The Mighty Dollar

[mikes350Z]

From the Economist, Dec. 2 (First paragraph and conclusion):

THE dollar has been the leading international currency for as long as most people can remember. But its dominant role can no longer be taken for granted. If America keeps on spending and borrowing at its present pace, the dollar will eventually lose its mighty status in international finance. And that would hurt: the privilege of being able to print the world's reserve currency, a privilege which is now at risk, allows America to borrow cheaply, and thus to spend much more than it earns, on far better terms than are available to others. Imagine you could write cheques that were accepted as payment but never cashed. That is what it amounts to. If you had been granted that ability, you might take care to hang on to it. America is taking no such care, and may come to regret it.

From the conclusion:

The dollar's loss of reserve-currency status would lead America's creditors to start cashing those cheques-and what an awful lot of cheques there are to cash. As that process gathered pace, the dollar could tumble further and further. American bond yields (long-term interest rates) would soar, quite likely causing a deep recession. Americans who favour a weak dollar should be careful what they wish for. Cutting the budget deficit looks cheap at the price.

[SmoothZ]

Actually, it's already happened at least twice that I know of. Each year for the past couple if not more, the U.S. has come close to defaulting on loans to other countries and organizations. Each time, the Secretary of the Treasury has authorized the govt to 'borrow' from the largest 401k in the world and pay those off.

I think it's illegal, but they claim they pay it back into that 401k with interest. How they calculate the lost interest is beyond me, but I'm sure it's complicated.

BTW, that 401k plan has over 1 million participants and holds over $100 billion in assets. It belongs to the military and civilian govt employees.

And yes, we need to stop spending more than we earn, as a country of course. Now let me see where I can apply for credit to buy that tt kit...

[mikes350Z]

Maybe try borrowing from the European Union since they are setting up to become the biggest creditor in the world.

[Rakshas]

Could debt finally cause world unity?

That would be interesting, to say the least.

[SmoothZ]

Originally posted by mikes350Z
Maybe try borrowing from the European Union since they are setting up to become the biggest creditor in the world.

As if their egos aren't big enough, they'll just laugh at us and charge higher rates.

No thanks, I say we just keep taking over oil rich countries...j/k.

[mikes350Z]

Yes, I guess if you think about it, who needs the dollar? Just let it fall to the floor. We'll buy things with barrels of oil.