U.S. Dollar Losing Value… So What?

June 4, 2009 | By aaron In Robert Kiyosaki,US Economy,US Financial | Comments(0)

So what has U.S. dollar depegging from gold got to do with the rest of the world?

Or perhaps, one would be asking, “What has that got to do with me?” The ignorant one would say, “Don’t know. Don’t care.”

Here are few questions to think about:

Is U.S. dollar the reserve currency of the world?
Which country has the biggest economy?
Which currency is used the most in global trades?
Which currency is Singapore Dollar, Malaysian Ringgit, Thai Bahts and other currencies peg to?

Well, if you have figured that out, lets move on. After 1971, U.S. dollar is a derivative of debt issued by the U.S. Treasury.

Foreign countries buy U.S. debt as an investment of their surplus U.S. dollars. Nowadays, China is the first holder of U.S. bonds. China owns so many U.S. bonds, there is fear that if they stop buying them, the U.S. economy would collapse. The bonds issue further links the U.S. and China economies so tightly that both fear the consequences of a potential slow down in China’s purchase of those bonds.

If the U.S. dollar continue to lose its purchasing power, what would happen to global trades?
If the U.S. dollar continue to lose its shine, what impact would that have on the Singapore Dollar, the Ringgit, the Pesos and etc?
Do you think the price of gold will go up or down?
How about the price of commodities? Up or down?
How about inflation? High or low?

Well, ponder over these questions. See you in the next session.