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Thread: Why Will The US Dollar Lose its Reserve Status?

  1. #1

    Default Why Will The US Dollar Lose its Reserve Status?

    I've been reading for years about how the Chinese or the Russians are going to replace the US dollar as a reserve currency. Most of the evidence revolves around replacing the dollar for daily transactions with respect to trade.

    I don't ever hear how the dollar as a reserve currency is going to be replaced with something else. The reason the dollar is so good as a reserve currency is because the market in dollars is measured as the total outstanding available to trade, currently at $17 trillion or higher (depending on whether you want to hold Treasury paper only or other paper), extremely liquid and extremely safe, at least with respect to value over time and fluctuations in that value. Yes, the dollar has gone down vs almost everything else, except for other currencies.

    How large is the Chinese bond market, and how safe is it compared to the US? Ditto for Russia or any other country thinking about reserve status.

    If you have $5 trillion to hold somewhere your safest bet is a dollar account. Gold? Try buying $5 trillion in gold, then watch what happens to the price when you stop buying. Oops!

    So who can give me a rational explanation of what currency will replace the dollar as a Reserve currency, not just for day to day transactions. And why. And more important, WHEN?

    Thank you,

    Andy

  2. #2

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    I'm not about to write an essay about this so you are getting the short answer.

    There isnít anything out there to take over. After Bretton Woods in the 70ís the Europeans were salivating at the thought of becoming the world currency. Easier said than done.

    As Ďbadí as you may think our economy is, compared to the rest of the world it is peaches and cream. Our public debt to GDP ratio is the envy of just about all European nations and most of the civilized world. Our tax revenue as a percent of GDP is also in fairly decent shape. We enjoy the lowest food cost on the planet, by a loooooooong shot. If you think our unemployment is bad, go and take a look at unemployment in Europe.

    China is a concern, one that may solve itself. Their fast economic expansion will come with a price. When those chickens come home to roost, they will tank hard because unlike the dollar, the rest of the world is not as dependent on Renminbi and donít care to bend over backwards to keep them afloat.

    But letís say that the days of the dollar are numbered. It will take a loooooooong time, and throughout that time the market will be a rollercoaster of exuberance and correction. Abandoning the market at this point would be foolish.

  3. #3

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    JMO, but the rest of the world is a bit tired of America throwing its economic might and currency manipulation around ..... They expect a bit more fiscal discipline to be exhibited by a country that is expected to serve as the world's financial standard bearer. Just my dos centavos .....

  4. #4

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    Quote Originally Posted by Avocado View Post
    I've been reading for years about how the Chinese or the Russians are going to replace the US dollar as a reserve currency. Most of the evidence revolves around replacing the dollar for daily transactions with respect to trade.

    I don't ever hear how the dollar as a reserve currency is going to be replaced with something else. The reason the dollar is so good as a reserve currency is because the market in dollars is measured as the total outstanding available to trade, currently at $17 trillion or higher (depending on whether you want to hold Treasury paper only or other paper), extremely liquid and extremely safe, at least with respect to value over time and fluctuations in that value. Yes, the dollar has gone down vs almost everything else, except for other currencies.
    How large is the Chinese bond market, and how safe is it compared to the US? Ditto for Russia or any other country thinking about reserve status.

    If you have $5 trillion to hold somewhere your safest bet is a dollar account. Gold? Try buying $5 trillion in gold, then watch what happens to the price when you stop buying. Oops!

    So who can give me a rational explanation of what currency will replace the dollar as a Reserve currency, not just for day to day transactions. And why. And more important, WHEN?

    Thank you,

    Andy
    Like it or not, the U.S. fiat dollar is already decreasing in it's share of foreign exchange reserves, while physical gold has never been removed from the status as the most "solid" holding of such reserves, with the stronger financial powers tending to have larger percentages of forex reserves in gold form; see http://en.wikipedia.org/wiki/Gold_reserve
    Charts here give you an idea of this gradual erosion: http://www.imf.org/external/np/sta/cofer/eng/


    Of course, the source above is only reported, many if not most observers believe much of the U.S. gold reserves have been sold (no audit in decades) while China is known to have far higher gold reserves.

    5 trillion in gold? Where are you going to get that? The entire claimed U.S. gold reserves are only a small fraction of that (less then 1/2 trillion, and even less if you go by official figures). Mere consideration of such a large reserve in gold by those who can make such decisions would send gold prices (and/or fiat dollar drop) rocketing to un-imagined amounts. Security of reserves in U.S. dollars -- sure. But what if U.S. becomes your enemy -- how secure are your digits then? With gold -- it doesn't matter - gold has no friend or enemy -- most everyone in the know will take gold, no matter the approval of international bankers.

    What's replacing the U.S. dollar as reserve? Multiple currencies -- but who knows what international bankers have in store, and when or how quickly the continued erosion of the fiat dollar as reserve currency. Maybe a new currency? But gold is still there as a reserve, and it's not like those reserves loose value over decades of time as does the fiat dollar (by design), and when considering national central bank reserves -- yes, long time periods do (or at least should) be considered, as should be the security from foreign financial systems no free nation should ever consider as guaranteed allies.
    Last edited by motocat; 04-23-2014 at 06:40 PM.
    ďOf all the contrivances for cheating the laboring class of mankind, none has been more effective than that which deludes them with paper money.ĒDaniel Webster (1782-1852)

  5. #5

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    Dont we go to war every time someone doesnt want to use the petrodollar?

  6. #6

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    Look. There's talk here n there about the desperate measures that are needed to "reset" the currency. If China, or a Russian-Chinese currency is on the cards, or a BRICS conglomeration up ahead:

    a) how long will an alternative currency take to anywhere near challenge the $US?

    b) how will they achieve this monuments goal?

    c) wtf do we little guys do about it to protect our interests?
    "Dad, why do guyz have nipples"

  7. #7

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    Quote Originally Posted by kiethstone View Post
    Dont we go to war every time someone doesnt want to use the petrodollar?
    Pure conspiracy theory. 1% evidence to back it up.

  8. #8

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    Quote Originally Posted by DBCooper View Post
    Our public debt to GDP ratio is the envy of just about all European nations and most of the civilized world.
    Excuse me??? you really believe that? your living on another planet
    104.65 % is NOT the envy of the world
    actually, comparing it to other countries, it is one of the worst

    http://www.nationaldebtclocks.org/de...k/unitedstates

    http://www.nationaldebtclocks.org/
    Last edited by Torcan; 04-23-2014 at 08:22 PM.

  9. #9

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    Who told you that the dollar will lose its reserve status? No one told me.

  10. #10

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    Quote Originally Posted by Torcan View Post
    Excuse me??? you really believe that? your living on another planet
    104.65 % is NOT the envy of the world
    actually, comparing it to other countries, it is one of the worst

    http://www.nationaldebtclocks.org/de...k/unitedstates

    http://www.nationaldebtclocks.org/
    Look at all that debt. The world must be crazy. How can the world still trust our dollars when looking at that? Or is there something else?

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