posted on Nov, 24 2010 @ 04:44 AM
Originally posted by eyesdown
Could someone take the time time to explain what this means. I feel stupid for not understanding this but am kean to know more. Am i right in thinking
that pricing for trade has always been in U.S dollars as apposed to pricing trade in their own currencies?
Yes you are correct. Since the demise of the British Pound as the defacto reserve currency after WWI the $US has acted as the benchmark for most
currencies to peg to as a measure of relative value.
But the inherent problem with this idea is that the weaker the economy that underpins this defacto reserve currency relative to the strengthening of a
lot of other currencies means that it becomes a less accurate means of determining relative value of non US currencies, so a better comparison is
When currencies were pegged to a certain amount of gold or silver, it was much easier to determine this value based on global supply and demand of the
commodity (and not the underlying currency), but when currencies were floated (i.e. the value became based on fiat values or pure faith) then the
actual value of a currency becomes vulnerable to market forces just the same as a commodity.
The $US is currently being revalued as a commodity the same way that any other commodity is valued - i.e how much is it really worth to the global
To put it in the terms of the financial community - the $US is being repriced based on the events of the last 10 years and its projected future value.
The Russians and the Chinese are simply accounting for the fact that the US dollar will eventually not be recognised as the defacto global reserve
currency due to the fact that they will be shortly surpassed as the biggest economic player in the global economy
edit on 24/11/1010 by Krusty
the Klown because: Further thoughts
edit on 24/11/1010 by Krusty the Klown because: (no reason given)