You must solve the dollar problem with real and not virtual solutions
Sir we have a saying in Venezuela that goes something like “the baby’s crying and the mother is pinching him” and something like that came to my mind when reading Fred Bergsten’s “How to solve the problem of the dollar”. December 11.
If the dollar is really in problems and there are no other currencies willing or able to shoulder its weakness, offering to the trillions of dollars existing in the financial oceans the possibility of converting them into the Special Drawing Rights currency baskets and of which $34bn of value are currently swimming around in the bathtub of the International Monetary Fund, does not seem a solution that carries enough punch. This is something that Bergsten recognizes, but only after he has made his case for radical and insufficient solutions.
Also hearing that the funds would be recycled into the same securities currently offered and that the funds gold holdings of (only) $80bn could provide additional backing, just makes me want to cry more… and perhaps run for the gold myself.
The fact is that if you cannot diversify yourself out of a currency into other currencies then the fault might not lie with the initial weak currency but with all of them and, if so, then you diversify yourself into assets, and then you might realize that the US is not so weak after all, at least if they decide doing something about their weaknesses, like raising the taxes on their petrol/gas consumption to European levels.
You see sometimes the most important assets of a nation are not so apparent because they live in that hazy world of public policies that could be corrected. The US in their gasoline consumption and in their health sector has a world of this type of hidden assets just waiting to be taken to the market.
If the dollar is really in problems and there are no other currencies willing or able to shoulder its weakness, offering to the trillions of dollars existing in the financial oceans the possibility of converting them into the Special Drawing Rights currency baskets and of which $34bn of value are currently swimming around in the bathtub of the International Monetary Fund, does not seem a solution that carries enough punch. This is something that Bergsten recognizes, but only after he has made his case for radical and insufficient solutions.
Also hearing that the funds would be recycled into the same securities currently offered and that the funds gold holdings of (only) $80bn could provide additional backing, just makes me want to cry more… and perhaps run for the gold myself.
The fact is that if you cannot diversify yourself out of a currency into other currencies then the fault might not lie with the initial weak currency but with all of them and, if so, then you diversify yourself into assets, and then you might realize that the US is not so weak after all, at least if they decide doing something about their weaknesses, like raising the taxes on their petrol/gas consumption to European levels.
You see sometimes the most important assets of a nation are not so apparent because they live in that hazy world of public policies that could be corrected. The US in their gasoline consumption and in their health sector has a world of this type of hidden assets just waiting to be taken to the market.
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