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THE Dollar Crash Thread pt 2

For discussions of events and conditions not necessarily related to Peak Oil.

Re: The Dollar Crash Thread pt 2

Unread postby mattduke » Sun 14 Aug 2011, 17:52:20

prajeshbhat wrote:The gold standard was abandoned by every country in the world except USA a long time ago. USA was the last one out when it became obvious that being the only country with the gold standard would be economic suicide. With such gigantic trade imbalances in the world, all the gold in the world will end up in china, Germany and OPEC nations anyway. What after that? These countries are already the largest creditors. So things turned out exactly as they would have under the gold standard. With the current fiat system, at least no real gold was lost. It is still in fort knox. In the worst case scenario, a new currency can be started with a gold backing.

prajeshbhat, your goal in life must be to spread economic fallacy. Under the international gold standard, trade is balanced. If one country imports more than it exports, it loses gold. As the local gold supply drops, prices fall. Lower prices attract foreign buyers. Exports rise until trade becomes balanced. If one country exports more than it imports, it gains gold. As the supply of local gold increases, prices rise. Higher prices repel foreign purchasers of exports. Exports fall and trade becomes balanced. Do as all a favor and stop speaking of which you know nothing.
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Re: The Dollar Crash Thread pt 2

Unread postby prajeshbhat » Sun 14 Aug 2011, 22:52:16

Wow. Another free trade ideologue

mattduke wrote:
prajeshbhat wrote:The gold standard was abandoned by every country in the world except USA a long time ago. USA was the last one out when it became obvious that being the only country with the gold standard would be economic suicide. With such gigantic trade imbalances in the world, all the gold in the world will end up in china, Germany and OPEC nations anyway. What after that? These countries are already the largest creditors. So things turned out exactly as they would have under the gold standard. With the current fiat system, at least no real gold was lost. It is still in fort knox. In the worst case scenario, a new currency can be started with a gold backing.

prajeshbhat, your goal in life must be to spread economic fallacy. Under the international gold standard, trade is balanced. If one country imports more than it exports, it loses gold. As the local gold supply drops, prices fall. Lower prices attract foreign buyers. Exports rise until trade becomes balanced. If one country exports more than it imports, it gains gold. As the supply of local gold increases, prices rise. Higher prices repel foreign purchasers of exports. Exports fall and trade becomes balanced. Do as all a favor and stop speaking of which you know nothing.


Yes. In fatasyland. In the real world, every country on earth protects its own industries. If the price of domestic goods is rising, the governments subsidizes those goods to make them cheap again. And if foreign goods are getting cheaper, governments impose tariffs to make them unattractive. That's pretty much how america got rich. By imposing tariffs on European goods. The same
policies are being practiced by China today. One of the reasons that made great depression worse was the enormous trade imbalances throughout the western world.
The countries that got off the gold standard saw a faster relief from the depression.
You sound like a conservative. Here's a conservative article which explains what I am talking about.
http://www.amconmag.com/article/2003/aug/11/00007/

Do all of us a favor and get a grip of reality.
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Re: The Dollar Crash Thread pt 2

Unread postby eXpat » Thu 15 Sep 2011, 21:38:01

[smilie=new_popcornsmiley.gif]
China to 'liquidate' US Treasuries, not dollars
The debt markets have been warned.

A key rate setter-for China's central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.

"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days.

"We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way."

"Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries," he said.

To my knowledge, this is the first time that a top adviser to China's central bank has uttered the word "liquidate". Until now the policy has been to diversify slowly by investing the fresh $200bn accumulated each quarter into other currencies and assets – chiefly AAA euro debt from Germany, France and the hard core.

We don't know how much US debt is held by SAFE (State Administration of Foreign Exchange), the bank's FX arm. The figure is thought to be over $2.2 trillion.

The Chinese are clearly vexed with Washington, viewing the Fed's QE as a stealth default on US debt. Mr Li came close to calling America a basket case, saying the picture is far worse than when Ronald Reagan and Margaret Thatcher took over in the early 1980s.

Mr Li, one of three outside academics on China's MPC, described the debt deals on Capitol Hill as "just trying to by time", saying it will not be enough to stop America's "debt dynamic" turning dangerous.

Fair enough, but let us be clear: the reason China has accumulated the equivalent of 6pc of global GDP in reserves (like the US in the 1920s) is because it has held down its currency to gain market share. As Michael Pettis from Beijing University points out tirelessly, the mercantilist policy hollows out US industries and forces America to choose between debt bubbles or unemployment – or, of course, protectionism, though we are not there yet.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011987/china-to-liquidate-us-treasuries-not-dollars/
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Re: The Dollar Crash Thread pt 2

Unread postby AgentR11 » Thu 15 Sep 2011, 23:08:58

The only people its dangerous for is China. As the end part of the article points out, China must choose between holding US Treasuries, or letting their currency float. If they let their currency float, all that wage disparity that promotes off-shoring will vanish, and vanish VERY quickly.

Its why that guy thinks in terms of "as soon as safely possible". He wants out bad, but he wants to control the value of his currency relative to the value of another fiat currency. Its a contradictory desire.
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Re: The Dollar Crash Thread pt 2

Unread postby dolanbaker » Thu 15 Sep 2011, 23:21:58

Once China has developed its own consumer market sufficiently to not depend on western trade, they'll float the RMB and then be even bigger competitors for globak resources.
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Re: The Dollar Crash Thread pt 2

Unread postby AgentR11 » Thu 15 Sep 2011, 23:55:00

dolanbaker wrote:Once China has developed its own consumer market sufficiently to not depend on western trade, they'll float the RMB and then be even bigger competitors for globak resources.


One can only hope. There's tons of coal that are in need of burning, and the EPA seems set on not letting us burn it here! :lol:

No seriously, that is the catch, developing that internal consumer market, providing electricity and gasoline to a billion plus people, and providing enough of it that they start thinking in terms of home entertainment systems, sports cars, and central A/C.

Anyone guess what a billion or so folks, burning 1000kwh/person/mo will do to those little ole CO2 meters?
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Re: The Dollar Crash Thread pt 2

Unread postby prajeshbhat » Fri 16 Sep 2011, 00:20:05

dolanbaker wrote:Once China has developed its own consumer market sufficiently to not depend on western trade, they'll float the RMB and then be even bigger competitors for globak resources.


First they'll need a much more advanced and powerful military so they have a say in global geopolitics. It is no coincidence that the US has the most powerful military and their currency is the global reserve. People want the currency from a government that can force other small resource rich countries like the MENA to accept their paper. Look what happened to Saddam Hussein when he said he wanted the Euro instead of the dollar.

They already have a very large consumer market. They burn three times more coal than USA. But they don't have much oil. If they want it, they would need a military that can go neck and neck with the US. Until then they must continue to depend on their exports for the cash they need to buy oil.
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Re: The Dollar Crash Thread pt 2

Unread postby dolanbaker » Fri 16 Sep 2011, 00:27:47

The US is rapidly exhausting itself, in a few years the Chinese won't need a huge military to help it buy what it needs.
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Re: The Dollar Crash Thread pt 2

Unread postby prajeshbhat » Fri 16 Sep 2011, 03:02:01

Niall Ferguson wrote an interesting Article about what will happen if the US ends its global military hegemony. He thinks it will lead to global chaos

http://www.mtholyoke.edu/acad/intrel/afp/vac.htm
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Re: The Dollar Crash Thread pt 2

Unread postby Outcast_Searcher » Fri 16 Sep 2011, 07:27:26

AgentR11 wrote:The only people its dangerous for is China. As the end part of the article points out, China must choose between holding US Treasuries, or letting their currency float. If they let their currency float, all that wage disparity that promotes off-shoring will vanish, and vanish VERY quickly.

Its why that guy thinks in terms of "as soon as safely possible". He wants out bad, but he wants to control the value of his currency relative to the value of another fiat currency. Its a contradictory desire.

Why can't China just continue to invest in things they'll need over time, like commodities required for growth, like say copper, instead of buying ever-more treasuries?

After all, as strong as treasuries are, and with the Fed apparently ready to do almost anything to prop up the treasury market, it's not like (IMO) China has to do the heavy lifting.

China is already experiencing rising wages, and is threatened now by THEIR jobs being offshored to cheaper venues, such as Vietnam. So they have their own competitive issues to worry about internally - cheap currency will only carry them so far.

Yes, I understand that they want their currency to be cheap to enhance their exports. With what the Swiss just did with their Franc, that seems to be a popular desire. :roll: :shock: (Even if much of your economy seems to be based on economic stability). :?

I'm just not so sure that they're dumb enough to go "all in" with an investment that looks as disastrous as U.S. treasuries, in the long term.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Dollar Crash Thread pt 2

Unread postby AgentR11 » Fri 16 Sep 2011, 08:26:18

Outcast_Searcher wrote:Why can't China just continue to invest in things they'll need over time, like commodities required for growth, like say copper, instead of buying ever-more treasuries?


They certainly can, but currently the exchange rate between rmb and dollar is extremely artificial, if they pull the plug on their dollar holding, the rmb will rise, and rise strongly.

I'm just not so sure that they're dumb enough to go "all in" with an investment that looks as disastrous as U.S. treasuries, in the long term.


They aren't "all in" as an investment. They'd like to hold as little as possible. At the moment, in order to hold their currency where they want it, they have had to buy and hold over 2 trillion in US bonds. That should give you a hint as to how artificial the exchange rate is. If rmb floats, they won't be able to sell a stinkin frying pan in the US.
Last edited by AgentR11 on Fri 16 Sep 2011, 09:54:40, edited 1 time in total.
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Re: The Dollar Crash Thread pt 2

Unread postby prajeshbhat » Fri 16 Sep 2011, 09:50:12

The real problem is that the people in china are just like the people in USA or India or Russia or Japan or whatever. Their people don't share and they don't care about each other. So the government has to create as much employment as possible. They will need strong labour movements and unions to raise their wages so that they can create some demand internally.

I believe the main reason countries export is because they need the cash to pay for oil. Oil availability automatically translates to military power. Right now OPEC nations only accept the USD as payment. So china has no choice but to keep their currency cheap and keep exporting to USA.
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Re: The Dollar Crash Thread pt 2

Unread postby eXpat » Tue 20 Sep 2011, 16:44:08

Israel Has Dumped 46 Percent of Its U.S. Treasury Bills; Russia 95 Percent
(CNSNews.com) - Foreign ownership of U.S. government debt declined in July for the second straight month, according to Treasury Department data released Friday.

Overall, foreign holdings of U.S. debt dropped from an all-time high of $4.5115 trillion in May to 4.4956 trillion in June and then to $4.478 trillion in July.

In June and July, President Barack Obama and congressional leaders were negotiating legislation to increase the legal limit on the U.S. government’s debt. In August, Obama signed legislation that will permit the Treasury to borrow up to another $2.4 trillion.

Among major foreign creditors of the U.S. government, entities in Russia led the way in divesting from U.S. Treasury securities, with Russian holdings of U.S. debt dropping by $9.6 billion from June to July.

In fact, Russian-based owners of U.S. debt have dropped about 43 percent of their overall U.S. debt holdings over the past year. Those holdings peaked at $176.3 billion in October 2010, according to Treasury Department data, and dropped to $100.2 billion by July.

More dramatically, since March 2009, according to historical Treasury Department data, the Russians have dumped about 95 percent (94.94 percent) of their holdings in Treasury bills, which are short-term U.S. Treasury securities that mature in periods of one-year or less.

Russian ownership of U.S. Treasury bills peaked at $73.15 billion in March 2009 and had declined to $3.7 billion by July.

Israelis have also been decreasing their ownership of U.S. government debt.

Total Israeli holdings of U.S. Treasury securities peaked at $22.0 billion in April 2010. That had dropped to $17.2 billion by this July, a decline of about 22 percent.

Like the Russians, the Israelis have dramatically decreased their ownership of short-term Treasury bills, according to Treasury Department data. Israeli ownership of Treasury bills peaked at $15.638 billion in March 2009 and declined to $8.375 billion in July, a drop of about 46 percent.

http://www.cnsnews.com/news/article/israel-has-dumped-46-percent-its-us-treasury-bills-russia-95-percent
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Re: The Dollar Crash Thread pt 2

Unread postby eXpat » Thu 01 Dec 2011, 18:17:54

Zimbabwe Bashes US Dollar, Alligns With Yuan
It was three short years ago that the small former British colony of Zimbabwe was spewing forth 100 trillion dollar bills. Since then, courtesy of a few trillion extra percent of inflationary RDA, the country had given up on its currency and replaced it with US Dollars. Now, the country's cult central banker Gideon Gono has made it clear he wishes to avoid another episode of transplant currency hyperinflation courtesy of his counterpart in the Marriner Eccles building and "has warned that Zimbabwe’s nascent economic recovery is at the mercy of the United States dollar, which is facing new pressures from the Euro-zone debt crisis." Yet the screaming sarcasm is the following: "Gono says Zimbabwe should in fact be looking to the Chinese yuan as its main currency, while urgently seeking to restore its own currency which was abandoned in 2009 after a dramatic loss of its value. With the continuous firming of the Chinese yuan, the US dollar is fast ceasing to be the world's reserve currency and the Euro-Zone debt crisis has made things even worse." And the terminal slap in the face of all that is American: "As a country, we still have the opportunity to avoid being caught napping by adopting the Chinese yuan as part of consolidating the country's look East policy." Well, if recently hyperinflating Zimbabwe is complaining about the US as being on the same path as itself, and instead wants to become a Chinese FX vassal state, perhaps alarm bells should go off somewhere. So the next time Tim Geithner is up on stage somewhere, it may be prudent for a question to be be asked: how and why is it that the world's (formerly) de facto banana republic is complaining that the next up and coming B-Rep is about to replace it in the annals of idiotic monetary policy?

http://www.zerohedge.com/news/zimbabwe-bashes-us-dollar-alligns-yuan
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Re: The Dollar Crash Thread pt 2

Unread postby eXpat » Mon 26 Dec 2011, 14:26:48

Well, well...
China, Japan to Back Direct Trade of Currencies
Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.

Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.

China is Japan’s biggest trading partner with 26.5 trillion yen ($340 billion) in two-way transactions last year, from 9.2 trillion yen a decade earlier. The pacts between the world’s second- and third-largest economies mirror attempts by fund managers to diversify as the two-year-old European debt crisis keeps global financial markets volatile.

“Given the huge size of the trade volume between Asia’s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations,” said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd.
Currency Swap

China also announced a 70 billion yuan ($11 billion) currency swap agreement with Thailand last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asian Nations and establish free trade zones.

Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the U.S. and Europe.

http://www.bloomberg.com/news/2011-12-25/china-japan-to-promote-direct-trading-of-currencies-to-cut-company-costs.html
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Re: The Dollar Crash Thread pt 2

Unread postby AgentR11 » Mon 26 Dec 2011, 15:15:22

They'll have to be real gentle about the Yuan & Yen exchange rate; it wouldn't take take much of a slip to make a Yuan -> Dollar -> Yen -> Yuan arbitrage produce profit. Hard to beat making guaranteed money on three mouse clicks.

In a world of ultra-puny returns, or even fees for sitting on cash deposits, it wouldn't take much to make such a game really attractive.
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Re: The Dollar Crash Thread pt 2

Unread postby eXpat » Sun 22 Jan 2012, 10:31:01

India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees
Two weeks ago we wrote a post that should have made it all too clear that while the US and Europe continue to pretend that all is well, and they are, somehow, solvent, Asia has been smelling the coffee. To wit: "For anyone wondering how the abandonment of the dollar reserve status would look like we have a Hollow Men reference: not with a bang, but a whimper... Or in this case a whole series of bilateral agreements that quietly seeks to remove the US currency as an intermediate. Such as these: "World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", and now this: "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says."" Today we add the latest country to join the Asian dollar exclusion zone: "India and Iran have agreed to settle some of their $12 billion annual oil trade in rupees, a government source said on Friday, resorting to the restricted currency after more than a year of payment problems in the face of fresh, tougher U.S. sanctions." To summarize: Japan, China, Russia, India and Iran: the countries which together account for the bulk of the world's productivity and combined are among the biggest explorers and producers of energy. And now they all have partial bilateral arrangements, and all of which will very likely expand their bilateral arrangements to multilateral, courtesy of Obama's foreign relations stance which by pushing the countries into a corner has forced them to find alternative, USD-exclusive, arrangements. But yes, aside from all of the above, the dollar still is the reserve currency... if only in which to make calculations of how many imaginary money one pays in exchange for imaginary 'developed world' collateral.

http://www.zerohedge.com/news/india-joins-asian-dollar-exclusion-zone-will-transact-iran-rupees
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Re: THE Dollar Crash Thread pt 2

Unread postby mattduke » Thu 24 May 2012, 16:31:36

Real federal deficit dwarfs official tally
The typical American household would have paid nearly all of its income in taxes last year to balance the budget if the government used standard accounting rules to compute the deficit, a USA TODAY analysis finds.

Congress exempts itself from including the cost of promised retirement benefits.
Under those accounting practices, the government ran red ink last year equal to $42,054 per household — nearly four times the official number reported under unique rules set by Congress.
A U.S. household's median income is $49,445, the Census reports.
The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits. Yet companies, states and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules.

http://www.usatoday.com/news/washington ... 55179748/1
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Re: THE Dollar Crash Thread pt 2

Unread postby ritter » Thu 24 May 2012, 17:09:24

mattduke wrote:Real federal deficit dwarfs official tally


No way. More obfuscation by our government? Can't be.
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Re: THE Dollar Crash Thread pt 2

Unread postby copious.abundance » Fri 25 May 2012, 22:28:16

Still awaiting that dollar crash.

Courtesy of Marketwatch, here's a 5-year chart of the US dollar index. Notice it's recently broke through some resistance at the ~82 level.

Image

Some here prefer to measure the dollar's value against gold. By that measure, the dollar has gained about 19% in value since August.

2011
Image
2012
Image
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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