I'm hoping some of you economists can provide an answer to a scenario. Should China and others, rapidly followed by the entire world, refuse to buy U.S debt and refuse to accept the currency for world exchanges in oil and other markets, it is clear the dollar currency would be worthless and most other world currencies would follow suit only to a slightly lesser degree. Under these gloomy circumstances where would one be best insulated? Many would say gold. That seems a logical start, but Would it be better to own land or other tangibles under these conditions? If so, which tangibles? Where else could one preserve their wealth other than in tangible assets? * Is there a currency that would be most stable under these conditions? Obviously one would first get out of dollars, but then into what? Any and all responses will be greatly appreciated! - Best regards Sphira
The USD is the standard global currency. It's not going anywhere. If you honestly think that it is any countries best interest to debase the USD, even our enemies, you need to do a lot more reading.
I agree with Karl. Until there is another global reserve currency, the dollar will not be allowed to decline past certain levels. Even then, I doubt it would completely crash as the US consumer still drives world consumption. China is already over extended believe it or not. A collapse in the American consumer would collapse them as well. Their domestic consumption is years away from making up the difference (if ever). And for any of you China worshipers who believe they are taking over, please subscribe to Roubini's RGE Monitor. Its the best econ site around, and they give really good, UNBIASED analysis of every region weekly (they don't work for the US Gov or Wall St as most economists do). They, as I, believe China could implode if the global recession is deep and long enough. Huge fx reserves do not solve the excess capacity problem, much less the need to employ massive numbers of new workers per year. They NEED roughly 10% growth per year to provide full employment. The leaders there are very paranoid about revolution at all times, and will do anything to keep the workers happy, including over extending themselves to bubble levels (haven't done that quite yet). This country is Marxist only in politics. It is very capitalist otherwise (west coast anyway). Anyway, I am rambling. The dollar will not collapse anytime soon. Even if debt to GDP goes up to say 8%. (It might with expansionary Keynesian spending that the left now expects to get).
dont china this, arab that, western this, jap that. we are all Humans and are in this together, should we be so racist towards fellow humans?
I beg to differ. If there are not enough demand for US treasuries for the bail out, you WANT them to shed US dollar. That is the only way to devalue US dollar without US gov spending like a drunken sailer. Why do you think the Fed is spending money like no tomorrow? They don't want a deflation scenario. In reality, China nor the middle east is strong enough to say we will not buy US dollar and hold our own currencies. Essentially, that action will let those currency appreciate against US dollar.
Jayford is on target with many points. China is like an elephant riding a bike, it better not slow down too much. China IS gaining ground at a rapid rate though and they are in very many ways more and more free market than the US. I should know I have been to just about every major city area and have done business there for over nine years. The real problem I think we face is not that countries gang up on us and TRY to debase us but rather that the demand for US debt slows down which could cause a huge problem here. It also appears to be a good recipe for war as war seems to get peoples minds focused on a common enemy and off of the social and economic problems inside a country. If we get a world wide depression the radicals will get their voices heard and that just spells a lot of trouble.
Thanks everyone for responding, though I think only poyayan actually touched on my actual question. I think their assessment is a good one though by my judgment. I'm trying to understand the worst to better address the likely in between. My post was not a prediction or a judgment, simply a what if with specifics. If anyone can take it point by point I will be grateful. thanks again Sphira
What was racist? it was just a discussion of the Chinese/US econ situation. lighten up, nothing even remotely racist implied by my post.
this was a question about a dollar collapse, not a devaluation. i could easily see it come off, but no way will it be allowed to collapse. this would be in NO ONE'S interest.
the OP's use of the word "jap" is racist...no? "dont china this, arab that, western this, jap that. we are all Humans and are in this together, should we be so racist towards fellow humans?"