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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (15882)	12/31/2008 1:28:53 PM
From: axial	2 Recommendations Read Replies (1) \| Respond to of 71402

Well said. It's a precarious balancing act. The US has been sold as a safe haven for petrodollars after the first oil embargo, starting '74-'75 - and has been, ever since. Foreign inflows accelerated over the last decade, bolstering USD even as producer nations like China and Japan accumulated huge USD reserves. The US and USD became the world's piggy bank. Any attempt to cash in will start a run, and everybody loses. *"Nobody moves, nobody gets hurt."* If nobody moves, then everybody loses trillions; the alternative is quadrillions. For instance if USD falls, what currency will be used to unwind hundreds of trillions in derivatives? --- Re: "They bail out each other via some sort of accommodation, otherwise they both go down. The problem is the mechanism for such an accommodation.I am not sure one exists." Me neither. By comparison, players in the global economy are like people in an overcrowded lifeboat, or doing a high-wire act - they're stuck, frozen in an unstable position. They don't dare make a move. To me, this explains G20 complaints, and comments about "never again" pegging the world's economic health to one currency, and the economic health of one player, no matter how formidable. The only solution seems to be time - over which global players will be forced (by self-interest) to slowly deflate, and in the process, let the US down gently. Until the process has reached some unknown point, the whole world is stuck in recession, frozen in slo-mo. The thinking seems to be: that's better than complete collapse, and global depression. Maybe, but it's a pretty dangerous game. In effect, global players are hostage to the fate of their piggy bank. If slow deflation works, it works to mitigate damage to everyone, but most of all, to the US. If it doesn't work, if somebody makes a bad move - look out. JMO. Complex stuff. Jim