Guest Post: How The U.S. Dollar Will Be Replaced

Tyler Durden's picture

Submitted by Brandon Smith from Alt-Market

How The U.S. Dollar Will Be Replaced

After being immersed in the world of alternative economic analysis for several years, it sometimes becomes easy to forget that most people do not track forex markets, or debt to GDP ratio, or true unemployment, or hunch over IMF white-papers highlighting subsections which expose the trappings of the globalist ideology.  Sometimes, you just assume the average person knows what the heck you are talking about.  This is, of course, a mistake.  However, it is a mistake that is borne from the inadequacy of our age and our culture, and is not necessarily a product of weak character, either of the analyst, or the casual reader.   

The great frustration of being actively involved in the Liberty Movement is the fact that many people are rarely on the same page (or even the same book) during political and economic discussion.  Where we see the nature of the false left/right paradigm, they see “free democracy”.  Where we see a tidal wave of destructive debt, they see a “responsible government” printing and spending in order to protect our “best interests”.  Where we see totalitarianism, they see “safety”.  Where we see dollar devaluation, they see dollar strength and longevity.  Ultimately, because the average unaware citizen is stricken by the disease of normalcy bias and living within the doldrums of a statistical fantasy world, they simply have no point of reference by which to grasp the truth when exposed to it.  It’s like trying to explain the concept of ‘color’ to a man who has been blind since birth.

Americans in particular are prone to reactionary dismissal when exposed to facts that disrupt their misconceptions.  Our culture has experienced a particularly prosperous age, not necessarily free from all trouble, but generally spared from widespread mass tragedy for a generous length of time.  This tends to breed within societies an overt and unreasonable expectation of ease.  It generates apathy, and laziness.  A crushing blubberous slothful cynicism subservient to the establishment and the status quo.  Even the most striking of truths struggle to penetrate this smoky forcefield of duplicitous funk.

In recent articles, I have outlined the very immediate dangers of several potential economic events that are likely to take place this year, including the exit of peripheral countries from the European Union, the conflict between austerity and socialist spending in France and Germany, the developing bilateral trade agreements between China and numerous other countries which cut out their reliance on the U.S. dollar, and the likelihood that the Federal Reserve will announce QE3 before the end of 2012.  All of these elements are leading in one very particular direction:  the end of the Greenback as the world reserve currency. 

In response to these assertions I have received letters from some people (some of them indignant) questioning how it would be even remotely possible that the dollar could be replaced at all.  The concept is so outside their narrow world view that many cannot fathom it. 

To be sure, the question is a viable one.  How could the dollar be unseated?  That said, a few hours of light research would easily produce the answer, but this tends to be too much work for the fly-by-night financial skeptic.  Sometimes, the job of the alternative analyst is to make the obvious even more obvious. 

So, let’s begin…

The Dollar A Safe Haven?

This ongoing lunacy is based on multiple biases.  For some, the dollar represents America, and a collapse of the currency would suggest a failure of the republic, and thus, a failure by them as individual Americans who live vicariously through the exploits of their government.  By extension, it becomes “patriotic” to defend the dollar’s honor and deny any information that might suggest it is on a downward spiral. 

Others see how the investment world clings to the dollar as a kind of panic room; a protected place where one’s saving will be insulated from crisis.  However, just because a majority of day trading investors are gullible enough to overlook the Greenback’s pitfalls does not mean those dangerous weaknesses disappear. 

There is only one factor that shields the dollar from implosion, and that is its position as the world reserve currency.  Without this exalted status, the currency’s value vanishes.  Backed by nothing but massive and unpayable debt, it sits frighteningly idle, like a time bomb, waiting for the moment of ignition.  

The horrifying nature of the dollar is that it is only valuable so long as foreign investors believe that we will pay back the considerable debts that we (the American taxpayer at the behest of our criminally run Treasury) owe, and that we will not hyperinflate in the process.  If they EVER begin to see their purchases of dollars and treasuries as a gamble instead of an investment, the façade falls away.  Yet again this year Congress and the Executive Branch are “at odds” over the expansion of the debt ceiling, which has been raised to levels beyond the 100% of GDP mark:

http://www.nytimes.com/2012/05/17/us/politics/obama-presses-congress-to-act-on-his-priorities.html

Barack Obama has made claims that increases in the debt ceiling are “normal”, and that most presidents are prone to hiking the barrier every once in a while.  Yet, back in 2006, when George W. Bush increased debt limits, Obama had this to say:

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills…Instead of reducing the deficit, as some people claimed, the fiscal policies of this administration and its allies in Congress will add more than $600 million in debt for each of the next five years…Increasing America's debt weakens us domestically and internationally. Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

For once, Barack and I agree on something.  Too bad the man changes his rhetoric whenever it’s to his advantage. 

Today, Obama now asserts that raising the debt ceiling is not an opening for more government spending, but an allowance for the government to pay bills it has already accrued.  This is disingenuous and hypocritical prattle.  Obama is well aware as are many in Congress that as long as the Federal Government is able to raise the debt ceiling whenever it suits them, they can increase spending with wild abandon.  It’s like handing someone a credit card with no maximum limit.  For most men, the temptation would be irresistible.  Therefore, one can predict with 100% certainty that U.S. spending will never truly be reduced, and that our national debt will mount in tandem until we self destruct.

How has this trend been able to continue for so long?  Our private central bank has created the fiat machine by which all economic depravity is possible.  Currently, the Federal Reserve is the number one holder of U.S. debt.  The Federal Reserve creates its own capital.  It prints its wealth from thin air.  The dollar, thus, has become its own lynchpin.  The secretive institution which has never been subject to a full audit is now monetizing endless debt mechanisms with paper promises.  What value would any intelligent investor put on such a fraudulent economic system?           

The epic dysfunction of the dollar is rooted in its reliance on perception rather than tangible wealth or strong fundamentals.  It is, indeed, like any other fiat unit, with all the inevitable pitfalls built into its structure.

Ironically, the value of the Dollar Index is measured not by its intrinsic buying power, or its historical buying power, but its arbitrary buying power in comparison with other collapsing fiat currencies. 

The argument I hear most often when pointing out the calamitous path of the dollar is that it is the go-to safe haven in response to the crisis in Europe.  What the financially inept don’t seem to grasp is that the shifting of savings back and forth between the euro and the dollar is just as irrelevant to our currency’s survival as it is to Europe’s.  BOTH currencies are in decline, and this is evident by the growing inflationary pressures on both sides of the Atlantic.  Ask any consumer in Greece, Spain, France, or the UK how shelf prices have changed in the past four years, and they will say the exact same thing as any consumer in the U.S.; costs have gone way up.  Therefore, it makes sense to compare the dollar’s value not to the euro, or to the Yen, but something more practical, like the dollar of the past….

In 1972, just as Nixon was removing the dollar from the last vestiges of the gold standard, a new car cost an average of $4500.  A home cost around $40,000.  A gallon of gas was .36 cents.  A loaf of bread was .25 cents.  A visit to the doctor’s office was $25.  Wages were certainly lower, but they kept much better pace with the prices of the era.  Today, the gap between wages and inflation is insurmountable.  The average family is unable to keep up with the flashflood of rising prices.

According to the historic buying power of the dollar, the currency is a poor safe haven investment.  With the advent of bailout efforts and debt monetization through quantitative easing, its devaluation has been expedited dramatically.  The Fed has left the door open for what I believe will be a final destructive round of publicly announced QE, weakening the dollar to near death:

http://www.reuters.com/article/2012/05/16/us-usa-fed-idUSBRE84F12320120516

The question then arises; why do foreign countries continue to buy in on the greenback?

The Dollar Dump Has Already Begun

One of my favorite arguments by those defending the dollar is the assertion that no foreign country would dare to dump the currency because they are all too dependent on U.S. trade.  To answer the question above, the reality is that foreign countries ARE already calmly and quietly dumping the dollar as a global trade instrument. 

To those people who consistently claim that the dollar will never be dropped, my response is, it already has been dropped!  China, in tandem with other BRIC nations, has been covertly removing the greenback as the primary trade unit through bilateral deals since 2010.  First with Russia, and now with the whole of the ASEAN trading bloc and numerous other markets, including Japan.  China in particular has been preparing for this eventuality since 2005, when they introduced the first Yuan denominated bonds.  The bonds were considered a strange novelty back then, especially because China had so much surplus savings that it seemed outlandish for them to take on treasury debt.  Today, the move makes a whole lot more sense.  China and the BRIC nations today openly call for a worldwide shift away from the dollar:

http://news.xinhuanet.com/english2010/indepth/2011-08/06/c_131032986.htm

With the global proliferation of the Yuan, and the conversion of the Chinese economy away from dependence on exports (especially to the West) towards a more consumer based system, the Chinese have effectively decoupled from their reliance on U.S. markets.  Would a collapse in the U.S. hurt China’s economy?  Yes.  Would they still survive?  Oh yes.  Far better than America would, at least…

In 2008, I warned of this development and was attacked on all sides by more mainstream economists and Keynesian proponents who stated that such a development was impossible.  Today, it’s common knowledge that our primary creditors are “diversifying” away from the dollar, though MSM talking heads and those who parrot them still claim that this is not a threat to our economy.

To be clear, the true threat to the dollar’s supremacy is not only due to the constant printing by the private Federal Reserve (though that is a nightmare in the making), but the loss of faith in our currency as a whole.  The Fed does not need to throw dollars from helicopters to annihilate our currency; all they have to do is create doubt in its viability.

The bottom line?  A dollar collapse is not “theory” but undeniable fact in motion at this moment, driven by concrete actions on the part of the very nations that have until recently propped up our debt obligations.  It is only a matter of time before the dollar diminishes and fades away.  All signs point to a loss of reserve status in the near term. 

What Will Replace The Dollar?

My next favorite argument in defense of the Greenback is the assertion that there is “no currency in a position to take the dollar’s place if it falls”.  First of all, this is based on a very naïve assumption that the dollar will not fall unless there is another currency to replace it.  I’m not sure who made that rule up, but the dollar is perfectly able to be flushed without a replacement in the wings.  Economic collapse does not follow logical guidelines or the personal pet peeves of random man-child economists.

Though, to be fair, and to educate those unaware, there IS a replacement already conveniently ready to roll forward.  The IMF has for a couple of years now openly called for the retirement of the dollar as the world reserve currency, to be supplanted by the elitist organization’s very own “Special Drawing Rights” (SDR’s):

http://www.guardian.co.uk/business/2011/feb/10/imf-boss-calls-for-world-currency

The SDR is a paper mechanism created in the early 1970’s to replace gold as the primary means of international trade between foreign governments.  Today, it has morphed into a basket of currencies which is recognized by almost every country in the world and is in a prime position to take the dollar’s place in the event that it loses reserve status.  This is not theory.  This is cold hard reality.  For those who claim that the SDR is not considered a “real currency”, they should probably warn the U.S. Post Office, which now uses conversion tables that denominate costs in SDR’s:

http://pe.usps.com/text/imm/immc3_007.htm

So, now that we know a replacement for the dollar is ready to go, the next obvious question would be:

Why would global elites destroy a useful monetary tool like the dollar?  Why kill the goose that "lays the golden eggs"?

People who ask this question are simply unable to see outside the fiscal box they have been placed in.  For global bankers, a paper currency is not important.  It is expendable. Like a layer of snake skin; as the snake grows, it sheds the old and dawns the new. 

At bottom, men who promote the philosophies of globalization greatly desire the exaltation of a global currency.  The dollar, though a creation of a central bank, is still a semi-sovereign monetary unit.  It is an element that is getting in the way of the application of the global currency dynamic.  I find it rather convenient (at least for those who subscribe too globalism) that the dollar is now in the midst of a perfect storm of decline just as the IMF is ready to introduce its latest fiat concoction in the form of the SDR.  I find the blind faith in the dollar’s lifespan to be rife with delusion.  It is not a matter of opinion or desire, but a matter of fact that currencies in such tenuous positions fall, and are in the end replaced.   I believe that the evidence shows that this is not random chance, but a deliberate process, leading towards the globalist ideal; total centralization of the world under an unaccountable governing body which operates a global monetary system utterly devoid of transparency and responsibility.   

The dollar was a median step towards a newer and more corrupt ideal.  Its time is nearly over.  This is open, it is admitted, and it is being activated as you read this.  The speed at which this disaster occurs is really dependent on the speed at which our government along with our central bank decides to expedite doubt.  Doubt in a currency is a furious omen, costing not just investors, but an entire society.  America is at the very edge of such a moment.  The naysayers can scratch and bark all they like, but the financial life of a country serves no person’s emphatic hope.  It burns like a fire.  Left unwatched and unchecked, it grows uncontrollable and wild, until finally, there is nothing left to fuel its hunger, and it finally chokes in a haze of confusion and dread…

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catacl1sm's picture

Gold & Silver - Silver & Gold.

Ahmeexnal's picture

German Imperial family about to step out of the closet.

Germany to return to open monarchy.

http://www.thelocal.de/national/20120314-41325.html

Speaking in Thursday’s edition of Die Zeit newspaper, Philip stressed that a monarch would be financially independent – and so would not be likely to accept presents from friends, such as those which led to Christian Wulff’s resignation from the presidency.

"A king is invulnerable to such cases," Prince Philip said. "Either he would have old family property or an Apanage – and it would be beneath his dignity to accept presents from friends."

"And there are no reporters on the level of sniffing around European ruling families,” added the prince, who is a Protestant minister.

Prince Philip said that although successful presidents made their mark with their statements, mentioning Roman Herzog and Richard von Weizsäcker as good examples, he said that words were not enough.

“This level of words is necessary, but they do not move people inside,” he said. “When our hearts are touched, we change. During the past football World Championship there emerged so much uncomplicated national consciousness that nose-wrinkling intellectuals no longer understood their country.

“Emotions are the field on which a royal family can play," he said. "They do not have to think up some programme, it goes to the hearts that they are simply there.”

He suggested that German politicians would even vote for a royal family to be reinstated, if it came to a vote – nearly a century after the last Kaiser was removed from the throne in 1918. Even left-wingers would be in favour, he suggested, pointing to Sweden where he said some socialists were also royalists.

hedgeless_horseman's picture

 

 

16 May 2012 - ECB operations during demonstrations planned in Frankfurt

 

In view of the demonstrations planned in the city of Frankfurt in the course of the next few days, the Executive Board of the European Central Bank (ECB) has taken the necessary steps to ensure that the ECB remains operational, with the objective of fulfilling its mission.

 

The ECB has also implemented measures to ensure the safety of its staff and visitors, taking into account the protection granted to the ECB’s premises and operations by the Headquarters Agreement between the ECB and the Federal Republic of Germany.

 

http://www.ecb.int/press/pr/date/2012/html/pr120516.en.html

Everybody can relax, the bankers are safe.

Spitzer's picture

The EURO is the replacement for the dollar.

It is no coincidence that gold and oil started going up just as the EURO was introduced.

The Euro is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar.[5][6] As of February 2012, with more than €890 billion in circulation, the euro has the highest combined value of banknotes and coins in circulation in the world, having surpassed the US dollar.[note 14] Based on International Monetary Fund estimates of 2008 GDP and purchasing power parity among the various currencies, the eurozone is the second largest economy in the world.[7]

CIABS's picture

Brandon, sorry, that's a lot of verbiage.  HOW is the dollar going to be replaced?  Put it here: ____________________.  Thanks.

resurger's picture

"

Silver and Gold = MonkeyHammered

USD = longest rally since 1985

 

Tim/Ben = 100

Goons =    0

Don't fuck with the Fed.

MF"

"My love said that XoXo"

 

LynRobison's picture

It appears to me that the problems in Europe will lead to printing of Euros. If that happens, it will destroy your idea that the Euro will be the replacement for the dollar. 

nuinut's picture

Your first point may indeed be the case, but your second is based on the assumption that you know what he is talking about with regards to the euro "replacing" the dollar and I think your assumption is incorrect.

See my further comments below if you are interested in testing that assumption.

mcguire's picture

1. SDRs

2. bilateral exchange treaties

3. petrodollar phase out

resurger's picture

Spitzer,

I dont mind any fiat to be the worlds reserve currency.

But after its's 100% pegged to gold

 

Spitzer's picture

It doesn't have to be. The Euro will become the reserve transactional currency. Strictly for medium of exchange puroposes. Physical gold will become the strictly the reserve store of value function. 

Ahmeexnal's picture

Why use non backed fiat worthless euros when you can use...unicorn droppings?

nuinut's picture

No particular reason other than the fact a lot of other people already find the euro functions fine as their medium of exchange. I think it's called the network effect.

But hey, knock yourself out.

Just make sure you don't try to store value in your medium of exchange, ok?

You wouldn't want to perpetuate the very problems you rail against, would you?

jekyll island's picture

The Euro was supposed to be the replacement for the dollar.  The Greeks blew that up, didn't they? 

 

nuinut's picture

Did they?

Does the euro no longer exist?

I didn't get the memo.

No problem, I store my value in gold. That still exists, right?

MsCreant's picture

WHY THE FUCK IS THE EURO BETTER THAN THE US DOLLAR?

BUT THEN AGAIN WHY IS AN SDR ANY FUCKING BETTER THAN A EURO OR DOLLAR. IT WON'T WASH. THERE IS NOTHING TO GUARANTEE THAT IT WILL NOT HAVE THE SAME CAREER AS THE DOLLAR, EURO, OR ANY FUCKING FIAT.

I hate this shit. But I sure as shit better get used to it. Justice does not matter, it is a fool's errand to seek it. They will do what they do. Unless we burn it to the ground, we must do what we must which is to try to out manuver and live with it.

jekyll island's picture

The Euro and the SDR are better than the FRN$ because they are more easily controlled by TPTB behind the federal reserve and ecb.  This allows them to screw the population even harder and extract more wealth, resources, etc from sovereigns.  It is easier to do this with an SDR than a currency that is controlled by one nation-state.  In short, the Rothschilds, Rockefellers and vampire squids have used up the dollar since 1972 and now they are ready to restart the process of another wealth and resource grab with another tool.  Don't be so attached to the dollar, it's fate was sealed by Nixon 50 years ago. 

 

Cathartes Aura's picture

perhaps the Euro was used by those who pull the strings to wean the "independent" nation states of EuroLand off their old individual currencies, retrain the minds to a different model of "money" - and now they can be herded towards yet another financial chess piece, incrementally widening the circle of banker influence.

the USDollar of course has been top o' the heap for decades now, and those same bankers have mis-used it accordingly - the taint of $ as an idea is spreading globally, and even the mighty murders of military can't hold this beachball under water forever - all fiat is faith-based, and the dis-illusionment of $'s is evident to any one watching.

given the IMF having the SDR in waiting since Nixon-era (end of gold standard, AND the un-locking of China's door to the world, *cough* Kissinger), I wouldn't be surprised if SDR's were used, via plastic 'n' pixels of course, why use outmoded "printing" of fiat, so messy. . .

nuinut's picture

MsCreant asks:

WHY THE FUCK IS THE EURO BETTER THAN THE US DOLLAR?

 Because it is only a medium of exchange, and is not attempting to be a concurrent store of value.

It is a shame the author of the post, and so many other "free-thinkers" have made up their minds that our monetary problems stem from fiat currency. They don't.

They stem from attempting to use the same media as both a store of value and a medium of exchange. That's the whole problem, right there. That's the root of the multitude of our problems.

 

So many minds wasting their efforts with false premises, all while accusing others of the same. Just because the authors of this site are professional technicians (and cynics) doesn't mean they haven't made assumptions too... this is a monetary error at the most fundamental level, but all technical analysis is derived from fundamentals, isn't it? 

 

It matters not what we use for a MoE, as long as it is valued by something else as a SoV.

Issuance/creation of the MoE is then fully mitigated by its value. A MoE is only as valuable as the goods and services it can be exchanged for. Period.

Any currency can function fine as long as its users do not attempt to simultaneously use it as a store of value.

 

The much maligned euro differs in that it actually is valued, on the Eurosystem balance sheet, in gold. Got that?

Its creators publicly declare the value of their MoE, valued in their SoV -->GOLD<-- for all to see. The significance of this is not apparent to most people, but it would be if they took the time to set aside their prejudices at least temporarily and consider this objectively. The significance of this will not be apparent to most people until they cease attempting to store value in their medium of exchange. Remember, no one can dictate how you choose to save. If you choose to save in euros, it would be wise to pay attention to the fact that the issuer of the euro actually tells you, if you care to look, exactly how much value a euro currently has. So why would you store value in euro when the euro issuers have been transparent enough to tell you that they store their value in gold. If it is good enough for them...

 

The USD has far too great a debt load to survive at anything close to its current value, and this debt is all held as a store of value. LOL.

The dollar is old, aged by being used as both a MoE and a SoV at the same time, a mistake which enables the misappropriation of value from dollar holders all over the world to the US' benefit. You guys don't actually believe you enjoy your high standard of living because you are "better" do you?

FOA:

 Politically, the world does not hate America; rather they hate the free lifestyle our dollar's illusion value brought us yesterday and today.

Haters gonna hate, but for small handful who haven't elevated their assumptions to beliefs here's a link.

lasvegaspersona's picture

Spitzer you old FOFOA-ist...I agree

the Euro is much prettier than an SDR and it has created a market for physical gold at market price....which will go much higher when the paper markets go boom (or crackle in zee fires of hyperinflation)

even if not one country uses the Euro as its internal currency the Euro has proven to the world that it takes its commitment to stabeeleetee VERY SERIOUSLY!!!

In fact that fact is leading to all kinds of problems for countries that can't control their spending now.

I say...Euro survives even if the countries that started it do not do so well...and the Euro, with its nice relationship to gold...wins.

The SDRs barely make the history books.

AurorusBorealus's picture

In the United States, laissez faire economics and protestant religious zealotry have been stewed together by talk radio hosts and evangelists and labeled "conservative."

Europe still has a nascent conservative tradition, long-slumbering since the days of De Gaulle, but still there.  I have little hope for a resurrection of true conservativism, but a little hope is hope still. 

God save the queen.

Silver Bug's picture

The dollars days are numbered. Hold tight your gold and silver.

 

http://ericsprott.blogspot.ca/

bernorange's picture

It seems like only yesterday that I took the red pill and started noticing the drumbeats to this story.

kato's picture

"The great frustration of being actively involved in the Liberty Movement..."

Enough said. The Kook movement. Smilar to the ron paul losers. = Many of you.

FrankThinkTank's picture

@kato 

says the man with a hollywood originated avatar.  

SubjectivObject's picture

Now THAT's a stunning indictment.

blunderdog's picture

"Yes, of course! Hence the name: movement. It moves a certain distance, then it stops, you see? A revolution gets its name by always coming back around in your face!"

Whiner's picture

Got no arguments, no facts, no reasoning skills? Well, hell MF, just call them "kooks". Must be an Alinski, Ayers, Obammy thinker. Excuse please, non-thinker. Get back to MSNBC and HuffPo and eat your pablum.

resurger's picture

A scrotum bag full of douche

MsCreant's picture

Incorrect. That would be something useful.

EnglishMajor's picture

Kooks, huh?  You have quite a voacabulary.  What are some of your other favorite words?  Nigger, Macaca, Wetback, Faggot, Kike?  If you are not already donning a white sheet and illuminating crosses in the front yards of people with Ron Paul signs, you might as well be.  Oh, and when the movement does become a revolution as it inevetably will, you might just want to lock yourself in your house, watch "V for Vendetta" over and over, and keep pretending you understand what your avatar represents.

Ahmeexnal's picture

I'm no english major.....wtf is a macaca?

EnglishMajor's picture

Sorry, that one is actually French.  Ask Dominique Strauss Kahn.

manhunter's picture

Extremely long, incredibly wrong.

bdc63's picture

I'm kinda busy today ... can someone post the Clif's Notes version ...

TrulyStupid's picture

Please elaborate on the "wrongness"

CharlieSDT's picture

I think this was an excellent article.  

Bizaro World's picture

Good article, pretty depressing but very likely accurate. Would have been much better if he shortened it, trimmed the fat if you will.

I give it 4 out of 5 silver coins...

SheepDog-One's picture

So theyll switch the fiat dollar for another fiat...and thats just that? Not before many other things happen, like a world war and a collapsed society and everyones wealth wiped out.

manhunter's picture

The SDR, solving a problem that doesn't exist. Every nation has a currency that can function as unit of account. The world wants a store of value, which the SDRcannot be.

Bluntly Put's picture

This. The world had a global reserve currency which articles like this tend to forget, gold or rather bills of credit that matured into gold bullion. The current world trade system evolved on these bills of credit as did modern economic formulas to calculate future value. At the root, the standard unit of account is assumed constant. Paper currencies are never constant as they can be inflated at will by banks, consumers and governments.

This is the problem, the formulas used evolved on a constant standard unit of account, historically gold or bills of credit that matured into gold bullion. Paper currencies cannot resolve this dillema even with the threat of global force, i.e. the point of a global gun to everyone's head.

jekyll island's picture

SheepDog,

Yeah, well, there is that too.  It got glossed over in the fine print.  Kinda like a Seinfeld episode:  I had some dollars, yada, yada, yada, now I have this SDR. 

carbonmutant's picture

While I appreciate the search for a universal currency... you can't have "universal currency" without a universal government... the EU is showing us that. And a universal government is not stable... anymore than a spinning top.

jekyll island's picture

Universal currency?  That would be gold.   

nuinut's picture

Gold?

That would be universal store of value.

midgetrannyporn's picture

Wordy and pointless.

nuinut's picture

Whereas you prefer pointy and wordless?

Roy Bush's picture

"There is only one factor that shields the dollar from implosion, and that is its position as the world reserve currency."

I'm not so convinced of this.  The main factor that sheilds the dollar from implosion is that we have the majority of the guns and weapons to back up the dollar and that we are in debt more than any other country.  If debt was simply the issue why hasn't the Yen been thrown into the dustbin yet? 

These fiat currencies will fail but who knows when.  And, because the US is in debt to everyone else it will fail last.  The secret is "being in debt"....it's the reason why an idiot like Trump is still around.  You need to have the banks unable to foreclose on you because you owe them too much....then the debtor has the debtee by the balls--not the other way around.