Gift Cards and Federal Notes for the Holidays

With little fanfare in the US, another pair of countries have announced another move away from the dollar.  China and Japan will no longer use dollars to transact between the two countries.  This follows a similar agreement between China and Russia as well as talks developing with India and Brazil.  Smaller but still notable countries making noise along those lines also include Vietnam, Qatar and Iran.  So why should we care here in America?  To understand the problem, consider the sale of Holiday gift cards...

Gift cards (like rebates) work because the merchants that issue them expect a certain percentage to never be redeemed.  Thus, they can bring in cash and never worry about giving a portion of their customers anything in return.  To crunch the numbers, merchants have made $41 billion in "free money" by selling gift cards.

This is small potatoes though.  Uncle Sam has "sold" $4.45 TRILLION to foreign countries, in exchange for real goods and services, with the hope that they never redeem their gift certificates / Federal Reserve Notes.  Three of the biggest holders of those gift cards?  You guessed it: Brazil, China and Japan.

We're still pretty safe for the immediate future, but places that need dollars to do business are slowly becoming fewer.  Eventually places that *want* dollars will also diminish.  And when that happens, everyone who has dollars is going to come shopping at the US of A to redeem their coupons, competing with domestic demand and inflating prices through the roof.