A No to US Dollar
With the Global Financial Crisis and the recession both starting from the United States, we are looking at the possibility of the loss of confidence in the Financial System of America and the Dollar in particular. It is clearly seen in the case of the possible realization of trading transactions between China and Brazil. The two countries are looking into the possibility of using their own currencies instead of the US Dollar.
Brazil and China will try to use their own currencies, rather than the Dollar, in trade transactions.
What we are talking about now is Brazil paying for Chinese goods with Reals and China paying for Brazilian goods with Renminbi.
Governors of the countries’ central banks will probably meet soon to discuss the matter.
The Financial Times reported, citing aides to Brazilian President Luiz Inácio Lula da Silva and Central Bank Officials.
No Confidence in US Dollar
This shows the level of confidence of the two countries have in the US Dollar. China has more confidence in the Brazilian Real rather than the US Dollar. If this is realized it could spark a new trend in international trade. Other trading partners of China may ask for similar arrangements. Other trading nations may also start trading with their own currencies instead of the Dollar.
The Future of the US Dollar
A stern warning about the US Dollar was made to the rich oil producing countries by Tun Dr Mahathir Mohamad in his speech at the Institute For Policy And International Studies, Tehran, Iran on 30 November 2008 and posted here as Global Financial Crisis.
The U.S. Dollar is not backed by reserves as are other currencies. Apart from that the Unites States is bankrupt as it has a debt of 14 trillion dollars and it can never repay this debt. This huge borrowing by the United States is because for many years it has trade and current account deficits which forces it to borrow 1 ½ billion dollars a day to sustain itself.
The only reason why the U.S. Dollar has any value at all is because it is used in trade payments. If the gold dinar or other currencies are used for trading then there would be no demand for U.S. Dollars. It would then become worthless.
This type of warnings have been made on several occasions by world leaders but it got no where.
Fundamental Indexes and the US Dollar
The strength of any currency depends on several Fundamental Indexes. The Indexes with high impact are the GDP and Trade Balance. However, these Indexes of the US are easily manipulated. In the case of the GDP, it is explained in The False GDP of USA. Similarly, on the same analogy the Trade Balance of the US is equally false and not a true Fundamental Index.
