just like '99, page-8

Gday timber1956

I am playing catchup in getting my head around all this stuff.

From my reading of things SDR's have been dead in the water a long time ago. They seem to have only been some sort of mechanism to placate the critics of Nixon's original decision.

Who knows whether this information represents serious discussion or is just bureaucratic fluff. But, I put it up because it does indicate that something is being agitated about regards the $US reserve status.

Interesting few months, I think. The US is pushing ahead with the taper [which I think they have to do .... the money printing has gone so far as to make a lot of people nervous]. As has been discussed on these threads, the Fed can finagle the numbers any which way, but as far as I can see the taper has to actually be substantive .... the $US dollar is being seriously questioned now.

The big thing for the US is can they hold interest rates down and hold the $US up? In the absence of higher interest rates the only fallback they have is to retain the US dollar as the reserve currency.

The falling currencies of the developing World is a mixed blessing for the US. On the one hand it leads to more buying of $US for 'safety' reasons and on the other it creates a demand for 'safety' for the holders of those falling currencies which, to my mind, should create an even stronger demand for 'physical' gold [among other things].

From a gold price perspective I think the effort to maintain the gold price at its current level will be maintained [yes I do firmly believe the price is being manipulated] ... however drivers of the true demand are increasing [currencies under pressure] so I can not see the manipulation winning.

All in all, it is the value of the $US which will determine things. If the $US begins to fall in a sustained way then the great QE experiment will have failed for the US [with Europe not far behind?]. Only a strong $US and it keeping its reserve status gives the US an out on its accumulated debts.

Personally, I think the outcome was 'baked in' going back to the original action by Nixon. It was a 'tricky' move by his administration to cheat the rest of the World on an outstanding debt. It started [by today's standards] rather modestly and it has snowballed ever since. Going over the history of the US foreign policy from that time till now it is possible to construct a narrative which has the Nixon decision as its starting point. The war in Veitnam, the ensuing corruption which gradually engulfed the US financial system, the creation of the 'Petrodollar' and the political decisions which became inevitable etc. etc. All of that is underpinning the US current predicament and is tangled in with any sentiment competing interests in the World might have.

The extent of the corruption and deceit is mind-blowing. The distortions to World affairs, over the last 40 years, is staggering.

One small example ... Bin Laden was opposed to the US military being stationed in Saudi Arabia. [The US has a military base there which is its largest such facility including within the US itself. The thing is a small city in its own right.] Bin Laden was a religious nutter and the story is complicated, but the US would never have installed that base in the first place but for the need to protect the Saudi 'Royal' family and guarantee the existence of the Petrodollar, which in turn might never have come into existence if the US had stayed on the 'Gold standard'. If those events had never occurred then perhaps the whole Bin Laden thing and Al Qaeda would not have happened.

I think the seeds for the unraveling of the US dollar domination of the World's finances are planted very deep. The recent bout of money printing has pushed the valuation of the $US into new territory. The backdrop that China is now an economic power has created a plausible alternative vision.

Interesting times......