The strongest economy in the world

But the $US tanking is always played in a very negative tone to American audiences as if its something to be avoided.

I hear little or no talk from American commentators about the $US hegemony being the at the root of worlds financial problems. Quite obviously these interviews are being pitched solely to American audiences and American egos.

If there is one thing dragging the worlds financial system down its the $US hegemony and USAs exploitation thereof. Something the US commentators are loathe to give up or admit to.

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Originally Posted by Panda

But the $US tanking is always played in a very negative tone to American audiences as if its something to be avoided.

I hear little or no talk from American commentators about the $US hegemony being the at the root of worlds financial problems. Quite obviously these interviews are being pitched solely to American audiences and American egos.

If there is one thing dragging the worlds financial system down its the $US hegemony and USAs exploitation thereof. Something the US commentators are loathe to give up or admit to.

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Good point, Panda.

I cannot even recall an article or news story discussing the dumping of US dollars all over the world in the US. Petro dollars (oil bourse) and currency reserves, and Bretton Woods.

In the US, it's not even discussed.

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Originally Posted by Panda

But the $US tanking is always played in a very negative tone to American audiences as if its something to be avoided.

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Really? Always? Plenty of commentators have pointed out that a weak dollar would be a good thing for the US now; there is a tendency for people to associate the strength of their currency with the strength of their country, but that is ignorance. I have linked to these guys before, but here goes again:
Krugman in the NYT:
China and the liquidity trap - Paul Krugman Blog - NYTimes.com
". . .the argument that a reduction in China’s dollar purchases would be contractionary for America because it would drive up interest rates is equivalent to the argument that fiscal expansion is contractionary for the same reason — and equivalently wrong.

But what if China doesn’t spend more, but just reallocates its reserves from dollars to, say, euros? The answer is, that’s also good for us: a weaker dollar will help our exports, at Europe’s expense.

One of the things I tried to tell the Chinese was precisely that the old co-dependence no longer exists. For now, at least, their dollar purchases are an unalloyed bad thing from America’s point of view."

Why is the dollar being propped up? Dean Baker:
Beat the Press Archive | The American Prospect
When China Buys U.S. Bonds It Is Manipulating Its Currency

The folks who couldn't see an $8 trillion housing bubble are now busy spreading another absurd untruth, that the United States needs China to buy its Treasury bonds to keep down interest rates. This is completely untrue and in fact runs against the stated goal of both the Bush and Obama administration of a higher-valued Chinese currency.

This should all be very straightforward. When China "manipulates" its currency (there isn't much secret here, the government openly manages its exchange rate) it buys up U.S. dollars. That is the way currency markets work. China's huge trade surplus would otherwise cause the value of its currency to rise against the dollar. However, China has an explicit policy of preventing this rise by using its foreign exchange earnings to buy dollar denominated assets. One of the dollar denominated assets it buys is Treasury bills.

If China stopped buying dollar assets (including Treasury bills), then the dollar would fall against China's currency. This would make Chinese imports more expensive to people in the United States (just like a tariff) and we would buy less of them. It would also make U.S. exports cheaper for people in China, causing them to buy more of our exports. This improvement in the trade deficit would help to stimulate the U.S. economy, which is one reason that many people have advocated reducing the value of the U.S. currency relative to the yuan.
-snip-
Finally, China is not buying these bonds as an investment. It absolutely will lose money on these bonds.The dollar will fall and interest rates will rise. This makes U.S. Treasury bonds a really bad investment for the Chinese compared to say, buying short-term euro assets or almost anything else in the world. They are obviously buying U.S. Treasury bonds for the purpose of sustaining their export market in the United States. This is not an accidental outcome of their actions."
(outlining above is mine)
Plenty of us are prepared to see the US consumer stop being the driving force of the world's top export economies. It is pretty obvious that people like Panda would like to blame the world's economic ills on US "hegemony" (you might try taking the blinkers off, mate- then again, I am sure alway having the demon US to blame is comforting in a way), but the fact is that there is plenty of blame to go around. China, the other Asian exporters, and Germany should have seen this coming, but were only too willing (especially in the case of China, Japan, ROK, Taiwan) to keep riding the vendor-financed US consumer gravy train like there was no tomorrow. That Wall Street and the big banks went along with it should come as no surprise- they make money rain or shine, as the current bailout proves.

It is really important to try to stop seeing this issue through the lens of nationalism. The multinational corporations, including banks and financial firms, operate outside confines of nationality; it doesn't matter if you are talking about Mitsubishi, UBS, Goldman, or Siemens- the multinationals are loyal not to the perceived national interest of their respective companies, wherever their putative HQs might be, but to profit alone. The people running these companies might as well not be living on the same planet as the rest of us, let alone in the same countries.

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Originally Posted by Panda

But the $US tanking is always played in a very negative tone to American audiences as if its something to be avoided.

I hear little or no talk from American commentators about the $US hegemony

---

Panda,

Could you give us a time-line and brief synopsis of the $USD hegemony, Panda?

And why it's bad for the world.

I only know the basics. Thanks if you want to just post a snippet.

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Originally Posted by Panda

If there is one thing dragging the worlds financial system down its the $US hegemony and USAs exploitation thereof

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I have mentioned this quite a few times on US based trading/investment blogs and being absolutley slated for it. Much to my amusement, its not something they want to hear about:)

Here is Celente on May 27, 09: USD decline, US moving to an under-developing world.

YouTube - Gerald Celente The bailout bubble The Mother of all bubbles 27 May 09

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Originally Posted by Milkman

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Originally Posted by Panda

But the $US tanking is always played in a very negative tone to American audiences as if its something to be avoided.

I hear little or no talk from American commentators about the $US hegemony

---

Panda,

Could you give us a time-line and brief synopsis of the $USD hegemony, Panda?

And why it's bad for the world.

I only know the basics. Thanks if you want to just post a snippet.

---

There tons on information and opinions on it available via a Google search.

But since you asked for my own opinion here it is.

The USA abandoned its currency links to gold in 1971 when it started running out of gold to back up its currency. Since the US economy was the largest and strongest in the world, it was accepted and the world accepted the $US as a replacement for gold reserves as a measure of wealth. Most countries sold off the bulk of their gold reserves and bought up $USs as a reserve of their wealth. (USA kept their gold though). This demand for $USs and the fact that it was the worlds default trading currency pushed up the value of the $US. The pricing of oil exclusively in $USs helped to cement the $US hegemony.

Other countries could trade in other currencies or hold reserves in other currencies, but since virtually everything was now priced in $USs there would be a price to pay in exchange rates for trade. And as the $US became more in demand it also became more stable than any other currency. The $US seemed as good as gold. Unfortunately, (for the rest of the world), all this happened at the end of an era when USA was a productive manufacturing giant with export trade surpluses to spare. And unfortunately for the rest of the world, owning the worlds printing press to create money led USA shift its wealth creation base away from actual production of real goods and more towards the strange world of financial services. A lot of the money that went out of the USA to pay for imports came back in the form of investment in $USs and US companies. I believe some people called it "the money go round".

Now that the glory days are over the only thing that persists is a desperate faith that the $US wont collapse. Investors flocked to the $US in the later part of 2008 as a safe haven for wealth storage as the stock market collapsed. Most countries are left holding large reserves of $USs they accumulated in better days.
No one else wants to see the $US crash because it would mean a substantial decline in the value of their own holdings. Yet the $US hegemony has gone from a safe bet based on productivity, to a last resort in the absence of any real alternative, now based only on debt, in just 40 short years.

The $US hegemony has turned out to be a total disaster for not only USA, but for the whole world economy.

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Originally Posted by Panda

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Originally Posted by Milkman

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Originally Posted by Panda

But the $US tanking is always played in a very negative tone to American audiences as if its something to be avoided.

I hear little or no talk from American commentators about the $US hegemony

---

Panda,

Could you give us a time-line and brief synopsis of the $USD hegemony, Panda?

And why it's bad for the world.

I only know the basics. Thanks if you want to just post a snippet.

---

There tons on information and opinions on it available via a Google search.

But since you asked for my own opinion here it is.

The USA abandoned its currency links to gold in 1971 when it started running out of gold to back up its currency. Since the US economy was the largest and strongest in the world, it was accepted and the world accepted the $US as a replacement for gold reserves as a measure of wealth. Most countries sold off the bulk of their gold reserves and bought up $USs as a reserve of their wealth. (USA kept their gold though). This demand for $USs and the fact that it was the worlds default trading currency pushed up the value of the $US. The pricing of oil exclusively in $USs helped to cement the $US hegemony.

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You might want to pause there for a second. Nixon made a deal with the Saudis to price oil exclusively in USD. While the dollar was no longer gold-backed (per se- the US mint will sell you as much gold as you want for "fiat" dollars- Eagles or Buffaloes), Nixon's deal made the currency effectively oil-backed. Change that and say "good-bye" to the dollar as reserve currency, but then again it is hard to see why that would happen. Maybe if Russia got its shit together, but with Saudi, Kuwait, Iraq, UAE, etc. ad nauseum in the US' pocket, I think oil is going to continue to be priced in dollars. The Chinese might make a play for major pricing in yuan, but do they really want to pull the legs out from under the USD? Rather doubt it.

This is a good page about the above and the relationship to USD "hegemony." Petrodollar warfare: oil, Iraq and ... - Google Book Search

Oil was certainly a big factor in cementing the $US as the worlds trading currency. Saddam Hussein started demanding Euros for his oil and look what happened to him. Iran has been unsuccessfully trying to persuade OPEC to deal in Euros too. The US backed Saudi dictators have said no, so thats the end of it for now. Right now the Iranians are trying to set up an oil bourse themselves to deal exclusively in Euros.

At the moment about two thirds of all world trade is conducted in $USs, and about one third in Euros, with the Euro gradually gaining ground.
Having the worlds trading currency based on just one countries or regions currency (who can then simply print their way out of debt) is madness open to exploitation.

BTW, --- Good link there Robuzo.

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Originally Posted by Panda

Oil was certainly a big factor in cementing the $US as the worlds trading currency. Saddam Hussein started demanding Euros for his oil and look what happened to him.

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I've always thought that was a big part of what happened to him. I think the US was also afraid that China would make inroads in Iraq and get some kind of sweetheart exclusive on all that oil.

Another good reason for the US (and everybody) to get off of oil- of course, not much chance of progress there while the US had a self-described "oil man" in the White House (albeit a failed "oil man").

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Originally Posted by Panda

Having the worlds trading currency based on just one countries or regions currency (who can then simply print their way out of debt) is madness open to exploitation.

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it is, I agree, and having the EURO compete is a good thing, but having the EURO replace the USD won't change the problem either, so at the end you need both. EURO for trades and reserve, and USD for trades and oil. A perfect combination. UKP as a side kick with the SWF. It's not all one way or the other as you seem to indicate so many times in your posts.

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Originally Posted by Butterfly

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Originally Posted by Panda

Having the worlds trading currency based on just one countries or regions currency (who can then simply print their way out of debt) is madness open to exploitation.

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it is, I agree, and having the EURO compete is a good thing, but having the EURO replace the USD won't change the problem either, so at the end you need both. EURO for trades and reserve, and USD for trades and oil. A perfect combination. UKP as a side kick with the SWF. It's not all one way or the other as you seem to indicate so many times in your posts.

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The basket of currencies represented by some kind of unit might be a good idea, but it will freak out the US right wing- single world currency! One world government! UN is going to invade!

Or there could be a return to some kind of Bretton Woods III- might bring some stability, but where to peg the currencies? Gold is archaic; please don't say "oil." Back to silver? In how many languages does "silver" also mean "money" (I can think of more than a few, including a couple close to home. . .)? And silver has a lot more uses than gold. Maybe using silver makes too much sense. Anyway, if the US had a sound monetary policy pegging to the dollar would work, but it has shown itself all too willing to exploit the system to support its various follies, as Panda points out.

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Originally Posted by passengers

^Correct, in stages 10 and 11 of the ecomonic forecast BKKandrew posted a long long time ago, with the baseline being early 2007...:

1. Global Housing Market Bubble Bursts
2. Global Bank Lending Implodes
3. Global Economy Begins to Contract
4. Global Banks begin to Fail
5. Global Unemployment Soars
6. Global Banks are Nationalised
7. Global Interest Rates are Lowered Dramatically to 0%
8. Global Quantitative Easing will be carried out on a Massive Scale
9. Global (Inflationary)Default on Debt
10. Global Hyperinflation
11. Global Dash For Assets
12. Global Monetary Collapse
13. Global Political Meltdown

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shit, I must have missed that, recap of your predictions AFTER things have happened, which half of them you posted at the time predicting the exact opposite :) and I think you missed your oil at 400 USD prediction with demand getting higher and higher until infinity

Do you even know what Hyperinflation is ? :rofl:

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Originally Posted by Butterfly

shit, I must have missed that

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Well, you miss most things, so no suprise there. Carry on.

A new international trading currency would need to be productivity based to be fair to everyone. And of course it would need to be controled by an impartial authority. Since it would only be required for international trade and countries reserve of wealth, it could be based on export/import values plus their overall participation in international trade.

EG: In its simplest form, --take a basket of currencies from say the top 5 or 10 trading countries in the world. Adjust their values in proportion to their import/export ratio. Average out the the values and assign each country a value based on their share of world exports.

Now before you all start pointing out the operational faults in such a plan, let me add that it is the concept, not the mechanics, I am putting forward here. I am sure developing a new trading international currency will be a complex matter with much debate and jockeying for advantage from the countries involved in its foundation.

Right now opposition from USA would not allow a new world trading currency to get off the ground. However, thats now while USA is using its privileged position to borrow as much as possible before the inevitable crash of their $. And as stated in previous threads, a crash in the tradable value of the $US will be good news for US exports and debt settlement. The idea is being fielded now by many countries including Russia and China. But the time is not right just yet.
After the $US crashes and other countries realize a big chunk of their reserve wealth has suddenly evaporated into the same thin air that Obama created all the new $USs from, there is likely to be a more condusive world attitude towards the concept.

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Originally Posted by passengers

Well, you miss most things, so no suprise there. Carry on.

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and I predicted that exact answer from you, damn, I should have opened a thread about it :)

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Originally Posted by Panda

A new international trading currency would need to be productivity based to be fair to everyone. And of course it would need to be controled by an impartial authority. Since it would only be required for international trade and countries reserve of wealth, it could be based on export/import values plus their overall participation in international trade.

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that sounds very nice, but it's all academic, unfeasible. Governments like people, like to cheat, and expecting fair play from everyone is beyond naive. The name of the game is competition, and currency valuation play a big part in that game. You are trying to set rules in a world that rely on no rules to compete. That's the very nature of free competition.

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Originally Posted by Panda

Right now opposition from USA would not allow a new world trading currency to get off the ground.

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I think it will come naturally. The USA is not to decide of anything, they are just dominant and can leverage. Eventually, that dominant position will fade in a natural kind of way.

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Originally Posted by Panda

After the $US crashes and other countries realize a big chunk of their reserve wealth has suddenly evaporated

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That reserve wealth was accumulated over the years, decades, you can't expect government to switch all of their assets into a new untested currency, like the EURO overnight. That change would be slow to be successful. If it was that simple, the changes would have already been made. I believe Japan is the only country that went that far and it cost them dearly, so at the end they just realized their worst nightmare.

Bo has a lot to answer for is all I say...:mid:

https://teakdoor.com/images/smilies1/You_Rock_Emoticon.gif

Source

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Originally Posted by Butterfly

That reserve wealth was accumulated over the years, decades, you can't expect government to switch all of their assets into a new untested currency, like the EURO overnight. That change would be slow to be successful. If it was that simple, the changes would have already been made. I believe Japan is the only country that went that far and it cost them dearly, so at the end they just realized their worst nightmare.

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The adoption of the Euro as the worlds default trading currency would be just as bad as staying with the $US (as I have often stated). Though a gradual shift does appear to be happening in the absence of any real alternative at the moment.

And of course establishing a new production based world trading currency ain't going to be simple. Never said it would be. In fact, quite the opposite. Still, doesn't mean it cant or wont happen within the next decade.

For there to be such a monumental change in world finances there will need to be some monumental reason. It ain't going to change just because it sounds like a good idea. For the past several decades things have been going along OK using the $US. Now things are changing. The US is deep in debt and going deeper with no way to pay it back unless there is a dramatic fall in the trading value of the $US. Thats something thats got to happen when the credit runs out sooner or later. All the countries with their reserve wealth stored in $USs are going to take a huge hit when that crunch comes. As are private investors who stay in it too long. Not to mention the holders of US bonds at virtually zero interest who will get paid back in depreciated $USs. Thats going to be the monumental reason to induce a change.

There have been a few monumental changes in recent history. WW2 sent Europe broke, -- hence the Brenton Woods deal when USA still was a productive powerhouse. The Vietnam war sent USA broke, -- hence the break from gold. Now the USA is broke again with nothing but paper money and promises to pay later to buy its way out. Paper money that the whole world has come to rely on because by faith in it, its been as good as gold for nearly 40 years.
But its not paper money founded on productivity anymore, its paper money based on debt owed to the countries who do actually produce a surplus.

The fact that major world financial players like Russia and China are already touting the concept of a new world trading currency at this early stage indicates that it is not just an academic idea confined to debate in the halls of universities.

Right now the $US is still strong and hence faith in its value is still strong. The US is borrowing at an unsustainable rate while the faith is still there. That must eventually come to an end.
Times change, and the currency of international trade will change too when there is sufficient reason. The British hegemony came and went, and so too will the US hegemony.

Monetary hegemony - Wikipedia, the free encyclopedia

Yeah, sure Boon Mee, after eight years of the most incompetent administration in my lifetime, possibly in US history, it's Obama's fault. It's only May- the worst terrorist attack on US soil happened in the first September of Bush's first term, and the right-wing hypocrites still blame Clinton.

Anyway, maybe this will help you understand why the stimulus package isn't really helping yet:
Zoellick Warns Stimulus ‘Sugar High’ Won’t Stem Unemployment - Bloomberg.com
World Bank President Robert Zoellick warned policy makers that fiscal-stimulus plans are insufficient to turn around the “real economy” and rising joblessness threatens to set off political unrest across the globe.

“While the stimulus has given an impulse, it’s like a sugar high unless you eventually get the credit system working,” Zoellick said in an interview with Bloomberg Television’s “Political Capital with Al Hunt” scheduled to air tonight and over the weekend. “When unemployment increases, that’s probably the most political, combustible issue.”

Its like a car running out of gas. It stops. Its starts. It stops again and then it starts again. But finally it stops until you top up the tank with something more than hot air.

The world economy can not be sustained by subsidizing its biggest consumer with never ending credit. That just ain't gonna work long term.

All growth has to be based on productivity. The financial wizards have been juggling the numbers around for a long time and it seemed to work for a while, but in the end if you spend more than you earn, you have to take a cut in living standards when the credit runs out.

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Originally Posted by robuzo

Yeah, sure Boon Mee, after eight years of the most incompetent administration in my lifetime, possibly in US history, it's Obama's fault. It's only May- the worst terrorist attack on US soil happened in the first September of Bush's first term, and the right-wing hypocrites still blame Clinton.

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Yep, those terrorists timed it right.
What a shallow, thoughtless prat you are, robu-jap clod-hopper. Add some backing to your comments besides your emotional farts.

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Originally Posted by Panda

in the end if you spend more than you earn, you have to take a cut in living standards when the credit runs out.

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Gee, the UAW workers seem to be doing OK. And so are the welfare types, the mortgage failure folks and the credit card cheats.

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Originally Posted by Jet Gorgon

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Originally Posted by Panda

in the end if you spend more than you earn, you have to take a cut in living standards when the credit runs out.

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Gee, the UAW workers seem to be doing OK. And so are the welfare types, the mortgage failure folks and the credit card cheats.

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Better ask them if they are doing OK before you make a comment like that.

But "credit card cheats"? Are you referring to the banks where new legislation is being introduced to stop their rip offs?

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Originally Posted by Panda

The adoption of the Euro as the worlds default trading currency would be just as bad as staying with the $US (as I have often stated). Though a gradual shift does appear to be happening in the absence of any real alternative at the moment.

And of course establishing a new production based world trading currency ain't going to be simple. Never said it would be. In fact, quite the opposite. Still, doesn't mean it cant or wont happen within the next decade.

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Could you explain to me why adopting the Euro would be just as bad as the USD.

The European Union is today the worlds strongest economy, not the US (maybe we should change the thread name:)), GDP for EU in 2008 was in millions of dollars: 18,394,115- the US 14,264,600.

The Euro value is largely based on production:

"The European Union is the largest exporter in the world ([15]) and the second largest importer. Internal trade between the member states is aided by the removal of barriers to trade such as tariffs and border controls. In the eurozone, trade is helped by not having any currency differences to deal with amongst most members. The European Union Association Agreement does something similar for a much larger range of countries, partly as a so-called soft approach ('a carrot instead of a stick') to influence the politics in those countries.
The European Union represents all its members at the World Trade Organization, and acts on behalf of member states in any disputes."


The Euro as a currency is much more stringently regulated than the USD and the Euro zone member countrys have quite firm ecomomic parameters they have to stay within, not one country alone would be able to print as many Euros as they wanted to cover debt, and there are some very conservative members that would not allow the Euro to run amok selling limitless amounts of bonds that could not be coved by real value I believe. ?


:)