Saturday, August 29, 2009

Time To Give It Up: The US Dollar Ain't All That

People are actually debating if the US dollar should maintain currency "hegemony" in today's world. Given the emergence of the Euro and the rise of China, we should have been realizing the reality years ago: sooner or later there will be some sort of basket of currencies that are considered a valid store of value. And that is not a bad thing.

For the US to be concerned about this instead of looking to other issues makes me want to buy everyone a copy of that stupid business managment book called "Who Moved My Cheese?". Sadly, this book seems to resonate for me these days. It seems to be the source of almost all political and personal issues out there. Sad, but true.

But I digress. The US has been fortunate enough for a very long time to be able to do whatever they want without having issues with the value of the dollar.

Have enormous deficits and need to barrow insane amounts of money? The dollar stays high! Lower interest rates to practically zero? The dollar stays high! World falls apart? The dollar stays high! This will not be reasonable into the future.

Growth in the US is fully mature, demand is coming from counties on the rise, and in my opinion, the world may be less volatile if the entire global financial system were not dollar denominated. We would still be one of the most important, but the risk would be diversified. Time to recognize there is plenty of room for cheddar and provolone, the cheddar is getting too sharp anyhow.

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