Saturday, November 21, 2015

What makes the Greenback Green?

The United States enjoys the best currency in the world.  You can spend US dollars anywhere.  People will buy our debt, US treasury bills, eagerly, even though they don't pay much interest.  It's a great deal, they give us hard cash, we give them paper.  If things get tight, we can simply print more greenbacks to make expenses, or redeem T-bills, and everyone will accept them.  US dollars are a pure fiat currency, we don't promise to redeem them for precious metals.
  The Russians would kill to have the ruble treated like the dollar.  Right now nobody will accept rubles in payment if there is anyway to avoid them.  Reason?  The Russians don't have anything to sell.  Rubles are only good to buy stuff from Russia, and who wants Russian made goods?  Driven a Russian built car lately?  The Russian airlines advertise that they fly only Western built airliners (Boeing or Airbus) rather than Russian ones, which have a nasty reputation for crashing.
   Whereas the holder of US dollars can buy top quality US made products, as much as they can afford.  We have the product to sell.  US dollars may not be backed by gold, but they are backed by the productive capacity of the US economy.  You need just about anything, you can buy it in the US,
  With one exception.  There is a US law preventing the sale of crude oil, something which we now have in quantity, thanks to fracking.  We ought to repeal that law, just in the interest of keeping the currency strong.  The greenies want to keep the prohibition on sale of crude oil, mostly 'cause they want to discourage oil production of any sort.   Well, even greenies gotta pay the bills.  We import a lot of stuff, and we gotta pay for it somehow.  And with Obama borrowing the country into who knows what, we need to keep the greenback green.

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