Destruction of the US dollar

[zdenek795]

Don't worry so much it's a positive change.

For the world it's better to have two or more reserve currencies.

Competition is good.

Does anyone know how many dollars are outside of USA???

 

[devil21]

Like I care what someone in Poland thinks about the destruction of the US standard of living. Worry about your own money ok? Let us worry about ours. I don't particularly care what's good "for the world". I care about America.

Speaking of which, the next article I'm posting should be pertinent considering zdenek795's comment.

 

[devil21]

http://www.washingtonpost.com/wp-dy.../11/10/AR2009111015034.html?hpid=opinionsbox1

Globe may not be big enough for World Government
By Dana Milbank
Wednesday, November 11, 2009

The New World Order came into being at 4:25 Tuesday afternoon.

It arrived at the Capitol, until that moment the seat of American government, in the form of the stooped and bespectacled figure of Ban Ki-moon, who as U.N. secretary general is the de facto leader of what conspiracy theorists call the One World Government. One floor beneath the Senate chamber, Ban, a South Korean national, took his place behind a lectern bearing the Senate seal and spelled out his demands.

"I would certainly expect the Senate to take the necessary action; that's what I have encouraged the senators," he told reporters as a trio of lawmakers stood at his side. He added an admonition for the chamber to deliver "as soon as possible."

The One World Government has specific requirements, Ban added, namely a "legally binding" commitment to "25 to 40 percent greenhouse gas reduction . . . as recommended by the IPCC, the Intergovernmental Panel on Climate Change."

Uh-oh. A U.N. official standing in the Capitol telling U.S. lawmakers what binding commitments intergovernmental authorities expect from them? Glenn Beck was going to burst a blood vessel.

But the man who orchestrated this putsch by the New World Order, Senate Foreign Relations Chairman John Kerry (D-Switzerland), did not appear concerned by the imagery. He called the secretary general "Your Excellency." Sen. Richard Lugar of Indiana (a Republican, but he drives a Prius) was equally deferential as he spoke of "the privilege of this distinguished visitor."

And Sen. Joe Lieberman (I-Conn.) hailed Ban for "the accelerated leadership role" that the United Nations has taken. "Your vision, that in Copenhagen there can be a politically binding agreement that will lead to a legally binding agreement to follow . . . is a very reasonable, sensible and hopeful course."

Somewhere in Manhattan, Sean Hannity was tearing up his script for the night's broadcast.

Kerry invited Ban to lecture the Foreign Relations Committee, but it's not clear what the chairman hoped to gain from the photos of him standing with Ban in the Capitol's Brumidi Corridors. Indeed, it seemed quite possible that a U.N. endorsement of Kerry's climate efforts would embolden its foes, who like the world body even less than they like cap-and-trade. In the pantheon of conspiracy theories, the United Nations is right up there with the Illuminati, the Trilateral Commission, the Federal Reserve and the Council on Foreign Relations -- which, as it happens, Kerry addressed a couple of weeks ago.

Even Americans who don't come from the grassy-knoll tradition tend not to regard the United Nations with great confidence. A Gallup poll earlier this year found that 65 percent of respondents thought it was doing a bad job, compared with 26 percent who think it is doing a good job. Ban himself is not terribly nefarious, if only because he is unknown. A Wall Street Journal poll found that 81 percent of those surveyed didn't know who he was. The others may have confused him with the Unification Church's Rev. Sun Myung Moon.

Ban's profile could become much higher, and not in a good way, if Americans start to perceive him as meddling in Senate consideration of climate legislation. Even before he stormed the Capitol, Fox News was drawing a connection between global warming talks in Copenhagen next month and One World Government.

"America, if you believe this country is great but you're not really into that whole One World Government thing, watch out," Fox News Channel's Beck warned a couple of weeks ago. His guest, Lord Christopher Monckton of Britain, told Beck that "at Copenhagen, a treaty will be signed that will, for the first time, create a world government with powers to intervene directly in the economy and in the environmental affairs of individual nations." Earlier on Fox News, Dick Morris informed Hannity that President Obama "believes in One World Government." And author Jerome Corsi went on Hannity's show to warn about a One World Government in which "our sovereignty would be subject to the dictates" of the United Nations and other international organizations.

The One World Government was on open display at the Capitol on Tuesday, as international U.N. staffers waited outside the room where Ban spoke to the senators. The secretary general had come with his own world government (armed?) security detail, who stood alongside the Capitol police.

Ban, wearing a gold U.N. lapel pin, unfolded his speech. "Less than a month from now, the leaders of the world will gather in Copenhagen," he said. "They must conclude a robust global agreement," that is "comprehensive, binding, equitable and fair."

Speaking softly but firmly, the South Korean cautioned the Americans that "the world is not standing still," and that "all the eyes of the world are looking to the United States."

After a few minutes, Kerry cut off questioning. "Folks, the secretary general has to get to the airport."

Ban needed to catch the U.S. Airways shuttle to New York. The One World Government Air Force isn't what it's cracked up to be.

The stupid attempts to turn the issue into a "party issue" aside and the overall snarky tone should be ignored. The meat of the article certainly isn't lost on me. UN SecGen meeting directly and privately with US Congress to "urge" (demand?) action of any sort is UNACCEPTABLE under the US Constitution. When the Copenhagen Treaty is signed and the subsequent Cap and Trade laws are passed, much of the USD in circulation today will go out of this country and into the UN and IMF's bank accounts for "developing nations", where they can enslave the people of those countries while knocking the US down a few pegs. Global socialism, paid for by Americans. I hit upon this in an article commentary a couple days ago. So not only is the dollar being deliberately destroyed, the ones being created today that still have value aren't even going to be injected into our economy. NOT GOOD.

 

[zdenek795]

It seems that Americans would readily take advantage of dollar's world reserve status but don't want to pay for it.

World reserve status isn't only a privilege it's a kind of obligation.

 

[zdenek795]

It pisses me off when Americans scolds China for pollution of environment, Al Gore promotes his ideas for the world but USA don't want to implement their stupid ideas at home.

 

[devil21]

Do you believe that America owes Poland something? Do you believe that America owes the rest of the world something? What do we owe you and why do we owe it?

Please explain the reasoning behind your posts.

*crickets*

 

[denison]

It pisses me off when Americans scolds China for pollution of environment, Al Gore promotes his ideas for the world but USA don't want to implement their stupid ideas at home.

agreed. we're being knocked off our high horse and it's too late to save face.

 

[denison]

It seems that Americans would readily take advantage of dollar's world reserve status but don't want to pay for it.

World reserve status isn't only a privilege it's a kind of obligation.

Now it's time to pay the dues. Our rampant greed, corruption and economic stupidity allowed to get ourselves into this position in the first place. The sooner it ends the better.

 

[shocker315]

China Signals That It May Allow Currency to Rise Against Dollar

http://www.cnbc.com/id/33850971

 

[devil21]

(Text of link above)

China Signals That It May Allow Currency to Rise Against Dollar

Nov 11 09

China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.

In its third-quarter monetary policy report, the People's Bank of China departed from well-worn language on keeping the yuan "basically stable at a reasonable and balanced level." It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.

"Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism," the central bank said in a 46-page monetary policy report.

The comments, published just days before a visit to Shanghai and Beijing by U.S. President Barack Obama, set out the possibility of a return to exchange rate appreciation that began with a landmark July 2005 revaluation.

The yuan strengthened by nearly 20 percent against the dollar until concern over the impact of the global financial crisis prompted Beijing to hit the brakes in the middle of last year to protect exporters.

The yuan has been stuck at around 6.83 per dollar ever since, drawing increasing ire from other countries, especially as it has followed the dollar downwards against other currencies.

The dollar has dropped 13 percent against a basket of major currencies including the yen and euro since mid-February.

Back to a Basket?

Some analysts have called for the return to a genuine basket of currencies, which the central bank said in 2005 it would use as a reference for the yuan.

"I think the wording change ... shows that it is an irresistible trend for China to resume yuan appreciation," said Xing Ziqiang, an economist at China International Capital Corp (CICC) in Beijing.

"It is not sustainable for the yuan to always be pegged to the U.S. dollar; after all, the repegging since late 2008 was just part of China's measures to address the global financial crisis, and now the impact of the financial crisis is fading, so the yuan should resume appreciation sooner or later."

The central bank's report came just hours after data that showed the world's third-largest economy had firmly put the worst of the global financial crisis behind it. Factory output growth surged to a 19-month high of 16.2 percent in October.

While exports were still down in year-on-year terms, economists pointed to the likelihood that they would start growing again soon.

Some analysts said the statement could have been timed to send a signal ahead of Obama's Nov. 15-18 visit to China.

Obama told Reuters on Monday that he planned to raise the currency issue during his trip.

However, Beijing is increasingly facing complaints about its currency from other emerging economies, which see an undervalued yuan as undercutting them in global markets.

No Sudden Shift

Those concerns were evident in a draft statement from APEC finance ministers circulated on Wednesday, in which they call for flexible interest rates and exchange rates as a way of redressing economic balances.

"We agreed that flexible prices, including exchange rates and interest rates, play a critical role in allocating resources efficiently, and can facilitate the adjustments needed to support balanced and sustainable global growth," said the latest draft statement by the finance ministers dated Nov. 10.

While the statement could change in its final form, a deputy Chinese finance minister was present at discussions on it, suggesting some level of agreement by Beijing on the wording.

However, analysts were quick to caution against expecting any sudden shift in the yuan's actual value, given China's penchant for carrying out any reforms gradually.

"The central bank's worries about capital flows, liquidity, and inflation signal growing pressure for yuan appreciation," said Ben Simpfendorfer, strategist with the Royal Bank of Scotland in Hong Kong.

"But I'm not looking for gains in the currency until the second quarter as the export sector still faces large challenges and margin pressure." Markets priced in a slightly greater appreciation over the coming year.

Offshore one-year dollar/yuan non-deliverable forwards (NDFs) fell to 6.6075 bid late on Wednesday compared with Tuesday's close of 6.6320.

Yuan appreciation implied by NDFs, which moves inversely with the forwards, was around 3.3 percent in a year compared with 3.06 percent before the announcement.

Xing with CICC said he was expecting even greater appreciation, of 3 to 5 percent next year, in the face of growing external and internal pressure.

"For China's own sake of balancing its economic growth and reducing its large surplus in the trade account, it is also necessary for the government to make the yuan more flexible."

 

[raiha]

I don't know Devil21, your policies have affected the rest of the world; your CIA backed coups; and your strutting around the world stage as King Pin. You bully smaller countries if we don't get in line with your empire building and Military Industrial Complex gameplan. The sooner the average American citizen wakes up to the reason they are not particularly liked (and it is not because we want to be 'over there!' or that we are jealous of your freedom), and take responsibility for consequences to your actions, the healthier the world will be. But I'm not holding my breath. Too much arrogance and sense of entitlement around! Sigh!

 

[devil21]

I don't know Devil21, your policies have affected the rest of the world; your CIA backed coups; and your strutting around the world stage as King Pin. You bully smaller countries if we don't get in line with your empire building and Military Industrial Complex gameplan. The sooner the average American citizen wakes up to the reason they are not particularly liked (and it is not because we want to be 'over there!' or that we are jealous of your freedom), and take responsibility for consequences to your actions, the healthier the world will be. But I'm not holding my breath. Too much arrogance and sense of entitlement around! Sigh!

Who is this "you" you keep referring to? I didn't bully anybody. I don't control the CIA or act as a King Pin. You confuse the American people with the policies of the government. While I'll never defend the election of most of these criminal politicians, it's hardly fair to call Americans the problem and almost root for our demise. At the end of the day, the people that suffer from the destruction of the dollar are the average citizens, not the people making the decisions. "America" doesn't owe anybody anything. We have as little control over the US government as you or the Polish poster do.

 

[devil21]

Follow up on a earlier item:
http://news.yahoo.com/s/ap/20091213/ap_on_re_la_am_ca/cb_cuba_leftist_bloc

Dec 13 09
HAVANA – Members of a leftist bloc of nine Latin American nations said Saturday they plan to use a new currency dubbed the "sucre" for trade among themselves starting in January.

No sucres will be printed or coined, but the virtual currency will be used to manage debts between governments while reducing reliance on the U.S. dollar and on Washington in general.

Cuba already signed an agreement on Saturday to pay for a shipment of Venezuelan rice in sucres, according to Rogelio Sierra, the island's deputy foreign minister. He declined to say what the shipment was worth.

That agreement was made even as ever cash-strapped Cuba has fallen behind on its debt to nations and multinational corporations amid the global recession.

The Bolivarian Alternative for the Americas trade group is holding a two-day summit starting Sunday in the Cuban capital.

The group was formed by Venezuela's self-described socialist president, Hugo Chavez, as an alternative to U.S.-backed free-trade consortiums. Member nations are Venezuela, Cuba, Nicaragua, Honduras, Ecuador, Bolivia, Antigua and Barbuda, San Vincent and the Grenadines, and Dominica.

Honduras remains part of the bloc despite a June coup that toppled leftist President Manuel Zelaya. Zelaya's deposed foreign minister is attending the summit, but the acting government in Honduras will almost certainly not abide by any agreements made.

Chavez was greeted Friday as he arrived in Cuba by President Raul Castro. Cuba and Venezuela signed "agreements of cooperation" on 285 bilateral projects in 2010 totaling nearly US$3.2 billion, according to Venezuelan Energy Minister Rafael Ramirez. He provided no details on what those agreements entail, however.

On Saturday, Raul Castro said the cooperation between the countries will allow them to "alleviate the negative impact of the current world economic crisis."

Leftist presidents Daniel Ortega of Nicaragua and Evo Morales of Bolivia are expected to attend the summit.

Funny how foreign socialists are "Leftists" yet domestic socialists are "Democrats".

 

[denison]

Follow up on a earlier item:
http://news.yahoo.com/s/ap/20091213/ap_on_re_la_am_ca/cb_cuba_leftist_bloc



Funny how foreign socialists are "Leftists" yet domestic socialists are "Democrats".

exactly, MSM hypocrisy.

 

[devil21]

The hits keep on coming! This is very, very bad for the USD. Oil no longer in dollars?

http://www.telegraph.co.uk/finance/...ency-in-latest-threat-to-dollar-hegemony.html

12-15-09
The Arab states of the Gulf region have agreed to launch a single currency modelled on the euro, hoping to blaze a trail towards a pan-Arab monetary union swelling to the ancient borders of the Ummayad Caliphate.

“The Gulf monetary union pact has come into effect,” said Kuwait’s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.

The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.

Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.

The Emirates are staying out for now – irked that the bank will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi. They are expected join later, along with Oman.

The Gulf states remain divided over the wisdom of anchoring their economies to the US dollar. The Gulf currency – dubbed “Gulfo” – is likely to track a global exchange basket and may ultimately float as a regional reserve currency in its own right. “The US dollar has failed. We need to delink,” said Nahed Taher, chief executive of Bahrain’s Gulf One Investment Bank.

The project is inspired by Europe’s monetary union, seen as a huge success in the Arab world. But there are concerns that the region is trying to run before it can walk.

Europe took 40 years to reach the point where it felt ready to launch a currency. It began with the creation of the Iron & Steel Community in the 1950s, moving by steps towards a single market enforced by powerful Commission and European Court. The EMU timetable was fixed at the Masstricht in 1991 but it took another 11 for euro notes and coins to reach the streets.

Khalid Bin Ahmad Al Kalifa, Bahrain’s foreign minister, told the FIKR Arab Thought summit in Kuwait that the project would not work unless the Gulf countries first break down basic barriers to trade and capital flows.

At the moment, trucks sit paralysed at border posts for days awaiting entry clearance. Labour mobility between states is almost zero.

“The single currency should come last. We need to coordinate our economic policies and build up common infrastructure as a first step,” he said.

Mohammed El-Enein, chair of the energy and industry committee in Egypt’s parliament, said Europe’s example could help the Arab world achieve its half-century dream of a unified currency, but the task requires discipline. “We need exactly the same institutions as the EU has created. We need a commission, a court, and a bank,” he said.

The last currency to trade in souks from Marakesh, to Baghdad and Mecca, was the Ottomon Piaster, known as the “kurush”. It suffered chronic inflation as the silver coinage was debased.

There is a logic to an Arab currency. The region speaks one language, has the unifying creed of “Umma Wahida” or One Nation from the Koran, and has not torn itself apart in savage wars – ever – in quite the way that Europe has in living memory.

Yet hurdles are formidable even for the tight-knit group of Gulf states. While the eurozone is a club of rough equals – with Germany, France, Italy, and Spain each holding two votes on the ECB council – the Gulf currency will be dominated by Saudi Arabia. The risk is that other countries will feel like satellites. Monetary policy will inevitably be set for Riyadh’s needs.

Hans Redeker, currency chief at BNP Paraibas, said the Gulf states may have romanticised Europe’s achievement and need to move with great care to avoid making the same errors.

“The Greek crisis has exposed the weak foundations on which the euro is built. The gap in competitiveness between core Europe and the periphery has grown wider and wider. The obvious mistake was to launch EMU without a central fiscal authority and political union, as the Bundesbank warned in the 1990s,” he said.

“The euro was created for political reasons after the fall of the Berlin Wall to lock Germany irrevocably into Europe. It was not done for economic reasons,” he said.

Ben Simpfendorfer, Asia economist for RBS and an expert on the Middle East, told the FIKR conference that the rise of China had paradoxically disrupted the case for pan-Arab economic integration.

There was a natural fit ten years ago between rich oil state and low-wage manufacturers in Egypt and Syria, but cheap exports from China have forced poorer Arab states to retreat behind barriers to shelter their industries. “The rationale for a single currency has become weaker,” he said.

The GCC also agreed to create a joint military strike force – akin to the EU’s rapid reaction force – to tackle threats such as the incursion of Yemeni Shiite rebels into Saudi territory earlier this year.

This is a major breakthrough after years of deadlock on defence cooperation.

The Sunni Gulf states are deeply concerned about the great power ambitions of Shiite Iran and its quest for nuclear weapons, to the point where the theme of a possible war between Iran and a Saudi-led constellation of states has crept into the media debate.

They nevertheless repeated on Tuesday that “any military action against Iran” by Western powers would be unacceptable.

 

[devil21]

http://www.business24-7.ae/Articles...2272009_b60d075ae8834ca981282abc0ee85802.aspx

12-27-09
A new global currency should replace the US dollar as the international reserve currency, as the long-term deterioration of America's economy and the greenback is fuelling a "currency-regime crisis", says Martin Wolf, associate editor and chief economics commentator of the Financial Times.

Wolf, who has honorary doctorates from three universities, bases his argument in part on the Triffin dilemma, an economic paradox named after economist Robert Triffin. The paradox shows that the US dollar's role as a global reserve currency leads to a conflict between US national monetary policy and global monetary policy. It also points to fundamental imbalances in the balance of payments, particularly in the US current account.

Account deficit

Speaking at an event organised by the Singapore Institute of International Affairs, Wolf said Triffin believed that the host nation of a global reserve currency will inevitably run up a huge current account deficit that would consequently undermine the credibility of its currency and adversely impact the global economy. "You can't have an open globalised economy that relies for its ultimate liquidity on the currency of one country. That was his [Triffin's] argument. And, therefore, he said the Bretton Woods system would break, which it did. And exactly the same thing happened with Bretton Woods II, which is the system of pegging.

"So I agree with this. And I'm absolutely convinced now, in a way that I was not three or four years ago, that we cannot continue with a genuinely global economy which relies on national money, and that's not sold by just adding another couple (of currencies). It actually means having a global money."

Indeed, Wolf said he's in complete agreement with China's Central Bank Governor Zhou Xiaochuan, who has argued for a new global currency "most credibly and convincingly".

"On the dollar, there is nothing to support this currency except the Chinese government and a few other governments that are prepared to buy it," said Wolf. "Anybody can look at the arithmetic of the fiscal deficit, the monetary policy, the external balance, which has improved but largely because of the recession, the dollar is not adequately supported." The US currently has a national debt in excess of $12 trillion (Dh44trn) or almost $40,000 per citizen, with a debt to GDP ratio of more than 85 per cent. In the July-September quarter, the US current account deficit rose sharply by 10.3 per cent from the previous quarter to $108bn. In the past year, the US dollar index, which measures the performance of the greenback against a basket of currencies, has also fallen significantly.

Destabilising euro zone

Apart from the economic risks posed by the decline of the US dollar, China's devaluation of its currency is causing "a real problem" for Europe. The "very perverse currency adjustment" is highly destabilising for the euro zone economy and could create a crisis, said Wolf.

"There is nothing to prevent this, unless the Europeans decide they are going to intervene in the foreign currency market to buy dollars and that would be over (European Central Bank president) Jean-Claude Trichet's dead body."

As there is "no chance" of European governments intervening in the foreign exchange markets to improve the competitiveness of the euro, it will result in major currencies such as the euro and Japan's yen becoming "very vulnerable".

"This is simply the American way of shifting the recession from them(selves) to their trading partners," said Wolf.

"What we need are global currency adjustments and it has to include the renminbi and global macro adjustments in those countries which make this less painful."

"In terms of the impact of this on the role of the US dollar as the currency of denomination for international transactions, basically I think it's become very unreasonable."

"Because the dollar, to my mind, given its underlying conditions, is no longer a credible long-term store of value," said Wolf. The decline of the US dollar underscores a phase of global power transition, with the balance of power moving from the US to Europe, China and India, Wolf argues, adding that the greenback's loss of credibility as the dominant global reserve currency is part of this messy transition.

No credible US policy

"The Americans no longer have the means to save themselves, this is what I think people don't understand. There is no credible American policy," said Wolf.

"We need to discuss this globally in a harmonious way. It's not happening, so at the moment the euro zone is a prime victim and it will continue to be, and that will create very big problems for European-based manufacturers, and quite particularly those that are relatively vulnerable to global price effects.

"And it's a tremendous mess, a horrifying mess and that's where we are, I'm sorry. And we've got to get through this transition as quickly as possible to a more stable global monetary system with a lesser reliance on the dollar. We're going to get there over the next 10 years, I'm sure of it. We're going to get there. The only question we have to decide is, how we're going to get there."
US-China trade

Meanwhile, a trade skirmish between the US and China could ensue, if Beijing continues to devalue its currency to bolster export-driven economic growth at the expense of economic recovery in the US, said Wolf.

He says China is working hard to defend the artificially low value of the renminbi in the hope that exports will pick up when external demand recovers. According to China's customs authorities, exports from January to November plunged by 18.8 per cent to $1.07trn from a year ago. However, according to The Royal Bank of Canada, export growth should pick up in the coming months and reach double-digits in early 2010.

China's efforts, Wolf said, will spark a "very vigorous, even vicious" reaction from the US as it's destabilising US efforts to engender an economic recovery.

 

[devil21]

Chinese bank official admitting they can't finance US deficits any more.

http://www.shanghaidaily.com/sp/article/2009/200912/20091218/article_423054.htm

12-18-09

IT is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.

The comments by Zhu Min, deputy governor of the People's Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of US government bonds.

Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its US$2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.

China's State Administration of Foreign Exchange reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as the country seeks to diversify its investments.

In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.

He then addressed where demand for that debt would come from.

"The United States cannot force foreign governments to increase their holdings of Treasuries," Zhu said, according to an audio recording of his remarks. "Double the holdings? It is definitely impossible."

"The US current account deficit is falling as residents' savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world," he added. "The world does not have so much money to buy more US Treasuries."

China continues to see its foreign exchange reserves grow, albeit at a slower pace than in past years, due to a large trade surplus and inflows of foreign investment. They stood at US$2.3 trillion at the end of September.

 

[devil21]

http://www.cnbc.com/id/34848783

Dollar crisis looms if US doesn't curb debt: Experts 1-13-10
The United States must soon raise taxes or cut government spending to curb its debt, and failure to act will risk a crippling dollar crisis as investor confidence ebbs, a panel of experts said on Wednesday.

"It has got to be done. It will be done some day. It may be done with enormous pain. Or it may be done more rationally," said Rudolph Penner, a former head of the nonpartisan Congressional Budget office who co-chaired the 24-strong Committee on the Fiscal Future of the United States.

President Barack Obama's administration will present his budget for fiscal 2011 early next month amid intense pressure to live up to election campaign promises not to raise taxes on middle class Americans, while confronting a record deficit.

As a result, Obama is expected to focus on long-term fiscal discipline, while maintaining policy support for an economic recovery in the near-term as the country rebuilds after its worst recession since the Great Depression.

The two-year study by the panel, assembled by the highly respected National Research Council and the National Academy of Public Administration, said that the White House had some time on its side to restore growth, but must then act.

"In the next year or two, large deficits and more borrowing are unavoidable given the severity of the economic downturn. However, action ought to begin soon thereafter," they said.

The national debt has risen above 50 percent of GDP (gross domestic product) from 40 percent two years ago, and within 20 years will blow past a previous record above 100 percent of GDP set after World War Two without stern official steps.

Mounting debt could sap investor confidence in the economy, and the nation's ability to honor its obligations, pushing up interest rates and causing a steep fall in the value of the dollar as international creditors seek safer returns elsewhere.

Cut Health Care

The committee identified curbing Medicare, Medicaid and Social Security spending as the top challenge, and had a lukewarm assessment of cost containment in health care reform currently before Congress that Obama hopes to sign soon.

Committee co-chair John Palmer said the reforms might lay the foundation for improvements in the future, but he was skeptical about presumed saving levels and said that "passage would not change in any substantial way our analysis."

The committee, which included three former heads of the CBO, outlined a range of options to lower the ratio of the national debt to 60 percent of the size of the economy.

The 60 percent threshold of debt to GDP, a target that is also used by the nations sharing the euro common currency, was a "judgment choice", said Penner, who is a senior fellow at the Urban Institute, a Washington think-tank.

He said it was deemed to be the most that could be borne without incurring debt levels that would drive up long-term interest rates, and the least that was politically feasible in terms of reductions in government spending.

At one end of the options, the committee reviewed a policy mix based on low spending and low taxes. This envisaged payroll and income tax rates staying as they are, around 18-19 percent of GDP, but healthcare and retirement program costs sharply curtailed and defense and domestic spending cut 20 percent.

The other end of the scale looked at a high spending/high taxes policy mix that would maintain the projected growth in Social Security and allow higher spending on federal programs.

However, this would see taxes rise above 40 percent of GDP, or in the neighborhood of Denmark or Sweden, in order to hold the national debt to 60 percent, unless a value added sales tax was also introduced to augment government revenue.

Between the two were several intermediary solutions relying on a blend of higher taxes and lower spending. The committee made no recommendations but warned there was no time to waste.

"If action is taken soon, the country has a wide choice of options to help achieve fiscal sustainability. All are difficult; but if action is postponed, the options will be fewer and the choices even more difficult," they said.

 

[devil21]

http://www.ft.com/cms/s/0/22f1bd26-05db-11df-8c97-00144feabdc0.html

1-20-10
Russia’s central bank announced on Wednesday that it had started buying Canadian dollars and securities in a bid to diversify its foreign exchange reserves.

Analysts said the move could be a sign of increased diversification of emerging market central bank assets away from the dollar and into investments denominated in other commodity-linked currencies, such as the Australian dollar.

Adam Cole at RBC Capital Markets said if taken in isolation, Russia’s announcement that it was buying Canadian dollars was not significant, but if it was part of a broader trend, then it was an important step.

“If it is a barometer for the activity of other central banks, then its is structurally positive for the currencies of countries like Canada and Australia that have a commodity bias in their economies,” he said.

Although not officially confirmed, traders said that other emerging market central banks, including some in Asia which hold large foreign exchange reserves, have also been active in the foreign exchange market in recent weeks buying both Canadian dollars and Australian dollars.

Alexei Ulyukayev, first deputy chairman of Russia’s central bank, said that it would invest in Canadian dollar-denominated deposits and bonds.

“The Canadian financial market is not very deep, so we can invest in deposits in significant volumes, while the bond market is limited,” he said.

Although the central bank did not specify how much of its reserves it was allocating to assets denominated in the Canadian dollar, analysts estimated that the central bank could put up to $9bn, or 2 per cent, of its foreign exchange reserves into the currency.

Russia’s foreign exchange reserves, the world’s third largest, stood at $439bn at the end of December. These stockpiles have grown by 14 per cent since the start of the rally on global asset markets in March as rising commodity prices have boosted mineral-rich Russia’s coffers.

Ahead of Wednesday’s announcement, Russia’s foreign exchange reserves were evenly split between dollar and euros.

Alarmed at the plummeting value of the dollars in its holdings, Russia has been at the vanguard of countries calling for the US authorities to stem the fall of its currency. Last year, along with China, Russia urged the creation of a new supra-national currency to replace the dollar as the world’s reserve currency.

The dollar has fallen more than 12 per cent on a trade-weighted basis since March. Commodity-linked currencies have rallied strongly, however, with the Canadian dollar up 24 per cent against the US dollar over that period and the Australian dollar 40 per cent higher.

This has prompted Russia to diversify its holdings. Indeed, in addition to its plans to buy Canadian dollars, Sergei Ignatiev, chairman of the Russia’s central bank, said last month that its was “discussing the possibility” of buying Australian dollars.

But some analysts warned that emerging market central banks might be in danger of buying commodity-linked currencies at the top of the market.

“In the long run it makes perfect sense for emerging market countries to diversify into commodity linked currencies,” said Simon Derrick at Bank of New York Mellon.

“But in the short-term, I would urge caution given that many commodity-linked currencies currently stand at extremely high levels on a historical basis.

 

[Zippyjuan]

A weaker dollar will help slow the flow of jobs outside the country (of course China has to let it go lower relative to its currency as well) as it causes the price of our imports to go up but the price of our exports to go down. This will help the trade imbalances we currently have. Having a strong dollar for a long time helped start the jobs exidus many years ago as manufacturers sought out cheaper labor to produce their goods.