The demise of the dollar - This article requires a little bit of a discussion.  From the article.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. (1)

How we got here:

If this report is true, to say this isn’t good for the dollar is an understatement.  If you haven’t read anything about dollar hegemony I would suggest that you do.  Also, if you haven’t read anything about the petro dollar and petro dollar warefare I would suggest that you do.  In a nutshell since our dollar is fiat money, meaning nothing is backing it’s actual value but the promise of the government, the only thing keeping the dollar’s value is the fact that oil is only sold in dollars.

What does all this mean?

I think that common sense would tell someone that since the Saudis are in control of the oil they would want a strong dollar and a dollar that retains its value.  However, with the spending spree that the US is on with an estimated nine trillion dollar deficit in the next ten years (2) the world is losing confidence in the dollar as seen by the following.

• UN is calling for new reserve currency saying, “The United Nations called on Tuesday for a new global reserve currency to end dollar supremacy which has allowed the United States the “privilege” of building a huge trade deficit.” (3)
• Dollar under scrutiny at G20 summit saying, “The embattled US dollar is expected to come under scrutiny at a summit of developing and industrialized nations following China-led calls to review its role as a reserve currency.” (4)
• China Urges New Money Reserve to Replace Dollar saying, “In a paper released Monday, Zhou Xiaochuan, governor of the People’s Bank of China, said a new currency reserve system controlled by the International Monetary Fund could prove more stable and economically viable.” (5)
• China backs talks on dollar as reserve -Russian source saying, “Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions.” (6)
• Gold hits record at $1,045, gains on report of dollar’s demise - ”Gold futures hit a new high on Tuesday, lifted by weakness in the dollar after Australia hiked interest rates and after a report that Gulf-area oil producers, along with China, Russia, Japan and France, are planning to eventually end dollar-based oil pricing.” (7)

What does this all mean?  From the looks of it a new reserve currency that is controlled by the IMF, which would mean to me that we would outsource our monetary policy to the IMF.  The IMF would issue the currency and be controlled by a very small group of people.  This small group of people would hold a massive amount of power over the world economy.  I see it as the Federal Reserve on steroids on a world stage.

Any thing positive?

There is some good news.  We have time to change things if the world decides to create a new world currency without the consent of the US.

Finance Minister Alexei Kudrin told reporters on the sidelines of the G20 finance ministers meeting that it would take up to 30 years to create a new super-currency, suggesting there was no unity in Russia on the issue. (6)

…

While few analysts believe that the dollar will be replaced as the world’s dominant foreign exchange reserve anytime soon. (5)

…

But he [Richard Cooper] said there were no feasible alternatives to the US dollar as a widely used international currency, discounting even IMF’s synthetic SDR currency, comprising a basket of the dollar, euro, yen and the pound.”The dollar will remain the dominant world currency, thanks to the stability of our political system and the rule of law that isn’t a feature of many other economies,” said Irwin Stelzer, director of economic-policy studies at the Washington-based Hudson Institute.

Some groups, he said, were buying euros and other currencies from time to time, “but not in amounts that threaten the dollar’s primacy.”

“Even the Chinese are stuck with nearly a trillion dollars worth of US bonds and are not likely to drive down the value of that hoard by selling large amounts of dollar-denominated assets”, Stelzer said. (4)

For now the dollar is fairly safe.  However, with the recent moves by the international community and the continues policy by the US government of intervention, spending, and isolation of other countries, I’m one to think that the US is only digging itself into a deeper hole.  A drastic course correction is in call for the US.  The question is; is the US going to do it on its own or is it going to be forced to change due to the actions of the international community that it can not control.

I should probably reserve my thoughts on Iran, Iraq, Afghanistan, and our isolation of ourselves to the rest of the world.  I should probably reserve my thoughts on Healthcare reform, Cap and Trade, and the Labor Union bills going through congress now.  However, I’m sure you can probably guess what my thoughts are so I’ll leave it at that.

UPDATE: Mike “Mish” Shedlock has a couple good blog posts with a different outlook for the dollar.  I would suggest taking a look at them.

• Ridiculous Hype Over Secret Oil Meetings
• Why Would Anyone Want To Hold Dollars?

External Sites:

• dollar hegemony
• petro dollar
• petro dollar warefare
• fiat money

Sources:

1. The demise of the dollar
2. Obama to raise 10-year deficit to $9 trillion
3. UN calls for new reserve currency
4. Dollar under scrutiny at G20 summit
   
5. China Urges New Money Reserve to Replace Dollar
6. China backs talks on dollar as reserve -Russian source
7. Gold hits record at $1,045, gains on report of dollar’s demise

I was introduced to TED talks a few years ago.  Every now and again I remember to go and check them out as they are truly awesome talks that are very interesting and sometimes very inspiring. 

I came across the talk below yesterday and had never heard of Juan Enriquez.  I started to watch this video and was enthralled in just a few seconds of watching.  One thing I have read and heard about restring an economy after a bust is there needs to be a wave of innovation.  Juan thinks that wave is in the biotech industry.  I don’t disagree with him in the slightest, especially after seeing his case for it.  What I am worried about is after the bust of the biotech industry what is going to be the next wave of innovation to get us out of an economic disaster?

I think one of the major things that Juan misses here is discussing the root cause of economic cycles.  If he would only take a look at the Federal Reserve and talk about money creation and monetary policy it would go a long way in his presentation.  The fact that he completely omits it is disappointing.  He doesn’t leave his audience any smarter than when they came in, just more informed about the next bing innovation wave and opportunity for the Fed to create an environment to have malinvestments in ideas that shouldn’t be invested in due to cheap money.

At any rate, Fed monetary policy and the effects it has on investment and innovation is a whole other topic.  If you’d like a starting point I would suggest reading about the late 90’s dot com boom and bust.

Enjoy the video!

Food Stuff:

While browsing I came across this tidbit.  I guess I could be called a “foodie.”  Although, probably not as much as a foodie as others, but this next article would be a nice thing to see.  I don’t know how it would really pay for itself, considering how inexpensive stickers and label makers are.  Would still love to see it so I don’t have to pick off stickers or create stickers while at the super market.

Laser Labeling Coming Soon to Fruits, Vegetables

New laser labels. Photo: ARS/USDA.

Political Stuff:

This past weekend was the huge rally in Washington D.C. by the “Tea Party Express.”  The World Net Daily has a decent article about it.  The main thing I was looking for was a rough estimate of how many people where there.  It looks like there really is no “rough” estimate, thanks to our wonderful media outlets.

Though crowd estimates vary from as low as 60,000 to 70,000 according to ABC News to a high of 2 million by London Daily Mail, photographs and videos of the march and rally demonstrate its enormity. (WND)

It’s a good thing that Obama was fully aware of the rally taking place or was he?

The White House said Friday it was unaware of the rally. President Obama has traveled to Minneapolis, Minn., to promote his health-care plans at a rally there. (WND)

At any rate, below is a picture of the attendance.  You decide if you think it was a success or not.  Looks to me it was pretty successful and rivals some of the largest protests in our nation’s history.

Awesome Stuff:

This one needs no explanation.  It’s just awesome!

The Hurt Feelings Report – a.k.a. The Cry Me a River Whine Report

External Links:

• Juan Enriquez shares mindboggling science
• Laser Labeling Coming Soon to Fruits, Vegetables
• A million or more rock Washington
• The Hurt Feelings Report – a.k.a. The Cry Me a River Whine Report