07-05-2009, 05:37 AM
<b>Dollar's Days of Dominance Dead</b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->While it may not constitute the final ânail in the coffinâ, India commemorated the 4th of July by joining China and Russia in announcing they were seeking âalternativesâ to the U.S. dollar (as âreserve currencyâ). With yet one more âpropâ removed from the gangrenous greenback, this left only the submissive Japanese as the last major holder of U.S. dollars who strongly supports its continued status.
Bloomberg reported Saturday that the economic advisor to Indian Prime Minister Manmohan Singh has publicly and explicitly recommended that India reduce the U.S. dollar component of its currency reserves. âThe major part of India reserves [totaling $264 billion] is in U.S. dollars â that is something that's a problem for us,â said Suresh Tendulkar.
These remarks come only one day after China's former Vice Premier, Zeng Peiyan stated, âThere should be a system to maintain the stability of the major reserve currencies.â
Several comments need to be made with reference to this remark. First, China commonly uses âvoicesâ of those associated to but not in the government to indirectly reveal its thoughts on issues. Thus the fact that Zeng is a former Vice Premier should not be taken to mean that his remark is not indicative of the position of the Chinese government.
Second, there were two subtleties which should cause Americans (and the Obama regime) serious concern. First, Zeng spoke of âmajor reserve currenciesâ - making it explicitly clear that he (and China) no longer consider the dollar the sole âreserve currencyâ today. The other point to ponder is Zeng's reference of a âsystem to maintain stabilityâ in currency markets. The U.S. dollar was that system.
There is much more at stake here than economic prestige. As the Obama regime floods the world with trillions of dollars more in U.S. Treasuries, the Federal Reserve has already been forced to buy-up a significant part of those Treasuries (i.e. monetizing debt). Monetizing debt alone guarantees the steady decline of the U.S. dollar versus other currencies (with the exception of the British pound and Japanese yen) because other economies have not been weakened to the point of such desperation.
However, as major economies continue diversification out of the U.S. dollar, even as economic growth in these other countries produces growing budget surpluses once again, few if any of those surpluses will be channeled into U.S. dollars.
The process is already well underway. China alone has engaged in currency swaps and trade agreements which by itself, reduces the demand for U.S. dollars by hundreds of BILLIONS per year. Many other countries are also engaged in similar measures â with varying speeds.
Countries either indifferent or antagonistic to the U.S. (Russia, Iran and Venzuela) come to mind, are already well-advanced in practically eliminating the use of dollar in their foreign trade. However, even many of the U.S.'s âalliesâ (with the Western-dominated Persian Gulf countries coming to mind) are also well down the path of reducing the U.S. dollar to merely one of their major currency holdings.
Indeed, the combination of rapid, extreme dilution of the U.S. dollar, along with rapidly diminishing demand mean there is no âfloorâ visible for the dollar â at any price level.
Reinforcing a future of endless declines for the dollar are the U.S.'s totally unsustainable mountains of debt ($57 TRILLION in total public/private debt + another $70+ TRILLION in unfunded liabilities. In comparison, real U.S. GDP is a puny $11.5 trillion/year â not nearly enough to even keep up the payments on the debt (let alone ever actually paying-off a dollar).
The only possible way for the U.S. to delay national default on these debt-mountains is to devalue the U.S. dollar to such an extreme that the real value of all those trillions in debt becomes sustainable. This will obviously necessitate at least a 75% decline in the dollar's grossly-inflated current value â and even then the viability of the U.S. economy is extremely dubious, unless there are huge reductions in spending to accompany the massive devaluation of the dollar.
Keep in mind that due to the success of the U.S.'s relentless propaganda-machine, most other countries are just beginning to comprehend the dynamics of the U.S.'s unsupportable debts. As that awareness grows, the decline of the U.S. dollar is certain to accelerate rapidly.
Themes: U.S. dollar, U.S. economy<!--QuoteEnd--><!--QuoteEEnd-->
http://seekingalpha.com/instablog/407380-j...-dominance-dead
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->While it may not constitute the final ânail in the coffinâ, India commemorated the 4th of July by joining China and Russia in announcing they were seeking âalternativesâ to the U.S. dollar (as âreserve currencyâ). With yet one more âpropâ removed from the gangrenous greenback, this left only the submissive Japanese as the last major holder of U.S. dollars who strongly supports its continued status.
Bloomberg reported Saturday that the economic advisor to Indian Prime Minister Manmohan Singh has publicly and explicitly recommended that India reduce the U.S. dollar component of its currency reserves. âThe major part of India reserves [totaling $264 billion] is in U.S. dollars â that is something that's a problem for us,â said Suresh Tendulkar.
These remarks come only one day after China's former Vice Premier, Zeng Peiyan stated, âThere should be a system to maintain the stability of the major reserve currencies.â
Several comments need to be made with reference to this remark. First, China commonly uses âvoicesâ of those associated to but not in the government to indirectly reveal its thoughts on issues. Thus the fact that Zeng is a former Vice Premier should not be taken to mean that his remark is not indicative of the position of the Chinese government.
Second, there were two subtleties which should cause Americans (and the Obama regime) serious concern. First, Zeng spoke of âmajor reserve currenciesâ - making it explicitly clear that he (and China) no longer consider the dollar the sole âreserve currencyâ today. The other point to ponder is Zeng's reference of a âsystem to maintain stabilityâ in currency markets. The U.S. dollar was that system.
There is much more at stake here than economic prestige. As the Obama regime floods the world with trillions of dollars more in U.S. Treasuries, the Federal Reserve has already been forced to buy-up a significant part of those Treasuries (i.e. monetizing debt). Monetizing debt alone guarantees the steady decline of the U.S. dollar versus other currencies (with the exception of the British pound and Japanese yen) because other economies have not been weakened to the point of such desperation.
However, as major economies continue diversification out of the U.S. dollar, even as economic growth in these other countries produces growing budget surpluses once again, few if any of those surpluses will be channeled into U.S. dollars.
The process is already well underway. China alone has engaged in currency swaps and trade agreements which by itself, reduces the demand for U.S. dollars by hundreds of BILLIONS per year. Many other countries are also engaged in similar measures â with varying speeds.
Countries either indifferent or antagonistic to the U.S. (Russia, Iran and Venzuela) come to mind, are already well-advanced in practically eliminating the use of dollar in their foreign trade. However, even many of the U.S.'s âalliesâ (with the Western-dominated Persian Gulf countries coming to mind) are also well down the path of reducing the U.S. dollar to merely one of their major currency holdings.
Indeed, the combination of rapid, extreme dilution of the U.S. dollar, along with rapidly diminishing demand mean there is no âfloorâ visible for the dollar â at any price level.
Reinforcing a future of endless declines for the dollar are the U.S.'s totally unsustainable mountains of debt ($57 TRILLION in total public/private debt + another $70+ TRILLION in unfunded liabilities. In comparison, real U.S. GDP is a puny $11.5 trillion/year â not nearly enough to even keep up the payments on the debt (let alone ever actually paying-off a dollar).
The only possible way for the U.S. to delay national default on these debt-mountains is to devalue the U.S. dollar to such an extreme that the real value of all those trillions in debt becomes sustainable. This will obviously necessitate at least a 75% decline in the dollar's grossly-inflated current value â and even then the viability of the U.S. economy is extremely dubious, unless there are huge reductions in spending to accompany the massive devaluation of the dollar.
Keep in mind that due to the success of the U.S.'s relentless propaganda-machine, most other countries are just beginning to comprehend the dynamics of the U.S.'s unsupportable debts. As that awareness grows, the decline of the U.S. dollar is certain to accelerate rapidly.
Themes: U.S. dollar, U.S. economy<!--QuoteEnd--><!--QuoteEEnd-->
http://seekingalpha.com/instablog/407380-j...-dominance-dead