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Peter Hun

Bernanke Hints Dollar Standard Is Flawed

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Bernanke hints dollar standard is flawed

Posted by Izabella Kaminska on Nov 22 08:23.

Blink and you may have missed it.

But last Friday, Ben Bernanke probably made his most important speech since his ‘helicopter money‘ talk almost eight years ago.

According to author and economist Richard Duncan this is the first time the Federal Reserve chairman has publicly pointed out that the international monetary system may have a structural flaw. In the dollar standard.

As Duncan told FT Alphaville this weekend:

In it he conceded the Dollar Standard is flawed. He said, “As currently constituted, the international monetary system has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances.”

With that statement, the Fed revealed it has been won over by the logic expressed in my book, The Dollar Crisis (John Wiley & Sons, updated 2005). The first two lines of that book state: “The principal flaw in the post-Bretton Woods international monetary system is its inability to prevent large-scale trade imbalances. The theme of The Dollar Crisis is that those imbalances have destabilized the global economy by creating a worldwide credit bubble.”

Never before has a senior US policymaker admitted that the Dollar Standard is flawed. Former Fed Chairman Greenspan wrote in his autobiography that the trade deficit was far down the list of things the United States needed to worry about. With this speech, the Fed abandoned that position.

According to Duncan — who largely predicted the subprime crisis in his 2005 published The Dollar Crisis — Bernanke may be alerting the world to the most important shift in US trade policy in more than a generation.

What’s more, since the flaw has now been declared, Duncan believes the world should expect the Fed or the US to do something about it relatively soon.

As Duncan expresses:

The world has been put on notice that the United States will take steps to correct this defect and the destabilizing trade imbalances it permits. If the flaw cannot be corrected through international coordination, then unilateral actions by the United States should be anticipated. These actions would likely include trade tariffs. Tariffs would have a devastating impact on the countries pursuing an export-led growth strategy, particularly China.

The United States last resorted to trade tariffs in 1971 when the Bretton Woods system collapsed. At that time President Nixon imposed a 10% “surcharge” on all imports.

Which essentially means: trade wars cometh.

To read the full text of Bernanke speech see here.

http://www.federalreserve.gov/newsevents/speech/bernanke20101119a.htm

http://ftalphaville.ft.com/blog/2010/11/22/411951/bernanke-hints-dollar-standard-is-flawed/

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All I can say is, this is brilliant.

To fix a problem you have to identify you have one and to identify it correctly.

It'll be tough getting a long term resolution and things are bound to get very much worse before they get better, but at least we're on the path.

but, Bernanke in his book says the reason the depression went on so long was due to the lack of liquidity.

one wonders how bankers survived for so long in the depression if that really was the case.

Now we see living reasons of why they did.

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Have you read his book?

One of the key analyses was that whilst credit was still made available, the cost and conditions for riskier borrowers rose. That is why he concentrates so much on driving down the costs of credit for all borrowers.

It will be interesting to see the side effects of his solution to one particular problem. Will it 'bubble' up somewhere else?

I havent, but it is often referred to by the Mises people when they look at WHY he is doing what he is doing.

I trust they arent lying about his beliefs.

bubble up elsewhere, now, if I was to hazard a guess, I would suggest that bailing Soveriegns might run out of cash, but, that would be years away.

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One of the key analyses was that whilst credit was still made available, the cost and conditions for riskier borrowers rose.

Yes thats what happens its a good thing. Pricing in risk is normal.

That is why he concentrates so much on driving down the costs of credit for all borrowers.

Oh no apparently rpicing risk correctly is not a good thing.

This is the reason an academic should never have been allowed near the job.

Epic fail Ben utterly clueless.

Oh BTW just before anyone tells me Ben is great lets be reminded that:

BEN WAS ADAMANT THAT REAL ESTATE VALUES IN THE US WOULD NOT FALL AND THAT IF THEY DID IT WOULD NOT HAVE A DETRIMENTAL EFFECT ON THE US ECONOMY.:lol::lol:

The guy is a first rate economic loon.

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I don't think it really matters what currency oil is priced in, what matters is who controls the supply.

Er, no. The pricing of commodities in USD gives it a massive advantage, one that they black mailed Britain to obtain after WW2.

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Er, no. The pricing of commodities in USD gives it a massive advantage, one that they black mailed Britain to obtain after WW2.

Just how does that work then. You mean I can't use Euros, Sterling etc to buy oil?

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No, you have to use US Dollars

http://en.wikipedia.org/wiki/Dollar_hegemony

Thanks, but that link doesn't mean you have to pay in dollars, it just means that it is quoted in dollars. You can pay for it in any currency, just at the prevailing exchange rate.

The fact that oil is quoted in dollars really does not have any significance.

Perhaps at the outset (70's), the dollar issue was more important, because there were far fewer convertible currencies. For example, the Soviet currency would not have been valid. Now, however, that really doesn't make any difference.

[Edit:] Oops. Far fewer convertible currencies might not be correct with the introduction of the Euro. Would need to check. But the message is the same. Any convertible currency can be used.

Edited by Toto deVeer

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More explanation here

http://www.sacw.net/free/rohini_marinella30012005.html

Basically, one of the advantages is that countries have to keep a (few?) trillion dollars available to buffer purchasing of goods. China for instance his hundreds of billions of dollars that they cannot easily dispose of as it would drive down the value of the remaining holdings. And whereas the rest of the world needs to work to earn dollars, the US can simply print as much as they want, forcing inflation onto the rest of the world while reducing its own debts.

Edited by Peter Hun

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Thanks, but that link doesn't mean you have to pay in dollars, it just means that it is quoted in dollars. You can pay for it in any currency, just at the prevailing exchange rate.

The fact that oil is quoted in dollars really does not have any significance.

Perhaps at the outset (70's), the dollar issue was more important, because there were far fewer convertible currencies. For example, the Soviet currency would not have been valid. Now, however, that really doesn't make any difference.

[Edit:] Oops. Far fewer convertible currencies might not be correct with the introduction of the Euro. Would need to check. But the message is the same. Any convertible currency can be used.

I think the fact that most debt outstanding in the world is denominated in dollars is far more important, as the debt interest is actually linked to the price of dollars (dollar interest...)

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And if the Arabs price oil in their own currency what then for the US?

Duh false flag attack then bombing to 'destroy the terrorists' and to 'take their oil into trusy for the good of the people'

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I think the fact that most debt outstanding in the world is denominated in dollars is far more important, as the debt interest is actually linked to the price of dollars (dollar interest...)

Yes this is a major benefit, as well as the fact that international trade can be settled in dollars throughout most of the world.

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Duh false flag attack then bombing to 'destroy the terrorists' and to 'take their oil into trusy for the good of the people'

But most currencies in the oil states of the Gulf are fixed to the dollar so they are effectively dollars anyway.

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But most currencies in the oil states of the Gulf are fixed to the dollar so they are effectively dollars anyway.

True and when you own the magic printing press for dollars.

The fun and games begins when they decide they don't want to sell in dollars. At which a the above happens and the people are murdered liberated.

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True and when you own the magic printing press for dollars.

The fun and games begins when they decide they don't want to sell in dollars. At which a the above happens and the people are murdered liberated.

Some years ago a good colleague of mine who happens to be a Muslim confided with me that there was a famous Islamic cleric and oracle who had famously predicted a number of historical events.

His major prediction (about 20 years ago) was that the Islamic world would move to a single currency backed entirely by gold.

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But most currencies in the oil states of the Gulf are fixed to the dollar so they are effectively dollars anyway.

No they are not effectively dollars. You wouldn't call the Yuan a US Dollar would you?

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  • 149 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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