Death Of The Dollar

[Mikhail Liebenstein]

http://www.telegraph.co.uk/finance/economi...the-dollar.html

This is an interesting story to follow. I bought the book Demise of the Dollar and how its great for your investment some years ago. An even with the recent rebound and subsequent fall back, the story hasn't changed - the Dollar looks like it is finished in the medium to long term.

Personally I don't think this will fix until the US and Europe are able to compete with the low cost producers thus resolving all the imbalance. It may not be so much a case of our currencies deflating in value, but perhaps their's inflating and certainly there is some evidence that recent company moves to China have not saved firms any money.

For me the headline issue is that the Yuan is artificially low and that is driving the imbalance. Taht said, China's addition to the world economy has so far added just 200m people to the world of middle class consumerism - it is less clear whether the rest of the rural peasantry are or will have any effect of further driving down global wage levels as they aren't going to have any impact until they are doing global economy type jobs. So I can see the negative effect of China on global wages eventually stalling, with perhaps a middle class of 200 odd million.

[Guest UK Debt Slave]

http://www.telegraph.co.uk/finance/economi...the-dollar.html

This is an interesting story to follow. I bought the book Demise of the Dollar and how its great for your investment some years ago. An even with the recent rebound and subsequent fall back, the story hasn't changed - the Dollar looks like it is finished in the medium to long term.

Personally I don't think this will fix until the US and Europe are able to compete with the low cost producers thus resolving all the imbalance. It may not be so much a case of our currencies deflating in value, but perhaps their's inflating and certainly there is some evidence that recent company moves to China have not saved firms any money.

For me the headline issue is that the Yuan is artificially low and that is driving the imbalance. Taht said, China's addition to the world economy has so far added just 200m people to the world of middle class consumerism - it is less clear whether the rest of the rural peasantry are or will have any effect of further driving down global wage levels as they aren't going to have any impact until they are doing global economy type jobs. So I can see the negative effect of China on global wages eventually stalling, with perhaps a middle class of 200 odd million.

Wouldn't ya just love to know what the story is behind those two japanese guys caught with $134 billion US treasuries?

Kinell!

What a story!

I doubt if we'll ever find out what that was all about

[Laura]

http://www.telegraph.co.uk/finance/economi...the-dollar.html

the Dollar looks like it is finished in the medium to long term.

Do want to put a more accurate time scale on that Mike?

Edited June 21, 2009 by Laura

[Mikhail Liebenstein]

Do want to put a more accurate time scale on that Mike?

4-8 years and it will cease to be the Global Reserve Currency.

Euro will take the lead first.

[Errol]

One assumes the Chinese dont want to have a hit in the $ portfolio.

If the Chinese take the hit in their $ what are their long term gains? Come to think of it what are the long term gains to be had by BRIC if the $ does take a hit?

The only advantage I see the US has is military technology. Thats the only way they can still rule but they are already selling some off to China.

They are playing the long game. Slow diversification out of the dollar - into commodities, gold, other currencies, companies, assets etc etc etc.

[CokeSnortingTory]

One thing that interests me with regard to China's dollar holdings is what if the Fed loses its battle against deflation? They certainly aren't winning it at the moment.

Bernanke seems to be following a half-way house policy of QE, but not enough to increase velocity. This in itself might be due to opaque Chinese threats to sell treasuries.

So if the Chinese can help keep the US in deflation, their US treasury holdings must surely remain a good investment (and an anchor around the USA's neck)?

[Laura]

4-8 years and it will cease to be the Global Reserve Currency.

Euro will take the lead first.

Thxs. I was concerned for a moment as the USD seems a good buy; for the short term.

Euro going under before GBP? - because of the problems in the near east?

[interestrateripoff]

One thing that interests me with regard to China's dollar holdings is what if the Fed loses its battle against deflation? They certainly aren't winning it at the moment.

Bernanke seems to be following a half-way house policy of QE, but not enough to increase velocity. This in itself might be due to opaque Chinese threats to sell treasuries.

So if the Chinese can help keep the US in deflation, their US treasury holdings must surely remain a good investment (and an anchor around the USA's neck)?

Seems plausible, debt is a killer.

Trouble is China needs someone to buy it's goods. Catch 22.

[Cinnamon]

4-8 years and it will cease to be the Global Reserve Currency.

Euro will take the lead first.

So, the US will cease to have a huge, modernised and productive population and they'll all disperse onto the land to henceforth live as humble, green peasants in stoneage manner?

Even if they throw the Euro and the Dollar out and start with a new currency after a Jubilee of some sort, whatever replaces it will have quite some clout because trade goes both ways and no-one can afford not to trade with the with each other.

[Harry North]

4-8 years and it will cease to be the Global Reserve Currency.

Euro will take the lead first.

There is not even a one percent chance that the USD will cease to be the world's reserve currency in the next ten years - the talk of SDRs is just that - talk.

[Orbital]

What does all this mean for house prices?

[porca misèria]

4-8 years and it will cease to be the Global Reserve Currency.

Euro will take the lead first.

That would be a dismal failure to learn the lessons of history. The Euro has the same underlying issue as the dollar: namely it's controlled by an entity that represents just one part of the world.

And it's not even backed by very much military force ...

[Deckard]

There is not even a one percent chance that the USD will cease to be the world's reserve currency in the next ten years - the talk of SDRs is just that - talk.

+1

and the BRICS cannot agree anyhting beween themselves, they are worse than the ECB

[lowrentyieldmakessense(honest!)]

yep

cant be long now

before 2012 it will cease to be the world reserve currency.

may happen a lot sooner

http://www.truthdig.com/report/item/200906...re_is_bankrupt/

This week marks the end of the dollar’s reign as the world’s reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That’s over. It is not coming back. And what is to come will be very, very painful.

Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America’s imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.

There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.â€

It is the first formal step by our major trading partners to replace the dollar as the world’s reserve currency. If they succeed, the dollar will dramatically plummet in value, the cost of imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe. Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak. And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered working and middle class. The people of this class will demand vengeance, radical change, order and moral renewal, which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News, will assure the country they will impose.

I called Hudson, who has an article in Monday’s Financial Times called “The Yekaterinburg Turning Point: De-Dollarization and the Ending of America’s Financial-Military Hegemony.†“Yekaterinburg,†Hudson writes, “may become known not only as the death place of the czars but of the American empire as well.†His article is worth reading, along with John Lanchester’s disturbing exposé of the world’s banking system, titled “It’s Finished,†which appeared in the May 28 issue of the London Review of Books.

“This means the end of the dollar,†Hudson told me. “It means China, Russia, India, Pakistan, Iran are forming an official financial and military area to get America out of Eurasia. The balance-of-payments deficit is mainly military in nature. Half of America’s discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don’t have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America’s military aggression against them. They want to get rid of this.

[Meerkat]

4-8 years and it will cease to be the Global Reserve Currency.

Euro will take the lead first.

Really? Any idea what the banking losses will be in Europe? Well, for example:

1. Total lending to emerging markets is now some $4.7 trillion.

2. 74% of that was lent by European banks.

3. Both Austria and Netherlands have lent more than 50% of their

GDP to foreign developing nations.

The problem with Europe is that the capital markets are organised in a different manner (except for Ireland and the UK) and the true picture will be revealed a bit later. PIIGS would be difficult enough for Europe let alone emerging markets.

BRICS?? Anyone has any info on how much, for example, Russian corporates need to roll (or re-pay) in dollars by the end of 2009? It will be an interesting show later in the year - not sure Russian reserves, that have collapsed already in their futile attempts to manage a controlled devaluation of rouble, will be enough if international bond buyers refuse to roll.

Brazil? How about them lending 4bn to Chavez and a billion to Correa? Safe investments, right... China? Surely we all know their strong points, but aren't they now doing a bold credit expansion after they were also teetering on the brink of recession as gobal demand fell for manufacturing goods?

Unless there is some conspiracy, I don't see it as anything guaranteed that $$$$ falls as the reserve ccy in medium term: plenty of debts to be repaid and, if no conspiracy, the US got to be realising that they need a strong dollar to preserve their influence, i.e. at a point they will have to stop printing? Not least, can anyone show any other serious country where market is closer to free market standards than in the US despite Obama's recent jokes? Where else in the world has anyone seen/heard of senators or population expressing their concern about state intervention so loudly as in the US? It's (the US) not ideal or anywhere near that, but which is the alternative at this stage? Is the market stupidity the reason why Russia, China, Brazil or India's CDS are all significantly wider that that of the US?

Not a US bull outright, but I don't get how and why, on relative terms, someone would write down the US.

[Deckard]

Really? Any idea what the banking losses will be in Europe? Well, for example:

1. Total lending to emerging markets is now some $4.7 trillion.

2. 74% of that was lent by European banks.

3. Both Austria and Netherlands have lent more than 50% of their

GDP to foreign developing nations.

The problem with Europe is that the capital markets are organised in a different manner (except for Ireland and the UK) and the true picture will be revealed a bit later. PIIGS would be difficult enough for Europe let alone emerging markets.

SNIP

Not a US bull outright, but I don't get how and why, on relative terms, someone would write down the US.

Very well put, Meerkat - I fully concur, particularly with the Euro bit.

I see you are living in Milan, which I'm sure gives you full visibility of how absurd and harmful the Euro is to the PIIGS economies.

Can I just ask out of curiosity, did you STR in the UK and relocate to Italy?

Edited June 22, 2009 by VoteWithYourFeet

[scottbeard]

There is not even a one percent chance that the USD will cease to be the world's reserve currency in the next ten years - the talk of SDRs is just that - talk.

Who would have thought in 1930 that by 1940 most of Europe would have been occupied by a hostile Germany?

Who would have thought in 1980 that by 1990 the Berlin Wall would fall?

Who would have thought in 2009 that by 2019 the USD would be replaced as the world's reserve currency?

I'm not saying it'll happen, but you've got to give it more than <1%.

[lowrentyieldmakessense(honest!)]

There is not even a one percent chance that the USD will cease to be the world's reserve currency in the next ten years - the talk of SDRs is just that - talk.

Rule Britannia

[Guest Parry]

Rule Britannia

http://www.flowercarole.com/

Berry Madness Smoothie

(serves 2-3)

Ingredients

1/2 medium cup of blackberries

1/2 medium cup of slices strawberries

1/2 small cup of raspberries

1/2 small cup of blueberries

1 1/2 medium size cups of milk

6 ice-cubes

sugar if desired

Method

Blend all ingredients till smooth. If preferred, sieve seeds out before serving and add sugar according to taste. Serve.

Thank you to Trixie Cortes for this recipe.

[Meerkat]

Very well put, Meerkat - I fully concur, particularly with the Euro bit.

I see you are living in Milan, which I'm sure gives you full visibility of how absurd and harmful the Euro is to the PIIGS economies.

Can I just ask out of curiosity, did you STR in the UK and relocate to Italy?

I'm neither English nor Italian. Had to relocate (restructuring due to cost saving) or become redundant and I did not take risks ... And indeed - if you think grass is greener in the continent, think twice... If somebody thinks London (or England) is a sh1thole, think twice... London, on balance, is and will remain one of the very few GREAT cities of the world. Absurdity - a great way to describe many things here. Once you have to do business here as a local, not a tourist, you start wondering why this place has not gone down the drain yet. Just a few examples: you have to pay a tax to the govy if you have a current account here... (a few EUR per 3 months), I have to pay some tolls (0.5EUR each payment, not a fee imposed by the bank) when paying my electricity and energy bills.. basically, got to pay a tax because I pay for something. And, I kid you not, some time ago in local media there was a serious discussion about rain tax - people were arguing if a council was OK to impose an extra tax due to too little or too much rain (don't remember exactly which way) as it meant more work to clean up streets. And people support this system, it's incredible... my Italian teacher could not think of anything wrong with the govy imposing tax on current accounts - it's not a lot you know... Of course, you understand why it's happening - the bloated public sector debt. So you better guys stop Darling or you will hv some funny taxes soon

Now, harmful EUR? Yes, had a business visitor from New York recently, complained about how expensive Italian cities can be. Maybe some "oligopoly" controls pxs here or what, beer is as expensive and even more than in Oslo airport - expect to pay 8-9 EUR for 0.4L in the very centre, freaking 8 pounds, and it's not even a pint. OK, 4-5EUR outside the central Milan, in some small villages in mountains, but it's still crazy..it's not even a pint and it's not London. OK, not everything so expensive, many things are better and cheaper (food, housing), but for a business visitor - beer, hotel, decent restaurant, a bit eye watering expecially given the expectations you were coming to the south of Europe, not London.

[Guest Parry]

I'm neither English nor Italian. Had to relocate (restructuring due to cost saving) or become redundant and I did not take risks ... And indeed - if you think grass is greener in the continent, think twice... If somebody thinks London (or England) is a sh1thole, think twice... London, on balance, is and will remain one of the very few GREAT cities of the world. Absurdity - a great way to describe many things here. Once you have to do business here as a local, not a tourist, you start wondering why this place has not gone down the drain yet. Just a few examples: you have to pay a tax to the govy if you have a current account here... (a few EUR per 3 months), I have to pay some tolls (0.5EUR each payment, not a fee imposed by the bank) when paying my electricity and energy bills.. basically, got to pay a tax because I pay for something. And, I kid you not, some time ago in local media there was a serious discussion about rain tax - people were arguing if a council was OK to impose an extra tax due to too little or too much rain (don't remember exactly which way) as it meant more work to clean up streets. And people support this system, it's incredible... my Italian teacher could not think of anything wrong with the govy imposing tax on current accounts - it's not a lot you know... Of course, you understand why it's happening - the bloated public sector debt. So you better guys stop Darling or you will hv some funny taxes soon

Now, harmful EUR? Yes, had a business visitor from New York recently, complained about how expensive Italian cities can be. Maybe some "oligopoly" controls pxs here or what, beer is as expensive and even more than in Oslo airport - expect to pay 8-9 EUR for 0.4L in the very centre, freaking 8 pounds, and it's not even a pint. OK, 4-5EUR outside the central Milan, in some small villages in mountains, but it's still crazy..it's not even a pint and it's not London. OK, not everything so expensive, many things are better and cheaper (food, housing), but for a business visitor - beer, hotel, decent restaurant, a bit eye watering expecially given the expectations you were coming to the south of Europe, not London.

May I just say, you're English is superb.

[huw]

Who would have thought in 1930 that by 1940 most of Europe would have been occupied by a hostile Germany?

That's an illuminating example, actually. It hardly supports the argument that USA power and influence "is over" simply because they're having a spot of bother with a potential hyperinflationary collapse

[porca misèria]

1/2 medium cup of blackberries

1/2 medium cup of slices strawberries

1/2 small cup of raspberries

1/2 small cup of blueberries

Aaargh! *something* of that must be out-of-season. And if you try to blend blackberries, you end up with a horrible gritty texture.

Anyway, blend up some double cream until it's nearly-butter. Add any or all of the above fruits except blackberries, and blend it in. Yum! You can start that generic recipe in April with rhubarb as the fruit-in-season, and continue through to plums in the autumn (while using blackberries in recipes that don't involve the blender). But right now in late june, gooseberries are the best of all!

[corevalue]

May I just say, you're English is superb.

Oh Parry, you just made me spray my single malt all over the screen. Not being a nal, but........

"May I just say, your English is superb."

Edited to avoid ridiculous auto-censor.

Edited June 23, 2009 by corevalue

[Executive Sadman]

http://www.telegraph.co.uk/finance/economi...the-dollar.html

This is an interesting story to follow. I bought the book Demise of the Dollar and how its great for your investment some years ago. An even with the recent rebound and subsequent fall back, the story hasn't changed - the Dollar looks like it is finished in the medium to long term.

Personally I don't think this will fix until the US and Europe are able to compete with the low cost producers thus resolving all the imbalance. It may not be so much a case of our currencies deflating in value, but perhaps their's inflating and certainly there is some evidence that recent company moves to China have not saved firms any money.

For me the headline issue is that the Yuan is artificially low and that is driving the imbalance. Taht said, China's addition to the world economy has so far added just 200m people to the world of middle class consumerism - it is less clear whether the rest of the rural peasantry are or will have any effect of further driving down global wage levels as they aren't going to have any impact until they are doing global economy type jobs. So I can see the negative effect of China on global wages eventually stalling, with perhaps a middle class of 200 odd million.

Yes, I think a lot of people Misinterpretate people like Jim rogers when they talk of Asia being the future. Undoubtably from an investment point of view, £1000 invested in China today or Europe today will almost certainly do far better in China come 20 years time.

On the other hand, for the average man on the street he shouldnt consider doing a Jim Rogers and move to Singapore (or for that matter China). Our living standards will decline, and theres will increase, but its so low over there it will take a lot more than 20 years to equalize IMO.