If currencies are truly competing with another, one will swap their dollars for another currency that actually pays them interest! We can't do that now because we have to repatriate back into dollars. The free market works DAS if you let it.
I did not say they were "backed" I said they were tied (exports of commodities affect those currencies value). A small distinction but a distinction none the less. However, it does differentiate those currencies from ours in a very real sense....as our currency is completely un-tethered (to commodities).
No, please re-read my posts. I never said that. I said "if" we truly had a free market, the market would correct the issue of artificially low interest rates. It can't now.
Exactly. Nobody talks about it much, but when the US dollar goes, that marks the end of the American empire. It's rarely factored into GDP calculations, too. When this sham of an economy runs out of borrowed money, the dollar collapse will likely double the severity of the coming Depression. The premium built into the dollars value is huge. Once BJ Bernacke or whoever debases to maintain a semblance of order, that premium evaporates in short order and wherever we are at that point (the toilet), gets compounded. I would also add, when the Chinese Yuan becomes fully-convertible, the end is close. It's no coincidence the international "community" and China agreed to full-convertibility a year or so before US debt markets are expected to implode (2015) - the ultra rich need a new ship before they jump the old one. I made a mental note of that - Yuan convertibility. Canary in the coal mine.
The US would be a much stronger country if it had thousands of competing currencies in circulation within its borders. And the rest of the world's investors would certainly want to have that kind of selection!
Ricter - we do have access to dozens of other currencies. Some brokers even let us buy on the bid and sell on the offer. ------- The Benefits of Reserve currency status may be an an Orwellian Lie - How do we know the reserve status is not what has caused the massive inflation we suffered the last 50 years or so?
I liked your original post better. There's a lot of truth to it. The US dollar was continually debased since the inception of the FED in 1917, the concurrent reduction in bank capital requirements, and the outright monetization of Government debt. But yes, you're spot on. Reserve status conferred a huge premium on the dollar and allowed Congress to spend far beyond their means on Entitlement bribes and military adventurism, which will shortly be our downfall. People need to understand the value of the dollar underpins the entire economy. When that goes, Katey bar the door. We are very close to that breaking point. 130% debt to GDP is the marker I'm looking at. At current spending, that's 3 years from now (2014-2015). Around 2014-2015, heightened market volatility will turn into wicked gyrations, and shortly thereafter, a run on the dollar. All the neocon idiots married to the ecstasy of empire need to get their heads checked. Even IF, we wanted to continue down the path of Military Imperialism, the money isn't there. We're nearly bankrupt. If we don't turn the ship now, we are headed for a total economic collapse that will rival the Great Depression. Given the current trajectory towards Authoritarian Government re the National Defense Authorization Act, MCA, Patriot Act, the political and social fallout will likely end in a Dictatorship, of some sort. But don't worry. Lets bomb some brown people to cheer us up. That's basically the endgame of the war on terror - a great distraction while the country is bankrupted and a useful canard to militarize "the Homeland".
I don't believe we're going to 130, I really don't. We're at war, taxes are down, safety net expenditures are up, so the debt is rising, yet it's not 130 now. Stop a war (or three), raise taxes judiciously, increase income (check out the NEI stats--quite good), and we'll turn the ship around, as you put it. Underestimating America is a famous mistake.