Sequel To Bretton Woods?

Jeremy Warner suggests that “the age of the dollar is drawing to a close”. He doesn’t really suggest what new framework for international economic exchange might be established as the US dollar rapidly loses its role as the world’s reserve currency.

More and more it appears that, though it will likely never be proclaimed officially, we are returning to a commodity based valuation for all the world’s currencies. As our trading partners and international bond holders increasing lose faith in the value of the dollar and commodity markets shift to trading in several other currencies, the most effective commodity to track for understanding relative currency valuation will likely be petroleum.

In describing the death of the hegemony of the almighty US dollar, Warner rightly describes the G-20 summit as a “hopelessly unwieldy exercise in global government wouldn’t recognize a corpse if stood before it in a coffin.”

As the G-20 goes about the meaningless charades, traders in the commodities and currency markets will sort out the relative value of the worlds currencies. For a good sense of where the adjustments are headed in the long term, a look at the World Debt Clock offers some pretty clear hints. As bad as things are economically here in the US, and while everyone discusses the crisis in Greece, watching he debt clocks escalate, it appears that England and Ireland may play very prominent roles in future rounds of sorting in the world economy and currency markets.

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