I have mentioned USD loss of confidence on MF a few times. The replies if any are: it will not happen
Well every currency looses it's leading role. As of now the USD is the reserve currency
But stuff happens. As of now the reserves held by other countries has fallen from approx 66 % to some where in the 50 % bracket. Not a huge loss, but the trend is important as foreign countries see less and less reason to hold USD to pay their trading accts.. Other currencies work for some and more will accept other currencies as time goes on.
Now you folks spend billions on the military. Canada could never hope to spend this amount or even as a % of our population. Our dollar would pay a stiff penalty
Tim mentioned CAD and USD being accepted at par. Well then, either before or after {i don't know when] we even went above your dollar before sinking as low as the high 60's vs the USD. Today we are at 83 cents vs the USD. So you see some currencies adjust to the USD and then some countries just don't carry as many USD to pay the trade bill.
So where does all this currency history take us. Well at one time Portugal had the strong currency and then other countries until the petro dollar was born
Today the ME oil is divided between selling to china and the USA. If and when china surpasses the USA as the leading economy, and purchaser of oil then one would come to the conclusion the USD will loss value and the USD purchasing power will be less and less vs china and the far east
At one time a bottle of coke cost 5 cents. Today much more although various loss leader sales still let us buy bottled coke at a low cost. But the same pricing is happening all over the world, thus the USD stayed strong.
Only when you look at the value of USD vs other currencies do you see the trend downward
The fact we do not see our loss of purchasing power as a threat, we are like the frog in boiling water
You have to dig deep into foreign held currencies held in reserve, [which I have for some time now] to realize USD's are losing out on the confidence game
Slowly for sure, but the trend is there for all to see
Biden's spending, the Fed keeping int rates low and buying bonds because nobody will buy a bond at 1.5 % with inflation at 3-4-5 % depending on how you do the math Even with inflation at 2 % you are the loser buying USA bonds. The above is some examples of why the dollar will loss value vs other currencies
There is so many other reasons to see the USD losing it's reserve status that this post does not have the room to post
But you folks have had the reserve dollar all your life time and can not accept that some day sooner than you expect, you will have a USD loss of confidence. I know you won/t accept this but how long can you export inflation away from your country and continue to buy boat loads of goods stuffed in containers arriving daily
You would rather use a paper I.O U. than produce the goods in the USA. Trump saw this but what is Biden doing??
Biden's preferred answer, with pressure from the likes of AOC is printing up more dollars for the citizens to have deposited in the bank acct to buy boat loads of goods from foreign countries
This kind of action does not strengthen the USA as a whole and it surely weakens the USD. You can only live on I.O.U's for so long and some body wants solid currency. You would be the same even with your best friend if the money did not come your way. Lending even to your best friend has a limit. So the same sort of thing, in a round about way works for world currencies
And I bet most of you will not agree with me. It has always been this way and you see no reason why it should change
Every currency since time started has been replaced with another currency
Why do you think this time is different??
Of coarse if you agree with me, then you have to hope the Fed changes direction. If the Fed should change direction, then you would have a much longer time span with the reserve dollar
Did you know the Fed is the most profitable Co. in the USA
Great topic Wayne!
The liberals/left regardless of their policies, will have their way most of the time now because the right is imploding and can't even win a battle between themselves.....let alone win a battle against a mostly united left/liberal side.
It's not even a prediction anymore. It's already happening. They have the White House and both houses already and are only getting stronger as the republicans weaken themselves from a self inflicted mortal wound that is gushing blood.
But the republican political surgeons/doctors that want to stitch up the wound, so their republican patient can start healing are getting kicked aside because 1 evil head doctor is getting half the political doctors to rip the wound open wider, claiming "we must bleed the patient out to save him!"
The above, sounds like a really dumb figurative scenario that makes no sense based on what we know in real life about medicine and doctors.
Welcome to the current world of the Republicans. The head doctor has totally captured the brains of half of his followers, just like in a cult. They can no longer think clearly and/or rationally. They just believe everything that he says and those that don't believe ........ARE AFRAID to say anything because the cult leader will obliterate them if they do and take away all their political power that the crave as much as life itself.
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Sorry for the long elaboration but what this means, again is that the dems will have their way going forward.
More spending, more inflation, weaker dollar, higher deficit and so on, along with all the other lib policies. Higher minimum wages, more immigration(because they say that Amercans will not work for low paying jobs-because they are paying them to NOT work).
I am for socialized medicine and helping the poor and staying out of expensive foreign wars(we have a big enough political one here) so as to not be totally against everything from that side.
I'm going to bump this up to the trading forum if you don't mind, despite my political explanation for how we get there.
Interesting topic, an one that will gain in importance.
Isn't one reason the return rate on treasury bills and bonds is so low is that everyone wants them ?
Looking around I just don’t see what currency would replace the dollar. China‘s ability to become a trusted reserve is hampered by their domestic policies, just too much hint of instability.
I think the world looks on the US as regaining stability after what we went through, we have been tested and it looks like we will come out the other side.
I confess to know little about the cryptocurrencies, possibly an option that doesn’t involve state sponsorship will evolve.
Instead of bemoaning or fearing the ‘weakening’ USD, celebrate the realities. Our exports, namely grains, become more competitive in the world marketplace. Engineered that way, sometimes. Foreign tourists flood our shores, seeking bargain shopping. Whatever manufactured goods can and often overwhelm their international competitors. Yes, an off shore Toyota etc will cost more, but this gives our farmers a BIG break.
Several of the key factors of our $$$ being the reserve currency are our political, economic and most importantly, legal stability. We’ve long been a nation of the rule of law, not personality, monarchy or despotic dictators. Look at the big picture. Don’t lose sight of the forest for the individual quirks of the trees.
Yes, you can use a microscope and see flaws, but believe it or not, this American Experiment has resulted in us being the oldest continuous government on the planet.
Now put THAT in ur pipe an smoke it.
Oh—one more thing. I’m running an extreme balance of trade imbalance thing with my local grocer. He keeps taking this fiat currency and continues to allow me to take goods off his shelves. In other words, China has been on a wild spending spree in South America and Africa, undoubtedly using some our dollars to purchase farmlands and political favor One will do good, one will blow back down the road. This whole reserve currency issue, in my humble opinion, is a real straw man. We are not the only country that fiddles with their currency. But now that’s a topic that can be discussed endlessly. Just wanted to give some of the basic realities to cogitate upon. By the bye, just what was the value relationship between the $$ and the Euro when the latter was introduced? And where is it now? Hmmmmm?
stomper
I've often responded to these questions, and my response has always been along the lines of "I've been hearing about this for decades, but it hasn't happened yet. The USD is the worst currency out there, except for all the others".
I agree with those great comments.
A lower dollar is wonderful for exports.
It will be tough to replace the US as the main currency. There is a good chance that the UN will establish a "global currency" at some point during the current administration if it has a 2nd term with Harris as president.