Clear thinking about currencies can make a lot of money -- remember George Soros' billion-dollar day pushing the Bank of England over the edge of devaluation, back in the day. I have neither the bucks nor the nuts to play that game, but still I like to understand stuff that seems complicated. (A quick Soros story: Among the interview questions for prospective traders for his Quantam macro hedge fund was this: "Imagine that you a certain of a major market move. How big a position do you take?" Now, all your wealth is tied up in the fund, along with that of all your peers and investors, not to mention your professional future and your good name. How big a risk do you take? The only acceptable answer was "All of it". If you're certain, put down all the chips. Diversification is for low-risk wimps, go work at a mutual fund or something.)

Just to show that I don't understand, here's an Economist piece (subscription required I think) about US foreign debt falling, despite the high current account deficits. A puzzlement. Here's the main explanation (after noting the outperformance of foreign stocks):

Even more important over the past three years has been the impact of a cheaper dollar. About 70% of America's assets abroad are denominated in foreign currencies, so when the greenback falls, their dollar value rises. Meanwhile, as the home of the world's main reserve currency, America has the advantage that virtually all of its foreign liabilities are in dollars, so that the currency's depreciation does not increase their value. Thus a fall in the dollar boosts America's net wealth.

So devaluing your currency makes you richer? Why didn't anybody tell me that before? Seems like it would have been good to know. And this game of compensating huge deficits by devaluing your external debt, how long can that last?

Being a reserve currency helps. One piece about the China announcement, the importance of which doesn't seem to be getting heavy press play, is that the trading band is against a basket, not just the US dollar. In other words, at least in one respect, and as far as China is concerned, the USD has just been cut from its reserve currency status. Reserve currencies don't change overnight, but they do change. Gold is gone, eg. And the German mark was as a reserve currency for awhile, for some countries, back when there was a German mark. How much longer will the USD be a reserve currency? And what will the consequences be of its loss of status?

At the moment, fossil fuels, with some hydro, provide most of our energy (not counting the sun on the plants we eat). I think the energy mix for next few decades, maybe even 100 years, is reasonably easy to predict. For transportation, easy oil will continue to get used until it's gone, then replaced by difficult oil (eg tar sands and oil shales) and liquifaction from natural gas or coal. At some point, for greenhouse gas reasons, the energy may be delivered as hydrogen rather than hydrocarbons, but the sources will remain fossil. For grid electricity, I understand that pretty much all the hydro available is being used, and wind and nuclear will increase, but fossil fuels (gas while it lasts, coal after that, hopefully with sequestration) will remain popular.

More interesting is what happens after the coal runs out, maybe 100 or so years from now. Renewables like hydro, wind, geothermal, biomass, and solar PV will still be around, but new sources may be required or become economical. I don't know enough about nuclear to talk about fuel depletion, or what advanced processes could make possible. I'd bet against fusion ever being economic, even if it becomes possible. More likely are things like OTEC (a form of solar), gas hydrates, and deep coal, perhaps liquified in situ.