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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (169322)	8/18/2005 4:48:50 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 281500

I think we are close in our understanding of the facts, but we disagree on the conclusion from those facts. Here is a tib bit from Wikipedia: A reserve currency is a currency which is held in significant quantities by other governments and institutions as part of their foreign exchange reserves. It also tends to be the international pricing currency for products traded on a global market, such as oil, gold, etc. This permits the issuing country to purchase the commodities at a significantly cheaper rate than other nations, which must exchange their currency with each purchase. It also permits the government issuing the currency to borrow money at a better rate, as there will always be a larger market for that currency than others. The United States has posted a rising trade deficit since its last surplus during its recession in 1991. Its persistence has been attributed to the dollar's role as a reserve currency, continued growth in the US economy, and the continued high demand for American investment assets. The decline in manufacturing in the United States has also affected the trade deficit. Note that even before 1991 US did not maintain good balance of trade. While I agree with the points you brought up in support of the dollar, I believe that we have milked them for all they are worth and that even a small change in USD as a reserve status will be the begining of having to pay the piper. ST