The dollar, or more specifically the petrodollar, is the linchpin to the current economic and geopolitical order. The fact that oil business is done exclusively in US dollars and is traded in economically significant levels only in London and New York, is the key reason why this country has been able to "pay" for the sprawling leviathan that is the US government.
Simply put, we sell our dollars to the world (via Treasury Bonds) so that the world in turn can pay its oil bill with them. This is as true for Russia, as it is for China, as it is for the EU.
Its like the globe is a giant Chuck-E-Cheese and we have all the tokens. The Russians, the Chinese, and the rest of the world want new tokens. It is one of the chief reasons for the emergence of the euro a decade ago.
But we've based our entire economy on the premise that the world will always come to us for dollars. That is the only reason why things are still puttering along economically in this country, though feebly. If the reserve currency was somehow taken away from the US, the arcane economic rumblings in far off lands today will become very real very quickly for everyday Americans tomorrow.
The individual investor would be wise to watch the reserve currency debate like a hawk.
It may mean your retirement.
“Only three, five years ago it seemed like a fantasy” to create a new reserve currency, Medvedev said yesterday in a speech in St. Petersburg, Russia. “Now we are seriously discussing it.”
Medvedev, who has repeatedly called for a supranational currency to match the dollar, said discussions with China are continuing on broadening the global options. Russia sold U.S. Treasuries for a fifth consecutive month in April, the U.S. Treasury Department said June 15. The world may need as many as six reserve currencies, Medvedev said.
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