Dolefully, Dollar

US Dollar has value everywhere except in US. It has became the obligation of other countries to keep the dollar afloat, as they hold USD as their main reserve of foreign currencies.

Who holds most of that? It is China. They were making toxic toys to tanks and selling all around the world in exchange of this paper, in currency or in bond.

And what was US doing? Simply printing. Printing as much as they wanted to spend. US Fed was printing more and more and giving cheap money to its citizen. They were, in tern, swiping their plastic cards to purchase these toxic toys. Fed was encouraging its citizen to spend more, beyond their means, even beyond their future earnings.

Result: fiscal deficit, in trillions of dollors!!

Now US and China are feared equally, each others action. US worries what if China start selling their bonds in the market? Dollar will go to drain.

China fears what will happen if US economy will not recover. What if fiscal deficit increases further. If you keep printing more money, as theory says, more money follow few goods turns to hyper inflation results devaluing bonds they are holding.

Not only China, but India, Russia, Brazil, GCC countries are holding huge reserves in USD or holding their bonds, but not that much as China holds.

Now think who has to worry more?

China is leveraging their foreign kitty by buying more assets overseas, from Austrilia to Antartica.  Buying more gold, buying mines, oil, whatever they can buy.  That is they are spreading this paper currency all over the world.

Then comes the news.  Gulf states were in secret talks with Russia, China, Japan and France to replace the US dollar with a basket of currencies in trading oil. Main reason countries holding USD was due to this reason.  No more explanation needed why dollar start crashing.  Even though these countries denied this report, not only there was no recovery but it crashed further, questioning the confidence on USD. 

It is not new that Chinese are pursuing other countries to use some Yuan in exchange of goods/services, and many Chinese friendly countries expressed their readiness, and anti-American countries (like Iran, Venezuela) jumped with joy to accept Yuan.

But, in India's perspective, a stable dollar is more desirable than Yuan.

Is there an alternative for USD? Not till now as liquid as dollar.  Above all, US is a stable, democratic, free society. Physically more powerful country.  There is no alternative to that yet.

Hope US will take confidence of all the countries, to revive dollar, at least for short term.

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