Thursday, April 28, 2011

Reprise: World Reserve Currency. IV.

World Reserve Currency. IV.

Today I elaborate on criterion III, viz., "the currency must have a widely accepted value (even if such value fluctuates moderately). "

What destroys a nation's currency ? I mean actually destroys it, not the hyperventilation of the pundits about a bit of inflation.

1. Loss of a major war.
2. Revolution.
3. Close calls with either of the above.

Over the past 100 years, China, Germany, Japan, France, Italy, Spain, Russia and Great Britain have all suffered one or two or all of the above. The US has not.

What nation NOW has the military power to forestall ANY concern about loss of a major war?

The United States of America.

What nation has had a stable, democratically elected republic for over 200 years ?

The United States of America.
What nation's currency has over 100 years of continuous value for the purchase of goods or services ?

The United States of America. I recently received a quarter minted in 1910 as change at a drug store. That quarter was still accepted as true money. This is NOT true for even the British pound. Old currency is NOT accepted, but must be turned in at the Bank of England with great inconvenience.

I have a few hundred Deutche Marks in my safe that are now effectively worthless, as the Euro has replaced them. But old US currency even the 19th century is still acceptable as money. It's actually worth a lot more than its face value to collectors. But that money is still money.

What nation has a large enough economy to permit other nation's to be assured of being able to actually spend the money they hold as reserves for their own currency?

The United States of America.

Recent news reports show that nation of big mouth leaders, Red China, refusing to let Coca-Cola purchase even a simple juice company. So much for any value for the Chinese yuan in size. Government permission is needed to spend it. And that means risk of confiscation.


Krypto wants me to makes sales of stocks across the board, in all but emerging markets.  All proceeds to cash, until bond & TIPs prices improve.

Word of the Day

"Wain" - noun [$10] archaic.
"Wainwright" - noun [$10]
Wain means a wagon. Wainwright means a wagon maker.
Sentence: LBJ's "anti-poverty" programs created poverty by providing incentives to climb onto the wain to ride while others pulled it. The Reagan years of supply side provided incentives to become a wainwright (metaphorically), not a mere rider. And the Clinton welfare reforms pushed many of the lazy riders off the wain.


Bud said...

from wsj today

Investors kept up the selling yesterday, with the dollar hitting new post-2008 lows. Gold climbed to $1,529 an ounce, while oil and other commodities rose as well. In early 2009, gold sold for about $900 an ounce. So it takes about 600 more dollars to buy an ounce of gold today than it did two years ago. We wonder how this fits with his goal of preserving the dollar's purchasing power—which is a good question for Mr. Bernanke's next press conference.

and the Bman says my global purchasing power isn't gettin decimated .........huh ??????????? is the Bman a knave ????

Bunkerman said...

OK, Bud, which nation has common stuff [i. e., stuff a common person might buy/use] become expensive vs. comparable place in US?

When you can list a dozen of those, then the dollar might be too low.

The dollar screechers never seem to list any ... I wonder why?

Mrs. B & I will be checking out Dublin, Ireland for the later part of next week. I'll see if I can get Irish Stew for a reasonable price vs. Boston.

Spin-em said...

Sam "Wainwright"..offered George Bailey the deal of a lifetime


hope the bama girls are ok Bunk..