I read your link. Excellent explanation, and even a gorilla like me could understand it :-)

Sounds like if the United States is hit by a severe terrorist attack or anything that would weaken the US Government, which would in turn make the dollar useless, the whole world is screwed.

The question on gold reminds of something I wrote on this topic a while back. It is simplified for a general audience but roughly describes what is going on. Here is an excerpt (http://asecondhandconjecture.com/?p=368):

To understand the situation imagine if all the worlds gold was produced here in the US and was the asset other countries banks used to back their currencies. In essence a gold standard with the US being the sole supplier of gold. We literally could export money (gold) in return for goods and services. Not a bad deal. Well, that is what we do now, we just use dollars instead of gold and it is a sweet deal. The reason people trust other currencies to have value is that the currency is backed by a portfolio of US currency, stocks and bonds which theoretically can be exchanged as needed for the local currency. So what we do here in the US is buy goods from other countries (I’ll use China as an example) and the Chinese exporter takes our dollars and exchanges them for Chinese currency. The central bank keeps a good bit of those dollars and thus demand for dollars is not fully met, thus propping up the value of the dollar versus the Chinese currency. More demand versus reduced supply leads to a higher price for the dollar than otherwise would exist. This means the Chinese run a trade surplus with us. As long as the Chinese accumulate dollar assets the trade deficit we run cannot be eliminated.

So what do the Chinese get? We gain in an obvious way. We in essence export money in exchange for goods. Most countries have to export services and goods in exchange for goods and services. We don’t have to to a certain extent, which is a wonderful situation. The Chinese get a currency people feel can be exchanged for dollars which they know can be exchanged anywhere, because it is other governments primary reserve as well. Of course idle currency is a pretty poor store of long term value, so the government exchanges that for bonds and other assets which back their currency and is what people are referring to when they say we are in debt. I think that is a poor way to look at it, because the term debt implies that what they have bought hasn’t evened out the exchange, but I’ll avoid that complication for now. The practical effect of this debt is that they can at some time in the future take those assets and spend them here on goods and services, which is exactly what people concerned about the trade deficit want them to do, they just want them to start sooner rather than later. My own opinion is they have spent it here, they sent us goods, we sent them money and bonds which are a pre-requisite for their currency to have any value. That is a pretty valuable service for them, and one we don’t need. We don’t need to run a surplus, they do.

This is a form of seignorage. We are exporting a very valuable product, a stable reserve for their own currency.

I personally believe that silver & gold should resume its tradtional role of sole coinage for our kingdom, but since mankind has become addicted to the ease & convience of paper money, it might be thousands & thousands & thousands of years before we have a true bi-metalic monetary sytem, and instead it is likely that the iraqi dinar will play a major role in covering up our birth right of “just weights & measurements” , yet these thoughts do not deter me from giving my full support to the iraqi dinar as being the leading candidate for the new world currency, because I think the iraqi dinar is an excellent practical tool that will bring about a political unity.

It has been said that politicians wish to separate and economist wish for unification and i have found that statement to be basically true. So, in many ways, it will be the economists that will help the politicians to graciously accept their role in the new world order.

In such a world, silver & gold is left behind for those souls who are pure in heart ,that are capable of rejecting all the various & assorted mankind idealogious, and have an inner peace within them that no storm shall ever disturb.

Yet silver & gold are much more than the most common expressions of wealth. Silver & gold are also a tool for creating wealth as can be readily seen in the industrial uses of these metals in such things as medical & eletronical applications.

I imagine one day the iraqi dinar will have set a price for silver & gold
and that will be that.

“It would be difficult to exaggerate the psychological and social impact of the anticipated replacement of the jumble of existing monetary systems–for many, the ultimate fortress of nationalist pride–by a single world currency operating largely through electronic impulses.”

i often post on the “investors iraq forum”

It is not that the expansion led to America’s superiority, it is the inherent belief that we are. So we have manipulated or experimented with other countries, both politically and socially to benefit our corporations and our proxy fights with communism. So it’s not at all impossible to believe that a monetary system would benefit us.

I’m still a newbie when it comes to currency/money issues. I haven’t quite wrapped my head around why gold is “real” money other than the fact that people consider it to be “real” money.

It would have advantages over fiat money in that government cannot devalue the currency unless they manage to dig more gold out of the ground. So I see it as a whole lot better than the system we have, where there is no standard and fractional reserve lending creates new money out of nowhere.

But I’m not enough of an expert on currency issues to necessarily endorse it as an ideal solution.