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Fall in Dollar... time to run for Euro and Yuan

April 1, 2009

Analysis of:U.N. panel says world should ditch dollar | www.reuters.com

In 1971, gold parity was abandoned, and we know of the consequences. If countries ditch the dollar, there is likely to be a run for Euro and Yuan. Many countries may go bankrupted when China puts its enormous dollar reserve on sale. The price of large commodity exports currently denominated in dollar would go up as dollar value goes down. World institutions may also collapse, the UN itself may not have enough funds for its actions around the world, the IMF and World Bank may not have enough funds to bail out economies. That would cause huge spasm and contraction in the world economy and further shocks. Someday, we should have a move away from the dollar reserves, but the question is: Is the timing appropriate? As G20 meets, may be rules would be set on a way forward, but would that be sufficient to hold frantics around the world from a run?

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