Reply #2: I'm convinced the problem is the dollar as the sole reserve currency...

[Petrodollar Warfare]

...that has had no restraints since August 1971 when Nixon delinked it from the gold standard (which is large part an outcome created by the massive expenses of the Vietnam war 1965-1970).

You have a good post and touched on many things such as energy (which is a subject by itself) and foreign wage disparities, but I think global credit creation and monetary expansion upon the dollar standard has become *The Problem.* It wasn't for the first 25 years after WWII, but in the last 30 years things have gotten unbalanced.

The world has become *solely* dependent on the US economy as the borrowing/cumsuming monster. The problem is we now have massive debt. We don't save money, but instead squeeze the world of its savings due to the dollar's role as monopoly reserve currency, and the ultimate result circa 2000 is the lack of global aggregate demand to meet current global capacity.

IMO, this must be corrected via a singificant devalution of the dollar, a multiple reserve currency system, and a European and Asia consumer base that can compete with the US, thus balancing the global monetary and creation of a more equitable system.

The problem? The US has the most to lose by far.

We'll have to give up some of what we have to "fix" the global economy. That is the only conclusion that I can rationally deduct. Each American is being subsidized by the world due to our trade deficit - to the tune of approx. US $4000 per year, while the developing countries have no savings to invest in their own assets. Duncan argues our trade deficit is now about $50-60 million per hour. In otherwords, the world is buying up US debt to support our consumption levels, and that is not sustainable. We must begin to export products that other countries want to purchase and *can afford*. Simple in theory, damn difficult in actual application.

Here's an analogy, that person in China, Mexico or ______ developing nation making that pair of "Nike" shoes gets paid $4 per day. Nike prices the shoe at $80 US. So, the US consumer is the only person that can afford it, not the person in the country that makes it. This is different than Henry Ford's boast from 80 years ago that a Ford Model T assembly line worker could actually afford to buy that Model T if they saved a little based on their wages. If Nike wants to make that same shoe here in the US, what would it cost? Well, I don't know, but it would be a lot more than $80 if the person is paid wages in US dollars at ~$6 per hour minimum wage (instead of $4 per day in Mexico)...

The answer according to some like Duncan? A GLOBAL minimum wage. A movement from the current $4 per day to $14 per day over a series of years could help create global aggregate demand, but he does not address the contentious issue of the dollar standard.

Anyhow, I posted this on a earlier forum, and it still warrants mention as I think you may find this infortmation of benefit:

To understand the current global deflationary pressures, I recommend Richard Duncan's excellent book "The Dollar Crisis: Causes, COnsequences, Cures." I read it this month weekend on a long plane trip, and it is perhaps the most easy to understand analysis of the macroeconomic picture = deflationary contraction. Mr. Duncan correctly predicted the Asian financial crisis of 1997-1998 (Thailand was the country he was studying at the time). He predicts the US trade account imbalance will soon lead to a deflationary contraction of the global economy. As this "disequalibrium unwinds" the dollar will face massive devaluation, and that is why I beleive the euro will become the next international reserve currency... but anyhow, this book is very useful and the research is quite impressive.

Here's an excellent interview with Richard Duncan:

'Interview with Richard Duncan on The Dollar Crisis: Causes, Consequences, Cures'
http://www.business-in-asia.com/dollar_crisis.html

....and #2 article on the book...

'Asia, its reserves and the coming dollar crisis '
By Richard Duncan 21 May 2003

Author of the new book, The Dollar Crisis, Richard Duncan explains why the dollar is the source of global deflation.

http://www.financeasia.com/articles/E867AEB6-642E-11D7-81FA0090277E174B.cfm

Finally, here's his book on Amazon, which I recommend if you *really* want to understand the problems inherent with the dollar standard, and how the US has sadly become the biggest drain in the global economy by soaking up the world's savings:

http://www.amazon.com/exec/obidos/tg/detail/-/0470821027/qid=1057866318/sr=8-1/ref=sr_8_1/102-3567107-9104949?v=glance&s=books&n=507846

Book Description (from Amazon)

The first book to confront the imminent dollar crisis

Given the current global economic situation, a dollar crisis seems imminent. It is predicted that the series of financial and currency crises in recent years will soon culminate in the collapse of the U.S. dollar, facilitating a worldwide economic slump. This timely and challenging book brings together the origins of this crisis and the solutions that will help counter global imbalance. Filled with in-depth insights and practical advice, The Dollar Crisis is a highly relevant guide for all markets, since the collapse of the U.S. dollar will result in global destabilization impacting capital markets everywhere.

About the Author
Richard Duncan (Hong Kong) has worked as a financial analyst in Asia for more than fifteen years. During his career, he has worked for leading companies such as Salomon Brothers, HSBC Securities, International Monetary Fund, and The World Bank.