“Dollar Bears”
“What matters is to have an agreed-upon unit of account in terms of which trading partners could price every contractual agreement, preferably having the medium of exchange serve as the unit of account, too. This anchor is missing in the international monetary system today, and is one reason for the financial havoc surrounding us. The volatility around a downward trend of the U.S. dollar — which was closest to playing the unit of account/exchange double role for half a century — has diminished its efficiency for these uses. As a result, contracts are shorter. Companies pay substantial insurance fees (and derivative contracts are in the trillions) to stay in their line of business and not get into exchange-rate trouble. Resource-rich countries keep their resources in the ground longer, rather than selling them for papers with uncertain values. And some investors have been loosing substantial amounts by holding bonds of devaluing currencies. Now people are deciding not to invest in U.S. dollar-denominated assets.” Read more.
“Dollar Bears”
Reuven Brenner
Wall Street Journal, March 18, 2008.
Image by Jeff Ratcliff / FreeDigitalPhotos.net.
