Is the death of the dollar imminent?
The hours would be in agony the dollar? I can hear the undertaker noise, teeth chattering and shake the portfolio burying this money, given the global threat of challenge to the deregulation of markets by yoyo’s dollar play.
The dollar is already dead for ages, according to some analysts. But it is still there, despite the bad weather and storms speculative markets. The green note survived one year with the typhoon “subprime” but for how long? Will he deal with the threat of global powers other than America that content of its most black oil!
World powers threaten to ban the dollar. This is how we learn today (The Independent) secretly, that a consortium of world powers, involving France, Japan, China, Russia and the Netherlands Gulf Arabs (who are preparing for their part, to the transition to a single currency *) is, about to ban the trade in oil dollars.
The dollar would be replaced by a basket of currencies including the yen, the Chinese Yuan, the euro, gold, and the future of the Gulf common currency by 2018.
This project anticipates the premature death of the dollar that would no longer be a universal medium of exchange, at least for petroleum products. And cede its role as reserve currency to gold …
The announcement of the newspaper The Independent, described by some rumour because fed denials, nevertheless had a considerable impact on the currency, especially that the dollar fell when price in oil did increase. The Americans are till now the Gulf allies, including the UAE and Saudi Arabia, whose reserves are huge (2000 billion dollars, with Kuwait and Qatar, according to The Independent). Must they take this threat seriously? Or should they take the option to keep waiting there, until the single currency project in the GCC (Gulf Cooperation Council) is finalized and implemented? (Thanks in part to the customs agreement between the 6 countries, for the moment, unlikely).
The survival of the dollar in the face of successive crises is now harder. The strength of the dollar against previous crises (1929 and 1973) is explained so far, in part by the U.S. policy of increasing consumption, interests rates very low incentive borrowing and enrichment of American pension funds through their investment abroad.
But since the financial and property crisis of 2008, as calls it Paul Volcker “Mother of all crises,” the vulnerability of the dollar seems to reach a point of no return. The Federal Reserve had purchased for $ 300 billion of U.S. treasuries, offering itself the luxury of filling the inside of the debt, and boost the dollar at the same time. However, it ‘s the debt financing by outside investors that increases the demand for dollars and the increased demand for raw materials (payable in dollars).
On the other hand, the strategy of the Federal Reserve, which does not raise interest, rates now close to zero, due to the dollar, a currency with low yields.
The parity of the dollar against other currencies is also directly dependent on the changes in demand for financial products and indicators of growth and profitability of businesses in USD. However, the low rate of investment following the crisis of “subprime” slows the U.S. economy and is therefore at risk that the dollar has been declining since 2005 and continue for at least ten years according to Warren Buffet and George Soros (Source: “The decline of the dollar” by Addison Wiggin).
This idea had already been raised by the Chinese at the last G20, who wanted “de-globalization” the dollar was considered too unstable, using the SDR (Special Drawing Rights, IMF unit of account) “super sovereign currency” whose value is determined from a basket of currencies (Dollar, Euro, Pound Sterling and Japanese Yen). Not to mention that Australia going against the tide of the crisis by raising its key rate to 3.25% and placing the dollar as a speculative currency.
The death of the dollar announced by analysts: utopia or reality?
Currently it’ s the economic growth differential between the U.S. and other developed areas (Including the EuroZone) that govern the exchange rate of the dollar.
But the new situation by changing the contribution of emerging markets like India with a share of its reserves having increased by $ 110 billion in one year (Source Bloomberg). Bank of India (Central Bank) explains that it is the variations in exchange rates and the value of the dollar against other currencies that explain much of the strong growth of its reserves, according to the AGEFI.
Not to mention China’s reserves that, have increased by nearly 25 billion per month since 3 years. China shakes the world stage and currency, by its strategic ambitions to diversify currency exchange.
Who should we believe then? Analysts are they to be taken seriously, as well as the threat of world powers trying to impose a single world currency for oil trade. Is the oil itself, not threatened by the crisis, not economic nor financial, but ecological?
The advance of new technologies related to the fight against global warming, such as clean energy, the threat of nuclear terrorism, and geopolitical uncertainties associated with wars (Afghanistan, Palestine, Iraq) may jeopardize irreversibly the supremacy of the historical currency: the U.S. dollar.
Will the dollar suffer the same fate as the British pound, which took advantage of the defeat of Napoleon to replace the franc in 1815? History should be, then repeating itself, with the new climate issues, armed conflicts and financial background of crisis knowing that the dollar alone weighs about 65% of world reserves of foreign currency against only 24% for the Euro and 5% for GBP and 3% for the yen.
In this particular match lost in advance, dollar doesn’t seem to have a serious challenging value as safe as a golden substitute?
Keep your eyes glued to the horizon for some hazy, sunny gold, for others, in a zen attitude, while expecting responses to all these questions!
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