Full Version: The Dollar
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DOLLAR LOSES RESERVE STATUS TO YEN AND EURO!!!
http://www.nypost.com/p/news/business/doll...170F8D6530791C5
More indications of what's to come.....
[Whodunit? Sneak attack on U.S. dollar]
http://www.politico.com/news/stories/1009/28091.html
[Entering the Greatest Depression in History]
"The Bank for International Settlements (BIS) Warns of Future Crises"
http://www.lewrockwell.com/orig10/marshall2.1.1.html
[Falling Dollar: Finally Front-Page News]
http://seekingalpha.com/article/165538-fal...front-page-news
[Whodunit? Sneak attack on U.S. dollar]
http://www.politico.com/news/stories/1009/28091.html
[Entering the Greatest Depression in History]
"The Bank for International Settlements (BIS) Warns of Future Crises"
http://www.lewrockwell.com/orig10/marshall2.1.1.html
[Falling Dollar: Finally Front-Page News]
http://seekingalpha.com/article/165538-fal...front-page-news
The rumours of the dollar’s death are much exaggerated
By Martin Wolf
http://www.ft.com/cms/s/9165b8b0-b82a-11de...amp;_i_referer=
By Martin Wolf
http://www.ft.com/cms/s/9165b8b0-b82a-11de...amp;_i_referer=
Embracing benign neglect
Free Exchange, Economist.com, October 13, 2009
One question that's worth asking: is there a sound case to be made that dollar weakness isn't all it's cracked up to be?
http://www.economist.com/blogs/freeexchang...ign_neglect.cfm
Free Exchange, Economist.com, October 13, 2009
One question that's worth asking: is there a sound case to be made that dollar weakness isn't all it's cracked up to be?
http://www.economist.com/blogs/freeexchang...ign_neglect.cfm
The Message of Dollar Disdain
Judy Shelton, Wall Street Journal, October 13, 2009
With U.S. debt set to exceed 100% of GDP in 2011, it's no wonder people are looking for alternative ways to preserve wealth.
http://online.wsj.com/article/SB1000142405...ss_opinion_main
Hyperinflation, national bankruptcy, dollar crash and other exaggerations
Posted: 14 Oct 2009 01:31 PM PDT
Submitted by Edward Harrison of Credit Writedowns.
Earlier today I wrote a post featuring comments by Marc Faber as I like to do from time to time. In this particular case Dr. Faber was waxing prosaically about an eventual bankruptcy of the U.S. government. His money quote was:
“Next station is when the U.S. government goes bust.”
I love this guy. Quite frankly, the man is a quote machine. He makes a lot of outrageous statements that get him noticed. Here are a few that I have featured in the past:
* Oct 2009 – “Monetary policy in the United States will stay expansionary”
* Sep 2009 – “The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society.”
* May 2009 – “I am 100% sure that the U.S. will go into hyperinflation”
* Mar 2009 – “The feds poured the gasoline and lit the match. Now they’ve joined the fire department”
* Nov 2008 – “I advise every American to hold his gold outside of the United States“
* Mar 2009 – “Don’t underestimate the power of printing money.”
The last one is my all-time favorite. And there are many more available at Credit Writedowns and elsewhere. Dr. Doom is very entertaining indeed – which is why I quote him so often. But, is he right?
That’s a good question – one I will take up indirectly by introducing the latest piece by Martin Wolf, another author I have featured at Credit Writedowns from time to time. You may have seen me tweet this earlier today. I had intended to add it to the links for tomorrow, but Niels Jensen, who I also feature often, convinced me to write it up as an ‘antidote’ to Faber.
Here’s how Wolf begins his article:
It is the season of dollar panic. These panic-mongers are varied: gold bugs, fiscal hawks and many others agree that the dollar, the dominant currency since the first world war, is on its death bed. Hyperinflationary collapse is in store. Does this make sense? No. All the same, the dollar-based global monetary system is defective. It would be good to start building alternative arrangements.
This is exactly what the Chinese are doing. They are preparing themselves for a non-dollar future. This is why the Chinese are buying gold. This is why the Chinese are settling trade in Yuan. And this also why the Chinese are getting a bunch of other countries onside. But they are not looking for a dollar crash as I indicated last week.
Then, there is the part about Dollar weakness being a sign of inflation. Here’s what Wolf has to say about this idea:
The dollar’s correction is not just natural; it is helpful. It will lower the risk of deflation in the US and facilitate the correction of the global “imbalances” that helped cause the crisis. I agree with a forthcoming article by Fred Bergsten of the Peterson Institute for International Economics that “huge inflows of foreign capital to the US facilitated the over-leveraging and underpricing of risk”.* Even those who are sceptical of this agree that the US needs export-led growth.
I hope this argument sounds familiar because it is one I made when I asked is the Fed just jawboning? The U.S. wants – it needs a lower dollar to avoid deflation. Quantitative easing is not solving the deflation question. The U.S. government wants a strong dollar? Well, policymakers say one thing and wish for another. The U.S. insistence on focusing on global imbalances at the G-20 should tell you what policy makers really want. This is why the dollar is falling.
The problem of course is that the dollar’s recent rout is not necessarily helping the U.S. because the dollar is overvalued vis-a-vis a host of pegged currencies. And while those currencies are under pressure to drop the peg, they are resisting because they do not want to move toward a more re-balanced global growth paradigm unless forced to do so. Unless these countries (read China) do something on the currency front, expect more of this, this and this – protectionism.
Then, the question arises, if everyone hates the dollar, what are they moving to? Wolf says:
Finally, what can replace the dollar? Unless and until China removes exchange controls and develops deep and liquid financial markets – probably a generation away – the euro is the dollar’s only serious competitor. At present, 65 per cent of the world’s reserves are in dollars and 25 per cent in euros. Yes, there could be some shift. But it is likely to be slow. The eurozone also has high fiscal deficits and debts. The dollar will exist 30 years from now; the euro’s fate is less certain.
This view may be too complacent. The danger of a collapse of the dollar is small and of its replacement by another currency still smaller. But a global monetary system that rests on the currency of a single country is problematic, for both issuer and users. The risks are also growing, particularly since the emergence of “Bretton Woods II” – the practice of managing exchange rates against the dollar.
I liken this argument to George Soros’ comments on dollar weakness: “The dollar is a very weak currency except all the others.” Right now, there is no alternative to the dollar. Some people are fleeing U.S. assets if they can. But the alternatives are limited and this limits how far the dollar will fall. And this is unfortunate because the monetary system now in place is in need of change. Without it, we are likely to see nationalistic policy responses to economic weakness, which will induce conflict.
Wolf says:
I arrive, by a somewhat different route, at the same conclusion as Mr Bergsten: the global role of the dollar is not in the interests of the US. The case for moving to a different system is very strong. This is not because the dollar’s role is now endangered. It is rather because it impairs domestic and global stability. The time for alternatives is now.
Apropos alternative monetary systems, we might start with Paul Davidson’s ideas, which I first highlighted in November. So there is no hyperinflation, no U.S. national bankruptcy, and no dollar crash coming. But, the financial crisis demonstrates we are living on borrowed time and need a new monetary system. The time is now.
Source
The rumours of the dollar’s death are much exaggerated – Martin Wolf
Posted: 14 Oct 2009 01:31 PM PDT
Submitted by Edward Harrison of Credit Writedowns.
Earlier today I wrote a post featuring comments by Marc Faber as I like to do from time to time. In this particular case Dr. Faber was waxing prosaically about an eventual bankruptcy of the U.S. government. His money quote was:
“Next station is when the U.S. government goes bust.”
I love this guy. Quite frankly, the man is a quote machine. He makes a lot of outrageous statements that get him noticed. Here are a few that I have featured in the past:
* Oct 2009 – “Monetary policy in the United States will stay expansionary”
* Sep 2009 – “The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society.”
* May 2009 – “I am 100% sure that the U.S. will go into hyperinflation”
* Mar 2009 – “The feds poured the gasoline and lit the match. Now they’ve joined the fire department”
* Nov 2008 – “I advise every American to hold his gold outside of the United States“
* Mar 2009 – “Don’t underestimate the power of printing money.”
The last one is my all-time favorite. And there are many more available at Credit Writedowns and elsewhere. Dr. Doom is very entertaining indeed – which is why I quote him so often. But, is he right?
That’s a good question – one I will take up indirectly by introducing the latest piece by Martin Wolf, another author I have featured at Credit Writedowns from time to time. You may have seen me tweet this earlier today. I had intended to add it to the links for tomorrow, but Niels Jensen, who I also feature often, convinced me to write it up as an ‘antidote’ to Faber.
Here’s how Wolf begins his article:
It is the season of dollar panic. These panic-mongers are varied: gold bugs, fiscal hawks and many others agree that the dollar, the dominant currency since the first world war, is on its death bed. Hyperinflationary collapse is in store. Does this make sense? No. All the same, the dollar-based global monetary system is defective. It would be good to start building alternative arrangements.
This is exactly what the Chinese are doing. They are preparing themselves for a non-dollar future. This is why the Chinese are buying gold. This is why the Chinese are settling trade in Yuan. And this also why the Chinese are getting a bunch of other countries onside. But they are not looking for a dollar crash as I indicated last week.
Then, there is the part about Dollar weakness being a sign of inflation. Here’s what Wolf has to say about this idea:
The dollar’s correction is not just natural; it is helpful. It will lower the risk of deflation in the US and facilitate the correction of the global “imbalances” that helped cause the crisis. I agree with a forthcoming article by Fred Bergsten of the Peterson Institute for International Economics that “huge inflows of foreign capital to the US facilitated the over-leveraging and underpricing of risk”.* Even those who are sceptical of this agree that the US needs export-led growth.
I hope this argument sounds familiar because it is one I made when I asked is the Fed just jawboning? The U.S. wants – it needs a lower dollar to avoid deflation. Quantitative easing is not solving the deflation question. The U.S. government wants a strong dollar? Well, policymakers say one thing and wish for another. The U.S. insistence on focusing on global imbalances at the G-20 should tell you what policy makers really want. This is why the dollar is falling.
The problem of course is that the dollar’s recent rout is not necessarily helping the U.S. because the dollar is overvalued vis-a-vis a host of pegged currencies. And while those currencies are under pressure to drop the peg, they are resisting because they do not want to move toward a more re-balanced global growth paradigm unless forced to do so. Unless these countries (read China) do something on the currency front, expect more of this, this and this – protectionism.
Then, the question arises, if everyone hates the dollar, what are they moving to? Wolf says:
Finally, what can replace the dollar? Unless and until China removes exchange controls and develops deep and liquid financial markets – probably a generation away – the euro is the dollar’s only serious competitor. At present, 65 per cent of the world’s reserves are in dollars and 25 per cent in euros. Yes, there could be some shift. But it is likely to be slow. The eurozone also has high fiscal deficits and debts. The dollar will exist 30 years from now; the euro’s fate is less certain.
This view may be too complacent. The danger of a collapse of the dollar is small and of its replacement by another currency still smaller. But a global monetary system that rests on the currency of a single country is problematic, for both issuer and users. The risks are also growing, particularly since the emergence of “Bretton Woods II” – the practice of managing exchange rates against the dollar.
I liken this argument to George Soros’ comments on dollar weakness: “The dollar is a very weak currency except all the others.” Right now, there is no alternative to the dollar. Some people are fleeing U.S. assets if they can. But the alternatives are limited and this limits how far the dollar will fall. And this is unfortunate because the monetary system now in place is in need of change. Without it, we are likely to see nationalistic policy responses to economic weakness, which will induce conflict.
Wolf says:
I arrive, by a somewhat different route, at the same conclusion as Mr Bergsten: the global role of the dollar is not in the interests of the US. The case for moving to a different system is very strong. This is not because the dollar’s role is now endangered. It is rather because it impairs domestic and global stability. The time for alternatives is now.
Apropos alternative monetary systems, we might start with Paul Davidson’s ideas, which I first highlighted in November. So there is no hyperinflation, no U.S. national bankruptcy, and no dollar crash coming. But, the financial crisis demonstrates we are living on borrowed time and need a new monetary system. The time is now.
Source
The rumours of the dollar’s death are much exaggerated – Martin Wolf
Marc Faber: “U.S. dollar weakness is a symptom of inflation in the system”
http://www.creditwritedowns.com/2009/10/ma...the-system.html
http://www.creditwritedowns.com/2009/10/ma...the-system.html
Quantitative easing: printing money like mad to ward off deflation
http://www.creditwritedowns.com/2008/11/qu...-deflation.html
http://www.creditwritedowns.com/2008/11/qu...-deflation.html
Paul Davidson: Reforming the world’s international money
http://www.creditwritedowns.com/2009/01/pa...onal-money.html
http://www.creditwritedowns.com/2009/01/pa...onal-money.html
The rumours of the dollar’s death are much exaggerated
http://www.ft.com/cms/s/0/9165b8b0-b82a-11...?nclick_check=1
http://www.ft.com/cms/s/0/9165b8b0-b82a-11...?nclick_check=1
Hyperinflation, national bankruptcy, dollar crash and other exaggerations
Submitted by Edward Harrison of Credit Writedowns.
http://www.nakedcapitalism.com/2009/10/hyp...ggerations.html
Submitted by Edward Harrison of Credit Writedowns.
http://www.nakedcapitalism.com/2009/10/hyp...ggerations.html
QUOTE(Snuffysmith @ Oct 15 2009, 07:52 AM) 
Apropos alternative monetary systems, we might start with Paul Davidson’s ideas, which I first highlighted in November. So there is no hyperinflation, no U.S. national bankruptcy, and no dollar crash coming. But, the financial crisis demonstrates we are living on borrowed time and need a new monetary system. The time is now.
Financial crisis demonstrates that rocket scientists should not be allowed to work on Wall $treet. Read Calvin Trillin:
http://www.nytimes.com/2009/10/14/opinion/...llin&st=cse
As far as the old US Dollar is concerned, there are so so many of them, and so so many countries have them as reserve currency; so in WHOSE INTEREST is it to bomb the dollar and switch to something else?
I'm waiting for an answer.
Happy Days Ahead With The Dow At 10,000!
Posted: Oct 15 2009 By: Dan Norcini Post Edited: October 15, 2009 at 12:02 am
Filed under: Trader Dan Norcini
Dear Friends,
Did you hear the sound of joy and the exuberant cries of rejoicing among the talking heads in the financial media and the hacks of Wall Street as the Dow peeked back above the magical 10,000 level in today’s trade? Happy days are indeed here again as we all know that the average man on the street will soon be rolling in new found wealth, more than happy to plunge back into the depths of debt and bondage if only to fuel the mighty consumer spending machine. I can already see the new home construction business sharply rebounding…
For all the near hysteria about the climb back above 10,000, a look at a ratio chart of the Dow Jones compared to an ounce of that “barbaric relic” and nemesis of Central Bankers, reveals a picture that if rightly understood by those leading the cheering and popping the corks, would turn them into weeping and wailing.
What we are witnessing is not a rising Dow but a collapsing Dollar fueling a wave of paper inflation in equities as the effects of quantitative easing take hold and shove prices higher in a remake of the 70’s horror film called “Stagflation”.
Please examine the following charts. The first is the Dow Jones Industrial Average running back into the 1980’s. Note on that chart the first ellipse between 1993 – 1995. It is 1994 that I want to draw your attention to. The Dow ranged between 3,500 and 4,000 for that entire year. Now look at the area denoted by the second ellipse to the right near the 10,000 level which is where it closed this year, 2009. That is a period of 15 years.
In nominal terms, over that period, the DOW ran up and went down and is now at 10,000 for a gain of 6,000 points for those 15 years. Not bad, I suppose (keep in mind that this does not account for companies that have been dropped out of the index due to failures).
Now take a look at the second chart – the Dow Jones – Gold ratio. Look first at the right side of the chart where you will see the ratio closed today – a bit above 9.4. Follow the line all the way back to the left where it intersects with the plotted value all the way back in 1994. What does this mean?
Quite simply – The Dow has in effect gone NO WHERE in REAL TERMS for FIFTEEN YEARS! Let this sink into your mind – FIFTEEN YEARS have come and gone and all the gyrations in the Dow and all the ups and downs have accomplished not a single bit of real gains when compared to an ounce of gold.
The debauchery of the Dollar has made a mockery out of wealth preservation for those who held nothing but paper equities.
The stock market is a leading indicator and what it is indicating is that the horrific consequences of conjuring paper money out of thin air are coming home with a relentless fury. The Fed has unleashed a tidal wave of inflationary forces upon the land and with the help of the gang of power-drunk, irresponsible, reckless and treacherous politicians, has set in motion a process which is going to bring grief and misery to millions.
Click charts to enlarge in PDF format with commentary from Trader Dan Norcini
http://jsmineset.com/
What More is There to Say?
Posted: Oct 14 2009 By: Jim Sinclair Post Edited: October 14, 2009 at 6:32 pm
Filed under: General Editorial
Dear CIGAs,
We can keep you updated on developments and Trader Dan can keep you updated on technical matters as the drama in gold will never end.
The dollar is headed for much bigger trouble quite soon.
Gold is going to $1224, $1650 and then on to Alf’s numbers.
The US dollar will touch its past low, fight a bit, but then give it up to the carry trade and fundamental economics.
All we have warned you of is happening now.
The countdown of days needs to be understood as a countdown for just what is happening. That countdown is to the faltering of a major area of dollar support becoming invalid as the carry trade monster devours any currency it adopts.
Interest rates cannot be raised to favor the dollar without throwing the MOPE recovery directly into the circular file.
Confidence in the dollar is waning with every passing day. As Armstrong has told you, one day soon confidence will simply implode.
This is a product of a lifetime of mistakes of which no one person can be considered the author. It is the sum of wrong economics, rewarding activities that produce nothing but paper shuffling, and punishing activities that produce goods, human services and employment.
Within one week of the countdown the dollar will take out areas expected to be the bottom of this decline by many talking heads today. That is a dynamic event as was what Trader Dan spoke of here on JSMineset last evening.
What has occurred are the things that economic history is made of> Few outside of Trader Dan and the most attentive CIGAs were really shaken by the occurrence.
This is what the countdown is all about. Look out the window and see it happening. It is history in the making but no more than what happened yesterday at lower levels.
The end is NOT coming. It has already happened. Are you insulated from the results thereof?
Sincerely,
Jim
Historically the greatest waste of words and money has been official intervention to offset a falling currency or statements contrary to the currency bear market.
It calls attention to the basic weakness and is useless to change the trend against the Carry Trade and basic economics. It has always been so.
U.S. dollar drop overrides official pleas for strength
Doubts about Washington’s sincerity, Fed’s low-rate regime offset rhetoric
By Laura Mandaro, MarketWatch
SAN FRANCISCO (MarketWatch) — Increased public hang-wringing over the U.S. dollar’s drop — from finance officials in Tokyo to Brussels to Washington — have failed to lift the greenback as investors bet major central banks won’t back up their remarks by buying dollars.
The U.S. dollar index, which measures the U.S. dollar against a basket of six currencies, has lost 4% since Sept. 1, bringing its drop this year to nearly 7% and its level to a 14-month low.
Against other units, such as the Canadian and Australian dollars, the greenback’s slide has been even more dramatic. It’s fallen about 6% since Sept. 1 against Canada’s loonie, bringing both units close to the same level, and about 8% against the Aussie dollar.
These declines have come despite a steady stream of official statements — with many coming from the European Central Bank head and finance ministers in Japan and France — in some cases saying that a strong U.S. dollar is important, while in others highlighting the greenback’s weakness.
Finance officials in New Zealand and Canada have mentioned the risks from the rapid rise in their own currencies.
The disconnect between the rhetoric and the dollar’s action reflects doubts by currency investors that governments, starting with the U.S., are preparing anything more to help support the U.S. dollar, analysts say.
More…
http://www.marketwatch.com/story/officials...lide-2009-10-14
It calls attention to the basic weakness and is useless to change the trend against the Carry Trade and basic economics. It has always been so.
U.S. dollar drop overrides official pleas for strength
Doubts about Washington’s sincerity, Fed’s low-rate regime offset rhetoric
By Laura Mandaro, MarketWatch
SAN FRANCISCO (MarketWatch) — Increased public hang-wringing over the U.S. dollar’s drop — from finance officials in Tokyo to Brussels to Washington — have failed to lift the greenback as investors bet major central banks won’t back up their remarks by buying dollars.
The U.S. dollar index, which measures the U.S. dollar against a basket of six currencies, has lost 4% since Sept. 1, bringing its drop this year to nearly 7% and its level to a 14-month low.
Against other units, such as the Canadian and Australian dollars, the greenback’s slide has been even more dramatic. It’s fallen about 6% since Sept. 1 against Canada’s loonie, bringing both units close to the same level, and about 8% against the Aussie dollar.
These declines have come despite a steady stream of official statements — with many coming from the European Central Bank head and finance ministers in Japan and France — in some cases saying that a strong U.S. dollar is important, while in others highlighting the greenback’s weakness.
Finance officials in New Zealand and Canada have mentioned the risks from the rapid rise in their own currencies.
The disconnect between the rhetoric and the dollar’s action reflects doubts by currency investors that governments, starting with the U.S., are preparing anything more to help support the U.S. dollar, analysts say.
More…
http://www.marketwatch.com/story/officials...lide-2009-10-14
What Soros Wanted, Obama Delivers
By Kyle-Anne Shiver
http://www.americanthinker.com/2009/10/wha...ama_delive.html
By Kyle-Anne Shiver
http://www.americanthinker.com/2009/10/wha...ama_delive.html
Greenspan Says He's Not `Overly Concerned' About Dollar; Debt `Worrisome' Former Federal Reserve Chairman Alan Greenspan said he’s not “overly concerned” about the recent weakening of the U.S. dollar, while warning of long-term costs to the country and its currency from the rising national debt.
http://www.bloomberg.com/apps/news?pid=206...id=aGz1PQJQvFfY
http://www.bloomberg.com/apps/news?pid=206...id=aGz1PQJQvFfY
The US Dollar – don’t just do something, stand there!
http://www.creditwritedowns.com/2009/10/th...tand-there.html
http://www.creditwritedowns.com/2009/10/th...tand-there.html
Russia ready to abandon dollar in oil, gas trade with China
20:50 14/10/2009
BEIJING, October 14 (RIA Novosti) – Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday.
The premier, currently on a visit to Beijing, said a final decision on the issue can only be made after a thorough expert analysis.
"Yesterday, energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.
He stressed that "there should be a balance here."
On Tuesday, Russia and China agreed terms for Russian gas deliveries at a level of up to 70 billion cubic meters a year. China also imports oil from Russia.
The Russian prime minister said the issue would be addressed among others at a meeting of Shanghai Cooperation Organization (SCO) finance ministers, who are to convene before the end of the year in Kazakhstan.
More…
http://en.rian.ru/russia/20091014/156468599.html
20:50 14/10/2009
BEIJING, October 14 (RIA Novosti) – Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday.
The premier, currently on a visit to Beijing, said a final decision on the issue can only be made after a thorough expert analysis.
"Yesterday, energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.
He stressed that "there should be a balance here."
On Tuesday, Russia and China agreed terms for Russian gas deliveries at a level of up to 70 billion cubic meters a year. China also imports oil from Russia.
The Russian prime minister said the issue would be addressed among others at a meeting of Shanghai Cooperation Organization (SCO) finance ministers, who are to convene before the end of the year in Kazakhstan.
More…
http://en.rian.ru/russia/20091014/156468599.html
Let Putin deal with the Chinese. Let them use ANY currency they want - Rubles, Renminbi, Monopoly money.
Who cares?
Meanwhile, an article in NYT a few days ago on a gas technique from Oklahoma
http://www.nytimes.com/2009/10/10/business...homa&st=cse
"...The global drilling rush is still in its early stages. But energy analysts are already predicting that shale could reduce Europe’s dependence on Russian natural gas. They said they believed that gas reserves in many countries could increase over the next two decades, comparable with the 40 percent increase in the United States in recent years..."
Poof, there goes Europe, Vladimir. Better look for another customer.
Who cares?
Meanwhile, an article in NYT a few days ago on a gas technique from Oklahoma
http://www.nytimes.com/2009/10/10/business...homa&st=cse
"...The global drilling rush is still in its early stages. But energy analysts are already predicting that shale could reduce Europe’s dependence on Russian natural gas. They said they believed that gas reserves in many countries could increase over the next two decades, comparable with the 40 percent increase in the United States in recent years..."
Poof, there goes Europe, Vladimir. Better look for another customer.
QUOTE(jeffmoskin @ Oct 15 2009, 10:44 AM)
QUOTE(Snuffysmith @ Oct 15 2009, 07:52 AM)
Apropos alternative monetary systems, we might start with Paul Davidson’s ideas, which I first highlighted in November. So there is no hyperinflation, no U.S. national bankruptcy, and no dollar crash coming. But, the financial crisis demonstrates we are living on borrowed time and need a new monetary system. The time is now.
Financial crisis demonstrates that rocket scientists should not be allowed to work on Wall $treet. Read Calvin Trillin:
http://www.nytimes.com/2009/10/14/opinion/...llin&st=cse
As far as the old US Dollar is concerned, there are so so many of them, and so so many countries have them as reserve currency; so in WHOSE INTEREST is it to bomb the dollar and switch to something else?
I'm waiting for an answer.
The answer is no bomb, they plan to bleed it to death gradually over nine years, bringing the Euro on-board with them (Russia, China etc.).
QUOTE(jeffmoskin @ Oct 15 2009, 10:08 PM)
Let Putin deal with the Chinese. Let them use ANY currency they want - Rubles, Renminbi, Monopoly money.
Who cares?
Meanwhile, an article in NYT a few days ago on a gas technique from Oklahoma
http://www.nytimes.com/2009/10/10/business...homa&st=cse
"...The global drilling rush is still in its early stages. But energy analysts are already predicting that shale could reduce Europe’s dependence on Russian natural gas. They said they believed that gas reserves in many countries could increase over the next two decades, comparable with the 40 percent increase in the United States in recent years..."
Poof, there goes Europe, Vladimir. Better look for another customer.
Who cares?
Meanwhile, an article in NYT a few days ago on a gas technique from Oklahoma
http://www.nytimes.com/2009/10/10/business...homa&st=cse
"...The global drilling rush is still in its early stages. But energy analysts are already predicting that shale could reduce Europe’s dependence on Russian natural gas. They said they believed that gas reserves in many countries could increase over the next two decades, comparable with the 40 percent increase in the United States in recent years..."
Poof, there goes Europe, Vladimir. Better look for another customer.
Shale is far harder and dirtier than off-shore and ANWAR drilling for oil...and you know how well that's accepted by this administration.
I'm afarid we'll be waiting for clouds to clear the solar panels and wind to push the pin-wheels in the plains. More nukes! More nukes!
QUOTE(Indianhead @ Oct 16 2009, 06:08 AM)
The answer is no bomb, they plan to bleed it to death gradually over nine years, bringing the Euro on-board with them (Russia, China etc.).
There are, perhaps, 1 % as many Euros as dollars. And they are only useful for buying Euro (well, German) products. Believe it or not, we still export a lot of stuff (and food) and we only accept Dollars. So I don't see it this way at all.
QUOTE(Indianhead @ Oct 16 2009, 06:08 AM)
Shale is far harder and dirtier than off-shore and ANWAR drilling for oil...and you know how well that's accepted by this administration.
I'm afarid we'll be waiting for clouds to clear the solar panels and wind to push the pin-wheels in the plains. More nukes! More nukes!
I'm afarid we'll be waiting for clouds to clear the solar panels and wind to push the pin-wheels in the plains. More nukes! More nukes!
More nukes. I agree.
QUOTE(jeffmoskin @ Oct 16 2009, 09:19 AM)
QUOTE(Indianhead @ Oct 16 2009, 06:08 AM)
The answer is no bomb, they plan to bleed it to death gradually over nine years, bringing the Euro on-board with them (Russia, China etc.).
There are, perhaps, 1 % as many Euros as dollars. And they are only useful for buying Euro (well, German) products. Believe it or not, we still export a lot of stuff (and food) and we only accept Dollars. So I don't see it this way at all.
QUOTE(Indianhead @ Oct 16 2009, 06:08 AM)
Shale is far harder and dirtier than off-shore and ANWAR drilling for oil...and you know how well that's accepted by this administration.
I'm afarid we'll be waiting for clouds to clear the solar panels and wind to push the pin-wheels in the plains. More nukes! More nukes!
I'm afarid we'll be waiting for clouds to clear the solar panels and wind to push the pin-wheels in the plains. More nukes! More nukes!
More nukes. I agree.
This is out of my area of expertese...This is the question that research needs to be organized around...a specific 5-year plan of study...this means delaying development plans but I suswpect it would be worth it...
The dollar and global imbalances:
Dollar Demise and Double Dip: Latest Forecasts
Menzie Chinn, Econbrowser, October 15, 2009
I thought it of interest to see what surveys of forecasters indicate about two questions being asked: Is a dollar collapse imminent...and is a double dip recession likely?
http://www.econbrowser.com/archives/2009/1...r_demise_a.html
Whatever happened to imbalances?
Samuel Brittan, Financial Times, October 15, 2009
In dollar terms the sums seemed huge. In relative terms they are less frightening. At their 2008 peak, on IMF estimates, global imbalances amounted to 2½ per cent of world gross national product, writes Samuel Brittan.
http://www.ft.com/cms/s/0/777b3940-b9cc-11...144feab49a.html
Is ECB Changing Its Tune on Core Inflation?
Brian Blackstone, Real Time Economics, October 15, 2009
The European Central Bank appears to be changing its view somewhat on the merits of core inflation as a gauge of price trends.
http://blogs.wsj.com/economics/2009/10/15/...core-inflation/
Dollar Demise and Double Dip: Latest Forecasts
Menzie Chinn, Econbrowser, October 15, 2009
I thought it of interest to see what surveys of forecasters indicate about two questions being asked: Is a dollar collapse imminent...and is a double dip recession likely?
http://www.econbrowser.com/archives/2009/1...r_demise_a.html
Whatever happened to imbalances?
Samuel Brittan, Financial Times, October 15, 2009
In dollar terms the sums seemed huge. In relative terms they are less frightening. At their 2008 peak, on IMF estimates, global imbalances amounted to 2½ per cent of world gross national product, writes Samuel Brittan.
http://www.ft.com/cms/s/0/777b3940-b9cc-11...144feab49a.html
Is ECB Changing Its Tune on Core Inflation?
Brian Blackstone, Real Time Economics, October 15, 2009
The European Central Bank appears to be changing its view somewhat on the merits of core inflation as a gauge of price trends.
http://blogs.wsj.com/economics/2009/10/15/...core-inflation/
Can Volcker Ride To The Rescue Of The Dollar?
Vincent Fernando|Oct. 16, 2009, 8:39 AM | 502 |comment6
Hawkish words could strengthen the greenback's outlook.
Read
http://www.businessinsider.com/volcker-sup...-dollar-2009-10
Go to Top of Page
10/16 End of US$ global reserve currency – GoldSeek
http://news.goldseek.com/GoldenJackass/1255640400.php
Dollar May Drop 20% More, Harvard’s Ferguson Says: The dollar will extend its drop versus the euro over the next two to five years, falling as much as 20 percent to an all-time low under a widening U.S. budget deficit, Harvard University’s Professor Niall Ferguson said.
http://bloomberg.com/apps/news?pid=2060108...id=aZYblKZy9jTs
http://bloomberg.com/apps/news?pid=2060108...id=aZYblKZy9jTs
QUOTE(Snuffysmith @ Oct 17 2009, 03:12 AM)
Dollar May Drop 20% More, Harvard’s Ferguson Says: The dollar will extend its drop versus the euro over the next two to five years, falling as much as 20 percent to an all-time low under a widening U.S. budget deficit, Harvard University’s Professor Niall Ferguson said.
http://bloomberg.com/apps/news?pid=2060108...id=aZYblKZy9jTs
http://bloomberg.com/apps/news?pid=2060108...id=aZYblKZy9jTs
This would be a real shot in the arm for American Manufacturers (yes, we still make stuff) and a real black eye for Europeans.
And it will cut down on American travel abroad (while increasing theirs to the USA).
If it happens, so be it. America will be the better off for it.
'Iran and Russia propose oil trade without USD': Venezuela's president has said that countries including Venezuela, Russia and Iran have proposed the US dollar should be replaced as the currency used for oil trade.
http://www.presstv.ir/detail.aspx?id=10897...ctionid=3510213
http://www.presstv.ir/detail.aspx?id=10897...ctionid=3510213
Iran to completely drop dollar from foreign exchange: Iran's Trade Promotion Organization has announced a near future plan to completely exclude the US dollar from the country's foreign revenues and reserves.
http://www.presstv.ir/detail.aspx?id=10886...ionid=351020102
http://www.presstv.ir/detail.aspx?id=10886...ionid=351020102
Embrace the Dollar's Downfall
By Dean Baker
Banks might suffer if China stopped buying US debt, but the US economy as a whole would be much better off. Continue
http://www.informationclearinghouse.info/article23756.htm
By Dean Baker
Banks might suffer if China stopped buying US debt, but the US economy as a whole would be much better off. Continue
http://www.informationclearinghouse.info/article23756.htm
Mitsui Strategist: Elliot Wave Theory Says Dollar Will Halve Next Year
http://www.businessinsider.com/mitsui-stra...l-halve-2009-10
Niall Ferguson: The Dollar Is Finished And The Chinese Are Dumping It
from Clusterstock by Joe Weisenthal
Economic historian Niall Ferguson warns that China's love affair with the dollar is fading faster than anyone realizes.
TechTicker: "The idea they don't have anywhere else to go or would shoot themselves in the foot if there were a steep decline in the dollar or appreciation of their currency reassures many people in Washington ‘we can relax'," he says. "An appreciation of the renminbi may reduce value of their international reserves but increases the value of every other asset the Chinese own," most notably the commodity assets they have been buying all over the world.
China's "current strategy is to diversify out of dollars and into commodities," Ferguson says. Furthermore, China's recent pact with Brazil to conduct trade in their local currencies is a "sign of the times."
Perhaps most importantly, China's massive stimulus program is helping to generate internal consumption in the People's Republic, meaning local manufacturers are less dependent on exports. Because of the "rapid growth" of Chinese domestic consumption, Ferguson predicts China's international trade surplus could be gone by next year.
http://www.businessinsider.com/niall-fergu...ping-it-2009-10
from Clusterstock by Joe Weisenthal
Economic historian Niall Ferguson warns that China's love affair with the dollar is fading faster than anyone realizes.
TechTicker: "The idea they don't have anywhere else to go or would shoot themselves in the foot if there were a steep decline in the dollar or appreciation of their currency reassures many people in Washington ‘we can relax'," he says. "An appreciation of the renminbi may reduce value of their international reserves but increases the value of every other asset the Chinese own," most notably the commodity assets they have been buying all over the world.
China's "current strategy is to diversify out of dollars and into commodities," Ferguson says. Furthermore, China's recent pact with Brazil to conduct trade in their local currencies is a "sign of the times."
Perhaps most importantly, China's massive stimulus program is helping to generate internal consumption in the People's Republic, meaning local manufacturers are less dependent on exports. Because of the "rapid growth" of Chinese domestic consumption, Ferguson predicts China's international trade surplus could be gone by next year.
http://www.businessinsider.com/niall-fergu...ping-it-2009-10
Lazard Dumps the Dollar
from SeekingAlpha.com: Home Page by Ray
Ray submits:
In a surprise move, Lazard Asset Management’s “The World Trust Fund” has dumped the USD as its primary currency in favor of Sterling. Typically these funds trade in the USD, but the fund’s board apparently felt pressure from shareholders and investors to change its primary currency from the USD to the pound. One can imagine it is because the recent slide of the USD from 89 to 75 in recent months impacts the real return of the fund’s performance.
In the filing, the fund stated:
Complete Story »
http://seekingalpha.com/article/168538-laz...lar?source=feed
from SeekingAlpha.com: Home Page by Ray
Ray submits:
In a surprise move, Lazard Asset Management’s “The World Trust Fund” has dumped the USD as its primary currency in favor of Sterling. Typically these funds trade in the USD, but the fund’s board apparently felt pressure from shareholders and investors to change its primary currency from the USD to the pound. One can imagine it is because the recent slide of the USD from 89 to 75 in recent months impacts the real return of the fund’s performance.
In the filing, the fund stated:
Complete Story »
http://seekingalpha.com/article/168538-laz...lar?source=feed
QUOTE(Snuffysmith @ Oct 23 2009, 01:55 PM)
In a surprise move, Lazard Asset Management’s “The World Trust Fund” has dumped the USD as its primary currency in favor of Sterling.
They should be committed.
The Pound Sterling is the LAST currency I would want to invest in.
UK has just finished its 6th consecutive DOWN quarter.
No end in sight.
And they don't have as big a stake in Iraqi oil as we do.
Lazard is drinking the Kool-Aid.
King Dollar Abdicates
from Taki’s Magazine
For the most part, the value of the dollar is given cursory attention by the financial media. Typically, its movements are assigned an importance on par with much less determinative metrics such as natural gas futures and construction permits. It’s only when major milestones are reached that anyone really takes notice of the dollar. We are living through one of those times. The great dollar rally of 2008-2009 has come full circle. When the financial crisis exploded in its full ugliness in mid-2008, the dollar, which had steadily declined over the previous four to five years, put in a rally for the record books. By March 2009, as investors across the world sought safety from the financial storm, the index had surged more than 25%. Since then, the dollar has steadily declined to the point where nearly all those gains have vanished. In short, the panic rally has given way to the long term trend. So, as the dollar index makes fresh 52-week lows on a nearly daily basis, discussion on the greenback is heating up. And while real insight on the topic is hard to find, the debate centers on the battle between two conventional opinions—both of which are wrong. The first camp, which is generally supportive of government intervention in the economy, argues that dollar’s decline is a positive for both the economy and the stock market. The second camp, which tends to fall on the more conservative end of the political spectrum, views the dollar’s decline as a problem but feels that tough talk and slightly higher interest rates are all that is needed to restore “King Dollar” to its throne. First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. And although I would prefer that the dollar remain strong, I know that currency values are a function of supply and demand, not wishful thinking. The past years of reckless monetary and fiscal policy have created conditions that must push the dollar down. Vastly expanded debt levels and monetary expansion have created a greater supply of dollars, while poor investment performance and diminished industrial capacity have lessened the demand for dollars. The regrettable truth is that while the weak dollar will help rebalance the global economy, it is not a panacea for the U.S. The fall is no more worthy of celebration than a student celebrating falling grades on his report card. If the dollar does not recover eventually, Americans will suffer diminished living standards. To avoid this we must make difficult reforms now. If we continue our current policies, we run the risk of a complete dollar collapse. Far from helping to solve our problems, this would be a true nightmare scenario. On the other side of the argument, those who correctly equate a weaker dollar with a weaker America mistakenly believe that mere posturing by officials or trivial rate hikes would be sufficient to restore the dollar’s lost vitality. We are long past that point. The best we can do now is to accept the penalty of a weaker dollar as punishment for our prior failures, and start building for the future. To save our currency, the Fed must get very aggressive with interest rate hikes and reign in the supply of dollars that have flooded the world over the past few years. The federal government must also do its part by cutting spending, which means no more stimulus and no more bailouts. Undoubtedly, these actions will have unpleasant economic and political consequences. A student who studies harder may have to miss a party or two. A simple analogy, but unfortunately it is that simple. Even in the unlikely event that our political leaders take these courageous steps, the near-term trajectory of the dollar may still be uncertain. A dollar rally that results from higher interest rates and a narrowing federal deficit may soon fade as the recessionary forces that such moves would unleash act to weaken the dollar once again. But at least we would be building a foundation upon which the dollar could eventually find some footing. With a restructured economy, higher savings, more capital investment, lower government deficits, and higher interest rates, the United States would once again attract international investment. Funds would flow here not out of fear, as they did last year, but out of confidence. The dollar’s strength would not rest on the willingness of foreign governments to buy our debt, but the willingness of foreign consumers to buy our products. Only then could King Dollar regain its throne.
http://www.takimag.com/site/article/king_d...#When:15:50:59Z
from Taki’s Magazine
For the most part, the value of the dollar is given cursory attention by the financial media. Typically, its movements are assigned an importance on par with much less determinative metrics such as natural gas futures and construction permits. It’s only when major milestones are reached that anyone really takes notice of the dollar. We are living through one of those times. The great dollar rally of 2008-2009 has come full circle. When the financial crisis exploded in its full ugliness in mid-2008, the dollar, which had steadily declined over the previous four to five years, put in a rally for the record books. By March 2009, as investors across the world sought safety from the financial storm, the index had surged more than 25%. Since then, the dollar has steadily declined to the point where nearly all those gains have vanished. In short, the panic rally has given way to the long term trend. So, as the dollar index makes fresh 52-week lows on a nearly daily basis, discussion on the greenback is heating up. And while real insight on the topic is hard to find, the debate centers on the battle between two conventional opinions—both of which are wrong. The first camp, which is generally supportive of government intervention in the economy, argues that dollar’s decline is a positive for both the economy and the stock market. The second camp, which tends to fall on the more conservative end of the political spectrum, views the dollar’s decline as a problem but feels that tough talk and slightly higher interest rates are all that is needed to restore “King Dollar” to its throne. First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. And although I would prefer that the dollar remain strong, I know that currency values are a function of supply and demand, not wishful thinking. The past years of reckless monetary and fiscal policy have created conditions that must push the dollar down. Vastly expanded debt levels and monetary expansion have created a greater supply of dollars, while poor investment performance and diminished industrial capacity have lessened the demand for dollars. The regrettable truth is that while the weak dollar will help rebalance the global economy, it is not a panacea for the U.S. The fall is no more worthy of celebration than a student celebrating falling grades on his report card. If the dollar does not recover eventually, Americans will suffer diminished living standards. To avoid this we must make difficult reforms now. If we continue our current policies, we run the risk of a complete dollar collapse. Far from helping to solve our problems, this would be a true nightmare scenario. On the other side of the argument, those who correctly equate a weaker dollar with a weaker America mistakenly believe that mere posturing by officials or trivial rate hikes would be sufficient to restore the dollar’s lost vitality. We are long past that point. The best we can do now is to accept the penalty of a weaker dollar as punishment for our prior failures, and start building for the future. To save our currency, the Fed must get very aggressive with interest rate hikes and reign in the supply of dollars that have flooded the world over the past few years. The federal government must also do its part by cutting spending, which means no more stimulus and no more bailouts. Undoubtedly, these actions will have unpleasant economic and political consequences. A student who studies harder may have to miss a party or two. A simple analogy, but unfortunately it is that simple. Even in the unlikely event that our political leaders take these courageous steps, the near-term trajectory of the dollar may still be uncertain. A dollar rally that results from higher interest rates and a narrowing federal deficit may soon fade as the recessionary forces that such moves would unleash act to weaken the dollar once again. But at least we would be building a foundation upon which the dollar could eventually find some footing. With a restructured economy, higher savings, more capital investment, lower government deficits, and higher interest rates, the United States would once again attract international investment. Funds would flow here not out of fear, as they did last year, but out of confidence. The dollar’s strength would not rest on the willingness of foreign governments to buy our debt, but the willingness of foreign consumers to buy our products. Only then could King Dollar regain its throne.
http://www.takimag.com/site/article/king_d...#When:15:50:59Z
Mortgage madness
US Federal Reserve claims that prices of mortgage-backed securities are likely to fall when it eventually begins offloading them are far-fetched. Not only will the Fed have to live with exposure to the securities for years to come; Washington's mortgage risk will at some point make or break the US dollar.
http://www.atimes.com/atimes/Global_Economy/KJ27Dj01.html
US Federal Reserve claims that prices of mortgage-backed securities are likely to fall when it eventually begins offloading them are far-fetched. Not only will the Fed have to live with exposure to the securities for years to come; Washington's mortgage risk will at some point make or break the US dollar.
http://www.atimes.com/atimes/Global_Economy/KJ27Dj01.html
An Interview With Economist Menzie Chinn
Will the Dollar Remain the World's Reserve Currency in Five Years?
By MIKE WHITNEY
Menzie Chinn, co-author of The Economic Integration of Greater China, teaches economics at the Robert M. LaFollette School of Public Affairs at the University of Wisconsin.
Whitney: What is the present composition of reserve holdings in central banks, and has there been a substantial falloff in US dollar reserves in recent years? Are central banks ditching the dollar?
Menzie Chinn: I've found it puzzling that there's all this talk about the prospects for the dollar, in the wake of the G-20 meetings, and more recently World Bank President Zoellick's comments about the primacy of the dollar as a reserve currency. My puzzlement arises from the fact that many of the concerns now being voiced have been voiced before. As I've noted on previous occasions, Jeff Frankel and I have outlined the conditions under which the dollar could lose primary reserve currency status to the Euro. In short, calamitously bad policies that induce rapid currency depreciation, or high inflation, would do the trick. Our results, last updated in early 2008 might seem somewhat out of date given all the turmoil that has occurred in the meantime. But it's important to realize that it's the relative performance (US versus euro area) that matters, and I see no greater reason to believe that the conditions are in place for a drastic "reversal of fortune" than before. I'd note that part of our results for the euro displacing the dollar depended on a London greatly overtaking New York as a financial center; well, that remains to be seen
In thinking about the prospects for the dollar, I think it's useful to break the forces affecting it into separate pieces. In particular, reserve currency status is not directly linked to the dollar's value, although they are of course related. The dollar could lose value without losing primary reserve currency status, and could gain reserve share without gaining value.... Safe Haven Effects reinforces the notion that dollar weakness, for now, is a function of the return of risk appetite. The spike in the dollar from September 2008 through the beginning of 2009 was flight to the safety of Treasuries. In this sense, the dollar decline is a good thing as it highlights the success of policymaker measures to normalize the financial markets. Reported reserves have declined substantially, but since many central banks -- including China's -- do not report reserves, some educated guesses are necessary. Then, the dropoff in the dollar share seems less marked.
(MW Note: Present composition of reserve holdings: Dollar roughly 62 per cent total holdings, Euro roughly 28 per cent total holdings)
Is there any plausible scenario in which the US dollar could lose its position as the world's reserve currency in the next 5 years?
Menzie Chinn: If the US administration were to pursue highly irresponsible policies, such as massive deficit spending for many years so as to push output above full employment levels, or if the Fed were to delay too long an ending to quantitative easing, then the dollar could lose its position. But I believe these scenarios are unlikely -- although the policies of 2001-08 did make the dollar more vulnerable than otherwise.
What is the role of "deep, well-developed financial markets" in determining which currency will be the reserve currency?
Menzie Chinn: Deep financial markets mean that it is less costly to transact in that particular currency. The US dollar has benefited enormously from the existence of a large market in liquid government debt. Such a thing does not exist for the euro, for instance.
Is the euro gaining on the dollar, and do you think Fed policymaking has increased those gains?
Menzie Chinn: The euro is probably gaining on the dollar, but mostly as a consequence of debt accumulation during the Bush years.
Do you think that the Fed's quantitative easing program has weakened the dollar? (or the perception of the dollar?)
Menzie Chinn: The Fed's measures have probably weakened the dollar over the short term; but in staving off a worse recession in the US (and a collapse in the financial system), it has probably meant a stronger currency over the medium term.
How will it effect the US economy if the dollar loses its position as the world's reserve currency?
Menzie Chinn: If the dollar does indeed lose its role as leading international currency, the cost to the United States would probably extend beyond the simple loss of seigniorage narrowly defined. We would lose the privilege of playing banker to the world, accepting short-term deposits at low interest rates in return for long-term investments at high average rates of return. When combined with other political developments, it might even spell the end of economic and political hegemony. These are century-long advantages that are not to be cast away lightly.
It’s widely believed that China will not abandon the dollar because of the nearly $1 trillion it has in USD reserves. Do you agree with this idea?
Menzie Chinn: It is true that each Asian central bank stands to lose considerably, in the value of its current holdings, if dollar sales precipitate a dollar crash. But we agree with Barry Eichengreen (2005) that each individual participant will realize that it stands to lose more if it holds pat than if it joins the run, when it comes to that. Thus if the United States is relying on the economic interests of other countries, it cannot count on being bailed out indefinitely."
What are the effects of the current account deficits on the dollar?
Menzie Chinn: Most recent assessments of the sustainability and adjustment of the US current account feature substantial depreciation of the dollar in the future, whether adjustment then operates via expenditure switching or a valuation effect. Our results suggest that such dollar depreciation would be no free lunch, and could have profound consequences for the international monetary system. These consequences include the loss of the exorbitant privilege of easy financing of large US deficits, both government and national. The political influence that American policy makers have internationally, including in international institutions, could also be diminished."
All quotes used by permission from Prof. Menzie D. Chinn, Robert M. La Follette School of Public Affairs, Department of Economics, University of Wisconsin, Madison, WI 53706-1393 E-mail: mchinn@lafollette.wisc.edu
Mike Whitney lives in Washington state and can be reached at fergiewhitney@msn.com
http://www.counterpunch.org/whitney10262009.html
Will the Dollar Remain the World's Reserve Currency in Five Years?
By MIKE WHITNEY
Menzie Chinn, co-author of The Economic Integration of Greater China, teaches economics at the Robert M. LaFollette School of Public Affairs at the University of Wisconsin.
Whitney: What is the present composition of reserve holdings in central banks, and has there been a substantial falloff in US dollar reserves in recent years? Are central banks ditching the dollar?
Menzie Chinn: I've found it puzzling that there's all this talk about the prospects for the dollar, in the wake of the G-20 meetings, and more recently World Bank President Zoellick's comments about the primacy of the dollar as a reserve currency. My puzzlement arises from the fact that many of the concerns now being voiced have been voiced before. As I've noted on previous occasions, Jeff Frankel and I have outlined the conditions under which the dollar could lose primary reserve currency status to the Euro. In short, calamitously bad policies that induce rapid currency depreciation, or high inflation, would do the trick. Our results, last updated in early 2008 might seem somewhat out of date given all the turmoil that has occurred in the meantime. But it's important to realize that it's the relative performance (US versus euro area) that matters, and I see no greater reason to believe that the conditions are in place for a drastic "reversal of fortune" than before. I'd note that part of our results for the euro displacing the dollar depended on a London greatly overtaking New York as a financial center; well, that remains to be seen
In thinking about the prospects for the dollar, I think it's useful to break the forces affecting it into separate pieces. In particular, reserve currency status is not directly linked to the dollar's value, although they are of course related. The dollar could lose value without losing primary reserve currency status, and could gain reserve share without gaining value.... Safe Haven Effects reinforces the notion that dollar weakness, for now, is a function of the return of risk appetite. The spike in the dollar from September 2008 through the beginning of 2009 was flight to the safety of Treasuries. In this sense, the dollar decline is a good thing as it highlights the success of policymaker measures to normalize the financial markets. Reported reserves have declined substantially, but since many central banks -- including China's -- do not report reserves, some educated guesses are necessary. Then, the dropoff in the dollar share seems less marked.
(MW Note: Present composition of reserve holdings: Dollar roughly 62 per cent total holdings, Euro roughly 28 per cent total holdings)
Is there any plausible scenario in which the US dollar could lose its position as the world's reserve currency in the next 5 years?
Menzie Chinn: If the US administration were to pursue highly irresponsible policies, such as massive deficit spending for many years so as to push output above full employment levels, or if the Fed were to delay too long an ending to quantitative easing, then the dollar could lose its position. But I believe these scenarios are unlikely -- although the policies of 2001-08 did make the dollar more vulnerable than otherwise.
What is the role of "deep, well-developed financial markets" in determining which currency will be the reserve currency?
Menzie Chinn: Deep financial markets mean that it is less costly to transact in that particular currency. The US dollar has benefited enormously from the existence of a large market in liquid government debt. Such a thing does not exist for the euro, for instance.
Is the euro gaining on the dollar, and do you think Fed policymaking has increased those gains?
Menzie Chinn: The euro is probably gaining on the dollar, but mostly as a consequence of debt accumulation during the Bush years.
Do you think that the Fed's quantitative easing program has weakened the dollar? (or the perception of the dollar?)
Menzie Chinn: The Fed's measures have probably weakened the dollar over the short term; but in staving off a worse recession in the US (and a collapse in the financial system), it has probably meant a stronger currency over the medium term.
How will it effect the US economy if the dollar loses its position as the world's reserve currency?
Menzie Chinn: If the dollar does indeed lose its role as leading international currency, the cost to the United States would probably extend beyond the simple loss of seigniorage narrowly defined. We would lose the privilege of playing banker to the world, accepting short-term deposits at low interest rates in return for long-term investments at high average rates of return. When combined with other political developments, it might even spell the end of economic and political hegemony. These are century-long advantages that are not to be cast away lightly.
It’s widely believed that China will not abandon the dollar because of the nearly $1 trillion it has in USD reserves. Do you agree with this idea?
Menzie Chinn: It is true that each Asian central bank stands to lose considerably, in the value of its current holdings, if dollar sales precipitate a dollar crash. But we agree with Barry Eichengreen (2005) that each individual participant will realize that it stands to lose more if it holds pat than if it joins the run, when it comes to that. Thus if the United States is relying on the economic interests of other countries, it cannot count on being bailed out indefinitely."
What are the effects of the current account deficits on the dollar?
Menzie Chinn: Most recent assessments of the sustainability and adjustment of the US current account feature substantial depreciation of the dollar in the future, whether adjustment then operates via expenditure switching or a valuation effect. Our results suggest that such dollar depreciation would be no free lunch, and could have profound consequences for the international monetary system. These consequences include the loss of the exorbitant privilege of easy financing of large US deficits, both government and national. The political influence that American policy makers have internationally, including in international institutions, could also be diminished."
All quotes used by permission from Prof. Menzie D. Chinn, Robert M. La Follette School of Public Affairs, Department of Economics, University of Wisconsin, Madison, WI 53706-1393 E-mail: mchinn@lafollette.wisc.edu
Mike Whitney lives in Washington state and can be reached at fergiewhitney@msn.com
http://www.counterpunch.org/whitney10262009.html
Fall of the Dollar on G-20 finance ministers agenda :
- by Bob Chapman - 2009-10-26
http://globalresearch.ca/index.php?context=va&aid=15838
- by Bob Chapman - 2009-10-26
http://globalresearch.ca/index.php?context=va&aid=15838
Dollar Collapse Update: "Obama Demands Pay in Euros!"
- by Mike Whitney - 2009-10-25
http://globalresearch.ca/index.php?context=va&aid=15808
Please Mr. Geithner, Don't Pass the Buck on the Dollar
Read more at: http://www.huffingtonpost.com/michael-pent...p_b_334236.html
The Huffington Post by Michael Pento
http://www.huffingtonpost.com/michael-pent...p_b_334236.html
It seems nobody in this country wants to take responsibility for the secular decline in the value of the U.S. dollar. When Fed Chairman Ben Bernanke is asked about the currency's decline, he refers the query to the Treasury Department. When the president is asked about the dollar, he often gives the tired old platitude that the U.S. has a strong dollar policy, but his vacuous words seem more like perfunctory utterances than a bona fide dollar-boosting strategy.
Recently, in an interview with CNBC's Maria Bartiromo, Treasury Secretary Timothy Geithner had some startling comments about the world's reserve currency. When asked about its chronic weakness, and what specifically he was doing to safeguard the dollar, Mr. Geithner said, "...if you look generally, you know, I don't talk about developments in the exchange markets." He continued, "If you look at what's happened over the last year, you've seen really a lot of confidence in the U.S. economy. When the crisis was at its peak ... you saw the dollar rise when people were most concerned about the future of the world."
Now that the U.S. dollar is once again caught up in a vicious secular bear market, losing nearly 16% of its value since March alone, the Treasury Secretary is once again opting to plead the fifth. Even worse, he claims that last year was a good example of global confidence in the currency, even though it was down over 8% for the year.
Can he really be counting on another collapse in the global economy to pull the dollar out of its downtrend? To use the previous year as an example of confidence and strength in the country, or the currency, is spurious in nature. It illustrates that our Treasury Secretary either tacitly condones a falling dollar or has no idea what causes a currency to be weak.
The progenitor of our weak dollar is the skyrocketing monetary base, which reached an all-time record high of $1.86 trillion last week. The Fed's monetization of banks' assets has caused real interest rates to become negative and increased interest rate differentials with the currencies of more sober central bankers, like Glenn Stevens from Australia. In addition, our profligate spending habits have caused record budget deficits and even caused our healing trade deficit to reverse course and head higher. Unfortunately, all those trends seem firmly intact and are actually growing worse.
There is, however, no shortage of gurus who will tell you that a weakening dollar is great for America. They'll tell you that it boosts exports and the earnings of domestic companies that conduct business on foreign soil. Their logic is flawed. First off, a falling dollar has actually pushed our trade deficit higher--not lower. If a weak dollar bolsters our economy and our manufacturing base, then why has the trade deficit surged since 2001, even as the dollar lost nearly 40% of its value based on a basket of the six currencies of our largest trading partners?
A specific example is illuminating in disproving the theory that you can balance a trade deficit by crumbling your currency. China announced in 2005 plans to increase the value of its currency and abandon its decade-old peg to the U.S. dollar in favor of a link to a basket of world currencies. Since then the Yuan has rallied from 0.1208 to 0.1465 to the dollar.
This rise in the Yuan, and fall in the dollar, has had a negligible effect on U.S. exports. For all of 2005 the U.S. deficit with China was $201 billion. In 2008, three years into the dollar's devaluation, it soared to $266 billion. Why didn't the falling dollar help boost exports? Because the price of goods produced in the U.S. went up.
That means foreign importers were immune from our made-in-America inflation, not that they could afford to buy more of our goods. There just isn't any amount of dollars the Fed can create that can serve as a substitute for manufacturing and producing more of the things that foreign countries want to purchase.
Multinational corporations are also better protected from the falling dollar than companies that strictly sell their goods inside the U.S. The foreign currency MNCs earn translates to more dollars once the cash is repatriated. But the purchasing power of those dollars becomes attenuated.
So again, there just isn't as much real return produced from owning multinationals as many investors espouse. And it certainly isn't worth the price we pay for rampant inflation at home. To claim that a falling dollar is great because it boosts the earnings of MNCs is tantamount to saying a rise in the number of car crashes would be wonderful for Americans because they can invest in air bag makers.
It would be better if the Chinese allowed their currency to strengthen rather than to pursue a homegrown U.S. policy of dollar weakness. There is a big difference if the former occurs. If the dollar loses its value because we pursue inflationary domestic policies, it means all Americans will suffer from the loss of their currency's purchasing power right here in the U.S.A. If, however, the Chinese sell dollars accumulated from their trade surplus, the Yuan will rise without the destructive inflation being generated here at home--provided that the U.S. repents from its profligate spending habits.
That doesn't mean the Chinese will necessarily buy more U.S. goods, but they might. The problem is that if the Chinese no longer need to park their savings in U.S. debt, Treasury prices will fall and yields soar. The dollar will suffer greatly in the short term as measured against the Chinese currency. But again, that is inevitable and much better in the long run for the U.S.
Finally, I'm tired of hearing there's just no substitute for the U.S. dollar, as if saying it enough will make it so. Or that the Chinese will be compelled to ruin their environment, work like dogs and squander their savings forever and remain powerless to do anything about it.
Does it make sense for them to keep buying Treasuries if their prices fall and the currency they are denominated in continues to crumble? Wouldn't it make sense to diversify their holdings into other currencies and commodities? In fact, that is exactly what they are doing. They have moved their holdings of Treasuries to the short end of the curve for an easy exit and are buying more Euros, gold and commodities.
In 2008 the 16 countries that use the Euro currency have an economy that is more than 76% the size of that in the U.S., according to Wikipedia. So is it incredulous to believe that the Chinese could, and should, diversify out of their current $800 billion-plus in Treasury holdings, or from their $1.3 trillion in U.S. reserves, or from having 65% of their reserves in the dollar?
It looks like the plan the U.S. wants to pursue is to continue to discourage foreign investment, punch our bankers (the Chinese) in the nose and punish those who are savers by crumbling our currency. But please, Mr. Geithner, let's not pretend it benefits anyone except those who are heavily in debt--chief among them our government. Unfortunately, even the U.S. government will be surprised to learn that the price of devaluing that debt through the process of inflation is the eventual destruction of our own economy.
Read more at: http://www.huffingtonpost.com/michael-pent...p_b_334236.html
The Huffington Post by Michael Pento
http://www.huffingtonpost.com/michael-pent...p_b_334236.html
It seems nobody in this country wants to take responsibility for the secular decline in the value of the U.S. dollar. When Fed Chairman Ben Bernanke is asked about the currency's decline, he refers the query to the Treasury Department. When the president is asked about the dollar, he often gives the tired old platitude that the U.S. has a strong dollar policy, but his vacuous words seem more like perfunctory utterances than a bona fide dollar-boosting strategy.
Recently, in an interview with CNBC's Maria Bartiromo, Treasury Secretary Timothy Geithner had some startling comments about the world's reserve currency. When asked about its chronic weakness, and what specifically he was doing to safeguard the dollar, Mr. Geithner said, "...if you look generally, you know, I don't talk about developments in the exchange markets." He continued, "If you look at what's happened over the last year, you've seen really a lot of confidence in the U.S. economy. When the crisis was at its peak ... you saw the dollar rise when people were most concerned about the future of the world."
Now that the U.S. dollar is once again caught up in a vicious secular bear market, losing nearly 16% of its value since March alone, the Treasury Secretary is once again opting to plead the fifth. Even worse, he claims that last year was a good example of global confidence in the currency, even though it was down over 8% for the year.
Can he really be counting on another collapse in the global economy to pull the dollar out of its downtrend? To use the previous year as an example of confidence and strength in the country, or the currency, is spurious in nature. It illustrates that our Treasury Secretary either tacitly condones a falling dollar or has no idea what causes a currency to be weak.
The progenitor of our weak dollar is the skyrocketing monetary base, which reached an all-time record high of $1.86 trillion last week. The Fed's monetization of banks' assets has caused real interest rates to become negative and increased interest rate differentials with the currencies of more sober central bankers, like Glenn Stevens from Australia. In addition, our profligate spending habits have caused record budget deficits and even caused our healing trade deficit to reverse course and head higher. Unfortunately, all those trends seem firmly intact and are actually growing worse.
There is, however, no shortage of gurus who will tell you that a weakening dollar is great for America. They'll tell you that it boosts exports and the earnings of domestic companies that conduct business on foreign soil. Their logic is flawed. First off, a falling dollar has actually pushed our trade deficit higher--not lower. If a weak dollar bolsters our economy and our manufacturing base, then why has the trade deficit surged since 2001, even as the dollar lost nearly 40% of its value based on a basket of the six currencies of our largest trading partners?
A specific example is illuminating in disproving the theory that you can balance a trade deficit by crumbling your currency. China announced in 2005 plans to increase the value of its currency and abandon its decade-old peg to the U.S. dollar in favor of a link to a basket of world currencies. Since then the Yuan has rallied from 0.1208 to 0.1465 to the dollar.
This rise in the Yuan, and fall in the dollar, has had a negligible effect on U.S. exports. For all of 2005 the U.S. deficit with China was $201 billion. In 2008, three years into the dollar's devaluation, it soared to $266 billion. Why didn't the falling dollar help boost exports? Because the price of goods produced in the U.S. went up.
That means foreign importers were immune from our made-in-America inflation, not that they could afford to buy more of our goods. There just isn't any amount of dollars the Fed can create that can serve as a substitute for manufacturing and producing more of the things that foreign countries want to purchase.
Multinational corporations are also better protected from the falling dollar than companies that strictly sell their goods inside the U.S. The foreign currency MNCs earn translates to more dollars once the cash is repatriated. But the purchasing power of those dollars becomes attenuated.
So again, there just isn't as much real return produced from owning multinationals as many investors espouse. And it certainly isn't worth the price we pay for rampant inflation at home. To claim that a falling dollar is great because it boosts the earnings of MNCs is tantamount to saying a rise in the number of car crashes would be wonderful for Americans because they can invest in air bag makers.
It would be better if the Chinese allowed their currency to strengthen rather than to pursue a homegrown U.S. policy of dollar weakness. There is a big difference if the former occurs. If the dollar loses its value because we pursue inflationary domestic policies, it means all Americans will suffer from the loss of their currency's purchasing power right here in the U.S.A. If, however, the Chinese sell dollars accumulated from their trade surplus, the Yuan will rise without the destructive inflation being generated here at home--provided that the U.S. repents from its profligate spending habits.
That doesn't mean the Chinese will necessarily buy more U.S. goods, but they might. The problem is that if the Chinese no longer need to park their savings in U.S. debt, Treasury prices will fall and yields soar. The dollar will suffer greatly in the short term as measured against the Chinese currency. But again, that is inevitable and much better in the long run for the U.S.
Finally, I'm tired of hearing there's just no substitute for the U.S. dollar, as if saying it enough will make it so. Or that the Chinese will be compelled to ruin their environment, work like dogs and squander their savings forever and remain powerless to do anything about it.
Does it make sense for them to keep buying Treasuries if their prices fall and the currency they are denominated in continues to crumble? Wouldn't it make sense to diversify their holdings into other currencies and commodities? In fact, that is exactly what they are doing. They have moved their holdings of Treasuries to the short end of the curve for an easy exit and are buying more Euros, gold and commodities.
In 2008 the 16 countries that use the Euro currency have an economy that is more than 76% the size of that in the U.S., according to Wikipedia. So is it incredulous to believe that the Chinese could, and should, diversify out of their current $800 billion-plus in Treasury holdings, or from their $1.3 trillion in U.S. reserves, or from having 65% of their reserves in the dollar?
It looks like the plan the U.S. wants to pursue is to continue to discourage foreign investment, punch our bankers (the Chinese) in the nose and punish those who are savers by crumbling our currency. But please, Mr. Geithner, let's not pretend it benefits anyone except those who are heavily in debt--chief among them our government. Unfortunately, even the U.S. government will be surprised to learn that the price of devaluing that debt through the process of inflation is the eventual destruction of our own economy.
http://www.youtube.com/watch?v=sjbgdg2_7XI
Peter Schiff issues a Red Alert: "Get out of the US dollar"
Peter Schiff issues a Red Alert: "Get out of the US dollar"
Death Cometh for the Greenback
by Joseph E. Stiglitz
http://www.nationalinterest.org/Article.aspx?id=22348
From the November/December issue of The National Interest.
by Joseph E. Stiglitz
http://www.nationalinterest.org/Article.aspx?id=22348
From the November/December issue of The National Interest.
Turkey Dumps US Dollar For Trade With Iran And China
Joe Weisenthal|Oct. 29, 2009, 6:09 AM | 522 |comment5
One by one...
Read »
http://www.businessinsider.com/turkey-dump...d-china-2009-10
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