What Happens If The U.S. Currency Is No Longer The World's Reserve...

currency? What happens to our economy? Please be specific.

but I'm not a financial analyst so take it with a grain of salt.

The People's Republic of China recently indexed its currency to the US dollar. With their large and fast-growing economy they now have us by the short curlies. By altering the exchange rate (which is controlled by the Chinese central government) they can produce huge effects on the prices of US consumer goods.

We have to cooperate with them now.

!

Saddam had switched from dollars to euros for denomination of oil and was encouraging other Arab countries to do the same thing.

No, of course I don't have a link.

Chavez in Venezuela is also a proponent of switching to Euros

Devaluation, inflation, imports become more expensive(Interesting, since so many companies are now offshore) and credit markets become real ugly.

That is just the beginning.

Provided the rest of the world has guts to follow through. Like the OPEC, China etc. switching to the €.

But it will be good, because the power-mad fat cats go down too. Unlike the current situation in which only the people get f*cked.

Is that specific enough?

I posted a similar thread under the name "The Fear". I'll provide a link if I find it again.

--bkl

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=203x19063

Not very much enlightening discussion, I'm sorry to say.

--bkl

means, but I remember reading something by Paul Krugman about this. Basically, since the dollar is the world reserve currency, and oil is bought and sold with dollars, foreign governments are obliged to retain a large amount of currency in dollars. Usually this currency is used to buy US Treasury bonds, thus their reserve is loaned to us for interest. We use these funds to help cover our huge deficits. That's why traditionally we can get away with huge deficits on a scale that would bankrupt most other nations. If the world moves to the euro then everyone would sell off these bonds and our economy would collapse. Think Argentina.

I've been thinking that, if Europe gets too disgusted with the Bush regime, they might be tempted to try to shift the reserve currency to the euro.

There is an excellent article here

"One of the stated economic objectives, and perhaps the primary objective, when setting up the euro was to turn it into a reserve currency to challenge the dollar so that Europe too could get something for nothing.

This however would be a disaster for the US. Not only would they lose a large part of their annual subsidy of effectively free goods and services, but countries switching to euro reserves from dollar reserves would bring down the value of the US currency."

<snip>
"There is though one major obstacle to this happening: oil. Oil is not just by far the most important commodity traded internationally, it is the lifeblood of all modern industrialised economies. If you don't have oil, you have to buy it. And if you want to buy oil on the international markets, you usually have to have dollars."

<snip>
"If on the other hand OPEC were to decide to accept euros only for its oil (assuming for a moment it were allowed to make this decision), then American economic dominance would be over. Not only would Europe not need as many dollars anymore, but Japan which imports over 80% of its oil from the Middle East would think it wise to convert a large portion of its dollar assets to euro assets (Japan is the major subsidiser of the US because it holds so many dollar investments). The US on the other hand, being the world's largest oil importer would have to run a trade surplus to acquire euros. The conversion from trade deficit to trade surplus would have to be achieved at a time when its property and stock market prices were collapsing and its domestic supplies of oil and gas were contracting. It would be a very painful conversion."

They are primarily the way we are financing our debt. Warren Buffet has said he is "...betting against the dollar" Better to pay off your loan/home/car/etc... than being tied up in equities. Gold Good - Walmart BAD. Get squared away NOW. Alot of economists are talking about this recently. It wouldn't take many terrorist attacks to spook the markets. I personally think we are going down big time. But Henny Penny is my wife.

Do we still have any factories... I don't think we have teh capacity to make TVs.... Wait, no TVs, maybe not so bad after all...

Actually, the end of the current American economy - no more US Gov debt (who would want it denominated in dollars) unless denominated in Euro, which would make it harder to pay. No ability to import... Generally, we would look like a 3rd world nation with a 1st world military.... Hmmmmm, Russia or China 25 years ago?