U.S. dollar losing luster as reserve currency

[UpInArms]

Source: Reuters

WASHINGTON, Sept 12 (Reuters) - The U.S. dollar's dominant position as the world's reserve currency is gradually diminishing as the euro becomes increasingly popular, the International Monetary Fund said on Wednesday.

According to data reported to the IMF by industrial and developing countries, the trend toward the euro is specially evident among the developing, or nonindustrial, nations.

"Nonindustrial countries hold some 30 percent of their reserve assets in euros and 60 percent in in dollars (as of December 2006), compared with 19 percent and 70 percent, respectively, six years ago," the IMF said.

The dollar was at a record low against the euro on Wednesday amid concern about the U.S. economy's strength and a growing feeling that U.S. official interest rates will fall.

Read more: http://www.reuters.com/article/bondsNews/idUSN1228283820070912

[no_hypocrisy]

1. That's why I don't understand other countries buying our Treasury notes.

Even if the notes are paid back with interest, the bondholder either gets its money returned w/o a stipend or loses some of its investment due to the devaluation of our currency.

[Deja Q]

10. Maybe they get some jobs offshored to them as part of the deal?

(I honestly have no idea what's going on)

[razors edge]

2. I put seven thousand in gold 18 months ago,

Just thought it was a good way to keep me from spending it, and if the time comes that we need to flee the country, it would help get me where I might go.

That investment is now worth over nine thousand dollars. a twenty eight percent increase.

The gold did not become more valuable, the dollar lost that much value. With inflation being stated at 2+%, someone is lying.

With a three percent wage increase over the same time period, that means we have lost twenty five percent of our purchasing power in 18 months.

Goodbye middle class America, was nice knowing you.

[Javaman]

3. I'm curious about various gold investments...

if they dollar does collapse, how do you get your return on your gold investment? It's not like you would actually have the gold in hand, right?

[roamer65]

5. You keep the gold and only redeem it into printed currency for specific transactions when necessary.

Ask Argentines or Brazilians, they have familiarity with treating currencies only as a medium of exchange, not as a reserve of wealth.

[Javaman]

6. So you are actually buying the gold? Hmmm, interesting.

That answers a worry that I have been having regarding the investment into gold. I thought it was just more paper, meaning you get a document stating you have such and such amount of gold.

[roamer65]

7. I hold physical gold, yup.

In the case of financial meltdown, you will not have access to it if it's in the form of a paper certificate.

[Javaman]

9. That's really cool.

where do you buy it from?

[bhikkhu]

11. Try Kitco

if there are no coin shops in your area selling bullion. Kitco.com is one of several huge online buy and sell outfits. I bought from them once and it was easy enough, though I don't have any gold or silver myself. As a "constant", it is still a bad idea I think to put money into metals while also servicing debt and interest. Get rid of the debt first.

[Javaman]

32. Thanks for the link!

I'm one of the few here in america that is debt free. I think I will be looking into investing into some gold.

Thanks for all the info. :)

Cheers.

[CountAllVotes]

34. cheaper here

www.golddealer.com

I have not bought from them but I have a friend that has done quite a bit of business with them and tells me they are the best company he knows of. :)

:kick:

[razors edge]

15. You can buy gold and have it stored for you

and receive a piece of paper to show you own it. That works for the millionaire who doesn't want it lying about the mansion cluttering up the place.

I prefer to hold my own, as I don't trust the bankers very much.

[razors edge]

14. There are two ways to hold gold.

One is bullion, you own and hold cast and certified ingots sold and traded at face value for goods, services, or traded for paper currency etc. Example, if the dollar collapses, I will give you one ounce of gold for one months rent. The downside of bullion is that it has been confiscated in the past by the federal government and was not legal to hold from sometime in th early thirties till around the later seventies. Selling more than twenty ounces a year will require a declaration on your taxes and profits will be taxed accordingly. Confiscation could happen again so bullion is an investment gamble of sorts.

The other is numismatic, coins of a certain age (1930 or so) that were not confiscated during that time due to the holders argument that they were collectors items and not an investment. The coins are generally considered to hold a value of at least 15% more than the "spot price" of gold at any given time. They are more expensive up front, but still worth more than bullion when traded and are generally smaller in size, making smaller transactions easier to do. Buy and sell all you like, they are not taxable if they increase in value.

Coins are the way to go for the survivalist, collector etc. I bought Swiss 20 Francs.

Edit: coins are also good for the investor, but lets not tell agent Mike.

[Art_from_Ark]

16. Bullion can also be in the form of coins

The most popular bullion coins in the US are, not surprisingly, coins that are produced by the US Mint. Since these coins are being vigorously promoted by the Mint, the threat of confiscation is extremely low. The only modern bullion coin to be subject to confiscation since 1974 was the Krugerrand, which was subject to confiscation for a while if it was brought into the US (but not if it was already physically present in the US)

With the temporary exception of a few foreign gold coins dated after 1960 (a prohibition that was largely ignored in the '60s and officially abolished in 1974), gold coins have always been legal to hold in the US. The most popular gold coins, of course, are US coins, and you can easily find a buyer for them. The problem with collector coins is finding an honest buyer who will give you a decent price for them. If you have bullion coins, however, there's pretty much a defined buy and sell range since one bullion coin of the same type is pretty much the same as another one of the same type. However, if you take your coin out of its case or holder and get nicks or dings in it, it will be worth less.

[razors edge]

17. Interesting,

I didn't know about the mint bullion coins.

I'll have to look into that if I buy in the future, thanks.

[Art_from_Ark]

19. A couple more things

Don't EVER shine up or otherwise clean coins, especially with an abrasive or chemically-treated cloth, since this will bring down the resale value big time.

Also, the "spreads" (percentage differences between dealers' buy and sell prices) are less on the bigger coins.

[razors edge]

20. That makes sense,

The real value is in the metal, the collectors value is limited to the number of actual items in the purchase having a value beyond the weight.

Personally I think the dollar is ready to collapse at any second, so investing in gold now is probably a little to late if I'm right. 50 pieces should get me back home to my hills, where my brothers and I will have to decide what is best for our families.

A coin or two will go a long way at that point to getting the food and fuel one needs to make it back home to ones family.

If I'm wrong, I have something to leave my sons, and thats a good thing too.

[Art_from_Ark]

21. While the real value may be in the metal,

always bear in mind that a bullion coin in perfect, straight-from-the-Mint condition will still fetch more than one that is damaged in any way. Think of it this way-- if you're buying a bullion coin, and you're looking at two coins that would be identical except that one has a gash and the other one doesn't, and they are the same price, which would you choose?

If you think the dollar is ready to collapse, then now might be the time to buy gold. Personally, I don't think that the rest of the world will allow it, at least not yet.

[razors edge]

22. Actually,

if you think the dollar is ready to collapse, like I do, then now is the time to buy firearms to protect your family, and your gold.

After a collapse nobody will care about the looks, just the weight.

[Art_from_Ark]

23. I never thought of it that way

But I still think the world will continue to prop up the dollar, at least in the hopes that sanity will return after the next election. Also, right-wing-itis seems to be a common ailment among the world's leaders these days, with the leader of nearly every major nation suffering from that malady. So, in my humble opinion, they're not going to pull the rug out from under one of their own.

Interesting, though, that Japan's current prime minister, who many considered to be to the right of his predecessor, has announced he is going to step down after leading a scandal-plagued government and promoting an unpopular right-wing agenda.

[razors edge]

29. I hope you are right.

We won't recognize this place if the dollar fails.

During the Great Depression the family farms would feed the needy, now we will be greeted at the fence line by a Black water guard walking post.

[gateley]

28. The wisest thing may be to learn how to plant our own food -- maybe even

gold won't do it.

[razors edge]

30. You got that right.

I am looking at heading for the mountains in WVA where my brother has a cabin, the hunting is so so, but its remote and the people take care of their own.

[roamer65]

4. That's exactly the way to think about it.

Gold doesn't lose value, the dollar has been devalued against gold. Gold and silver are constants, fiat currencies are not.:thumbsup:

[muriel_volestrangler]

12. Gold and silver are not 'constants'

As a demonstration, look at this graph showing the ratio of the gold and silver prices:



In the past 20 years, the ratio has been both over 100 and under 50 - towards the end of 1997, the ratio almost halved in about 6 months. Clearly, they cannot both be 'constants'. They are investments that can go up and down in value against anything else, just like other commodities.

[roamer65]

18. Can't print more gold, can they?

Gold can't be inflated out of existence like a fiat currency. Here is what the Federal Reserve has done to our currency since its 1913 inception.

http://www.infoplease.com/ipa/A0001519.html

Gold may fluctuate like any other commodity, but it certainly has the US dollar beat.

[muriel_volestrangler]

25. But they can dig it out of the ground, can't they?

It makes no sense to tie the world's wealth to a commodity that a select few countries can mine, while the useful work of humanity is done all over the world.

Note how regular the variation of that Consumer Price Index is, in comparison to the wild gyrations of the gold price. Clearly, the worth of the dollar compared to the constituents of the CPI is far more stable than gold.

[Art_from_Ark]

26. Which is easier?

Printing money, or exploring for promising deposits (first with aerial photos, then with on-site surveys), taking samples, sending them to the lab for analysis, rejecting ore grades that are too low, finding maybe one promising area, setting up extraction facilities (often in rugged terrain or in harsh environments) over the course of a year or two, finally commencing extraction (often underground), transporting the ore to a dressing plant, then to a smelter (refiner), extracting a few grams of gold for each ton of ore, and disposing of the slag in an environmentally sound manner?

[muriel_volestrangler]

27. Are you saying that it's good that people go to such lengths to get gold?

If your goal is a currency in which the price of one act or object is constant, then why pick a commodity which is impossible for most people, and countries, to produce anything of, but others can produce - at significant effort, but based on owning the mineral rights? Wouldn't something like "an hour's unskilled labour" (ie something useful and universal) be a better thing to base the currency on?

[SlowDownFast]

31. "something useful and universal) be a better thing to base the currency on?"

Like what?

..."an hour's unskilled labour" is not a stock option, as far as I know, and you can't store it in a safe, either.

[muriel_volestrangler]

33. And what have stock options or storability got to do with a currency?

Currencies are a way of comparing the values of good and services. If people have a problem with a currency whose exchange value is set by a market, then fix it to something important to every person - basic labour.

The obsession of some people with gold as a currency standard comes out of history, when it was about the only thing portable (when any communication between distant parts meant carrying something physical) and non-forgeable. But now, when we have the modern advantages of telegraphic communication, and can set up banking systems to check on each other, we don't need that. If people don't like a currency whose relative value is determined by lots of people, then why go to a commodity susceptible to mining companies controlling the market, and irrelevant to the average person? Unskilled work is something vital, and something many people can do. If you want a government to set a fixed standard for its currency, why not use that?

[againes654]

8. So if I have money that I want to invest

gold is the way to go? I am lower-middle class (as far as income), and concerned about my future. I do have other questions, but I don't want to hijack this thread. Can someone PM me and help me?

[ohio2007]

13. and China is stuck holding a mount Everest size bag of worthless paper debt

gotta be putting their shorts in a bind

[ProudDad]

24. I've GOT IT

This was chang kai sheks big plan!!!

He probably clued in Ike who clued in nixon who clued in ray-gun who clued in the bushes...

Sell off the country to the Chinese "communists" then go belly up taking them with them...

Then chang-kai-shek marches in with the remnants of the Kuomintang and take over the mainland...

Clever boy...

[Xenotime]

35. The dollar, like the economy, is dead. You need to move your money elsewhere to find value.

[TrogL]

36. Buy loonies now!!!

They're a great investment no matter what the economic client.

(Hey, if the Gold Bugs can do it, why not me)