By MICHAEL GRAY
One of the earliest green shoots in the recent economic snapback was the dollar. However the dollar index is now at its lowest level of the last 12 months.
This should come as no surprise to Washington. President Barack Obama’s budget aside, which has global finance ministers leery about the future of dollar strength, Fed chief Ben Bernanke’s actions of monetizing T-bills and T-notes through purchases in the debt market has many economists whispering “Banana Republic economy.”
Since you have the Fed on both sides of the trade, how long can this go on before the $10 bill has $1 buying power?
Chinese and Russian finance ministers have pounded their shoes at the podium recently about the dollar’s reserve currency status. The Chinese are looking to the yuan, which currently is worth 14 cents to the dollar, to become the regional reserve currency.
Since the yuan is locked in a very tight trading range by the Chinese government, which means plenty of communist intervention, I don’t see how the yuan can move to reserve status.
The euro and Japanese yen have greater acceptance within the global markets, but these currencies are no better than the dollar on a value basis and each one’s home market is in worse shape than the US economy.
New World Order proponents look to the World Bank, BIS, IMF or other illuminati-centered institutions to create a new uber-reserve currency for international trade.
My view is that any new currency has to be an asset-back currency to be acceptable in replacing the dollar. This motion is highly unlikely to happen because it restricts the issuer of floating the currency to inflate or deflate economies through manipulation.
A gold asset-backed currency would be too finite in value to have the ability to cover huge liabilities needed to be covered –– ranging in the trillions –– unless gold prices are allowed to trade freely.
The projection of the dollar as measured by the dollar index will continue trending down, which will cost Uncle Sam far more to borrow and will generally inflate dollar-denominated commodities such as oil, gold and silver in the long run.
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