Thursday, May 01, 2008

The Day the Dollar Died



IN and of itself, paper has little to no intrinsic value. Currency on the other hand, is worth quite a lot. The reason for this discrepancy is because as a society, we have come to a collective agreement on what that piece of paper is worth. Without that collective agreement, a hundred dollar bill is just paper. It cannot be eaten, planted, or worn. The only useful thing that can be done with it is to light a fire.

For decades, the US dollar has been the global currency of choice. The world uses the US dollar to track prices of commodities like metals, food, and most importantly, oil. In Thirld World countries the dollar is the currency of refuge. People who have no faith in the currency that their own country prints will hoard US dollars, as they serve to protect against inflation.

The US government has fully exploited that by printing more and more money, to solve all its problems. Unfortunately, the world is catching on, and the global collective agreement appears to be weakening. Two major events have happened recently which I believe collectively will serve to mark The Day The Dollar Died.

1. Iran, the world's second largest exporter of oil, has recently announced that it will no longer accept US dollars as payment for oil sales, and will only accept Euros. Venezuela has made a similar announcement. As of right now, oil is the most important commodity on the planet. The disassociation of the US dollar with this precious commodity is of huge psychological importance to the global colelctive agreement on the value of green pieces of paper.

2. The European Union has begun to produce 200 and 500 Euro notes. The single most smuggled substance on the planet is currency. It is only logical that these transactions, which used to take place in US dollars, will now begin to happen in Euros, as it is a lot easier to hide a one inch stack of 500E notes than a six inch stack of hundred dollar bills. The long term effect of this will be to further reduce the collective agreement on the value of green pieces of paper.

If you have US dollars, get rid of them. Use them while you still can to buy commodities, or change them into another currency.

I am.

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