by seahorse » Wed 02 Feb 2005, 00:35:21
Maverick,
I read the post you linked. Its interesting now to use hindsight on the article and see how his assumptions as to why the dollar will remain the reserve currency pan out. One, he states that the appreciation of the Euro against the dollar won't continue based on the continued growth of the U.S. economy. That has proved incorrect. The U.S. Economy has grown, but so has its twin deficits, and the Euro has continued to appreciate to all time highs. Second, but related to the first, he states the biggest threat to the dollar remaining as the world reserve currency are the twin deficits and low savings rates. In fact, our deficits each year get larger and larger, and we have no savings, thus, the dollar continues its fall. He also points out the fact that it would be hard to get off the dollar as the currency for trading in oil, bc it is traded on NYMEX. However, the Iranians are developing their own oil bourse for the purpose of trading oil in Euros, scheduled to begin sometime in 2006. Last, it is more and more probable that the Chinese will revalue their yen, distancing themselves from the dollar, and again, this year, the Russians have once again talked about trading oil in Euros. So, many of the assumptions made in this article have not proven true in just the last year and a half. There is serious risk to the dollar.