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The U.S. Dollar is on the Endangered Species List

October 9th, 2009 Comments off

The conspicuous decline in the American dollar these last few days, coinciding with the rise in gold prices to well above a thousand dollars per ounce, is apparently another nail being driven into the greenback’s monetary coffin. As I noted in an earlier post, the U.S. dollar is being used increasingly as the currency of choice in the carry trade. Just look at the current ratio of yen to dollar, a clear marker of fundamental weakness.

It is apparent to me and many others that the U.S. dollar is now living on borrowed time as the world’s predominant reserve currency. The Chinese, the Russians, the Gulf State Arab countries, the Europeans, even the United Nations, are all talking openly about the need for a new global reserve currency mechanism. When the dethronement of the American dollar as the world’s reserve currency occurs can only be guessed ; it could happen 5 years down the line, perhaps longer, but even more likely much sooner than anyone can imagine.

The rhetoric emanating from the mouth of U.S. Treasury Secretary Geithner on the Obama administration’s commitment to a strong dollar is beyond meaninglessness. Nobody takes anything Geithner says on behalf of a supposed strong dollar policy seriously. The die is cast. It is only a question of when and how the reign of the American greenback as the universal global currency is terminated.