Quote from: btc_n_economics on January 06, 2015, 02:06:05 PM

Quote from: Foxpup on January 06, 2015, 03:07:21 AM

Quote from: btc_n_economics on January 05, 2015, 02:41:26 PM

As long as the rest of the world believes that our government can tax citizens and pay interest on its debt, the international community will have a demand for dollars. Demand for dollars is not only buying and selling of goods - most of the time it is transfer of US Treasurys, which act as cash equivalents. So if people think they will get paid back on their UST, they will have no problem dealing with the US and holding our debt. And this payments, we agree, will always be made.

And here is the problem. There are growing indications that the rest of the world does not think that, and other powerful countires (notably China) are trying to move away from the US dollar as a reserve currency. This is not unexpected - no currency has remained a reserve currency for much more than a century - and it's certainly not going to come without warning, but it's definitely going undermine the value of the US dollar and radically impact the US economy. Will there be a recession? Very probably. Will the US recover? Again, probably. Will there be an apocolypse? Highly doubtful.

It's actually not a problem at all. Those countries have their own agendas and reasons for doing deals which are political in nature. China and Russia doing deals on the side means nothing when the rest of the world is not following suit. If you want to see if people believe in the ability of the US to tax, look at the USD at ten year highs, look at US Treasury yields approaching multi-decade lows.. your assertion that people are losing faith is based on no facts, you are ignoring all the evidence to the contrary. Let's just say you are right and the US loses it's status.. who is it going to go to? China with their fabricated economy that no one has faith in? Or Europe which is teetering on collapse? There is no one else. Full stop. Period. Besides even if it does happen, that is not a kiss of death. Great Britain was just fine after they lost reserve status, their economy did not collapse and the world kept spinning. I'll tell you one thing, it sure as heck won't be Russia or Brazil or China accepting BTC for their goods and services.

Let's step back and ignore what the market is telling you and also put aside our theories for a second and think: why on Earth would the US all of a sudden not be able to tax its citizens and pay interest on its debt? That is the fundamental question. We have a powerful military to protect us, we have one of the best economies in the world and we have the best legal system in the world. There are no rational or logical reasons to think that the US is on the decline or the dollar is doomed or anything close to that. And looking at interest rates and FX strength you can see the world does agree with that statement.

Quouting the above, The US dollar loses its status as the reserve currency, the question is not who it goes to but what it goes to, look at what all the central banks hold as their reserve assets, the dollar and GOLD! There does not need to be one country with a reserve currency, there is already a backup in place and all the central banks of the world hold it already. Its not going to be game over for the US once it loses its reserve status, after the dust settles I expect they will bounce back as a manufacturing powerhouse and will remain a preeminant world power, it is an incredible and dynamic place.

Consider that China has been buying treasuries throughout this past decade, this is what has given support to the dollar all this time but they have now stopped and started acquiring gold. If the dots havent connected for you yet, well they bumped off Gaddafi after he threatened to sell oil for gold didnt they?

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