What used to be greenback magic is no longer. Jay-Z now has incorporated a plain and simple truth into his post-retirement MO. Flossing a phat wad of 500 Euro notes, he too realizes what most truly astute financial gurus acknowledged long ago. The dollar's supremacy as the world's top foreign reserve currency is fast fading. In his Blue Magic video, Jay-Z reiterates a truth that I revealed one year ago after having read a fabulous book called Petrodollar Warfare, which had typically been labeled as a collection of conspiracy theories.
The slippage in the value of the dollar has been long awaited in many economic circles. Due to irresponsible tax cuts pushed through by the Bush administration and due to a fiscally reckless war machine, America is pissing away its financial health. We used to be a sound fiscal entity with a decent credit rating. W has done a far worse job than even the average American (with horrendously bad judgment in the credit department) would do. While the debt may eventually be easier to pay off, and while the sinking dollar may help out the gargantuan trade deficit, it will serve ultimately to decrease the overall standard of living in the US because it diminishes our capacity to purchase goods produced in other countries. Since demand for dollars is a huge part of why the US indeed has such a high standard of living in the first place, this whole mess is irreversible. The vicious cycle is unleashed.
Petrodollars in decline
There are voices on the geopolitical circuit demanding that oil no longer simply be denominated in dollars. Iran and Venezuela are leading this anti-petrodollar charge. Ultimately, pricing oil with a basket of currencies would tremendously decrease the demand for dollars, pushing the currency even further into the ground. Reserve banks throughout the world now believe that holding a basket of currencies will best insulate them from the risk associated with putting all their pennies/centimes in one basket. While I know whom to blame for horrendous fiscal mismanagement in my country, I, along with every other American who relies on the strength of the dollar to sustain purchasing power, will suffer the harsh consequences. The oil companies, on the other hand, are laughing at Blue Magic all the way to the bank.
MTV Arabia
For his part, Jay-Z deserves some air time on MTV's new Arabic language channel, which just went on the air this past weekend! Audiences in the Middle East will better understand the extent to which cultural norms reflect geopolitical truths. Jay-Z may be no Ben Bernanke, but his dough stacks speak far louder than any Fed Chairman's voicebox.
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