The US dollar hit 1.52 vs. the Euro this week. A few years ago, the dollar was considerably stronger than the Euro, a currency that most in the States thought was destined to fail. For Americans, this does not just mean an inability to visit Europe due to the astronomical cost of a European vacation when measured in dollars. There are many other implications to the dollar collapse, most poorly understood. As the dollar evaporates in value and the US economy rapidly shrinks in global significance (the dollar has been on a free fall against all significant currencies in the world) we should wonder when will the dollar reach a value that makes the financial world crack.
When will the Arabs stop taking dollars for their oil? When will the sovereign funds, now the most significant global investors massively shift their holdings to euros? When will the Chinese get tired of buying US debt and holding US dollars, especially since the US government seems to block them on any significant purchase Chinese companies want to in the US for security reasons? When will the US regulators realize that the world financial center is not New York City anymore, but London, because not only the dollar is such an unstable currency but because the US is beginning to look like a bureaucracy compared do the Old Empire? Can the US really be a super power and at the same time the world biggest debtor with an economy that is less and less relevant in global terms? I apologize for a post that mostly contains questions but I believe that the US government not only has shown to be an irresponsible global power in the security arena but equally important it is now showing the same by neglecting the dollar. If trends continue the talk will not be about petrodollars anymore but about peso dollars and how the USA joined the rest of Latin America as a nation unable to rise above its financial troubles.
Follow Martin Varsavsky on Twitter: www.twitter.com/martinvars