Unbeliever

I came across this article over at The Daily Irritant, and was hoping to get some comments and opinions on it, as I am not qualified to assess the information contained therin. I'm sure someone out there is well versed in the field of geopolitical economics.

Ruy Lopez

So far no one has shown up as a geopolitical economic expert here. Just use your head.

From the link;
America was in serious trouble long before the Al-Qaeda attacks of September 11, 2001. Its real threat came not from the Middle East so much as from the EU with its new currency, the euro. Commanding 40% of world trade, the EU poses a major challenge to continued U.S. dominance. If only a few Opec members switched to euros, argues Heard, that would hurt the U.S. in two critical ways: it would result in a stronger euro and an increase in the "eurozone" and it would trigger dollar dumping and depress the greenback's value.

Like most currencies, the US dollar depends on the strength of the economy behind it relative to other economies. It also depends on a belief and assessment that the dollar fits the requirements of "international trade and reserve currency". There are no more gold-backed major currencies to my knowledge. This means fiat currencies can be abused as the dollar has been way beyond its intrinsic worth and the relative strength of its economy.

Every other American knows how heavily indebted is the other person; while the US gov't and its corporations are deemed over-borrowed. This bubble has worked so far because the US managed to secure lenders and investors. Also the Fed simply creates more dollars from the air that lenders hold on to. Shifting to the Euro or any other currency MEANS DENYING CREDIT to the US.

There is indeed severe and imminent danger because:

1)US has been losing world trade market share

2)US gov't expenditure needs to expand further

3)While Euro economies would also succumb to world recessionary trends, the US economy would tend to fall more because it had risen more in the last 50 years. It has a bigger bubble that needs correcting while most Euro economies were already mediocre since the 90s. Ever wonder why Japan and Germany are more seriously affected by this economic downturn? Because they had the greatest economic "miracles" in the last 50 years.

4)Currently, the US dollar is the most overvalued. Check this link.

http://www.gold-eagle.com/gold_diges...ton081301.html

Weighted value of the US dollar against a basket of currencies. Its technical position on the chart(scroll down to see chart) is eerily dreadful. The weighted index has already started to fall by late 2002. The chart is not updated. I think it is forming a head and shoulder pattern. The current downswing would probably halt at the 108 value; recover somewhat; then fall again. The decline would become precipitous once the "neckline level of 108" is overrun. Would this happen? I am 90% certain it will. Except in the military aspect, US power and influence had been weakening elsewhere.

It's a good reason to go to war with; only it cannot be admitted in public.

Edit;
There is another reason for a hard dollar landing. The dollar bubble is partly artificial like Enron's valuation. I read a couple of articles alleging that in 1994-95 Lawrence Summers and another fellow, with Greenspan's backing, persuaded Clinton to adopt a strong dollar policy. They deliberately sold down gold together with Euro Central Banks and conducted a campaign that US equities ARE THE PLACE TO BE IN THE LONG-RUN.