No. of Recommendations: 3
US dollars have often been held by foreigners because they were more stable than their own currencies, and they were often invested in US assets as now. However, the flow of dollars back into US assets is now emanating mostly from foreign central banks, not from individuals. If the Japan and China CBs stopped getting rid of their surplus dollars this way, and bought euro bonds for instance, things would change. The danger is that these decisions are in the hands of a small handful of people, rather than a huge group of various investors overseas.

Just one more instability factor for the economy and the dollar.

Nomads in Afghanistan used to use silver dollars as their currency of choice (smart nomads), and perhaps still do if there are any nomads left. There must be dozens of situations in which foreigners currently find it to their advantage to use dollars for various purposes, many of them illegal, but the advantages of paper dollars all pretty much evaporate if they continue to lose value over time. For this reason it will not be good if dollar depreciation does not continue to be "measured". But you could say this about any currency today. There are many other countries though whose currencies are just as flaky as ours, and they are all fiat now.

I am beginning to develop a tangible desire for some gold coins in the basement, but according to Arnold at the convention tonight, those like me who do not have confidence in the future are "economic girly-men" Maybe he's right.

Good luck,

Ed.

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