GoFuckYourself.com - Adult Webmaster Forum - Why the dollar isn't coming back

"Between 1969 and 1999 total international reserves, primarily consisting of deposits, currency, bonds, equities, and scarcely any gold, grew 20-fold,[ii] standing at roundabout $1.6 trillion. From January 2002 to July 2004 alone aggressive money creation by the Fed, coupled with insidious fractional reserve and central banking the world over, added a whopping $1.307 trillion to global currency reserves."

"American indebtedness has burgeoned at a commensurately astounding clip. Total borrowing per annum (government and private sector) has grown from $89bn in 1969 to $1.673 trillion in 2003 and cumulative outstanding debt stands at $22.394 trillion compared to $1.332 trillion in 1969.[iii] As one would guess, the U.S. household savings rate declined from 10% in the 1980s to less than 1% today."

"Put simply, the U.S. requires about $2bn per day from foreigners to appease its insatiable borrowing addiction."

"Little wonder Asian governments have opted to use heavy purchases of dollar reserves to peg their currencies to the greenback at undervalued rates. Mean currency values keep Asia's exports competitive, supporting the rapid growth that underpins its economic success."

"At the same time, acquisitions of U.S. Treasury bonds reduce American interest rates, which sustain spending and ensure that American consumers keep buying Asian wares. Without currency intervention by Asian central banks, America would not be able to finance its deficit without higher bond yields or a bigger fall in the dollar than what has already occurred thus far."

"The downside of this policy is that as Asian central banks purchase dollars and dollar-denominated debt instruments in exchange for won, renminbi, yen, etc., it expands each country's domestic money supply, precipitating their own boom and bust sequences. Richard Duncan's book, The Dollar Crisis, best illustrates how asset price bubbles have burned Asian countries with sizable dollar inflows during the 1980s and 1990s and helps explain the boom in credit creation currently gripping China."

"Presently, Asia holds 65% of the world's foreign currency reserves, or about $2.183 trillion.[v]Japan and China hold $820bn and $514.5bn of foreign reserves?mostly dollars?respectively. Asian countries have a delicate choice to make. Does each nation continue to finance America's spendthrift ways, courting boom and bust cycles of their own, or do they part with the dollar standard and permit their currencies to rise, thereby kicking the last leg out from under the dollar?"

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