|| -----Original Message-----
|| From: dlawbailey
||
||
|| The whole key to that article is the question of who is
|| financing the
|| account deficit. If one looks at Mexico and Canada, one sees
|| three strong
|| second/third-tier economies which, although stable, cannot seem
|| to harden
|| their currencies versus the dollar The value that these
|| countries create,
|| particularly Mexico, has to be going somewhere and one has to
|| believe that
|| it is going into the dollar-denominated credit system, thus
|| strengthening
|| the dollar.
Or Argentina, I believe. The wads of dollars (much of which came from the IMF) in the convoys of armored cars heading for the airport just before the crash are now probably safely invested in T-bonds. This is actually a secret clause of the Monroe doctrine: All your profit are belong to us.
|| Then you have the trade in contraband - that's got to be traded
|| mostly in dollars, particularly now that d-marks have to be cashed in.
|| You've got to suspect that the worldwide demand for U.S. cash
|| strengthens
|| the dollar. I don't think those trends are likely to change.
Sounds right to me. Do you think drugs and other contraband account for the "black hole", viz:
"But the world as a whole ran a notional current account surplus with itself of Dollars 182bn. About this blackhole little can be said, except that it must largely consist of unrecorded exports and so capital flight from developing countries."
A minor note, however: D-marks are still in circulation here and and in bordering countries bec of the relatively large cash-based gray economy.
|| Unless the euro really explodes as an international
|| currency (and does so
|| to the detriment of the dollar, which is another matter), the global
|| currency will remain the dollar (possibly increasingly so) and
|| in that case
|| we can't imagine that the dollar's current account is defined by the US
|| borders, can we?.
No, and that's the beauty of the US seignorage scam. Yet, doesn't it all rest ultimately on confidence, since it's obviously not the low interest rates that are drawing the world's capital to the US? If the media follow FT's lead and start pointing finger's at the emperor's bare ass, what's to stop the global casinogoers from playing at the Euro or the Yen table?
Hakki