March 24, 2009

UN Recommends World Should Ditch Dollar

By admin

It’s about time:  folks at the UN are recommending that the world ditch the US dollar in favour of a shared reserve currency.

Original Reuters story here .

For years (arguably, decades), the US has dominated the world economic scene because they’ve been very effective in having everything trade in US dollars, including commodities, treasuries and other securities.

The commodity shock that the world felt in 2007 / early 2008 was due to the plunging value of the US dollar.  This will happen again and put a lot of people around the world in poor houses, force them out of business and increase their cost of living all so that more McMansions and SUVs can be sold and driven in the US.

This is what I call ‘interflation’.  It’s the internationalization of price increases to suit a specific audience, in this case, the Americans.

However, the small sign from the UN is a show of something bigger and more promising:  the US economy is about to face a massive readjustment.  We know that the reality is that the US will continue to print money.  Obama doesn’t have a choice.  The challenge now is that if settlements and other transactions are done using a basket of currencies instead of just the US dollar, there’s no one to demand US dollars, resulting in a massive devaluation of the US dollar.

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