Dear Dave,
I�m hearing more and more about �de-dollarization� and how several countries are moving away from the U.S. dollar as their basis of international trade. Will this affect the strength of the dollar, and should I be concerned about how I�m saving and investing because of this?�
Zack
Dear Zack,
First and foremost, I care enough about you to say you may be spending way too much time on the internet, buddy. You�re drifting into the realm of conspiracy theories here, so let�s slow down and take a look at some facts.
China, Brazil and Russia are the three main players in all this. They already don�t use the U.S. dollar as their basis of international trade�all three have their own currency, and there�s a conversion rate between all those currencies and the U.S. dollar. Those three countries, along with some of the oil-producing countries from the Middle East they�re trying to get on board with the idea, are talking about developing one currency they all use. In international trade, that currency would be converted back and forth to dollars�much like what Europe did with the euro. Which, by the way, really hasn�t worked out so well.
Are those countries going to be able to devalue the dollar by doing that? No. Why? Because while those countries take up a lot of land mass, they don�t take up a lot of the gross domestic product (GDP) of the world. The United States still represents the vast majority of the world�s GDP. Sure, China�s big in that regard. But Russia doesn�t bring much to the table, and Brazil is barely scraping by in a failed economy. Plus, they�re tiny as far as economics are concerned. I mean, Texas probably has a larger GDP than Brazil.
In other words, they just don�t have the muscle to take down the dollar mathematically speaking. Now, if they do manage to put this idea together, it still won�t end in �de-dollarization.� The dollar will not be done away with. Even if they create their own currency, they�re still going to have to trade with the 800-pound gorilla, which is America. And they�re going to have to trade with us in dollars.
Am I worried about this, Zack? Not one bit. And you shouldn�t be either.
� Dave
