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Nothing in Sight to Replace the
US Dollar as an International Reserve Currency New The New Zealand dollar Posted, Monday, August 3, 2009 7:13 pm Your recent article on
the U.S. dollar as the world's reserve currency really put things into
perspective. What do you think is likely
to happen to the New Zealand dollar, in view of the fact that the relatively
high exchange rate of the New Zealand dollar against the U.S. is making it
very difficult for New Zealand exporters? The NZ Reserve Bank governor has
said that it is essential for the NZ dollar to remain low against the U.S. if
an export led recovery is going to happen. But just the opposite is
occurring. Many speculators see the NZ dollar as a good currency to hold, and
it continues to appreciate against the U.S. since early March. This is
causing great difficulty for exporters while the NZ economy remains in
recession. At what point will
fundamentals take over as exporters continue getting hammered Or in
view of U.S. dollar weakness do you see continued appreciation of the NZ
dollar? Dan Answer by R.T.: My best estimate is that the US
dollar will keep declining against the AU dollar, the Canadian dollar and the
NZ dollar for a year or two, i.e as long as short-term interest rates in the US
remain at the zero level. Sooner or later, inflation will
pick up in the US and long-term interest rates will rise. Then, the Fed will
be forced to raise short-term interest rates also. At this juncture, the
other currencies will drop vis-à-vis the US dollar, and all currencies
will fall vis-à-vis gold. Therefore, the NZ dollar could
remain overvalued for sometime. I agree. That's bad news for NZ exporters. New Seigniorage Posted, Monday, August 3, 2009 7:08 am After reading you article
today on the decline of the US dollar, I note you missed its main parasitic
role as the sole petro-currency. The US can simply print
money to acquire real goods and services, other nations must sell to the US
to get the dollars required to purchase oil. This is one of the prime reasons
for the Iraq war as Saddam had broken the dollar monopoly by selling his oil
in Euros and not Dollars. This means that other nations did not have to
stockpile dollars to finance their industrialisation and thus the US could
not ‘tax’ the rest of the world through inflation. Why do you think all of
Americas ‘enemies’ are people who simply want to trade their
precious resources in a fair and equitable manner to others? Jon Answer by R. T.: In fact, I mentioned the
seigniorage that the U.S. extracts from the international monetary system:
“Moreover, it has used it seigniorage
gains to deploy troops and military
equipment around the world, a move that has created much resentment.” Also, when I wrote that
“It is true that the United States, as a
sovereign country, has abused and is still abusing its privileged position
derived from the fact that its national currency is being used as the world
key currency,” that's what I meant. This era though
is drawing to an end. New September 15, 2008 Posted, Sunday, August 2, 2009 15:32 pm I have been trying for
some time now to find out who or what was responsible for the huge capital/money
market outflow on or about Sept. 15th/18th 2008? And why was it done? Apparently our economy
and the world economy was teetering on collapse. Any information you might
have about this would be greatly appreciated . Christopher Answer by R.T.: On September 15, 2008, Lehmans
Brothers failed. That was the main trigger of a worldwide financial crisis. I explained it in my October
2008 blog: www.TheNewAmericanEmpire.com/tremblay=1102 New China Super Power?
Posted, Saturday, August 1, 2009 11:50 am What China
can do with US$ 2000 billion reserves? In reality nothing. There is a Hindu saying why
goddess of wealth and God of protection is a pair. The reason being wealth
needs protection and the protector needs wealth to keep self in a fit to
protect. China has the wealth,
unimaginable in the recorded history of human race. This China wealth is in
real and hard cash. But China does not have the strength, military strength
to decide how to spend the money China earned by hard work. China money can be
visualized in a simple way that all whites (Anglo Saxons in particular) work
for couple of years to repay the China money. During those years the Anglo
Saxons cannot take any money home. Anglo Saxons will have to borrow to live
for those years. From whom, from China only. In short Anglo Saxons has sold
them to China for ever as long as present financial system is in place. There is no way China can
realize the value of these US$ 2000 billion without taking all whites as
slave labors for couple of generations. The slavery need not be the way
blacks were to whites. It will be like Indians to British. British did all
the dirty jobs for Indians, killing Muslims, chasing robbers, Creating jobs
for Indians across the world in plantations, educating them , organizing
their armies, etc. Now China is like Britain of 19th century, the
question is USA is ready to be a British India to China. British in India offered
what Indian’s lacked, that is the instinct to kill. British could go
and kill many natives who resisted them and used Indian soldiers to settle
safely in faraway lands. Most Indians returned home after the mission leaving
British to have all the fruits of the Invasion. Twenty first century does
not have lands to explore and conquer. Neither USA is ready to be a side kick
to China man. How long China can keep
the feeling I have the money, you better listen to me under control. The
moment China starts flexing its muscle to show its money power, USA will
create trouble. Fomenting trouble will cost only couple of million dollars to
USA. USA will be ready to spend even 100s of million dollars to foment trouble
in mainland China to avoid the pain of returning the money. USA has
expertise, institutions to export treachery and revolutions. The strategy will be to
create groups in the name of democracy. Next stage will be asking the rebels
to form governments in exile. These governments in exile will demand the
reserves as the legitimate ownership of government in exile. USA will write
false accounts and ensure all the money is shown as spent in the freedom
struggle. Saddam Hussein of IRAQ is an example where all his
governments’ money got locked by the West. The fall of Soviet Union
and ruble as a currency of any importance is another example. Russians share
the barbarian qualities with westerners and white Christians. There is no historical
record that Chinese could act like barbarian to outsiders. China can fall
faster than Soviet Union. Considering that China does not have gas and oil
like Soviet Union, the fall of China will be more painful and irretrievable
for decades. In case China decides to
buy the assets overseas with the money it has, maybe it can buy assets like
Nigerian / Sudan oil fields at a fat price where in western countries could
not operate against local Muslim terrorist / gangs / pirates. These
investments will not be commercially right ones. Investment will be a way to
park surplus cash. If China tries to buy any
quality western asset against the wishes of western governments, that too
strategic ones like ports, aircraft manufacturing companies, airlines, shipping,
besides the loss of money the experience of the Russian oligarchs who all
ended up in prison will be the fate which will await China man. So, China is now in a
catch 22 situation, wherein they have the money but not the power, military
power. US$ 2000 billion is such a huge amount of money that it can go only as
a waste. Money will get wasted over a period of time. Only option available to
China is now, to float a bank with Chinese name for international
development, human development, and exchange stability. China should make
either Beijing or Shanghai as the financial capital of the world. China has
got eight times more money than the IMF. With a capital 500 billion dollars,
China should start a bank which will fund only governments. China should buy
out the liability of many governments and make these governments indebted to
China, moving them away from west dominance. In the process, it should
establish military bases across the world. With bases across the world and
money in hand China will fulfill the basic qualification to be a super power. Now, the world is without
a super power. USA has got military power, but no money. China has got money
but no military power which can be deployed across the world. The probability
of the USA emerging as a super power is not there. It is only an academic
discussion and television statements that there is uni polar world. In fact,
there is no polarity in the world and the world is drifting, without a
leadership. China should step in as
matter of urgency to prevent this world getting drifted with no decisive
leadership. USA has been a military failure. USA is like a boxer who lasts
for more rounds but finally getting knocked out. The strategy of USA to
corner China with traditional competitors like Japan, India, and Australia
and to some extent Russia is dangerous. Among big guys China has no real
friends. China is alone in the world. China is not USA or
Japan. China does not make premium priced products. China produces simple day
to day needs needed by Billions of the people in the world. Take away the
billion Europeans and USA. China has still five billion people as market for
China products. So China should buy out
the debts of all these poor countries using the billions China has and make
these countries indebted to China. Funding these countries will also generate
market for China products. This act of China wiping
out the debts all poor countries will open up China as the greatest country
built on as honest ethical super power against the gun boat diplomacy of
Britain, or the Drone diplomacy of the USA. The time is running out.
China needs to do this in a matter of 12 months. China should start running
in the path to super power immediately. Ramadurai
New Is the SDR the Solution?
Posted, Thursday, July 30, 2009 5:34 pm I liked your article. I
was curious, with respect to the IMF's special drawing rights, do you think
this is a viable option? You briefly touched upon it, however, you did not
explain why this cannot be used by countries world wide or even if it
eventually will be the solution to replace the dollar. Why or why not? The
Chinese and the Russians have already gone on record, most notably at the
conference in the UK, saying this is a viable option for future trade. Also, I would like your
opinion on the possiblity of a collapse of the US dollar. Is it possible? Is
this something that could happen in the near future? Why or why not? I would
expect you to suggest something along the lines that hardly any countries,
America and the West, or China and the non-Western world, would want this to
happen, for obvious reasons. Niall Fergason's "Chimerica"
example; that what exists today is a hybrid between the giant of the West
(USA) and the East (China) and that this interdependence makes it difficult
to foresee a collapse since it would be mutually destructive to everyone. But what if the Chinese in the
long run hope for a collapse of the US in order to assert their position in
the world, both politically and economically? And what if the West wants to
see a collapse of the US dollar, in order to re-create the system? I have
never majored in economics or finance, but everyone knows the US dollar is
worthless. Marx's theories on dialectical materilism sometimes comes into
play -- you create a "problem" only for that problem to be solved
by a "solution" provided by the same people who caused the problem
-- thesis vs. anti-thesis. This is a far fetched idea, surely, but perhaps
you need to break a few eggs to make an omlet, and the US dollar could be the
largest egg in history. ___________ Answer by R.T.: The SDR is a book entry at
the IMF. It is newly created reserves for the central banks. It does increase
the volume of high-powered money and can create worldwide inflation. The reason it is not used in
private markets is because there are no large money or capital markets for
securities in SDRs. In theory, there could be.
However, the IMF is not a country and it cannot guarantee its borrowings
above and beyond the permission obtained by the member countries. Most
countries would refuse to give the IMF complete monetary authority and reduce
their own monetary sovereignty. New The Fed and global monetary policy
Posted, Thursday, July 30, 2009 3:55 am I would add that focusing
on the dollar instead of the financial system misses the point. Just because
the dollar has managed to remain, so far, an important reserve currency and
unit of account, does not mean that the Fed will continue dictating global
monetary policy to the advantage of the US and other rich countries. As we
all know, it is the system that crashed, not the dollar which has been
volatile, yes, but has more or less, until now, retained its value. The dollar may well go
the way of the pound, which remains a reasonably respectable reserve currency
even after the fall of the British Empire, or of Latin, which remained the
lingua franca long after the fall of the Roman Empire. The pound and Latin
are echoes from the past, and not terribly important since goods and ideas can
be exchanged using other currencies or languages. The relevant issue is the
crumbling of empires and its systems, including its financial one. Just as empires are
somewhat legitimized by maintaining order, financial systems, even imperial
ones, are expected to redistribute savings efficiently and productively. The
US took massive amounts of wealth from the developing world and blew it. I
assure you, wealth is no longer flowing into the US, but out. The old system
has collapsed for good. Michael New "Green Shoots" Propaganda!
Posted, Thursday, July 30, 2009 1:00 pm Boy, the collapse of
Superpower USA may be a boon to the American little guy, but it is certainly
scaring the hell out of the Canadian elite! The problem with Mr. Tremblay's
article is that it postulates as premises the very point he claims to be
arguing, namely, that there has to be a single dominant power in the world
and that that country's currency has to be the world reserve currency. Thus,
he claims that there is some sort of "vacuum" and a "gap"
to be filled but does not say why such a "gap" needs to be filled
in the first place. Equally, he argues that there is no chance of an
agreement on "a new supranational key currency". He's right, of course,
but only because nobody sees the need for such a currency! As for the Euro,
in spite of the success Mr Tremblay points to, it will not be a world reserve
currency simply because no one in Europe wants to see the EU propelled into
the same mess that world status has brought on the US and, indeed, such
status would conflict with the "no more war" ethos which underlies
the European unification project. So, yes, there will be no succesor to the
dollar as world reserve currency, but that will be because no such currency
is needed in the new world economic order which is developing. And, yes, the
dollar will not collapse overnight, quite simply because the world doesn't
work that way. To me, this is just the
classic Eric Walberg harangue re-hashed into the polite language of the
"green shoots" propaganda line! Michael New How About "Baskets" of currencies?
Posted, Thursday, July 30, 2009 2:39 pm No single currency can
replace the dollar, to be sure. But you do not mention the "basket"
of currencies that is being proposed--dollar, euro, yen, pound. Also, something along the
lines of the keynesian Bancor? Jim Answer by R. T.: A basket of currencies can
serve as a unit of account to determine the exchange rate of a given
currency. Many countries use that technique. However, such a basket of
currencies cannot be used for international loans or credits. This requires a
money market and a capital market. There are international markets in U.S.
dollar-denominated financial instruments (Ex.: the euro-dollar market).
That's the usefulnes of the U.S. dollar. I mentioned Keynes' bancor in
my article. The IMF's SDRs are the closest to an international bancor.
However, there are very little SDR-denominated financial instruments outside
of central banks. New Some major events coming in the near future!
Posted, Thursday, July 30, 2009 1:03 pm Thanks for your latest
analysis. As you know I see things from a slightly different perspective than
yourself. I believe that the corruption
that permeates the US govt and banking system has to a lesser extent spilled
over to Canada. What I mean is that the same globalist forces trying to
reshape the geopolitical landscape and bring the world into a one world
government are at work in Canada and all over the world with the possible
exception of Europe. I believe that the priority for them right now is to
bring down the US and its middle class. The Federal Reserve has created bubble after bubble and clearly
has not worked in the best interests of the United States. I do not know if
the Bank of Canada is privately held or held by the govt. so I will avoid
making comments on it and will limit my comments on the US only. I am sure we are on the same
page when it comes to distrust of US govt economic statistics. When the
existing stat no longer serves the intended objective it appears in a
different form or disappears. The most notable is the disappearance of M3 in
2006. Unemployment in the US is now over 20%. If you use the broadest measure
in the govt stats; that is U6 you will get over 15%. The workweek in the US
is now at 33 hours meaning a large swath of the employed are really under
employed. I now read in newsletters
that the fed is providing money to foreign central banks to buy treasuries
and using foreign accounts held by the fed to buy treasuries in order to
create the illusion that demand for treasuries is still very robust. In
Canada I read that RBC and Toronto Dominion have applied to become primary
dealers in treasuries. I don't understand what is behind this, unless they
have been bribed or coerced into creating the illusion of foreign demand for
treasuries under some non public program. Neil Barofsky, a special
inspector general, estimates that the US govt exposure to all of this mess is
$23.7 trillion not $14.8 trillion as other estimates state. Barofsky's
estimates were generated from govt. figures. The real number is likely closer
to $30 trillion. The real numbers of course are hidden in the Fed who claims
that public release of their information could worsen the crisis. I think we both know the
stimulus package is quite simply looting of the public. It has done nothing
to loosen up commercial and private lending. Banks are holding onto their
reserves for more nightmares in commercial real estate, credit card defaults
and more residential mortgage problems. Also the big city banks like Citi
could keep the reserves in order to buy some regional banks which will be
hurt in the upcoming Commercial Real Estate bust. Commercial and private
borrowers are saving and are afraid to borrow. Good corporate numbers are the
result of downsizing not expanding business activity. FASB rules have been relaxed so that banks can value the garbage on the books at "mark to model" as opposed to mark to Market. The banks can now make this toxic garbage worth anything they wish. Banks like GS and MS have just produced a blowout quarter. GS has been using priority software for high frequency trading. They are able to take the pulse of incoming order flows and use that information to front run incoming orders. Front running is illegal since it uses info not available to all market participants at the same time. The SEC is controlled by GS and has done nothing to stop this version of insider trading or close any loopholes that permit it. No wonder these guys can have blowout quarters when other corporations are failing. When the software was stolen from GS, the corporation admitted that in the wrong hands the program could be used to manipulate the market. Hello! Where are the regulators? The stock market is for all intents and purposes a rigged game. Traditionally players in the
Comex gold market closed out trades, before expiration, without taking
delivery. Recently when players realized that central banks and the US
Treasury were playing with gold pricing in the futures market to suppress its
price; ie. paper gold price, some attempted to take delivery of gold and let
their contracts expire. Comex faced a dilemma, initially made it difficult to
take delivery of the physical asset. Now the rules have changed so that they
can pay contracts with paper etf's. This is just another scam. The market will get wise to
the fact that the government has changed the accounting of treasury sales to
disguise the fact that foreign buyers are drying up. They are also trying to
disguise the "quantative easing" ie. printing money where the fed
buys the treasuries, giving $$ in return. Some writers that I pay
attention to see a bank holiday in Sept or Oct. when enough people figure out
the scams and begin dropping the $ like a hot potato. Obama's approval rating has
plunged to 49% the fastest decline in recent history. His agenda is stalling
out. He is still trying to push through his program of rationed health care. The bankers like GS and MS
are levered at 50-1 which quite simply means they are "gambling at the
track", knowing that if they make the wrong plays the taxpayer will
rescue them. They want a second stimulus package. There is a move by the
government expand the powers of the fed. The public is getting wise to the
fraud and corruption in the fed. I believe that the elite
bankers are getting very worried that their criminal activities are getting
too much attention and that the public will soon be turning on them. Obama
with a low approval rating is becoming a liability to them. My prediction is that there
will soon be a new 9-11 event coming at us. Could it take the form of a
nuclear weapon in a city? I cannot say. My money is on a biological event
unleashed on the public. This will rally support around an Obama who has the
vaccine in place and will impose a manditory vaccination program. On the geopolitical front
things are heating up in Iran. Israel has moved warships into positions around
Iran. The US is trying to get the Ukraine and Georgia into Nato as part of a
program to encircle Russia. This cannot make Russia feel comfortable. Don't
be surprised if the solution to this economic crisis comes in the form of a
war. I think that the US has
become very unpopular over their irresponsible handling of the world's
reserve currency. The BRIC nations in particular want changes. Even if they
are sidelined at G7 meetings they are big creditor nations and they cannot be
ignored forever, considering the lack of integrity and irresponsible
behaviour of US authorities. The US is quickly losing credibility and with it
the confidence in its currency. One thing for sure Dr.
Tremblay, we live in interesting times and we can expect some major events
coming in the near future. Rick Answer by R.T.: I did mention that the USA
has been losing in credibility and moral status around the world. I have also
often written about the corrupt American political and financial systems.
See: http://www.thenewamericanempire.com March 5, 2007 www.thenewamericanempire.com/tremblay=1060.htm March 12, 2007 www.thenewamericanempire.com/tremblay=1061.htm Besides, my coming book
“The Code for Global Ethics” goes even further into the issue: www.thecodeforglobalethics.com/ However, my article of today
is strictly about international monetary and financial institutions from a
purely practical viewpoint. Regarding future events, I
too am apprehensive. When I look at a long-run SP chart, it's clear that
something big will provoke a collapse in a not too distant future. The only
thing is that I don't know what will be the trigger. New Is China a democracy?
Posted, Thursday, July 30, 2009 10:13 am I was very much taken aback
by your attack on China in your last article. ...Some
of your allegations are arguable; others are just lazy Western
ethnocentrisms, infuriating and ignorant hogwash. If you want to prophesy
that the RMB won't become a world reserve currency that's fine. ...It's
enough to say that China is a developing country with an unproven economic
track record, for just one example of another compelling and neutral argument
that could be used to support that hypothesis. Why only use a judgmental
tirade about China's assumed moral deficiencies? As if the US got to rule the
economic roost in the globe on basis of its "morality". Has China
no positive points to recommend it in this circumstance whatsoever? You blatantly overlooked the striking
fact in China's favor that thus far the "Chinese model" has
weathered the global economic dislocation in an almost unparalleled way, for
instance. M.Shaw
Answer by R.T.: Please read this article to
see if the Chinese
empire is a democracy. It would be difficult to tell
the Uighurs and the Tibetans that China is a democracy. An any case, people in China
are not allowed to read this blog. Maybe you could, because you are probably
in the United States, but Chinese can't. |