Reservations About The Dollar

Elliot Eisenberg, Ph.D.,
GraphsandLaughs, LLC

Since the start of the Great Recession of 2008 and the Fed’s decision to inject trillions of dollars into the banking system, there has been constant talk of the US dollar losing its position as the world’s reserve currency, the position it has held since the end of WWII.  After all, our debt is huge and growing, DC is thoroughly dysfunctional, our share of the world economy is shrinking and China is increasingly pushing for a post dollarcentric financial system.  Despite all the concerns above, the dollar’s position as the reserve currency of the world is safe for a long while.

First, which currency can realistically unseat it?  The British pound is simply too small to do the job as the British economy is about 1/7th the size of the US economy.  As for the euro, while it is large enough, there are too many structural problems including weak growth, over taxation, an inflexible central bank and the outside possibility of the collapse of the monetary union to entice many central banks to significantly increase their euro holdings.

As for the Yen, Swiss Franc or Chinese renminbi, you have got to be kidding!  With a debt to GDP ratio greater than that of Greece, Japan makes the US look downright fiscally responsible. Moreover, Japan and Switzerland are both pushing down the value of their respective currencies making them that much less appealing to hold.  Lastly, the renminbi does not freely float and there are significant foreign exchange controls in place.  As a result, it will take at least a decade before China has the necessary legal framework and deep and open financial markets that are a necessary prerequisite before the renminbi can become a credible reserve currency competitor.

Second, because of increased capital flows between nations due to increases in trade and investment, central banks have been repeatedly told by their respective governments to hold larger quantities of safe and easy-to-sell assets which can be easily liquidated in time of crisis.  As a result, total foreign reserves have nearly quadrupled in the past decade and this has dramatically increased the demand for dollars.  For example, when foreign capital suddenly flees a developing nation, it puts downward pressure on the local currency.  By selling some of its dollar holdings to purchase its own currency, a country can stabilize its currency and avoid large currency swings.  Moreover, simply holding a large supply of highly liquid foreign assets, like dollars, discourages speculation and demonstrates that a nation has the necessary reserves to pay foreign creditors for things like oil and wheat.

Lastly, with large holdings of dollars the last thing foreign nations want to do is harm the dollar as that would reduce the value of their holdings and that, in and of itself, reinforces the dominance of the dollar and thus improves its stability.  That is at least partly why for the past 15 years 60% of world foreign exchange reserves have consistently been in dollars.  Were that percentage to slowly fall to 50% over the next few decades, it would matter relatively little.

To sum up, despite lots of talk, there exists no strong competitor to the US dollar and one is unlikely to appear anytime soon.

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net.  His daily 70 word economics and policy blog can be seen at www.econ70.com.

Structural Plan Review Workshop

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The Miami-Dade County Department of Regulatory & Economic Resources
Presents a

Structural Plan Review Workshop*

Friday, February 28, 2014
2:00 p.m. – 4:00 p.m.

Location:
Miami-Dade County Herbert S. Saffir Permitting & Inspection Center
11805 S.W. 26 Street (Coral Way)
Conference Rooms I & J (Second Floor)
Miami, Florida 33175-2474


LIMITED SEATING – MAKE RESERVATIONS ONLINE AT:
http://www.miamidade.gov/building/
(and click Register for first time registrants or Login if already registered).

For additional information, contact Communications & Public Information Section at:
(786) 315-2297 (office)

Please arrive at least 20 minutes early for continuing education sign-in.

* This workshop is approved for two (2) Professional Development Hours (PDH)
for Professional Engineers (continuing education provider #0003711 with the Florida
Board of Professional Engineers).

* This workshop is approved for two (2) Contact Hours for Registered Architects (continuing education provider #0003938 with the Florida Board of Architecture & Interior Design).
“Delivering Excellence Every Day”

 

miamidade_logo“Delivering Excellence Every Day”
Miami-Dade County provides equal access and equal opportunity in employment and services and does not discriminate on the basis of disability. “It is the policy of Miami-Dade County to comply with all of the requirements of the Americans with Disabilities Act.”

Miami-Dade: BASF Members get special briefing on new land development reqmts…..

At BASF’s November Miami-Dade Legislative Committee, Members heard a special presentation  – for BASF Members Only  – about the MAJOR CHANGES to Miami-Dade utility approvals.

See attached powerpoint for synopsis. BASF will be scheduling in-depth MEMBERS ONLY Workshop with the County experts, so you can ask all your questions – and learn from the experts! WASD-Consent-Dec-Short-PPT-11-16-13

FHBA Fall Conference News: BASF’s Ray Puzzitiello in line for President….

Good afternoon, BASF Nation! The Florida Home Builders Associatino (FHBA) held its Annual Fall Conference this past weekend.

Over the past weekend, Ray Puzzitiello, BASF Past President, Hall of Famer and Life Director was installed as Secretary – he will ascend to FHBA Presidency in another 3 years! Congratulations, Ray!

Governor Rick Scott addressed the conference of over 200 attendees, highlighting housing’s upswing in jobs and home values….all good news on the South Florida economy.

BASF’s Jeff Spear (The Spear Group) took over the reigns at another most important FHBA Committee, Government Affairs. Conference highlights included the preparation of the Government Affairs Legislative Priorities, with Jeff’s direct guidance.

Join us for the Spring Conference in Tallahassee, set for April 7-9, 2014!

 

Use All Legal Means Necessary to Protect Property Rights

NAHB’s proactive litigation efforts have forced governmental bodies and agencies at the state and federal levels to scale back or entirely eliminate efforts to limit or stop development on countless parcels nationwide. Fighting on behalf of property owners, NAHB on Nov. 28 filed an amicus (friend of the court) brief with the U.S. Supreme Court in Koontz v. St. Johns River Water Management District, a landmark case that will have major implications for land developers across the country.  The U.S. Supreme Court will decide the extent to which government can tell a home builder or developer to pay money or make improvements to off-site land miles away from their own property before they can develop their own land.   The Supreme Court is expected to rule on the case by June 30, 2013. View more details here.