Dollar Blow From Vietnam And Qatar

[madasafrog]

Telegraph article

Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets.

The Saigon Times said this morning that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc.

Vietnam, which has mid-sized reserves of $40bn, is seen as weather vane for the bigger Asian powers.

Together they hold $3,575bn of foreign reserves, over 65pc of the world's total. China leads with $1,340bn, but South Korea, Taiwan, Singapore, and even Thailand all built up massive holdings.

The concern is that once one or two members of the region jump ship, it could set off a broader scramble. None of them want to be the last one left holding a devalued asset. Vietnam's central bank said this week that it would move "gradually" to a floating currency.

Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia.

The move is intended to increase long-term returns for future generations, but it can easily be seen as a vote of no confidence in US economic management.

The drastic shift by the Qatar Investment Authority is a warning that petro-dollar powers with some $3,500bn under management may pull the plug on the heavily endebted US economy -- which needs to suck in the majority of the world's savings just to stay afloat.

"OPEC and Asia have been the two blocks funding the US current account deficit," said Hans Redeker, currency chief at BNP Paribas.

"Vietnam is a relatively small country but it is symptomatic of Asia. The entire region is seeing inflation move up as a result of mercantilist policies of holding down their currencies with 'dirty floats', which are designed to help their export sectors. They need to change monetary policy, " he said.

There have been reports that China is already pulling out of US bonds to fund its new sovereign wealth fund. Foreign central banks slashed holdings by $32bn in the last two weeks of August. We will not know which country was responsible the Treasury's TIC data is released in November.

Japan also has colossal reserves, now near $914bn, but it is does not face the same inflationary threat as the rest of Asia, and is in any case an intimate military ally of the United States.

It is likely to coordinate its dollar policy very closely with Washington for geo-strategic reasons.

Saudi Arabia set off jitters in the currency markets last month when it decided not to cut interest rates in lockstep with the US Federal Reserve, raising doubts about its commitment to the Saudi dollar peg. But it too has strong political reasons to stick with America.

Kuwait has already abandoned its peg, fearing that its economy would overheat if it continued to import America's loose monetary policies.

Separately, Iran said it would soon refuse to accept dollars for its oil exports, preferring to be paid in a "more credible currency".

It already receives 65pc of payments in euros and 20pc in yen, but insisted that the remaining 15pc in dollars entailed an excessive risk of devaluation.

The demarche is largely policitcal, since oil is a fungible commodity and the currency markets are highly liquid.

However, if a number of OPEC suppliers began demand long-term futures contracts in euros instead of dollars, this would have an impact over time.

[council dweller]

What an irony! Vietnam has reserves of 40 billion dollars but the U.S. Federal reserve

only has about $ 66 billion worth of foreign currency, not all that much more.

Maybe Vietnam can dump their dollars and so get a tiny bit of revenge on their former

enemy !? Especially if they can start a chain reaction among other asian countries.

Revenge tastes sweetest when served cold ,so they say........prefer a nice curry myself though.

[Guest mattsta1964]

Telegraph article

The end of dollar hegemony

The end of empire

The end of endless undeclared war and mayhem

There will be major upheavals in the global economy as the dollar dies. Looking further ahead, it'll probably be a good thing. Bush could do something really dumb like a premptive nuclear strike against Iran but it'll just accelerate the demise of the US economy....and everyone elses

[The Bachelor of Arts]

Wow! Interesting. I believe that the dollar slide will either be orderly down to 40 on the index over say 4 years (unlikely), or a quickening rush to the exits. Like an object slowly tipping off a cliff and gaining more momentum to the downside as it goes.

If more of the smaller nations do bail and the dollar starts to go, it will be interesting to see how long Japan and Saudi are able to hold out for.......Saudi I'm sure can always make the same 'power' deals with China that they have done with the US since the early 70's. After all, money and power are fickle mistresses who are only loyal to the present circumstances.

[Goldfinger]

The run on the Dollar seems to gain momentum. I hope everyone on this board understands how serious this is. The Dollar is THE world reserve currency, i.e. we are facing a global monetary crisis here. Think of Vietnam and Kuwait as of the first people who queued up at Northern Rock, only that there is no BoE who can bail out the Dollar. The allies/vasals of the American Empire (Europe, Japan) will do everything to stop this, i.e. they will wreck their own currencies voluntarily and will let them sink alongside with the USD.

Get out of fiat now.

Edited October 3, 2007 by Goldfinger

[huw]

The subtext is that Asian countries that have been intervening to keep their currencies competitive, will now allow those currencies to float. The question is, will the spring that they have compressed so tightly now smack them in the face as it uncoils? It means fewer US imports, tougher markets for these emerging economies (in a world where a downturn is already looming), and eventually a resurgence of US exports.

Despite the fact that it will bring short/medium term pain to the West, in the long run this was necessary (and inevitable).

[Goldfinger]

... in the long run this was necessary (and inevitable).

Absolutely. Under a gold standard, it would not have happened first place (i.e. no pain at all!).

[madasafrog]

The end of dollar hegemony

The end of empire

The end of endless undeclared war and mayhem

There will be major upheavals in the global economy as the dollar dies. Looking further ahead, it'll probably be a good thing. Bush could do something really dumb like a premptive nuclear strike against Iran but it'll just accelerate the demise of the US economy....and everyone elses

Maybe we could see a change in fortunes for the 2 superpowers. Not too many years ago the US was the superpower flush with a thriving economy while Russia suffered with a collapsing economy. Now we have Russia's economy thriving through its oil & gas industry. How long before we see a failed US economy and a Russia brimming with economic power. How will the US cope with no longer being the economic and military world leader?

[Confounded]

The run on the Dollar seems to gain momentum. I hope everyone on this board understands how serious this is. The Dollar is THE world reserve currency, i.e. we are facing a global monetary crisis here. Think of Vietnam and Kuwait as of the first people who queued up at Northern Rock, only that there is no BoE who can bail out the Dollar. The allies/vasals of the American Empire (Europe, Japan) will do everything to stop this, i.e. they will wreck their own currencies voluntarily and will let them sink alongside with the USD.

Get out of fiat now.

Has the Dollar gone to far to be supported by higher FED rates, or would the damage to the Economy offset any of the perceived benefit?

[huw]

Has the Dollar gone to far to be supported by higher FED rates, or would the damage to the Economy offset any of the perceived benefit?

Do US policy-makers feel any need to support the $ in any case? They have been griping about Asian currencies being artificially low for some time now. So what if imported manufactured goods get more expensive? It just means US consumers will be able to buy less junk.

Now if oil were priced in euros it might be different...

[R K]

So what is the non-panic scenario for

1. US

2. UK/Europe

of a much weaker dollar and sell-off as a reserve currency.

(If possible without mentioning guns, woods, tinned beans, mushroom clouds and gold)

ta.

[The Bachelor of Arts]

the Fed could support the dollar with substantially higher interest rates, but at the expense of the next election for the Repulicans - plus depression, etc,. It is what is categorically required to save the US economy in the medium term.

They have decided to let the dollar go.....if this becomes a global rout, I believe that other govts would not be able to debase their currencies fast enough anyway. They could buy up the dollars in a JP Morgan style vote of confidence, but that would surely lead to bankruptcy on their part.

Not being a conspiracy theorist by nature, a deliberate run on the dollar would wash away the excesses and debts of society - at a huge cost to the non-elite members of the world (i.e. pretty much everyone), and would pave the way for the Amero - provided you could get the Canadians to accept it. So we are either dealing with incompetence on a grand scale and an inability for the US govt to do the right thing to save the economy..........or this is part of a grand plan.

Please note - all elite money is bailing out of equities and buying the following: Agricultural land, harbours, bridges, toll roads, etc,. It's like the industrial revolution has finally (almost) completed one full turn and the elite will be the landowners again with us serfs paying to farm/use/ live of it.

[Wlad]

The run on the Dollar seems to gain momentum. I hope everyone on this board understands how serious this is. The Dollar is THE world reserve currency, i.e. we are facing a global monetary crisis here. Think of Vietnam and Kuwait as of the first people who queued up at Northern Rock, only that there is no BoE who can bail out the Dollar. The allies/vasals of the American Empire (Europe, Japan) will do everything to stop this, i.e. they will wreck their own currencies voluntarily and will let them sink alongside with the USD.

Get out of fiat now.

Why would Europe and Japan necessarily trash their own currency and economy too?

[Wlad]

The US and UK airforce are starting night exercises over East Anglian this week so my guess its preperations for war with Iran becuase this was on the local news.

The US fleet held exercises in the gulf this time last year. Nothing happened afterwards.

[council dweller]

The subtext is that Asian countries that have been intervening to keep their currencies competitive, will now allow those currencies to float. The question is, will the spring that they have compressed so tightly now smack them in the face as it uncoils? It means fewer US imports, tougher markets for these emerging economies (in a world where a downturn is already looming), and eventually a resurgence of US exports.

Despite the fact that it will bring short/medium term pain to the West, in the long run this was necessary (and inevitable).

I take your point about Asian economies being damaged by an extremely weak dollar but

aren't they tough enough to shrug this off?

No doubt all Asian countries are aware that the U.S is in terminal decline and will

adjust themselves to the new world order.

Although Vietnam , China and Japan all have very different post war (ww11) histories,

the one thing we can count on is their survivability !

I'd be more concerned about lardy old Britain if I were you! I guess you are though.

[Moo]

The US and UK airforce are starting night exercises over East Anglian this week so my guess its preperations for war with Iran becuase this was on the local news.

Absolutely nothing unusual about this.

On something of a tangent, for those of you who want to play predict-a-war, give www.globalsecurity.org a go, and keep your eyes on troop movements. It's a surpisingly objective and accurate site, given the nature of what it covers. It gave me a 9 month heads up on the invasion of Iraq (no-one moves *that* much hardware if they ain't going to use it), and if anyone thinks that wasn't planned years in advance... they're full of poop.

[Goldfinger]

Why would Europe and Japan necessarily trash their own currency and economy too?

Why not? Japan has already. Just look what they did over the last 18 years. Britain is similar. Sold all their gold to please the US. We are only vasals.

No doubt all Asian countries are aware that the U.S is in terminal decline and will

adjust themselves to the new world order.

I am not entirely sure. Yes, there is some reaction. But my impression is that many Chinese still think the Dollar is as good as gold. The pending Chinese hyperinflation might end this delusion.

[Wlad]

Why not? Japan has already. Just look what they did over the last 18 years.

So you are saying that Japan for some reason voluntarily trashed its own economy? What a load of rubbish! It was that events occured that they couldn't get out of, e.g. a recession that affected the USA, UK, Europe, too. Mismanagement? Entirely possible? Intentional economic hari-kari? I doubt it.

[Goldfinger]

Intentional economic hari-kari?

I absolutely think so. The Japanese are masters of currency manipulation. They have played for many years exactly the same game as China does at the moment: keeping their currency cheap for the exports. Then things went belly up. Did they properly fix it? Did they use their hundreds of billions of USD reserves to fix it? No! Instead they flooded the world with cheap money. At some stage the chickens will come home to roost. The only reason why the Japanese sit on their pile of Greenbacks is that they do not want to hurt the US. Instead, they rather suffer through an 18-year slump.

The thing is: I think the Chinese won't do that. They start to suffer already (inflation), but they possibly won't go down for the US like Japan did.

Edited October 3, 2007 by Goldfinger

[lufc]

I take your point about Asian economies being damaged by an extremely weak dollar but

aren't they tough enough to shrug this off?

No doubt all Asian countries are aware that the U.S is in terminal decline and will

adjust themselves to the new world order.

Although Vietnam , China and Japan all have very different post war (ww11) histories,

the one thing we can count on is their survivability !

I'd be more concerned about lardy old Britain if I were you! I guess you are though.

Lardy old Britain ... Gordon will be outraged ...

[Justice]

The end of dollar hegemony

The end of empire

The end of endless undeclared war and mayhem

There will be major upheavals in the global economy as the dollar dies. Looking further ahead, it'll probably be a good thing. Bush could do something really dumb like a premptive nuclear strike against Iran but it'll just accelerate the demise of the US economy....and everyone elses

Yes i agree 100%

Russia and China know what Bush is playing at and they will stop him dead in his tracks

[Goldfinger]

Yes i agree 100%

Russia and China know what Bush is playing at and they will stop him dead in his tracks

You mean if he shows intentions about Iran they will threaten to use the Dollar Nuke?

[Justice]

You mean if he shows intentions about Iran they will threaten to use the Dollar Nuke?

Bush does not care about the $$ as much of his money is in saudi arabia and dare i say it , Gold but if needed the nukes wil be the real stuff but rest assured Bush will use them first.

i want to be liberated by the russians

[huw]

I take your point about Asian economies being damaged by an extremely weak dollar but

aren't they tough enough to shrug this off?

Time will tell. They have become used to rapid growth on the back of exports driven by their own undervalued currencies and their customers' growing deficits. They have done their best to sustain this (by intervening in the currency markets to hold their currency down). I'm sure that they would prefer this scenario to continue (else why would they have paid out so many billions, and sacrificed their own peoples' well-being in favour of subsidising foreigners), but it's inherently unstable and now they have to accept that it is over.

No doubt all Asian countries are aware that the U.S is in terminal decline and will

adjust themselves to the new world order.

Perhaps ... but they have come late to the party, arriving as industrial powers just as oil and gas are peaking, and various planetary resources are being stretched to breaking point. It's going to be interesting to see whether societies that have held together during the recent years of growing prosperity, can continue to do so during a global recession/depression (because even if the Asian tigers emerge as a new superpower bloc of some kind, they are going to go through a painful adjustment period to get there. People often assume that China is homogeneous and internally consistent, but it's far from it. They could face all kinds of unrest if they fail to deliver the goods. The same for other parts -- remember Chinese communities being attacked in Indonesia (I think) when times were hard a few years back?

Although Vietnam , China and Japan all have very different post war (ww11) histories,

the one thing we can count on is their survivability !

I'd be more concerned about lardy old Britain if I were you! I guess you are though.

Indeed, I'm more concerned about Britain than about most places, mainly because we have such a large, lardy (great word btw!) population compared to the resources available to support it. Then again, Britain's long history shows that there's a certain degree of 'survivability' present here, too.

[Justice]

Then again, Britain's long history shows that there's a certain degree of 'survivability' present here, too.

As maybe but that was before we got flooded with immigrants and we were sold down the road.

Who the hell is going to go over the wall for Britain nowadays