Reply #8: Inflation. [View All]

[puerco-bellies]

I've posted this on discussions on energy trading/oil prices. The U.S. dollar's value is pinned to the cost of a barrel of oil. Oil drives the world's economy, and was traded in U.S. dollars. The dollar is losing value because of our trade imbalance, especially because now China and India are competing with the U.S. for oil. Since oil is in greater demand, oils intrinsic value is outstripping the dollars ability to buy it. Once oil is traded in Euro's the intrinsic value of the dollar will be lost.

A dollar soon won't buy any oil. Since we are deeply in dept, and no longer producing the worlds machines and consumer goods, the value of the dollar will only be tied to U.S. Treasuries.

It is very likely in the near future inflation will out pace interest on U.S. bonds and treasuries. That is like saying your currency is backed by an I.O.U. Would you take a check (read dollar here) drawn on a empty account? We have to, it's our currency. The rest of the world does not have to, and they will trade their vast dollar holdings (trade imbalance)for other currencies, or gold and silver. More dollars back in circulation, the less they are worth. In a word; Inflation.