LifeLines
Caldari
Capital Construction Research
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Posted - 2009.11.11 10:29:00 -
[1]
Edited by: LifeLines on 11/11/2009 10:32:31
Edited by: LifeLines on 11/11/2009 10:30:27
 Originally by: Apurimac
I don't know why i'm bothering but here goes...
The dollar isn't going to die anytime soon. The fact that global investors were running to the dollar and treasuries in droves during the banking crisis in '08 is the most solid evidence it is still the worlds reserve currency. One of the biggest reasons it is still the worlds #1 reserve currency is the U.S. has one thing the Europeans severely lack: an effective military. Without U.S. support, NATO would be an even bigger joke than it already is and the ability for Europe to respond to an invasion from say, Russia, would be extremely limited. Hence the euro is not as solid as the dollar from a long term standpoint. The dollar is experiencing pre-recession levels of inflation, but there's still significant deflationary pressure on the dollar because of the weak US economy which is why the fed can print all the money it wants and inflation still stays at about 4% year to year. U.S. banks are swimming in liquidity right now but it hasn't affected prices that much because they are still extremely reluctant to lend.
BTW, isn't the leader of IT Alliance SirMolle? Last i checked he was American, is the weak dollar going to mean you guys are out of a leader?
lol the chinese and others have been hoarding dollars and not euros not because EU doesnt have its own army, but because euro is a relatively new project(started 10 years ago), and there still are many uncertainties about its future... for example, will southern european countries cut their deficits so as not to endanger the whole eurozone..
but then again if US deficit continues growing at this rate, nobody will want your newly printed greenbacks. even though euro is a very new currency, it accounts for around 25% of reserves in worlds central banks. now having in mind that the primary goal of ECB is to maintain price stability(the fed cares more about output growth), I can see the chinese and russians switching to euro as a reserve currency.
the dollar wont "die", but its going to get dethroned as a reserve currency of the world really soon if that 1.6tn deficit doesnt start shrinking, and i think it wont shrink in the next decade due to the ongoing wars and USA's new healthcare system.
Quote:
The fact that global investors were running to the dollar and treasuries in droves during the banking crisis in '08 is the most solid evidence it is still the worlds reserve currency.
no this is called flight to liquidity and its in no way an evidence that dollar is going to be strong in future. when lehman brothers went under, a massive selloff in equities started and investors had to put their money somewhere. US treasuries were and still are considered to be the least risky investment.
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