DesideriScuri -> RE: Interesting Take on Obamacare (9/24/2013 9:36:48 AM)
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ORIGINAL: thompsonx So fucking what? That others might value their goods and services in a manner not denominated in dollars does not devalue the dollar...only our printing presses can do that. Why is that a reason to go to fucking war? Paper Money is only a medium of exchange. In the fiat system we (the world) operate in, having a reserve currency sets the basis of the system. http://www.quora.com/What-are-the-advantages-of-being-the-worlds-reserve-currency#quote:
#1 - No currency-conversion-based transaction costs on international commodity transactions. International Commodity markets prices are set in the currency of the reserve currency. As such, all transactions through the Commodity market are conducted in the reserve currency. Exchanging one's currency into the reserve currency incurrs a small transaction cost. This transaction cost is incurred by all, save for the nation which issues the reserve currency: since no currency exchange occurs prior to the transaction, no transaction costs are incurred. #2 - Marginally improved Sovereign Credit due to externally inflated currency demand. Since other nations hold the reserve currency, the market for the reserve currency is larger than if it were not the reserve currency. As such, Sovereign Bonds which pay out in the reserve currency are in higher demand (than they would be if the issuing country's sovereign currency was not the reserve currency), which drive down the interest rate paid on those bonds, resulting in a lower "Cost of Credit". Trading between countries not using the US$ means no #1 advantage. If you don't need to use US$ for exchanges, #2 disappears, too. You are correct that the value of the dollar, in terms of purchasing power, is controlled by the printing or destroying of dollars. Sadly, we've been hammering away at that since the 70's.
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