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Bernanke: The Dollar System Is Flawed


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Stranded Shipscook

Look to where the power is and that is the safe place. The US is still the largest economy, by far, as well as the only military superpower. Things may be slowly changing, but will remain this way for some time. If the US dollar collapses, so will the rest of the world economy. The US is still the haven of choice in troubled times, and the US dollar the currency of choice. It may not be this way forever, but it is right now.

 

mmh, this isn't entirely correct ..

 

The USA is ranked after the European Union in GDP, followed by China which is catching up with enormous speed. predictions are, that China surpasses everybody in the next few years.

 

as well as the Euro has surpassed the US $ in circulation

 

but i agree with the rest of it, if the US economy/dollar collapses, the world economy would collapse too. The same would apply if any of the big economy collapses.

 

This is why the nations bail out each other in times. And that is a good system.

That statement is deceiving also. The European Union is made up of individual countries who still maintain some control over their local economies, therefore you can't compare it to the USA. Individual failures like Greece, Ireland etc. threaten the integrity of the whole Euro system. Problems within the individual US states, such as the budget deficits in California, have little overall impact compared to what is happening in Europe. You are comparing a union of individual countries, each with their own interests at heart although with a common currency, to the USA and China which have more control. I don't think the Euro will succeed in becoming a dominant currency because those countries will always be in competition with each other.

 

Quite right!

 

Two additional points. Currency in circulation is a meaningless figure. Why? Because as a general rule notes and coins are a small percentage of the money that actually goes round and drives the economy. M1 , M2 and M3 from my economics course at university float vaguely around my head. Also: as a general rule (or compared to others), Germans don't write cheques and don't use credit cards (I never wrote when I lived there) so they have lots of cash in circulation. In fact I suspect that german citizens and Russian mafia are probably the only people that use 500

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