January 10, 2011

Other nations working on getting rid of USD for trade

There is news today that India and Iran are trying to come to an agreement on using gold to settle oil trades.  This comes on the heels of news that China and Russia are going to settle their energy trades in Yuan and Rubles for their new oil pipeline and other cooperative ventures.  Accordingly, exchanges have begun trading the Yuan/Ruble pair.

The only thing keeping commodity inflation from going apeshit in the US is the international reserve status of the US Dollar.  This drives a demand for Dollars, which has the effect of exporting our inflationary practices to other nations.  Needless to say, other nations realize this and with the Fed in full retard mode, they are starting to devise strategies to avoid the US Dollar for commodity trade.  To the extent that they succeed, it will force Dollar inflation back into the US.

An inflationary, weak dollar policy may seem like a good idea for exporting industries,  but it comes with a host of unpleasant consequences.  As other nations continue to lessen their reliance on the US Dollar for trade settlement, people are going to come to realize just how destructive the Fed's current policies are.

Posted by: Hermit Dave at 11:55 AM | No Comments | Add Comment
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