As a relative newcomer to this board I ask for feedback regarding your interest and the value such postings have in contributing to the objectives of this board. At a crossroads in my life my goal has become the mutual enlightment of myself and others ... I will aggressively pursue boards with such an interest and rather than make a nusiance of myself respectfully look forward to your replies.

with thanks, orgy

In response to the assertion made by an excellent poster on the Peter Grandich Blogsite in which they expressed concern over the impacts of a reserve currency being something other than the US$ on the citizens of the US and the potentiality of a basket of world currencies becoming the next reserve currency I postulated the follwing response in italics below.

I forgot to begin with the importance that we not lose sight of what money is ... a medium of exchange, hence reserves are nothing more than a recognized basis for an acceptable supply level of a fiat currency. It is my opinion that unconsumable hard assets make an ideal basis for a medium of exchange.

SGG - certainly a very realistic scenario … I think you very well could be understating how devastating the impact on American citizens if the USA loses the status of reserve currency will be especially in the immediate aftermath. This is very well understood by the leaders of the country be they Republicans or Democrats. Getting there will not be peaceful, it will require the Saudi’s to renege on the agreement to price oil in US$ and if necessary turn the taps wide open if other OPEC countries refuse to supply the USA. I don’t see that happening especially with the recently acquired strength of a 104 acre embassy in Iraq … the withdrawl of troops from Iraq will not mean the removal of US army bases. Combined with the Israel bases ensures the USA has sufficient continued influence over Saudi Arabia regardless of what the other Arab states do.

Nonetheless the US currency as the exclusive reserve currency will be unacceptable to other countries without it being stable and dependable. This is the crux of the problem today and in the case of all fiat currency failures. The best and most peaceful case scenario is the limitation of currency generation … in the current system it is debt based … GDP the ultimate method if it were consistent over the long term alone is subject to distortion. Asset backed paper or the physical use of a recognized and valued commodity (such as silver and gold) is the only way to ensure long term economic stability. If fiat currency had remained tied to being asset back (unlike real estate, gold is transportable, relatively small and can be shifted between countries) a single reserve currency is viable as countries who compete through the better utilization of the factors of production are compensated by the shifting of the recognized asset (not a federal reserve promise).

The result of this shift would mean the country who previously had the assets must shrink their money supply and hence their standard of living until they improve their countries ability to be competitive through better utilization of factors of production, increased work ethic, more private investment with lower returns etc.

The age of entitlement created by the fiasco of moving away from asset backed paper would be ended and with that the ability of the central bankers to make money simply by lending fiat currency.

Wall street would suffer, Detroit with its job guarantees that gave employees above average wages for North America by reporting to a building and sitting and playing cards doing crosswords (this is no exageration) while laid off would also suffer. These types of entitlements were a gross misallocation of scarce resources in a world where sick men, women, and children worked themselves to death in support of their family and community units.

North America starting with the leaders need to drastically scale back their expectations of their consumption levels, expectations for entitlements, lifestyle, selfishness and own grandiose perception of their overall value to humanity.
President Obama’s expression regarding how “neat” it is to be entitled to the use of airforce one is a very distressing signal of how far away from change leadership really intends to go.

I remain in sorrow,

orgy