With dollar losing its sheen against currencies like euro, countries can, & have started to make adjustments in their holdings, which mean that the position that the US dollar has occupied – as the reserve currency of the world – is in threat.
“Central banks, particularly in Asia, are gradually shifting to currencies like euro to diversify their reserves, as they know that if they do that quickly, it could send the dollar sharply lower, which would devalue their dollar reserve holdings,” said currency analyst Karsten Fritsch of the Commerzbank in Frankfurt. In fact, Gulf Cooperation Council (GCC) countries, along with some East Asian nations, have already started the rejig & have also started trading oil in euros (from petro-dollars to petro-euros).
A devastating crash of the US economy is in reality closer than one can imagine. Just visualise this. In one line, what caused the South-east Asian crash? Simple, Due to free flow of capital, when the Asian stock markets started going down, foreign investors fl ed these markets, thus taking down the economy in a virulent downward deadly spiral. Now answer this in one line – what do you think can cause a US economic crash? You got it right. All it takes is a tipping point for foreign investors to even dump their remaining dollar holdings to exit the US. That’s it. A US economic crash is closer than you think. Let’s leave you with a conclusive finality – US Treasury Secretary Henry Paulson hasn’t visited China 70 times in the last 7 years just because he loves the hospitality of the Chinese. There is obviously much more to it...
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Source:- IIPM Editorial, 2006
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