We will revert to a world without such a reserve, or we will not.
I also believe that you are likely correct that no other currency, whether an existing one or some newly constructed one, is likely to be able to step into the role of such a reserve currency.
So either the dollar stands, or we revert.
And further I pretty much agree with your analysis of the situation with China. If we cannot put the current house of financial cards back together, their economy is toast.
We seem to disagree only on which outcome is more likely, the continuation or collapse of the current system.
You seem to be presuming that the political and financial leaders of the world have some ability to choose whether this happens, and since they won't want to see their economies collapse, they will choose to keep the present financial system running.
Eric Janszen is figuring that we, including our leaders, have run out of room to keep the present financial system running.
Actually, if my memory is correct, Eric made a similar call for a collapse after the dot-com bubble burst. He did not anticipate the mortgage debg and housing bubble.
I am rather confident that sooner or later, the current financial system will collapse, and that as we all seem to agree, that will be ugly. I think I know what will happen, but I cannot be certain of when it will happen. My current estimate is that most likely the collapse will be in the next year or two, on the demise of an aborted Dollar/Treasury bubble. But I am open to the possibility that I am off by one bubble. I seriously doubt that I am off by more than one bubble; which is to say I am confident that the worlds current financial system (dollar as the reserve currency, Americans borrow and spend, upcoming nations lend and sell) will collapse within the next ten years.
By this time next year, I'll wager that you agree on this.
I agree that the American era of “borrow and spend” is coming to a close. It isn’t quite finished yet at a national policy level. It is pretty close to finished at a personal/household level, and might be finished this year at a personal/household level.
I agree with you that there is a Treasury/Agency bubble. It is the fastest-inflating bubble I’ve ever seen, and I can find no parallel in history.
The mega-buck question there is this: how long can that bubble be kept inflated? Well, part of what it holding it together is that there is no alternative currency. Part of what is holding it together is that despite all this mental masturbation of “decoupling” that was bandied about in the past three years, no, there is no decoupling: everyone else is wedded to our economy. When we catch a cold, they catch pneumonia.
So there’s some enlightened self-interest abroad to prop us up, which might keep this T-bubble inflated longer than you or I would believe possible.
We agree we are running out of room to prop up the current system. I agree with you on that. I think that an austerity budget is about to be forced down on the politicians as the more likely outcome tho. If they don’t cut spending and reverse the deficits, then I’ll agree with you that there is no hope for the US dollar and the present financial system.
There’s also no hope for anyone else when that happens.
And when we run into this situation in history, we see wars develop. There’s nothing quite like a war to eliminate vast chunks of productive capacity to re-establish relative scarcity of production to help prop up prices again.