http://www.ft.com/cms/s/
572b41a6-a414-11db-bec4-0000779e2340.html
Euro displaces dollar in bond markets
By David Oakley and Gillian Tett in London
Published: January 14 2007 22:08 | Last updated: January 14 2007 22:08
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The euro has displaced the US dollar as the world’s pre-eminent currency in international bond markets, having outstripped the dollar-denominated market for the second year in a row.
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Is this the beginning of the end of the US Dollar as the world’s reserve currency?
Try to envision what that means.
(1) Dollars stored overseas will come back to us as sort of IOUs. Foreigners will buy something with those dollars to take home. Anything of value. Remember the Japanese buying Rockafeller Center in NYC? The inflation that we exported overseas will come home to roost.
(2) Imports will get more expensive. Big Time! As we will have to pay for them in Euros, not Dollars.
(3) The general rise in prices caused by too many dollars chasing to few goods will hurt the poor, the elderly on fixed income.
(4) The non-productive parts of our economy (think government) will become more expensive as the prices go up. Government costs will rise faster. (Why? Only real people pay for things. Government and business are really fictions that just pass along costs to real people for payment. There’s “shipping and handling” on every transfer. Corporations, because of competition are motivated to minimize that. Governments are not. Thus if the cost to government goes up a dollar, I’d expect the cost to me goes up four dollars. While me quibble about the multiplier, it’s definitely there.)
Plan your finances accordingly.
Don’t hold dollars; buy things that will “surf” in inflation. Gold, Commodities, Equities, Treasury Inflation Protected Securities, things that appreciate in value.
Reinke Faces Life 