On the “global currency” I think Schiff and a few other books I read explain it better than I could. It’s not a safe bet for long term investments.

1.                Meltdown- a free market look at why the stock market collapsed the economy tanked and Government bailouts will make things worse. Thomas E. Woods, Jr.

2.                America’s Great Depression, Murray N. Roghbard

3.                The End of Prosperity – How Higher Taxes Will Doom the Economy If We Let It Happen, by Arthur B. Laffer, Ph.D., Stephen Moore, and Peter J. Tanous

4.                Crash Proof 2.0 – The Book that Predicted the Market Crash – How To Profit From the Economic Collapse, by Peter D. Schiff with John Downes

        They all show the assault on the US economy and the effect on the value of the dollar. We have consumer debt financing instead of jobs that create wealth. Schiff gives a history of monetary exchange that is basic but very good. Pg 242 “New Economic Alignment” you will recall that he states that “The reality is that in the United States economic freedom, just like sound money, is a distant memory.” 

        Keep in mind that since Bretton Woods in 1944 things began to change. The dollar as the reserve currency, “the badge of America’s preeminence”, is not what it once was. At that time it could be said that we had a “global currency” since foreign governments and institutions used the dollar to settle their foreign exchange debts. The dollar was linked to gold, silver and oil. At that time we were China, meaning that we were the industrial giant and our gold reserves where great due to our thriving economy and exports which helped back our currency. Those days are gone!

        We no longer export commodities. Ships filled with stuff from China return empty. Today there is credible evidence that it would benefit foreign governments to decouple from the dollar as the world’s reserve currency. It hasn’t happed yet, but according to credible experts like Schiff it will. China is buying gold and copper and slowly divesting itself of the dollar.

        The end is in sight, but first our economy has to get worse. If President Obama is successful the Democrats will have tremendous power, and the national debt they create will be unsustainable. It looks as if the demand for treasuries is drying up, and if that happens the feds have two choices. Default, or monetize. In either case it is not good for reserve dollar status. What “global currency” will exist then? Perhaps a basket of currencies?

        The dollar has to fail because of the erosion of our manufacturing base and trade deficit. Service economies do not reduce trade deficits, and do not pay as high a wage as do manufacturing jobs. This economy makes us deadly dependant on imports from China, Germany, Mexico, South America, wherever!  There is a distinction between generating money and generating wealth. We are not generating wealth. Money is a medium of exchange. Wealth is what is received in that exchange.  

        Silicone valley produces what? Are the chips developed there made there? I don’t know, but I don’t think so. Consider all the unskilled workers. Can you see those workers developing chips on the seventh floor sitting in front of a computer performing high level math equations? No, but I can see them pouring molten steel into a cast and picking up a healthy check at the end of the week, but where are those jobs? Bethlehem Steel in Pennsylvania use to employ 28,000 of those workers per year. Hundreds of thousands earned a living there. Now the steel plant is gone, and in its place there is a gambling casino that employs 80 people. Now instead of exporting steel, these 80 people are helping to diminish savings, and perhaps robbing stores of sales of back to school supplies [made in China]. And those steel workers making $15 to $20 per hr. took jobs paying $3. What a brilliant strategy! But hay the Feds soaked the steel corps for taxes, and unions made steel producers pay dearly for labor, and environmentalist and complaints about noise ran steel production to China and elsewhere in the world.

        “Global currency”? the only thing global about currency is that foreigners hold a lot of dollars that represented by debt in treasuries, and at some point those dollars will either come back to the US and inflate the demand for goods, such as we have. And we don’t have much that doesn’t come from China. And when those treasuries mature, which is fairly soon, how is the treasury going to pay the holders? How about when Germany after the Second World War had to print so much money so fast that they stared printing only on one side? And by the way, Germany was a very advance culture, so I won’t say it can’t happen here.

        Without the dollar as the reserve currency upon which foreign currencies are pegged, can we truly say that we will have a “global currency”? One possibility is that nations will return to the gold standard, but more than likely private groups will trade on the gold standard and loose faith in fiat currencies that are unreliable. Many would probably totally disagree with this next scenario, so academically, what if, and I’m not saying it will happen, but if Iran were to explode a high altitude nuclear bomb it would destroy the whole country’s electric grid. It could take years to rebuild. How much will the dollar be worth then? What kind of “global currency” will exist then?

        So while I concede that at present we have what we can call a global currency, it is not something that we should be betting on for a long term investment strategy.