Thread: The strongest economy in the world

^^ Giving that much temptation to just one group would surely lead to some form of self interest manipulation sooner or later. The rest of the world has no control over what future changes might be made to the governing practices of the EU.
The world agreed to use the US currency as its default trade currency because it was a dynamo of export production and a stable economy, not to mention the biggest. Pretty much the same reasons suggested for swapping to the Euro.

I dont believe we should put the worlds trading currency at the control of one country or region.
If things are left alone the Euro probably will eventually replace the $US as the worlds default trading currency. It has been making slow but substantial inroads in that direction for some time now. However there is no guarantee the EU will be in the same economic position in 20, 30 or 40 years from now. Consider what would happen to the EU trade position if all the money invested in $USs was to switch to Euros.

Something as important as a world trade currency, which would also by default become the worlds reserve currency, needs to be based on something more than just one countries or regions current economic standing.
The only fair and eternally enduring way to set up such a new system of world trade currency is to base it on the productivity of a basket of the largest producing nations. That way, no one country could manipulate the system for individual gain. Such a system would have the advantage of not being rigidly fixed to one countries or regions fortunes as individual inputs would be based on their productivity.

If the world is going to make such a big change in our financial system of trade (as it will have to sooner or later), its better to do it right, based on sound and enduring economic principles rather than to simply stumble onto the next best thing at hand at the time.

^Panda, such a basket exists. Its called the SDR's. The only problem is that the fools at the G20 instructed the IMF to QE (print) $1TR 'worth' of SDR's a few months ago, making any pretence of that currency being used sensibly a (bad) joke.

Stage 9 is upon us:

https://teakdoor.com/us-domestic-issu...ml#post1070050

^^^
^^Thanks

Originally Posted by passengers

^Panda, such a basket exists. Its called the SDR's. The only problem is that the fools at the G20 instructed the IMF to QE (print) $1TR 'worth' of SDR's a few months ago, making any pretence of that currency being used sensibly a (bad) joke.

They will figure it out sooner or later.

Some journalist made up the title. I'm not sure "puzzled" is the word to use.

Federal Reserve puzzled by yield curve steepening

Sun May 31, 2009



WASHINGTON (Reuters) - The Federal Reserve is studying significant moves in the U.S. government bond market last week that could have big implications for the central bank's strategy to combat the country's recession.

But the Fed is not really sure what is driving the sharp rise in long-dated bond yields, and especially a widening gap between short and long term yields.

Do rising U.S. Treasury yields and a steepening yield curve suggest an economic recovery is more certain, meaning less need for safe haven government bonds and a healthy demand for credit? If so, there might be less need for the Fed to expand the money supply by buying more U.S. Treasuries.

http://www.reuters.com/article/ousiv...54U1NZ20090531

Celente on May 31, 09: Some current talk.

No surprise here. Not enough customers.

NEW YORK -- The amusement park company Six Flags filed for bankruptcy Saturday.
The operator of 20 theme parks in the U.S., Mexico and Canada says the filing in a federal court in Delaware is part of its plan to reorganize and shed $1.8 billion worth of debt.

Company CEO Mark Shapiro says the move won't affect the day-to-day operations of the parks.

http://www.forbes.com/feeds/ap/2009/...ap6540525.html

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.

An addendum to my previous comment. So, any sane person should not blame Clinton for 9/11 as it happened more than seven months after his watch ended, but we should all blame Bush for the monthly increase in unemployment and economic failure after five months of Obama? For your sake, I hope his admin can start fiddling the numbers soon.

Interesting reading the whole thread from the beginning! Seems some of the posters knew more about what was in store for the world economy than our beloved politicians and financial gurus( or at least what they would admit to! ) What will happen next I wonder?

Originally Posted by Jet Gorgon

the monthly increase in unemployment and economic failure after five months of Obama? For your sake, I hope his admin can start fiddling the numbers soon.

They did already, did you see the non farm payrolls reduce from 600,000 to 345,000?

That was achieved by some tinkering with the birth / death model used to calclate the numbers and "somehow" 220,000 jobs were "created".

The market went down on that news because everybody knew it was bullshit.

^ No, thanks for the info. I know they are hiding the other unemployed #s like those who have given up looking or are under-employed.

^ Not forgetting those who's benefits simply ran out and and are no longer counted in the total.

Regarding the world economy, I just finished reading a long report out of China that basically said demand for manufactured goods is not returning. Much of the rallies in the world stock markets had been driven by stories of China restocking commods due to increased demand for production. The article indicated that there was no external demand, but rather a huge shopping spree by China to get stuff on the cheap and to store for later use, while prices were at rock bottom and shipping rates are dirt cheap.
If theres any truth in this, I'm pretty sure the markets will head south at a fair old clip. Something to think about for me.

^ Heard about that. I still think the US stimulus won't do much if biz is not allowed to proceed. Those 18 industry czars scare me, too. Was toying with the idea of Treasuries, but that's out now. Some biotech startups look good, but I hate investing in a co that just has cash burn and no rev flow. And then there's the healthcare reform to think about.

^ I did see that Robo, but there are plenty of "positve signs" out there. To say there are "no positive signs" is nonsense. One only has to look to the tech sector and see demand ramping in the LCD tv sector, supplier factory utilisation rates are up and some companies like Corning who are one of the largest makers of glass used in lcd tv screens are performing well since over a month ago.

We'll see. I think governments are trying to talk up the "green shoots" based on the idea that if the consumer starts feeling optimistic again he'll start buying. I'm posting a link and an extract from an article below that addresses this issue very well (italics below mine).

http://www.nytimes.com/2009/06/07/op...nWEB.html?_r=1
Mr. Obama thinks that the way to revive the economy is to restore confidence in it. If the mood is right, the capital will flow. But this belief is dangerously misguided. We are sympathetic to the extraordinary challenge the president faces, but if we’ve learned anything at all two years into the worst financial crisis of our lifetimes, it is that a capital-markets system this dependent on public confidence is a shockingly inadequate foundation upon which to rest our economy.

World trade, or any kind of trade for that matter has got to be based on the exchange of real goods and services rather than just paper money that the world has come to believe has more value.

All we are seeing now is the re inflation of the bubble with paper money that cant be backed up with actual goods and services. This current minor resurgence is purely faith based and not based on production at all. Its going to pop again sooner or later. And the next crash will be harder than the last because the faith wont be there to prop it up again.

Everything China sent to USA is gone. All China has is a bunch of IOUs saying they will pay it back eventually. All those US Government bonds China and Japan own are but pieces of paper, IOUs in fact, proclaiming the holder will get paid back in $US paper money when clearly the USA does not have the capacity to pay that money back at current purchasing power of actual goods. Somethings got to give eventually, and its got to be the tradable value of the $US.

The faith based boom of the past several years and this most recent mini resurgence in the world economy is purely faith based on the disproportionate value of the DEBT BASED $US. Eventually someone will have to pay. And that will be China and Japan, the worlds leading producers ironically. But of course we will all pay in some way as the worlds trading system collapses and rebuilds itself as it always does.

^Correct. IIRC the monetary base of the US has been expanded in the past 6-months 10 times the amount since the the creation of the FED 100 odd years ago.

I know certain posters have difficulty with complex numbers (pay attention Butterfly!), so to put this simply, the US monetary base (the fundamental amount of USD in 'existance') has been doubled in the past year.

Ron Paul's recent FED Audit bill (which is explosive to say the least) accurately states that in the 100 years of the FED, the USD has lost 95% of its value. In reality this pales into insignificance to the fact that $1 when Obama first grinned at the camera as POTUS is now technically 'worth' 50 cents. It just takes the markets to catch up with such things.

Anyway, as you were.

Trillions of dollars of capital are being allocated sub-optimally, by politically tainted government calculations rather than by the economic rationality of markets. Hence the nation's prospects for long-term robust growth — and for funding its teetering architecture of entitlements — are rapidly diminishing.

The president's astonishing risk-taking satisfies the yearning of a presidency-fixated nation for a great man to solve its problems. But as Coolidge said, "It is a great advantage to a president, and a major source of safety to the country, for him to know that he is not a great man." What the country needs today to shrink its problems is not presidential greatness. Rather, it needs individuals to do what they know they ought to do, and government to stop doing what it should know causes or prolongs problems.

George Will: Recovery, meet sobriety
http://jewishworldreview.com/cols/will061109.php3

Dont panic. The rest of the world is still buying it, -- $USs that is.
Why shouldn't they just keep printing the stuff so long as others are prepared to send real goods in exchange? And of course there's the $trillions in loans, -- all in $USs too. Print, spend and borrow while the going is good makes a lot of sense, because in the end somebody else pays.

Well, what do you know; the dollar really might be a goner:
Truthdig - Reports - The American Empire Is Bankrupt
There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.”

It is the first formal step by our major trading partners to replace the dollar as the world’s reserve currency. If they succeed, the dollar will dramatically plummet in value, the cost of imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe. Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak. And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered working and middle class. The people of this class will demand vengeance, radical change, order and moral renewal, which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News, will assure the country they will impose.

I called Hudson, who has an article in Monday’s Financial Times called “The Yekaterinburg Turning Point: De-Dollarization and the Ending of America’s Financial-Military Hegemony.” “Yekaterinburg,” Hudson writes, “may become known not only as the death place of the czars but of the American empire as well.” His article is worth reading, along with John Lanchester’s disturbing exposé of the world’s banking system, titled “It’s Finished,” which appeared in the May 28 issue of the London Review of Books.

“This means the end of the dollar,” Hudson told me. “It means China, Russia, India, Pakistan, Iran are forming an official financial and military area to get America out of Eurasia. The balance-of-payments deficit is mainly military in nature. Half of America’s discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don’t have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America’s military aggression against them. They want to get rid of this.”

^ If it's a basket of currencies, fine. Let it be an IMF-organised currency. But China better start floating the yuan if it wants to be part of that little collective.

BBC NEWS | Business | Dollar's reserve status 'is safe'

Dollar's reserve status 'is safe'


Mr Kudrin said the US dollar's reserve status was safe

The dollar has risen after Russian finance minister Alexei Kudrin said it would not be replaced as the world's reserve currency in the near future. Earlier in the week, Russian President Dmitry Medvedev and Chinese central bank governor Zhou Xiaochuan had both questioned the dollar's status.
They had said it was time to consider an alternative benchmark currency for international debt.
But Mr Kudrin said "it's too early to speak of an alternative".
His remarks came ahead of a summit of leaders of Russia, China, India and Brazil on Tuesday in the Russian city of Yekaterinburg.
A Kremlin spokesman said on Sunday that the summit would not be discussing the possibility of a new global reserve currency.
"We will speak more about the possible ways to reform international financial institutions," he said.
The dollar was up 0.61 of a euro cent at 0.7197 euros and up 0.38 pence at £0.6119 (making one pound worth $1.63438).