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Motley Fool Global Gains / GGT: Let's Talk Currency


Subject:  Re: Poll: What are you doing? Date:  9/26/2011  7:40 PM
Author:  anuragupta Number:  188 of 189

This is an ongoing debate - at least in the US financial media. I have taken a different approach here. Since currency is only a mechanism of exchange of goods and services that is where the value lies. So it does not matter if dollar devalues by 100x as long as bulk of my wealth in essential goods and services. Since US is such an advanced system, I do not expect a steep devaluation relative to those essential goods and services. I do not care for devaluation with respect to gold or other currencies.

My second fundamental argument is that ultimately the purchasing power of the currency is a function of productivity of the people who use it. Productivity of a nation is a strong function of its infrastructure, skilled work force and work ethic. Based on this I think US dollar should carry a decent weight and it does. So as long as the US worker's productivity is a prized commodity globally, the US consumer will matter and others will accommodate the USD. Isn't this what is happening already? US has been able to export its inflation to exporter nations primarily because its consumer appetite is so prized.

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