Friday, February 11, 2011

What is currency?

A couple of interesting news articles out there. Firstly, China is building a very large building to hold it's precious minerals in, why not just leave them in the ground until needed? And at the same time the United States has just discovered that it has more oil reserves than Saudi Arabia. This one is good, we have just learned that we can drill straight down to recover the oil, huh?

Two currency things going on. The IMF is recommending that we use a conglomerated currency as the world's reserve currency and the stock markets are about to be consolidated.

Here is what I see. We are going to consolidate international trading currencies and currencies will be resource based. In other words the value of your money will be based on the value of your mineral and other resources. It is like going to the gold based currency; but, includes all of your tangible resources. This means that if you don't pay your foreign debt you will need to give them your natural resources. In order for that to work countries will begin to nationalize ownership of the minerals or at least control their use.

From an economic standpoint this makes partial sense. Currencies based on promises can have high inflationary points. Currencies based on minerals become very restricted. It leads countries to over mine minerals and store resources. I will attempt to keep an eye on these issues for the readers and provide more links. Have a great weekend and enjoy the love of your life. Be well.

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