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Subject: Currencies

Money, serving as a medium of exchange, that may be made reference to in securities transactions and financial product terms.

Government spending:

US fiscal deficit soars six-fold

Obama administration falls off the cliff

This “Obama Deficit” is about six times the fiscal deficit for the year 2003 and at the highest level in American history.

The Federal Reserve Flow of Funds accounts for Q2 2009, estimates the US fiscal deficit (on an annual basis) at $1,294.9 billion.

Uncontrolled spending by the US government and the lack of any clear plan as how these outlays will eventually be financed has resulted in the world fleeing dollars.

Foreign trade:

Falling US dollars and exports

Dollar falls after nine-eleven ...

When the US fiscal deficit grows rapidly and Americans are reluctant to save, more dollars in foreign hands are needed to absorb the necessary issuance of government bonds. Should the trade deficit begin to shrink, foreigners will have less dollars to finance the United States. The combination of deficit spending, low domestic saving, and a slowing in the growth of the trade deficit makes inflation more likely.

International finance

Who chooses the global reserve currency?

An alternate

Who determines the ‘world reserve currency’? Central bankers? IMF officials? College professors?

The answer is ‘none of the above’. In an open, global economy, the world reserve currency is determined by the judgment of millions of importers and exporters in many countries.

The world reserve currency is decided by consensus and the personal decisions of exporters as to what currency they will accept for their goods.

On this basis, it’s too early to count the dollar out.

Page 1 of 212

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2010-11-05 15:03