National currencies are as strong as the country that issues them. The US military and territory and populations under its control back the value of the dollar.

The problem is that having a national currency as the world reserve currency gives tremendous power and potential for abuse to the issuer. The US broke with the gold standard in order to finance the Viet Nam war- this was could also be described as tapping into the line of credit represented by the overall use of the dollar. As long as dollars are being used in trade, demand remains high for them, securing their value.


The most traded commodity in the world right now is oil, and if you want to buy it, you probably need dollars because none of the persian gulf states will accept other currencies. Anyway, this is probably really old news for most forum members, but its just background for the consideration that at this point the dollar is very much overextended, and that there is a historical precedent for the currency of every major empire to be debased to the point where it was eventually worthless.

        The liquidity issued by the fed by their bond buying program (QE) is sitting in reserves right now to cover the adjusted capital requirements in post housing bubble financial regulation, but some of these adjustments have been revoked thanks to a very well financed financial lobby. Those dollars, which if released into the market in their entirety would probably be enough to trigger hyperinflation, are, very wisely on the part of the banks, slowly filtering into the economy. This stealth approach reminds me of the same technique of a whale who slowly sells off a security before dumping a larger amount to crash prices and buy back at the bottom of the market.

      The massive reserves being held by the major banks really give them the power to manipulate the global currency market for profit. It can also be used as a political power mechanism in the US\Russian rivalry. This is all well and good as long as their greed doesn't get out of hand. What I mean to say, is the huge cash reserves of the banks allow them to drive economic growth, profits, and thereby tax revenues, but it also gives them the power to unwittingly cause hyperinflation. So far they have shown a lot of restraint, but I highly doubt that this can be maintained indefinitely.

     Makes me wonder if the recent move to weaken Iran\Russia\Venezuela\Syria by the US in collaboration with Saudi Arabia in dropping the oil price has anything to do with the strengthening dollar? Also, what does the deflationary pressure in the EU have to do with any of this?

      With any event its important to ask "Who benefits?" I see China as the big winner in this series of events, as a big holder of dollar denominated debts, dollar reserves, and the US's biggest trade partner, also one of the countries most dependent on oil imports who has been shoring up massive reserves with the present low prices...

     Also important to note is the yet unrealized theft represented by QE, which is being covered right now by simultaneous tapering of dollar QE and increasing QE in the Yen and Euro. In other words, the major banks with the help of the Fed are quietly siphoning value out of the dollar holdings of everyone in the world to their benefit, and the Central banks of the EU and Japan are helping them to cover it up. Honestly, I know all the Central bank leaders meet once a month at the BIS in Switzerland to coordinate global economic policy, but Occum's Razor would really point to them all having a single boss. Now we just have to figure out what he\they want, and position ourselves to profit... this does not necessarily mean doing what they want us to, in fact, it may mean figuring out what they want us to do, and doing the opposite.

     As for the dollar- is it a safe investment? Sorry, the US trade deficit is not going anywhere fast, the Yuan is getting set to float- its an existential gamble for China, but US dependence on China is such that they could afford to make the US buy Yuan in order to trade with them... I think this would be a massive coup, because the skyrocketing demand for yuan could allow them to expand their power in trade deals by massively expanding the money supply to keep prices down for the sake of exports, while simultaneously securing trade deals all over the planet with the newly highly sought after currency. Right now they can get poised by shoring up massive reserves of oil in exchange for their soon-to-be-much-less-valuable dollars, and in order to cope with shortages that might come about due to disturbances originating from the Saudi-US complex, when they finally decide to make their move.

     This is, of course, all speculation, hence the name of the board...