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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (74500)	2/1/2007 6:06:22 AM
From: Real Man	Read Replies (1) \| Respond to of 94695

The concept of "reserve currency", in which one country is allowed to print currency in exchange for goods and services, seems faulty to me. I agree on Euro - it was introduced with exactly that goal, to compete with USD for the status of reserve currency. It now accounts for 1/2 or more of all credit derivative trades, so it probably can't gain much more on the dollar. On the other hand, I do believe inflation stats in the US (at least) is severely underreported. So far, Euro has been a bit better, but the abuse associated with its now established reserve status could be on its way. I don't know how the current account deficits in the US could be persistent over time, without causing USD to fall. Will the Asian countries keep accumulating USD and Euro in reserves to infinity? It seems the "reserves" may now be flowing to the oil producing countries, which may choose to spend them elsewhere, or to allow their currencies to appreciate - less inflation for them. Without "reserve currency" status, 7% US current account deficit is clearly unsustainable, and should lead to a severe depreciation of the currency (against the currencies that run a surplus). Pound is not any better either. Overall, I don't think we have a precedent in history when the US current account deficit has been so large for such a long time. During this decade, it simply zoomed upward, and stayed there. If this continues, I think, oil may go up further, reversing the current account surplus for Asian countries. Will they allow their currencies to appreciate then?