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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: skinowski who wrote (66656)	7/15/2007 12:47:17 PM
From: Metacomet	Read Replies (2) \| Respond to of 116555

Your answer is correct as far as it goes. All currencies would have a relative value to each other so in that sense, overall liquidity is maintained. The problem for the US is that once the dollar standard for international settlements in oil is replaced, the worldwide demand for dollar holdings will be drastically reduced. Countries won't need and certainly won't maintain the mountains of eroding dollars that they currently do. The problem for the US in this situation is that since we are now a debtor nation, like any debtor, inflation is advantageous to us over time. We benefit to the extent that the purchasing power of the dollar declines, and the increment of inflation associated with that gigantic pool of petrodollars is a significant fraction of our national wealth. A move away from dollars in international oil settlements will have profound consequences for the US dollar. The central banks of the world will dump them wholesale if they don't need them, for settlements.