One who intends to leave others better off for his having existed.

2/5/14

Great Economic Read; "What does it mean to be the world’s reserve currency?" and what may happen to some foriegn currencies

"...the country with the reserve currency [USA] gets to receive loans at discounted borrowing costs.

...commodities [like most energy, food and internationally manufactured goods] are priced in the reserve currency, meaning central banks around the world [other than the US Federal Reserve] must hold the currency in their reserves to facilitate trade.

...Trading nations need [US] dollars to lubricate trading and as foreign exchange reserves that bolster the value of their own currency and provide the asset base for the expansion of credit within their own nation”
.
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"...Many different currencies have held reserve status throughout history.

...just like everything else, reserve currency status doesn’t last forever.

At present, the US dollar is the world’s main reserve currency.

...The end of easy money and artificially low interest rates will not bode well for the emerging markets.

Other countries had to print and/or borrow more than the US has
to stay competitive and pay for social programs.

The “faulty five” – aka the “BI ITS” – Brazil, India, Indonesia, Turkey and South Africa are particularly vulnerable because they rely on external financing to operate [priced in US dollars].

...a reduction [of the supply of ever higher supplies of more printed money] means fewer US dollars leaving the country.

This has implications for other countries because they use USDs to buy US assets and for reserves.

...the world’s reserve currency will have to choose between:

1 ) running a trade deficit [for as long as possible] - risking of a loss of confidence in its currency and solvency while the rest of the world enjoys an adequate [to potentially too high of a] supply of USDs.

or

2) running a trade surplus and enjoying an appreciation in the value of the dollar while the rest of the world suffers from a lack of liquidity and collateral.

Or (3) inflict our inflated number of US dollars on hyper devalued foriegn currencies,
and by default, force our currency on the populations of said countries,
creating what could eventually be a period of relatively economic stability.

...the end of easy money isn’t going to be easy.

If...the fed continues to taper its asset purchases [money printing/QE/currency debasement], then it’s likely that emerging market currencies ...will face increasingly negative pressures...

If emerging market currencies continue to depreciate then the relative value of the cash flows of companies that operate within those countries [should] fall.

...an increase in the relative value of the USD [may] cause the price of imports, financial assets, and external debt to rise in local [Emerging Market] currency terms...

Until they could be forced to adopt the US dollar as thier means of commerce.

...the falling trade deficit in the US is likely to increase the relative value of the dollar.

...there is no easy way out of this giant moral hazard driven debt bubble that the world’s central banks, and in particular the fed, have created.

...The entire world is in way over its head in debt...

...What used to be known as the business cycle – i.e. a cycle wherein a period of expansion is followed by a recession which cleanses the system of malinvestment – doesn’t [appear to] exist anymore.

Currently, the entire economic system [seems] centrally planned.

Instead of letting nature run its course, the world’s “best and brightest” minds in economics – the central bankers – have decided to try and outsmart it.

...policies that were intended to “smooth out” the economic cycle [appear to] have only resulted in bigger booms and busts."

http://www.triggers.ca/

https://twitter.com/sobata416

http://www.zerohedge.com/news/2014-02-05/triffins-dilemma-2014-edition

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