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How Realistic is a North American Currency?

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Could a seismic currency shift be in our future?

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"World, hold on. Instead of messing with our future, open up inside." --Bob Sinclair

Thomas Jefferson once said "when you reach the end of your rope, tie a knot in it and hang on." As the global financial system pushes on a string, investors are desperately trying to hold tight.

The New World Order is upon us, full of hope, promise and a fair amount of fear. In our recent discussion regarding the direction of our country, we noted the risks of catering to conventional wisdom and the implications for the U.S. dollar.

The Minyanville mantra is to provide financial news you need to know before you know you need it. That's a fine line to walk as foresight often flies in the face of mainstream acceptance.

In 2006, it seemed counter-intuitive to forecast a "prolonged socioeconomic malaise entirely more depressing than a recession."

For years, the notion of an "invisible hand" was conspiracy theory until we learned that The Working Group on Financial Markets was a central policy tool.

And now, as we gaze across our historically significant horizon, we must open our minds to thoughts and ideas that may seem foreign to folks conditioned by the past and stunned by the present.

Currency Crossroads

As governments take on more risk-as they price assets on behalf of the market and transfer debt from private to public-the common denominator, or release valve, becomes the currency.

If our economic condition is allowed to take medicine in the form of debt destruction, the greenback will appreciate and asset classes, as a whole, will deflate. If we continue to inject drugs that mask symptoms rather than address the disease, the likelihood of a seismic readjustment increases in kind.

The deflationary forces in the marketplace are pervasive and the "other side" of our current equation-hyperinflation-may be years away. Given the magnitude, breadth and pace of the global financial epidemic, however, we must explore each side of the twisted ride.

Years ago, the Federal Reserve wrote a "solution paper" regarding the need to combat zero bound interest rates. The concern was the flight of capital from the U.S. and an option discussed was a two-tiered currency, one for U.S. citizens and one for foreigners.

Canadian economist Herbert G. Grubel first introduced a potential manifestation of this concept in 1999. The North American Currency-called the "Amero" in select circles-would effectively commingle the Canadian Dollar, U.S. Dollar and Mexico Peso.

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No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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