Originally posted by ahmad
It's interesting how some of you can predict the future with absolutely no precedent in the past. Is it wishful thinking or is your crystal ball flashing at midnight?
Is every event in history a repition of something happened before in an exact and predictable manner? Or is that your
As a currency trader I can tell you that the economic collapse of the U.S. is all but impossible. Why? Because the largest economy in the world, i.e. China, is dependent upon it.
Is that really so? China exports to US only because they currently believe the export earning are worth something in the world market.
China could easily export to other countries which are productive or have some things they could buy from.
You make it sound as if US consumption, which is exactly what US economy is all about, is somehow essential for the rest of the live!
The value of the dollar versus other currencies is a reflection of buy/sell trading activity related to a particular country's trade surplus or debt.
That could easily happen with another currency replacing the US$ as the bench mark currency too!
Oil and gas are currently denominated in dollars and dollars are denominated in oil and gas. Think about that (it takes a little brain glucose to figure it out).
Yes, that is the only thing that is holding the US$ hegemony and that could change. If you read the article carefully it also mentions
From the artcile in the link
Yet China and Japan, fearing the dollar crisis, have recently begun heavy buying of commodities, from oil to iron ore to copper to gold. They are using their trade dollars to buy real commodities, instead of US Treasury debt, which is mere paper. Chinese panic buying of oil for stockpiling reserves is a major factor pushing oil prices again to record levels of $42 barrels despite two major OPEC quota rises. Steel prices have exploded due to China demand.
What this means is China doesn't trust the longterm buying potential of the US$ and resorting to extracting committments
buying things of real value for dollars.
If King Saud government falls and the replacement decides to sell oil for something other than US$, that will be good enough to bury the US$! If China enters into barter with other countries (Chavez of Venezuela is doing it) that it trades with, that too can bury the US$. So too can Russia, by deciding to sell its crude for something other than US$.
The person who wrote that article knows nothing of how currency really works - and more importantly, why it works.
And you do
Currency is an instrument of faith. And the US$ doesn't inspire faith anymore! It doesn't matter what US is capable of consuming, what matters is what it is capable of exporting which is not much. That scenario is irreversible. US$ is no longer useless for anyone other than Americans, just as it should be!