Why the Dollar's Reign Is Near an End

Discussion in 'Economy' started by Trajan, Mar 5, 2011.

  1. Trajan
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    Trajan conscientia mille testes

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    the money shot......are we prepared to deal with this? Doesn't look like it...:eusa_eh:

    snip-

    The impact of such a shift will be equally profound, with implications for, among other things, the stability of exchange rates, the stability of financial markets, the ease with which the U.S. will be able to finance budget and current-account deficits, and whether the Fed can follow a policy of benign neglect toward the dollar.


    and..

    One obvious change will be to the foreign-exchange markets. There will no longer be an automatic jump up in the value of the dollar, and corresponding decline in the value of other major currencies, when financial volatility surges. With the dollar, euro and yuan all trading in liquid markets and all seen as safe havens, there will be movement into all three of them in periods of financial distress. No one currency will rise as strongly as did the dollar following the failure of Lehman Bros. There will be no reason for the rates between them to move sharply, something that would potentially upend investors.

    But the impact will extend well beyond the markets. Clearly, the change will make life more complicated for U.S. companies. Until now they have had the convenience of using the same currency¬ódollars¬ówhether they are paying their workers, importing parts and components, or selling their products to foreign customers. They don't have to incur the cost of changing foreign-currency earnings into dollars. They don't have to purchase forward contracts and options to protect against financial losses due to changes in the exchange rate. This will all change in the brave new world that is coming. American companies will have to cope with some of the same exchange-rate risks and exposures as their foreign competitors.

    more at-

    Dollar's Reign as World's Main Reserve Currency Is Near an End - WSJ.com
     
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  2. william the wie
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    william the wie Gold Member

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    A bit overdone but actually such a fall will improve American balance of payments and lead to another rise in the dollar.
     
  3. Toro
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    Toro Diamond Member

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    That's an interesting article, and as awfully pathetic the dollar has been, I hesitate to say its hegemony is at an end.

    The simple fact is that there are only two other realistic alternatives, and both are deeply flawed.

    But for the past decade, the government and the Fed have been on an active campaign to wreck the value of the dollar, which has only accelerated in response to the Financial Crisis.
     
  4. Trajan
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    Trajan conscientia mille testes

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    the euro has its own issues and the yuan is hostage to the whim of Chinese totalitarians....you're right, there really isn't another viable choice yet. Thats not exactly a ringing endorsement though ;)
     
  5. Big Fitz
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    Big Fitz User Quit *****

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    That lack of choice i one of the few reasons the Dollar has survived this long.
     
  6. bigrebnc1775
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    bigrebnc1775 Diamond Member

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    Last edited by a moderator: Aug 19, 2014
  7. konkon
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    konkon Member

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    The US dollar will continue to be the world's reserve currency. Those in charge of arranging this financial crisis will make sure of this.
     
  8. bigrebnc1775
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    bigrebnc1775 Diamond Member

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    I must disagree with you.
     
  9. skeptic
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    skeptic BANNED

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    well what the article failed to mention is that the leading contender for the new world reserve currency is not the Euro or the Yuan, it is SDR issued by the IMF.

    SDR are a basket of currencies, including the dollar, yuan and Euro, that collectively are held in reserve against notes issued by the IMF. They are fully convertible and almost exactly match the reserve portfolios of most central banks.

    They are also the preferred "new world order" reserve currency of China, India and Russia. And I doubt the EU would object to their ascent toward world reserve currency status.

    The point is that even as the US dollar loses reserve currency dominion it is still gonna be one of the reserve currencies of the future. We will fall off our perch but we won't fall into the sea.
     
  10. william the wie
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    william the wie Gold Member

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    Most financial moves are still made in the Dollar with the other two contenders being the Yen and the British Pound. Way further back is Switzerland. Those league rankings are based on military not economic history. People like to put their treasures someplace where it is unlikely to be looted by invading hordes or some tinhorn dictator. There are extremely few contenders for such a crown so, I think the WSJ may have gone overboard on this call.
     

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