both worlds; the country can still have total control over its monetary policy and capital accounts but still influence global economics by being part of a basket of currencies.

 

“What the Chinese want is to have the Yuan in the SDR basket but not open up their capital account,” he said. “That is a backdoor way for the Yuan to be a de facto reserve currency without having to give up control.”

What’s Missing?

It is silly to exclude the Yuan from the basket of currencies.

Indeed, given that there are privileges and burdens of having the reserve currency, I would argue that – if we are going to move away from the dollar as sole reserve currency – all of the currencies of the world could be in the basket … in proportion to the size of their economies.   It is simple to look up the GDP of the world’s nations.

That way, each country would all share in the benefits and costs, in proportion to its size and strength.

(Obviously, some countries have such small or unstable economies that no one would want to settle in their currency.  To be realistic, they’d probably be dropped out of the basket.  But the ideal of including everyone is worth maintaining.)

Keynes and Other Economists Say We Should Use a Basket of Commodities

While having a basket of different things acting as the world’s reserve currency may sound like a new idea, John Maynard Keynes – creator of our modern “liberal” economics in the 1930s – promoted a basket of 30 commodities called the “Bancor” to replace the dollar as the world’s reserve currency.

The arguments for currency fixed on a basket of commodities – as opposed to currencies – was that it would stabilize the average prices of commodities, and with them the international medium of exchange and a store of value.

As China’s head central banker said in 2009, the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”. Likewise, China suggested pegging SDRs to commodities.

Economics Professor Leanne Ussher of Queens College in New York concludes that a reserve currency made up of a basket of 30 or so commodities would:

Reduce the disorderly swings in individual commodity prices … reduce supply constraints, stabilize costs of production, promote global effective demand from the periphery and balance growth between periphery and core countries.

Monetary expert Bernard Liataer – formerly with Belgium’s Central Bank – writes:

The idea of a commodity-based currency may seem to some a step backwards to a more primitive form of exchange. But in fact, from a practical point of view, commodity-secured money (for example, gold- and silver-based money) is the only type of money that can be said to have passed the test of history in market economics. The kind of unsecured currency (bank notes and treasury notes) presently used by practically all countries has been acceptable only for about half a century, and the judgment of history regarding its soundness still remains to be written.

 

With a commodity-based currency, a central bank could issue a New Currency backed by a basket of from three to a dozen different commodities for which there are existing international commodity markets. For instance, 100 New Currency could be worth 0.05 ounces of gold, plus 3 ounces of silver, plus 15 pounds of copper, plus 1 barrel of oil, plus 5 pounds of wool.

 

This New Currency would be convertible because each of its component commodities is immediately convertible. It also offers several kinds of flexibility. The central bank would agree to deliver commodities from this basket whose value in foreign currency equals the value of that particular basket. The bank would be free to substitute certain commodities of the basket for others as long as they were also part of the basket. The bank could keep and trade its commodity inventories wherever the international market was most convenient for its own purposes–Zurich for gold, London for copper, New York for silver, and so on. Because of arbitrage between all these places, it doesn’t really matter where the trades would be executed, as the final hard currency proceeds would be practically equivalent. Finally, since the commodities also have futures markets, it would be perfectly possible for the bank to settle any forward amounts in New Currency, while offsetting the risks in the futures market if it so desired.

 

This flexibility results in a currency with very desirable characteristics. First of all, the reserves that the country could rely on–actual reserves plus production capacity–are much larger than its current stock of hard currencies and gold. The New Currency would be automatically convertible without the need for new international agreements. Since the necessary international commodity exchanges already exist, the system could be started unilaterally, without any negotiations. Because of the diversification offered by the basket of several commodities, the currency would be much more stable than any of its components–more stable, really, than any other convertible currency in today’s market.

3 Choices for a More Stable Money System

The 2 choices for reserve currency discussed above are using a (1) basket of currencies or (2) basket of commodities.

A third choice – which may be the best – is to use a mixture.

For example, we could have 50% currencies and 50% commodities.

That would give us some of the desirable characteristics (like stability) of a commodity basket, but not immediately move away from the fiat money systems which are now status quo for the current system.

Any of these 3 choices would give us far more stability and prosperity than we have today … without the chaos and misery – especially for Americans and perhaps Chinese – that switching to a Yuan-only reserve currency would bring.

Notes:  You might assume that public banking advocates would be for a currency-only basket. But Bernard Lietaer was one of leading public banking advocate Ellen Brown’s main teachers, and he is pushing for a basket made up solely of commodities.   (But public banking advocates might argue for adding currencies to the basket currencies to allow for some elasticity in the money supply.)

Gold standard advocates would obviously prefer commodities to currencies.  A basket of commodities might not have the simplicity of a gold standard, but it would accomplish a lot of the same goals.

As an American who wants stability and prosperity for my country, I think a basket would be the best option for a healthy future for the U.S.  And as someone who wants good things for the rest of the world, I believe that a basket would help to share political influence more widely.

BONUS:

Bill to Curb NSA Spying Introduced Today

 

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Tue, 10/29/2013 - 23:21 | 4103724 George Washington
George Washington's picture

Excellent points.

Tue, 10/29/2013 - 22:23 | 4103582 mumbo_jumbo
mumbo_jumbo's picture

lasts 40 years but your little chart has 6 that goes back 600 years....WTF?

Tue, 10/29/2013 - 21:34 | 4103462 proLiberty
proLiberty's picture

When the Federal Reserve prints money, or forces new debt into the monetary system in exchange for dollars, when those dollars are spent by government to buy things, the economic resources that purchase realize are paid by dilution of the value of the entire monetary base.

Should the dollar fall from reserve status, the monetary base would shrink as private wealth that must cross borders (and thus currencies) is exchanged out of dollars and into the currency to be used for exchange. The smaller the amount of dollars in private hands, the greater the dilution caused by money printing or debt creation by government, and the greater the level of "inflation" will be when it is manifested.

Tue, 10/29/2013 - 20:56 | 4103344 Fishhawk
Fishhawk's picture

Right on, Popper.  The SDR requires all the contributors in the basket to float, which takes us back to unbacked fiat, or, in our present situation, lies backed by nuclear weapons. (Where is Radical Marijuana in this debate?)  I agree that China is not trusted by most of the world, but the US is rapidly becoming more untrusted, so if being widely hated is a good reason why the yuan will not become the new reserve (in addition to its too small share of world trade), then it is an even better reason why the dollar will not remain the reserve much longer.  All reserve currencies led to empire, and then to collapse.  The US is well into its collapse phase (ObozoCare or its replacement 'single payer' fraud will complete the collapse within two years), and China is not ready to begin its empire phase (indeed may be decades away at least).  So internationally we are as short on leadership as we are here in the US and Europe is in the EU.  Everyone is clueless, as there seems no way to continue the bankster ponzi without some sort of reset, and soon.  Thus it will be war.  

Fishhawk

Tue, 10/29/2013 - 21:07 | 4103376 Carl Popper
Carl Popper's picture

Good points. Being the cleanest dirty shirt is nothing to brag about I suppose. Especially as it seems to be getting dirtier by the day.

I still think large capital intensive manufacturing will disappear in the next 50 years as we become a maker society. China, just like an old general, is always fighting the last war. They will be left with huge sunk costs and an obsolescent old school manufacturing economy that is no longer needed by the rest of the world.

Tue, 10/29/2013 - 20:48 | 4103326 essence
essence's picture

Give George some credit for attempting to get some debate going on the subject.

But seriously George, look at Governments track records for acting in a senseable,just manner. One would be a fool to think that any "basket" wouldn't be hopelessly gamed to the benefit of the elite and insiders  Look at the founding of the Fed for instance. It was promoted to the public as a way to stabilize the money system,prevent recessions,banking panics and keep Wall Street from dominating the banking/credit system. How did that turn out?

Instead of a basket, why not just use Gold for International account balancing. Countries could keep their present day fiat currencies. Central Banks could keep their reserves primarily in Gold (as the ECB currently does). The Gold would be marked to market and definitely NOT pegged to currencies. Countries would remain free to inflate/deflate their own currencies but doing so affects the price of foreign goods within the country. It would be mostly self regulating as it's the FLOW of gold back and forth between countries that's the key facet.

Face it folks, anytime we call on Government to act on our behave it's like calling in the devil. Let's devise a system will as few overseers as possible.

By the way, this in no way addresses the subject of fractional reserve banking and the collecting of compound interest by banks for 'money' they created from thin air. That's a whole other, even larger, subject that society needs to address, but that's a topic for another time.

Wed, 10/30/2013 - 04:20 | 4103973 Element
Element's picture

You forgot to add the problem of collecting TAX, which I think is one of those things, like central Govt, that has to go away and never return, for any reason.

Tue, 10/29/2013 - 20:50 | 4103337 George Washington
George Washington's picture

Essence, I voted you up.

Tue, 10/29/2013 - 21:32 | 4103452 Ignatius
Ignatius's picture

Because a physical only gold market with gold as the wealth reserve asset is the answer.

"Reserve currency" means 'saving in currency'... which is failing miserably.

 

Tue, 10/29/2013 - 20:37 | 4103304 Walt D.
Walt D.'s picture

Before the collapse of the USSR, people used packs of cigarettes, Levis jeans, Pringles potato chips as currency. I guess we could use bullets. (Now you know why Homeland Security is stockpiling ammunition.)

Tue, 10/29/2013 - 20:37 | 4103303 jonjon831983
jonjon831983's picture

"Cities compete to be global centre of renminbi trading"

http://www.ft.com/intl/cms/s/0/b7ea287c-4066-11e3-bd57-00144feabdc0.html

Tue, 10/29/2013 - 20:39 | 4103306 jonjon831983
jonjon831983's picture

Though, I like how someone put this comment citing a ZH pdf:

 

Mainland Investor | October 30 12:33am | Permalink

A bit lengthy, but a first-rate overview of China's equity and bond markets:
http://www.zerohed...nking%20System.pdf

Tue, 10/29/2013 - 20:34 | 4103294 Carl Popper
Carl Popper's picture

You cannot have your currency in the SDR unless you have a floating currency. Othrwise there is no way to value the components of the SDR fairly. Take China's word on the value of the yuan component in the SDR basket? Lol.

China is mistrusted and less popular than the united states internationally. We arent the only people they have poisoned. South americans have been also, also other asians. The chinese are disliked intensely.

And they are about to go down the flusher with the biggest capital misallication in history, 80 percent of water supplies polluted to critical levels, an inefficient and soon to be uncompetitive manufacturing base as the rest of asia comes online, a huge demographic nightmare, and they are still incredibly poor. Mexico is now a cheaper manufacturing destination than china, Laos and vietnam are nipping at their heels and stealing business.

China is so over.

Tue, 10/29/2013 - 20:28 | 4103282 Fishhawk
Fishhawk's picture

You are correct, akak, that moneyness requires the basket to contain only commodities with a high stock to flow ratio, thus eliminating all the metals except gold and silver (and perhaps rhodium), and all the farm products, plant or animal, thus leaving only oil and gas, and perhaps graphite and phosphate.  Such a basket would be highly stable over time, thus driving the wedge between money power and the state, which would be highly desirable for liberty/freedom, but would starve the state.  Thus no such stable basket will be considered by the PTB.  And thus any such basket-based currency is a non-starter.  The key to the question is found in the words used: on what rule or substance could we base a currency such that it was defacto money?  And the answer is obvious: the state prefers currency, as it is easy to manipulate, whereas money is outside the control of the state, and thus will not be tolerated.

Fishhawk

Tue, 10/29/2013 - 20:17 | 4103218 falak pema
falak pema's picture

there is a trilateral deal cooking between China, Russia and India. It has all the makings of a new monetary order; sometime in 2015, depending how the first world cookie crumbles in 2014 in USA and EU monetary and currency war blues. 

Western underwear very thread worn as Borisov would say.

http://www.asianage.com/columnists/new-power-triangle-402

Tue, 10/29/2013 - 20:40 | 4103312 Carl Popper
Carl Popper's picture

Lol. And do you know the value of the trade between these three countries as a percent of world trade? I am not losing any sleep over it.

China will be left with rusting smokestack industries with few exports and a land completely poisoned while the USA moves into a maker society. China needs the USA, not the other way around.

Tue, 10/29/2013 - 23:22 | 4103680 DaveyJones
DaveyJones's picture

and the easter bunny will feed us

the fact that you (and a lot more) are not losing sleep over it is one of the main reasons it's going down. China is definitely "poisoning" things, but what's the "west's" participation in that sport, historically speaking? How about in ratio to its population? How quickly is the "value" of the east changing, how about the west? Which directions? Which economy is being built upon the true cost of energy and which on the pathetic hope that its fading military can continue to enforce its own artificial price? How many consumers exist in the USA? How's their debt and income? How about the rest of the world?    

Tue, 10/29/2013 - 19:43 | 4103170 failsafe
failsafe's picture

Wow GW... You're really paying for that little drop of hope in the "lets all just get up this morning and die" zh crowd lol. ...frankly, even if it's a lot of bollocks I'm a hope camel and all I see for billions of miles is a desert of slow catastrophes. So I'll take it and be grateful, maybe I'll get amoebic dysentery, maybe I won't lol

Tue, 10/29/2013 - 19:41 | 4103166 Diamond Jim
Diamond Jim's picture

"....a basket of world currencies, based on their GDP...:   do you really believe that the Chinese can actually provide us a number we could believe in ???

Tue, 10/29/2013 - 19:46 | 4103180 George Washington
Tue, 10/29/2013 - 20:22 | 4103275 Diamond Jim
Diamond Jim's picture

touche........

Tue, 10/29/2013 - 19:44 | 4103156 akak
akak's picture

Of course, the most logical, most rational, most just solution would be to end government involvement with the issuance of money, and let the market decide WHAT is the reserve currency (money), or IF it needs one at all.

By the way, the attached chart is mostly nonsense, as it is incorrect and inapplicable to talk about 'reserve currencies' before World War I, and particularly prior to the Napoleanic Wars era, as there WERE no 'currencies' as we know them today --- there was simply gold and silver money, and notes (supposedly, at least) backed by gold and silver.  It mattered very little whether the bulk of hoarded (metal) money happened to be coined by Britain or Spain or France or the USA; what fundamentally mattered was its physical precious metal nature.

Tue, 10/29/2013 - 19:52 | 4103183 George Washington
George Washington's picture

"Of course, the most logical, most rational, most just solution would be
to end government involvement with the issuance of money, and let the
market decide WHAT is the reserve currency (money), or IF it needs one
at all."

True!

But how do we get there?

And would a basket of commodities be an interim step?

Tue, 10/29/2013 - 19:56 | 4103204 akak
akak's picture

If that basket is going to be defined by governments, then I have to assume that it would not be such a step.

But I'm not really arguing here with you GW, as I suspect we are on the same page.  I was merely pointing out the ultimate ideal: the separation of money and state.  Which would, of course, end the (sociopathic, parasitic, unsustainable) state as we know it today.

Tue, 10/29/2013 - 20:00 | 4103208 George Washington
George Washington's picture

How about - just for fun - we ZH'ers come up with our own, private sector basket of commodities? What would we put in it?

Tue, 10/29/2013 - 20:15 | 4103244 akak
akak's picture

It would seem to me that, ideally, such commodities would have a large stock-to-flow ratio (i.e., much more than one year's world production held as reserves).  Unfortunately, the only two such commodities that I can think of that meet than criterion are gold and (less so) silver.  Not even platinum and palladium, much less any of the base metals, and especially none of the grains or other foodstuffs, have much more than one year's world annual production held in stock at any given time.

So, ignoring that fact, how about:

Gold
Silver
Platinum
Copper
Aluminum
Nickel
Tin
Zinc
Steel (to be defined)
Petroleum (WTI or Brent)
Natural Gas
Wheat
Rice
Corn (Maize)
Barley
Oats
Soybeans
Peanuts
Sugar
Coffee
Cotton
Wool
Lumber (to be defined)
Rubber
Beef
Chicken
Pork
Olive Oil
Palm Oil
Sunflower Oil
Soybean Oil

 

I think that makes 30.

 

EDIT: 31, actually.  Either way, that is one heavy basket!

Wed, 10/30/2013 - 04:14 | 4103963 Element
Element's picture

I would add akak that these do not have to be in an already grown, or processed, or ores even mined to serve as a large known or potential 'backing' reserve, right? So not like you have an incentive to rape the Earth to build wealth and a solid reserve, and use it sensibly, etc.

Basically we all want something that can "pay us back" in trades, when the chips are down and everyone has defaulted on creditors and run-on currencies fail. What does everyone want to be paid back with, when that happens, and they can't get anything else?

It's the ability to live, eat, drink and be clothed, and have energy.

So if that's the ultimate and final level of transaction, that we all not just desire, but all require when things go pair-shaped, in a reserve currency system, then why is that not the currency's fundamental core of 'backing', to begin with?

Tue, 10/29/2013 - 23:55 | 4103769 layman_please
layman_please's picture

you forgot to add the second biggest market in the world (after weapons) - illicit drugs. or maybe it should be the basket of drugs or their crude form. sarc off

Tue, 10/29/2013 - 20:22 | 4103273 Son of Captain Nemo
Son of Captain Nemo's picture

Bravo AKAK you nailed it!

Perhaps we can get the likes Berwick and Ulbricht World Minister(s) of Finance to denominate that "heavy basket"?

Tue, 10/29/2013 - 20:15 | 4103258 George Washington
George Washington's picture

Thanks,  akak.

What do others think of that list?

Wed, 10/30/2013 - 22:12 | 4107358 BigJim
BigJim's picture

What do I think? I think you need to work out what you mean by having money tied to a basket of commodities.

When money is 'tied' to gold, it means that the amount of currency circulating directly reflects the amount of gold held by the currency issuer(s). Incidentally, The amount of (out of the ground) gold increases by approximately 1.5% per annum.... roughly in line with an expanding developed economy.

So, coming back to this 'basket of commodities' idea - how would it 'relate' into the quantity of currency in circulation? Commodities, by their very nature, get used up (which is why gold isn't really a commodity). ie, their quantity is volatile.

People talk about using a currency 'based' or 'tied' to a basket of commodities but no one ever explains what this would actually mean.

Wed, 10/30/2013 - 11:26 | 4104457 daemon
daemon's picture

 

 

".....

Petroleum (WTI or Brent)

....."

But what happens to your list of commodities, when you take the notion of  "peak production"  into account ?

Won't a lot of these commodities become luxury goods ?

 

 

Wed, 10/30/2013 - 01:09 | 4103847 rlouis
rlouis's picture

Computerization makes the basket size less burdensome, and a bigger basket allows each region to maximize its own resources for trade currency.  I like the idea of adding consumables to the other components. A trade weighted flexible basket composed of the (50/100/150) largest industrial commodities in international trade?  And reset the basket each year.  Because it would be based on international trade, it might reduce any one group's ability to manipulate it (probably naive optimism.) Environmental concerns pose some challenge since the desire to exploit a resource often means a lack of regard for the consequences or means of extraction - oh... arggghh - human nature!

Great topic George.  The perfect solution will always escape our grasp, but if we could only refrain from doing so damn much damage along the way, future generations might have a better chance for better lives.

Wed, 10/30/2013 - 00:21 | 4103810 Boris Alatovkrap
Boris Alatovkrap's picture

Where is vodka on list!?

Wed, 10/30/2013 - 04:11 | 4103968 Doña K
Doña K's picture

There is barley and sugar. You can work out something with these two. 

Tue, 10/29/2013 - 22:45 | 4103641 DaveyJones
DaveyJones's picture

vinyl LPs

Wed, 10/30/2013 - 00:36 | 4103823 SubjectivObject
SubjectivObject's picture

BWWAAAAAHAHAHAHAHAHAaaaaaaa.......

I'd be freaking RRRICH!

 

Problem would be parting with them.

Tue, 10/29/2013 - 21:06 | 4103371 Teddy Tenpole
Teddy Tenpole's picture

 

 

He missed Tallow.

Tue, 10/29/2013 - 21:04 | 4103366 knukles
knukles's picture

gold and silver

Period, EOC, thanks very much, indeed....
The inclusion of ag is a problem in that supply can be manipulated by man (over/under-planting) as well as subject to Nature and Nature's God...
Which only throws additional uncontrollable circumstances ibto the calculations.
And I even lean the same toward industrial metals (steel, etc.) for the very same reasons.
Hell, there has been historically enough trouble just allowing free substitution between gold and silver, for what that's worth...

Tue, 10/29/2013 - 19:22 | 4103118 Cheduba
Cheduba's picture

So, is GW ADVOCATING a one world currency?  I'm fairly certain that any wet dream of Keynes such as the Bancor would enslave humanity forever as it has always been the dream of the globalists to have one currency that they control.

Usually, what GW says makes a lot of sense, but not this time.

Tue, 10/29/2013 - 19:42 | 4103127 George Washington
George Washington's picture

Thanks, Cheduba ... that's the first real constructive criticism on this ...

I'm not for a one world anything.

I'm trying to brainstorm a way to avoid total chaos for Americans when the dollar stops being the reserve currency.

Plus Liataer argues:

The New Currency would be automatically convertible without the need for new international agreements.

Do you have a better idea? If so, I'd be open to listening ...

Wed, 10/30/2013 - 03:14 | 4103936 geewhiz
geewhiz's picture

Consult von Mises about what to do. I hope the Chinese and Russians don't get sucked into the idea of a NWO basket of fiat crap, that will be "privately" administered by some global bankster club.

Tue, 10/29/2013 - 22:50 | 4103626 DaveyJones
DaveyJones's picture

I'm not 100 percent certain the rest of the world cares what happens to America. Lots of people everywhere have lots of reasons to not care...or care the other way. And let's see, there's 315 million of us and billions of them. Things happens so much faster than they used to. I think the rest of them are just waiting and positioning until our path is less relevant to them. That time is coming quickly.   

Wed, 10/30/2013 - 04:02 | 4103961 Doña K
Doña K's picture

I think that many middle class third world citizens are accumulating USD's and the prospect of the USA faltering terrifies them.

In SE Asia there are millions of $100 bills in matresses. In some countries in south America the USD is a parallel currency circulating freely. (no coins) Panama, Peru, Equador etc. 

Those do care

Tue, 10/29/2013 - 20:18 | 4103264 nmewn
nmewn's picture

Seeing as how we're brainstorming, let me tell you what I think ;-)

There are many things that make a "world reserve currency"...that is, something everyone trusts to hold its value at the time it is aquired. The unlikelihood of it becoming worthless is of course paramount.

But what is currency as we commonly know it? Its government currency, if a government fails from debt or invasion, the currency is worthless or worth less. This implies a power quotient.

Lets reverse it all then, just for the sake of argument, lets say China through military superiority and conquest became the preeminent power making a basket of currencies unviable as well, as it wouldn't recognize other currencies thus making them "contraband" for obvious reasons.

For me, this points away from ANY government currency being involved as a measure of currency value. They are all inherently unstable by their nature.

Money/currency should never be.

It doesn't act differently based on someones skin color, nationality, origin or who is in power.

Gold & silver & copper are money, which is the reserve currency. They do not spoil, take refrigeration, get insects or care what national markings are put on them and are easier to transport than a fifty gallon oil drum...lol.

Wed, 10/30/2013 - 03:51 | 4103956 Doña K
Doña K's picture

Good points indeed, but copper turns green after 10 years. Can we just substitute with Platinum?

Tue, 10/29/2013 - 22:43 | 4103633 DaveyJones
DaveyJones's picture

because it makes sense and is honest, it may never happen

Wed, 10/30/2013 - 15:23 | 4105909 donsluck
donsluck's picture

Or it is inevitable.

Tue, 10/29/2013 - 20:52 | 4103340 George Washington
George Washington's picture

Thanks, nmewn.  Good points.

Tue, 10/29/2013 - 20:00 | 4103211 akak
akak's picture

 

I'm trying to brainstorm a way to avoid total chaos for Americans when the dollar stops being the reserve currency.

I sadly feel that that result is, as they say, already baked into the cake.

The best that we as Americans might hope for at this point is a long, relatively controlled decline, much as (now not so) Great Britain experienced in the decades following WWII, as that nation's currency effectively lost its reserve status as well.

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