Sunday, November 18, 2007

No more dollars at the Taj Mahal... India decides only rupees will do to visit the Mughal's jewel in the crown. In a word it's over for the dollar. The only question to be answered is will there be an orderly queue at the exit or a stampede. We are of course talking about Gresham's law "When there is a legal tender currency, bad money drives good money out of circulation." Or, more accurately, "Money overvalued by the State will drive money undervalued by the State out of circulation." Very simple really. So it's all over for the the dollar. China will quietly and slowly buy Euros and sell dollars. That's it really. Cookienomics for dummies. Soon we will see a spot market for oil priced in Euros in Rotterdam. Till that day comes keep your powder dry and hang onto your hats. There will be a bumpy ride ahead. Without a revaluation of China's Renminbi the country is facing fierce inflation. The only way out is to convert their foreign reserves into Euros and, as Japan did before, revalue their currency. So, bye, bye dollar, it was nice knowing you.

1 comment:

Anonymous said...

I remember getting very upset when they autohrised the use of the dollar in Cuba. They have a crazy situation out there where a skilled worker like a teacher or medical worker can earn more money through driving a taxi, dealing drugs, selling condoms or becoming a prositute - all because these alternative proffessions offer them access to the dollar.