If Australia is being paid in US dollars for all of our commodity exports, what happens to us when the US dollar craters? Are these US dollars held in reserve here? Is that a stupid question as it is all just numbers on a computer anyway?
All of the above. 55% of Australian commodities contracts are denominated in US dollars so as Aus dollar passes through parity with US we get both advantages and disadvantages. The so-called '2 speed economy' issues. The rest of the world is in a similar position regarding the US dollar so if it is destroyed there goes most world commerce. Hence the US emergency response mode of pushing through a single gold backed world currency should its dollar look too ragged. And yes, it is just zeros on balance sheets apart from a small amount which is released for the peasants to swap for goods.
GP made a typo and put a question mark where an exclamation point should've gone...what he meant to write was; Buy gold now! Foreign exchange investors are specialists, that's all they know and pretty much all they can do. (I'm not talking about all the eminent speculators in the western suburbs that emerged with 'parity' and nearly made 'currency speculation' an entry on "thingsboganslike.com" ). They work with a just a portion of a client's investment portfolio as all well balanced portfolio's should have (including a smattering of precious metals) . My point is, there won't be a fullscale shift of wealth out of currency, sound economic risk manangement won't allow it. Money will stay in currencies, but which ones? Let's ignore the big currencies as a given, they're all doing poorly and declining which is why the For. Ex. Investors are trying to link to something tangible, like commodites, and that ain't going to change soon. Manufacturing is the other tangible but the only manufacturing done these days is in China whose reniminbi is being suppressed, and Germany whom has been brought down by the Euro. So were stuck with raw material commodities. Africa and South America are too unstable...hmmn what else is left?...Canada, New Zealand, Australia and Brazil (a currency that according to the article rose 33% in 1999 ). The article makes a point that while Australia is a major exporter of building materials, the other 'big mover' commodities have been food commodities. Coffee, Soy, Sugar, Beef etc, all of which Brazil has a major hand as a producer. While no one produces wheat and canola like the Canadians. So you may want to switch your over valued AUD for over valued Brazilian Real's or CAD, but nothing is much safer at the moment ...or in the near future, regardless of any 3-5 cycles the article refers to. So, regardless of what's over/underpriced according to the OECD, nothing's really going to change regarding a safe basket of currencies until the EU, US and China sort out their currencies.... or a war breaks out.
