01-01-2020, 10:46 AM
** 31-Dec-2019 World View: US Dollar Reserve Currency
The dollar didn't become the reserve currency because a piece of
paper was signed in 1944. It was the other way around. A piece
of paper was signed in 1944 to reflect the reality that the dollar
already was de facto the reserve currency.
It seems every year for the last 20-30 years, someone has been talking
about replacing the dollar as a reserve currency -- Iran, China, the
euro, etc. That would be like trying to replace the Titanic with
a rowboat. The US dollar has far too much mass and momentum to be
replaced in any time span less than a few decades.
For the same reasons, it's very unlikely that the dollar will
significantly weaken in the face of a stock market crash or global
financial crisis, since a weaker dollar would affect the rest of the
world as much as it would affect the US. What is much more likely is
that the dollar will remain relatively stable, but the value of US
stocks and bonds would collapse. I could imagine a scenario where the
dollar retains its value but becomes a crypto-currency.
Once the Singularity occurs, the dollar crypto-currency could be
managed by our computer overlords.
richard5za Wrote:> As a results of agreements at the Bretton Woods conference in 1944
> the US dollar became the reserve currency of the world giving the
> USA substantial economic advantages. With the strong physical flow
> of gold to Asia, and especially China, over a period of many years
> now, a speculation has developed that at some point the Asians
> would launch their own reserve currency to reduce their dependence
> upon the US dollar.
> The logical economic consequence would be a weaker US dollar. Gold
> would increase in dollar terms.
> And the value of USA stocks would reduce simply because the
> dividends are lower in terms of global currencies.
> If the PE ratio was say 12 then one would expect a correction not
> too far away from the currency depreciation. However at current
> levels it would create a crash. So as a matter of speculation
> this, or even serious talk of this, might be the catalyst for the
> next crash. I wonder if 1944 is significant in terms of
> generational theory?
The dollar didn't become the reserve currency because a piece of
paper was signed in 1944. It was the other way around. A piece
of paper was signed in 1944 to reflect the reality that the dollar
already was de facto the reserve currency.
It seems every year for the last 20-30 years, someone has been talking
about replacing the dollar as a reserve currency -- Iran, China, the
euro, etc. That would be like trying to replace the Titanic with
a rowboat. The US dollar has far too much mass and momentum to be
replaced in any time span less than a few decades.
For the same reasons, it's very unlikely that the dollar will
significantly weaken in the face of a stock market crash or global
financial crisis, since a weaker dollar would affect the rest of the
world as much as it would affect the US. What is much more likely is
that the dollar will remain relatively stable, but the value of US
stocks and bonds would collapse. I could imagine a scenario where the
dollar retains its value but becomes a crypto-currency.
Once the Singularity occurs, the dollar crypto-currency could be
managed by our computer overlords.
