Saturday, March 14, 2009

Currency's new world order

And you thought the rupiah had problems?

It almost went unnoticed, but this week we saw the first hints of a major global shift in finance and geopolitics. The Chinese are wringing their hands about their massive (read: trillion-dollar) investment in US Treasury bonds, say their leaders. Huge government spending in response to the financial meltdown, leading to the full-speed printing of money, leading to the eventual devaluation of American currency, is what's causing the nervousness. Seems rational to me.

Presumably this Chinese trial balloon will lead to a shift in how they invest their money, i.e. not US Treasuries as the default investment of choice. That, in turn, will put major pressure on American currency in years to come, and a significantly ramped-up inflation level. Not Zimbabwe, hopefully, but something to which Americans haven't been accustomed since the early 1980s when inflation reached double-digits.

Perhaps the only thing saving the US dollar right now is that a major alternative, the Euro, is also a major basket case, as they figure out how to prop up horrendous Eastern European economies. Long-term, though, remember this week as an early sign of the end of America's currency hegemony.


Today's Top Stories

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Obama says, Apa kabar?
Talks to SBY on the phone

iPhone 3G on the way to Indonesia
Get ready for the addiction

SBY figuring out new coalitions
What to do after Golkar defection?

8 comments:

Sabardansyukur said...

woww,,,,very enlightening, but i still feel that USD is TOO IMPORTANT TOO FALL.

Christopher Taylor said...

Perhaps so, but just in case, have some gold handy! :)

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