Re: Re: Re: Re: US Dollar - Special offer - 2 for 1
Well economists seem to think so. For convenience here's an extract from a wikipedia article which seems to represent the consensus view - but who knows, it could all be a load of monkey poo.....
............"Negative balances are not necessarily terrible news, either. In particular, an effect known as reserve currency status makes it possible for dominant currencies to run significant trade deficits with limited economic impact. Because the United States dollar is generally regarded to be extremely stable, dollars which are exported are held by persons overseas and there is no pressure to return them to the United States. Furthermore, countries running large trade surpluses (e.g. China and Japan) use these funds to purchase US Treasury Notes, essentially allowing the United States to export monetary paper and get real goods and services in return. The pricing of oil in US dollars also forces nations and institutions to hold some of their reserves in US dollars in order to hedge against the rapid rises and falls in prices of this all-essential energy source.
Reserve currency status, however, is not without its risks. While the United Kingdom enjoyed economic benefits through the 19th Century up until 1914 from the strength of the British Pound and its reserve currency status, the relative weakening of the UK and strengthening of the US economies in the inter-war and post-war periods caused the shift in currency reserves, culminating in a 30% devaluation of the British Pound in 1949 which ended the dominance of the British Pound as a world currency. Weighed down by the debts of fighting World War II, and without the benefits of reserve currency status, the United Kingdom struggled to rebuild its economy, entering a period of economic slow down and decline that would last over three decades.
If, as some economists are speculating, current weakness in the dollar were to cause the shift of foreign exchange reserves or oil pricing into another currency such as the Euro, then the reserve currency advantage would also switch to the European Union..........."
Effectively reserve currency status gives you something - goods and services, for nothing - bits of paper, or even an electronic signal which merely represents bits of paper. If the US wants to give away such a "good" it would be churlish to refuse
.
Giz said:
Well economists seem to think so. For convenience here's an extract from a wikipedia article which seems to represent the consensus view - but who knows, it could all be a load of monkey poo.....
............"Negative balances are not necessarily terrible news, either. In particular, an effect known as reserve currency status makes it possible for dominant currencies to run significant trade deficits with limited economic impact. Because the United States dollar is generally regarded to be extremely stable, dollars which are exported are held by persons overseas and there is no pressure to return them to the United States. Furthermore, countries running large trade surpluses (e.g. China and Japan) use these funds to purchase US Treasury Notes, essentially allowing the United States to export monetary paper and get real goods and services in return. The pricing of oil in US dollars also forces nations and institutions to hold some of their reserves in US dollars in order to hedge against the rapid rises and falls in prices of this all-essential energy source.
Reserve currency status, however, is not without its risks. While the United Kingdom enjoyed economic benefits through the 19th Century up until 1914 from the strength of the British Pound and its reserve currency status, the relative weakening of the UK and strengthening of the US economies in the inter-war and post-war periods caused the shift in currency reserves, culminating in a 30% devaluation of the British Pound in 1949 which ended the dominance of the British Pound as a world currency. Weighed down by the debts of fighting World War II, and without the benefits of reserve currency status, the United Kingdom struggled to rebuild its economy, entering a period of economic slow down and decline that would last over three decades.
If, as some economists are speculating, current weakness in the dollar were to cause the shift of foreign exchange reserves or oil pricing into another currency such as the Euro, then the reserve currency advantage would also switch to the European Union..........."
Effectively reserve currency status gives you something - goods and services, for nothing - bits of paper, or even an electronic signal which merely represents bits of paper. If the US wants to give away such a "good" it would be churlish to refuse
.