The Demise of the Dollar

[EmeraldCityGrl]

http://news.independentminds.livejournal.com/4291901.html?page=2#comments

I'm more disturbed when I read the comments section of an article like this one. If there is truth to any of this, there would never be a more important time for American's to show some sort of solidarity. These idiots dare to suggest a scenario like this could develop in nine months. It really infuriates me.

[flamingdem]

1. What is the slant of this paper? Level or chicken little, buy my gold variety ? nt

[muriel_volestrangler]

6. liberal and free trade, I'd say

It was strongly against the invasion of Iraq, and Tony Blair singled it out for special criticism for putting comment on its front page. Robert Fisk, the author, is probably the most experienced Middle East correspondent in the Western media. Of the 2 UK papers that roughly fit the outlook of DU, it's one (The Guardian being the other). It's certainly no 'gold bug' enthusiast.

[EmeraldCityGrl]

2. First article I've read from it. eom

[Why Syzygy]

3. I agree with your solidarity point.

We need to de-balkanize our country. We are all in this together. Only the power grabbers benefit from causing division. We do not.

[Po_d Mainiac]

4. Rumors.....(maybe) see story below

ISTANBUL/SYDNEY (Reuters) - Big oil producing nations denied a British newspaper report on Tuesday that Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the U.S. dollar with a basket of currencies in trading oil.

http://www.reuters.com/article/newsOne/idUSTRE59507620091006

Who the hell knows? If the oil States were looking to move from the dollar, it's doubtful they'd want the info out in the open till they had a chance to diverse/shed their holdings.

It dun't take a koledge edukation two sea what wood happan to the dollah. :scared:

ymmv

[pokercat999]

5. Who cares? You can change your dollars for other currencies

24/7 online. This article is just noise.

[EmeraldCityGrl]

7. If it's just noise, it's being heard far and wide...

Gold is surging today.

Something strange is going on.

[pokercat999]

8. I think it's the usual, rats following the piper.

Mish says it much better:

http://globaleconomicanalysis.blogspot.com/

Ten Simple Facts

1) Oil is priced in dollars.
2) Oil trades in Dollars and Euros right now in spite of the pricing unit being dollars. OPEC has recently admitted this fact.
3) Clearly oil does not have to be priced in Euros to trade in Euros, or for that matter priced in Yen to trade in Yen. The same applies to any major currency.
4) Neither Venezuela or Iran hold any dollar reserves. To the extent that either is taking trades in dollars, there is clearly nothing forcing them to hold dollars. By extension there is nothing forcing any OPEC country to hold dollars if it doesn't want to.
5) It takes less than a second for Forex trades to take place. 24 hours a day, 7 days a week, one can sell any currency they want and buy any other currency.
6) The above logic applies to any currency and any commodity.
7) Nothing is stopping anyone at any time anywhere from selling dollars for whatever currency they want to hold. Nor is anything stopping anyone anywhere at any time from selling any major currency for U.S. Dollars.
8) Because currency conversion is instantaneous no one has to hold U.S. dollars to buy oil, copper, gold, iron, lead, wheat, soybeans, or anything else.
9) Dollars are held (or not held) for reasons totally unrelated to pricing unit. Some of those reasons are political, some are based on sentiment, some on trade patterns and trade relationships, and some to suppress the value of local currencies to improve exports.
10) Currencies float and so do the price of oil and commodities. Pricing oil (or any other commodity) in Euros will not cause a price change in dollars. Look at gold which is simultaneously priced in everything as proof.

[econoclast]

9. Excellent points

Moreover, the Chinese peg the renminbi to the dollar ( more or less ). The peg keeps the renminbi competitive. As the dollar declines the Chinese have to buy dollars and sell renminbi to keep the peg. If not the renminbi appreciates and that threatens China's exports. That will not fly. Add to that the huge Chinese positions in US treasuries. A dollar swoon seriously puts a crimp in their value.

All of which add up to the fact that the Chinese will not anyone rock the dollar boat too much.

[shaayecanaan]

11. They'll have to rock it sooner or later...

If not the renminbi appreciates and that threatens China's exports.

Yes, but it also bolsters domestic Chinese markets, which eventually will need to step up to the plate in place of the American consumer, who is just about tapped out.

Add to that the huge Chinese positions in US treasuries. A dollar swoon seriously puts a crimp in their value.

Rather like buying buckets of sand on the beach, on the basis that once the beach is almost empty the price of sand will have to rise.

China is in the same situation as the US in the 1920s. Large scale production without equivalent consumption. American firms tried to get rid of their mountains of cash by lending it to ordinary slobs through margin schemes who then invested it back into the firms, leading to 1929.

The situation is the same now, except that China now lends money to Americans with which to buy their products.

[notesdev]

13. It's their own damn fault

Artificially suppress your currency's value and guess what? Sure, you increase exports, but you also create a pressure cooker under your currency, just waiting for that one shock to explode.

[angryfirelord]

10. Well, it popped over 1030 today

And the dollar chart still looks like crud, so I think what we're seeing is the real deal. The main question is that if oil and other commodities will follow suit and if they do, it's going to put a big drag on the economy.

[wuvuj]

12. The underlying reasons?

http://www.informationclearinghouse.info/article23647.htm

Reports of the dollar's demise are greatly exaggerated. The dollar may fall, but it won't crash. And, in the short-term, it's bound to strengthen as the equities market reenters the earth's gravitational field after a 6 month ride through outer-space. The relationship between falling stocks and a stronger buck is well established and, when the market corrects, the dollar will bounce back once again. Bet on it. So why all the talk about Middle Eastern men huddled in "secret meetings" stroking their beards while plotting against the empire?


Yes, the dollar will fall, (eventually) but not for the reasons that most people think. It's true that the surge in deficit spending has foreign dollar-holders worried. But they're more concerned about the Fed's quantitative easing (QE) program which adds to the money supply by purchasing mortgage-backed securities and US Treasuries. Bernanke is simply printing money and pouring it into the financial system to keep rigamortis from setting in. Naturally, the Fed has had to quantify exactly how much money it intends to "create from thin air" to placate its creditors. And, it has. (The program is scheduled to end by the beginning of 2010) That said, China and Japan are still buying US Treasuries, which indicates they have not yet "jumped ship".

The real reason the dollar will lose its favored role as the world's reserve currency is because US markets, which until recently provided up to 25 percent of global demand, are in sharp decline. Export-dependent nations--like Japan, China, Germany, South Korea--already see the handwriting on the wall. The US consumer is buried under a mountain of debt, which means that his spending-spree won't resume anytime soon. On top of that, unemployment is soaring, personal wealth is falling, savings are rising, and Washington's anti-labor bias assures that wages will continue to stagnate for the foreseeable future. Thus, the American middle class will no longer be the driving force behind global consumption/demand that it was before the crisis. Once consumers are less able to buy new Toyota Prius's or load up on the latest China-made widgets at Walmart, there will be less incentive for foreign governments and central banks to stockpile greenbacks or trade exclusively in dollars.