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To: Professional
As the creator of the world's reserve currency, we have been able to both play the game of Monopoly, and have been the game's banker. That is, alone among nations, we get to create brand new thin air money, and other nations take it.

Among the many advantages of this arrangement, all oil contracts have been denominated in dollars, artificially propping up its value, in spite of its massive creation out of nothing to finance our welfare state, consumer habits, military spending etc.

It's might handy, when playing Monopoly, to be the one player at the board who can simply declare at any time that he has found another stack of $500 dollar bills...that the other players must take for hotels etc. Under such rules, it's very easy for that banker/player to think he is the all time genius of Monopoly players...but this does not endear him to the others at the board.

But even this golden goose can be killed through massive overuse, as we are about to see. And once the dollar dumps into the crapper, this situation will be over, and the dollar will be no more special than the Argentine peso, and there will be no limit it its ultimate fall. NO one will need to convert their national currencies into dollars to buy oil (the Japanese are already buying oil directly in Yen, the first break with the system.) And as banks around the world are damaged by the current credit squeeze, these countries will increasingly blame "poisonous" or "toxic" CDOs originating in the USA for their problems, further turning the world off on dollars.

Even today the Chinese are not showing up at the treasury window, and without them taking our new bond issues, we are screwed.

These are all consequences of the dollar losing its unique and exalted position as the world's reserve currency.

37 posted on 09/29/2007 9:10:32 PM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee

I’m sorry, but all your describing is the consequences of a weak dollar. Yes, other nations decide, temporarily, that there must be a better instrument. A weak currency has effect in that the current state of affairs makes domestic business much stronger, thus more valuable. This weak dollar has what affect on domestic ag biz, auto sales, Boeing, MSFT INTC CSCO ORCL..., medical equipment, tourism, etc? Also, do you realize many American companies are borrowing in foreign currencies now, and doing share buy backs? They intend to pay these loans back, at a discount...

When a deal is made for US cash, not goods, the cash must do something. If they don’t sit on the cash, they must trade it away, buy US securities, R/E, US business interests, or something.

It appears that to a great extent, they’ve traded it away to the lowest bidder, making the currency weaker. At some point, that imbalance becomes so great, that uppity Londoners fly to NY for back to school clothes...

What we are talking about is a financial chess game, that always results in the US returning to the “runner” of the board. Within months really, the USD should rally, this will bring foreign money back to the US equity and bond market, the domestic returns will be very nice.

I feel sorry a bit for the misguided public that has been again tricked into buying foreign stocks and bonds at the peak in the cycle.


39 posted on 09/29/2007 9:22:07 PM PDT by Professional
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