Monday, February 14, 2011

The Dollar's Bubble

If the word "worthless" was uttered into a babies ear, maybe not a thought would be had, but when the word is uttered from experience, a dreadful notion takes hold.  Absolutely worthless?  How could anything be so?  Surely as in nature all items have worth in context.  Yet this remains untrue for one thing:  The Dollar.

The dollar as monie is supposed to hold four things true.  It is a store of wealth.  It is a medium of exchange.  It is a unit of account.  It is fungible.  The dollar passes the fungibility test, as we can rip it into small bits, but once the cornerstone of the argument is laid bare, that it is indeed NOT a store of value due to its fiat nature, the other requirements wash away.  If it is not a store of wealth, what account can it hold?  None.  If it is not a store of wealth, how can it be a medium of exchange?  It is not.  And so the dollar washes to the sea.

All fiat is such, but it so happens the dollar supports all fiat.  The dollar is the reserve currencie, and all debts can be paid in dollars.  The dollar holds the cup of life, as if one has dollars, any trade can be made.  The Euro is underscored by dollars, as many European banks have their debt denominated in the greenback.  The IMF facilitates loans, and those loans are denominated in dollars.  The dollar reigns over all fiat.

So if the dollar fails, all fiat fails.  This catastrophe will stop finance in its tracks for those not prepared.  As gold and its sister precious metals DO define monie, they are the alternative.  Everything else may very well wash away.

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