NationStates Jolt Archive

In the near future, will the dollar lose its world currency status?

With America exporting debt at record levels, but historically low interest rates, how long will (Mainly Asian) Investors and Governments buy American Assets and bonds?

Is this bubble ready to pop in the next ten years?

It will only when the US stops being the financier of the world. That's how the pound lost its supremacy. It maintained it long after the US became the bigger economy because the US always needed British capital. By about 1930, the US stopped needing so much capital, as its capacity to build production was slowing down. The US was ready to reinvest its capital to be a financier. I suspect China will find itself in a similar situation in 30 years. The dollar's biggest competitor is not the euro, but the yuan.

Is this bubble ready to pop in the next ten years?

I'm crossing my fingers that it does.

I'm crossing my fingers that it does.
So that the Swedish crown can take over as the world's supreme currency of course... Sorry, I voted yes for the euro and am still irritated at having to change my money everytime i go to eurozone countries.

I'm crossing my fingers that it does.
I'm not trying to be critical, but I'm just wondering if you have a vested interest in the end of the dollar as a premiere reserve currency.

For my pound, I can get roughly 2 dollars, does that not mean that the pound is stronger than the dollar and therefore the dollar isnt sumpreme already? This wasnt a slag or anything, just a question, i'm sorry to say but my ecconomic understanding isnt great.

For my pound, I can get roughly 2 dollars, does that not mean that the pound is stronger than the dollar and therefore the dollar isnt sumpreme already? This wasnt a slag or anything, just a question, i'm sorry to say but my ecconomic understanding isnt great.
All it means is that its demand is greater relative to its supply. But there aren't enough pounds to both keep the UK economy stable and finance the entire world economy at the same time. The dollar probably can't either, but it's more able to because of its huge supply.

So that the Swedish crown can take over as the world's supreme currency of course... Sorry, I voted yes for the euro and am still irritated at having to change my money everytime i go to eurozone countries.

Oh, I'm crossing my fingers that the Euro crashes and burns, as well. It's been terrible for Euroland economy. I'm so glad people here weren't fooled into accepting it, like they were with the EU from the get go.

I'm not trying to be critical, but I'm just wondering if you have a vested interest in the end of the dollar as a premiere reserve currency.

Call it anti-Americanism. That's what you'll do in the end, no matter what I say, seeing as I come from a "criminal socialist country," I believe you called it, so I shan't waste my breath.

Eh, most likely. Not now of course, but in the future.

Here's a radical idea. Create one, international currency for the whole world, the World Dollar or something. Sure, it destroys more of our national sovereignty (I'm looking at you Lotus Puppy) but at least it'll be simpler.

Call it anti-Americanism. That's what you'll do in the end, no matter what I say, seeing as I come from a "criminal socialist country," I believe you called it, so I shan't waste my breath.
Probably. No hard feelings, of course. I just wish that you think more for yourself, and not about others.

Probably. No hard feelings, of course.

Of course not. Feelings would demand that I gave a crap.

I just wish that you think more for yourself, and not about others.

I'm great at multi-tasking, and being able to divert my thinking processes at different subjects, so, do not waste your futile wishes.

Eh, most likely. Not now of course, but in the future.

Here's a radical idea. Create one, international currency for the whole world, the World Dollar or something. Sure, it destroys more of our national sovereignty (I'm looking at you Lotus Puppy) but at least it'll be simpler.
That would not happen, also, if it did, America would no longer the word's economic superpower, so that currency would probably be called the world yuan or something like that. Also, I think we should stop sacrificing national sovereignty for that kind of junk.

It will only when the US stops being the financier of the world. That's how the pound lost its supremacy. It maintained it long after the US became the bigger economy because the US always needed British capital. By about 1930, the US stopped needing so much capital, as its capacity to build production was slowing down. The US was ready to reinvest its capital to be a financier. I suspect China will find itself in a similar situation in 30 years. The dollar's biggest competitor is not the euro, but the yuan.

But The world finances the US. The US is a vast net debtor.

For my pound, I can get roughly 2 dollars, does that not mean that the pound is stronger than the dollar and therefore the dollar isnt sumpreme already? This wasnt a slag or anything, just a question, i'm sorry to say but my ecconomic understanding isnt great.

It's all relative. The current exchange rate gives no indication of which is "strong" and which is "weak." You need to look at and compare overall purchasing power. Sure the dollar is worth half a pound, but we have twice as many (per capita). More importantly, beer is cheaper here.

The dollar is supreme because it's the most widely accepted form of curreny. Plus the US government offers a high interest rate to investors. Normally, the higher the interest rate, the faster a currency declines vs. others. The dollar has been suprising in that it has (for the most part) maintained its strength.

But The world finances the US. The US is a vast net debtor.

Only in regards to the government, not the private sector. In 2003 the US had over 5 times more outward investments than inward (of FDI).



Pretty good info here:
http://www.unctad.org/Templates/Page.asp?intItemID=3198&lang=1

In the near future, will the dollar lose its world currency status?

With America exporting debt at record levels, but historically low interest rates, how long will (Mainly Asian) Investors and Governments buy American Assets and bonds?

Is this bubble ready to pop in the next ten years?

It's already lost a lot of its value and continues to plummet. Soon it will no longer be "the world currency standard".

Yes.
As soon as China's economy, which is currently being built on a foundation of mostly corrupt banking practices funding real-estate speculation like the Japanese of the 80s, collapses.

When that bubble bursts, America's biggest lender will have to call their debts due, and I fear that, without appropriating assets from other countries, America simply won't be able to pay up. If that happens, I expect the American economy and the dollar to go into a tail-spin. Having off-shored most of their manufacturing capacity, and without sufficient resource capacity for their own demands, I don't expect it'll level out until the American dollar matches the peso or so.

What the new standard will be, I don't know. Odds favor the Euro, but the Japanese, having learned from their past, might be in position to make a comeback. If you want a longshot, you can also go for the Canadian dollar, as the Canadian economic position might be strong enough to withstand America's collapse.

When that bubble bursts, America's biggest lender will have to call their debts due, and I fear that, without appropriating assets from other countries, America simply won't be able to pay up. If that happens, I expect the American economy and the dollar to go into a tail-spin. Having off-shored most of their manufacturing capacity, and without sufficient resource capacity for their own demands, I don't expect it'll level out until the American dollar matches the peso or so.
.

China's not going to redeem that debt (and generally can't, I must clarify). The money invested is too valuable and too stable for them to unload; the last thing they want to do if their economy crashes is collapse their banking system by removing the one thing that is primarily responsible for shoring up their financial system. Other countries' bonds are much more likely to be sold than T-bills, which are the best paper on the planet. Only if our economy were to cave (not likely unless there's some kind of war) would we see these kinds of problems.

The Eurozone should be more worried than the US; they've got bigger deficits (as %GDP), stagnant and jobless economies, lower interest rates, and huge long term problems that make our liabilities look tame. If the US cuts its budget deficit and keeps raising rates above the ECB, the Euro will drop like a stone.

Yes.
As soon as China's economy, which is currently being built on a foundation of mostly corrupt banking practices funding real-estate speculation like the Japanese of the 80s, collapses.

When that bubble bursts, America's biggest lender will have to call their debts due, and I fear that, without appropriating assets from other countries, America simply won't be able to pay up.

It doesn't work that way. Payments are on a fixed schedule. You can't "call" them in whenever you please.

No. But you stop lending out at the same rate. It has much the same effect when the economy you're borrowing from is based on a continuous cycle of credit.

The dollar doesn't have "world supremecy", it's a floating currency. There is some premium factored into its cost becuase of the overall size of the US economy, but it's only worth what the world market says it is.