USD or not?


Source: DBS

The value of the currency wars and an alternate currency

Can gold be an alternate currency? Or, are the central bankers afraid of hedging? Here are some few thoughts on the issue of alternate currencies.

  1. The resolution of the Central Banks between countries to adopt a monetary policy that can maintain the exchange rate within a fixed value or less than 2-3 % variation of the currency can support inflation and deflation for any country.
  2. In the face of the system, the leading world currencies can trade keeping a back-up of gold, hedging against any risk based on the currency fluctuations.
  3. The base of the world’s leading currency or namely, US Dollars can backfire given further QE or Quantitative Easing number 4, against the backdrop of mortgage backed securities, that can be an unsuccessful rider if the mortgages fail and draw back the dollar advantage.
  4. Arresting deflation with QE or nearly zero interest rates will actually prove beneficial to the currencies which are fluctuating against the US dollar.
  5. Kenysian Economics, which create a need for governmental intervention of the economy to maintain a level of employment, is sought against the back drop of free trade of the countries having an equivalent of good balance of trade among the countries, and having a similar exchange rate value in the currency world, which can be beneficial.
  6. The future of the EU, currently heading to the credit bubble in Greece and Spain, can perform better with Trans Atlantic deals to hedge any further risk as a bloc.
  7. Gold as an alternate currency can back as a currency will create depleted gold reserves, and reduce money supply, where severe inflation or deflation will create gold convertibles.
  8. A parity in terms of gold to establish a required balance, can address issues with 2-5% of their gold standards fluctuations can see a backdrop of a risk post hedging.
  9. “Gold Fix” or countries can convert dollars to gold, while holding dollars as their alternate currency can create a surplus reserve.
  10. If the fiscal deficit and government backed securities on the lines of the mortgage fail in the country with the leading world currency, it will create a big turmoil in the emerging markets.
  11. If possible, gold as an alternate currency can be linked to surplus and deficit exchange to hold the baton.
  12. Sudden collapse of the US Dollar, would make the world responsible for a great recession, if the world currency does back Yen or Yuan or Euro.
  13. Holding dollars as a currency, post its depletion, or a slight devaluation will create inflationary measures back to normal for a lot of African and Oil exporting countries, other than the OPEC.
  14. Pluralistic depletion of economic power led to an increase with the advantaged roles of the US dollars will actually create a better deal with other leading currencies.
  15. Corporate bonds or even the buy backs, will actually lease out the financial turmoil, if the mortgage backed securities fail post QE2.
  16. Buying pegged gold and distributing it against trade, will actually raise the value of the gold as a paper currency.
  17. Capital based valuation model, against the back drop of traditional PPP or purchasing power parity, should determine the actual exchange rates, rather than currency trading alone.
  18. RERERs or real effective financial exchange rates can involve capital and trade inflow for each economy.
  19. Exchange rates fluctuations can be pegged if enough US Dollar reserves are kept in the backyard, but hedging the local currency against the backdrop can actually involve a better capital involvement and trade inflow.
  20. US Dollars effectively needs to lessen its valuation and peg it to gold securities or corporate bonds it can raise in the US market, vis-a-vis mortgaged based bonds and their bail out from unwanted securities.

It is a good time that the world thought about an alternate currency!

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