The gamesmanship of Congress is still reverberating through the world’s financial system with a big drop in stock markets today.  But that may be only the start of the problems caused by the self-inflicted calamity.  At risk is the source of the USofA’s real power around the globe – not the military, but the US Dollar itself.

The high standard of living enjoyed in the US is based on the fact that our currency is the standard “reserve currency” across the globe.  All commodities and many long-term contracts are priced in US Dollars.  If, or more likely when, that comes to a screeching halt the implications are vast for our economy and just about everything we do.  Where it gets interesting is that, done well, it could be a liberating experience.

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It’s been a busy week on the economic front.  Congress got its act together, sort of, and passed a debt ceiling raiser that a solid majority of Americans considered “ridiculous”.  The Dow Jones Industrial Average dropped 500 points in response to this, a new salvo in the currency war, and uncertainly about jobs.  Today it may gain some of that back now that the July jobs report shows solid gains, however.

If stock traders and reporters alike seem to be hopping around like scared bunnies, there’s a reason for it – uncertainty induced fear.  If you are afraid for your own future, you’re clearly not alone.

That may sound like small comfort, but it shouldn’t be.  Confronting our fears will be the first step to recovery.  You can read that as either pop psychology or economics.  The source of the fear, however, will take us some time to work out because it’s a major feature of the world we live in.

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