October 09, 2009

Washington DC discovers new economic force: the World

Compelling evidence that FinancialCryptography.com is not deeply read in Washington DC arrived with this fascinating article:

Itís the biggest mystery in global finance right now: Who conducted a sneak attack on the U.S. dollar this week?

It began with a thinly sourced but highly explosive report Monday in a British newspaper: Arab oil sheiks are conspiring with the Russians and Chinese to quit using the dollar to set the value of oil trades ó a direct threat to the global supremacy of the greenback.

Is it true? Everyone from the head of the Saudi central bank to U.S. officials scrambled to undercut the story, but no matter.

Wakeup America? The collapse of the dollar was first heralded around 2001. The clue was the weaker-than-deserved crash after the dotcom era. Then, as evidence continued to pile in that the Fed was managing the US crises and economy too nicely, and the President was spending too many of the toys chasing towelheads and oil in Asia, the idea of a shift from dollar hegemony to multiple leading units went from theory to inevitability.

War Against the Dollar, the Pillar of United States Power

Whatever happens, Washington can no longer backtrack. In fact, the survival of the U.S. is menaced - not by an external enemy, but by internal economic weakness and tensions running between its communities. Many are becoming conscious of the fact that U.S. power is based upon a mirage, the dollar. These are only pieces of paper, printed when more are needed, while the rest of the world feels obliged to use them.

For the past three years, Jacques Chirac and Gerhard Schroder have engaged France and Germany in a pitiless war against the United States. They have sent emissaries world wide to convince other States to convert their monetary reserves to euros. The first to accept were Iran, Iraq and North Korea. Precisely the countries described by George W. Bush as those of the "axis of evil".

Meanwhile, Vladimir Putin has begun restoring the economic independence of the Russian Federation. He has reimbursed - ahead of time - the debts that Yeltsin had contracted with the International Monetary Fund and will also make an early repayment, before the end of the year, of the remaining debts to the Club of Paris.

That was 2003. It was reported here, not because we like poking fun at the Yanks, but because a monetary shift of this proportion is HUGE. Such a shift passes as news, except in Washington DC of course, where it's a sneak attack! The evidence in monetary terms was compelling enough to make it not only hypothesis but a clear progression; this blog reported it at least a dozen times back to 2003 (when the blog started. E.g.: 2008, x, x, x, x, The Coming Collapse of the Dollar, x, x, x, x, x, 2004).

Meanwhile, back in Washington DC, where the brightest and best are analysing this surprising development:

For American officials, the possibility of the dollar losing its long-term dominance in global commerce is a nightmare scenario because it would likely mean sharply higher interest rates at home and a declining ability to finance the U.S. debt. No one believes it could really happen right now, but stories like the British report this week make it seem incrementally more likely.

Reading the article, I get the feeling that because the report is British, it isn't credible. And Fisk, the author, is apparently a radical who consorts with Osama bin Laden. That's good news for us here in financialcryptography. That means it is not personal, the people in Washington DC don't read anything from outside their borders....

And so the USA seals its fate. With analysis like that, American policy is apparently immune from forces beyond the board, even when triggered from within.


In other news, President Obama was awarded the Nobel Peace Prize, which comes with a gold medal. Going up in value every day...

If he can save the dollar, he could be in line for another gold coin. He's probably too late this year as the Prize in Economics, in memorium of Alfred Nobel, will be awarded this Monday. But there's always next year.

Posted by iang at October 9, 2009 10:34 AM | TrackBack
Comments

What shall be the reserve currency? Without a World War no currency has the ability to sustain the heat unless it is a reserve currency, but it better be very liquid, because Central Bankers want to press the gas pedal and make it go when they want it to. If the Saudis, Russians, Chinese, and members of aligned and unaligned status wish to drive down a reserve currency without offering an alternative then what are the ramifications of this illogical action? The answer is simple there are too many greenbacks floating around and the Federal Reserve has acted without informing their partners of the inflation. This lack of a coordinated stance which should have included the Russians, Chinese, and others is a mistake and this short term punishment is a sign of an ever increasing lack of interest in the US Dollar. What will fill the ever growing void ? The answer is no one has a clue and until that time the US Dollar will suffer and dwindle in value. The commodity market will change radically without a reserve currency and prices must escalate until some level of assurances satisfy the commodity producing nations. IF the Saudis accept Chinese currency then the question is already answered. The Saudis are the key since their acceptance of another currency would be coupled with their assurances of military aid in times of trouble. This situation provides and excellent opportunity for the Peoples Liberation Army and the Chinese Central Bank to expand their presence. America welcomes any and all replacement scenarios since we can no longer determine who the winners will be. We are broke with no way to pay off our huge debt and must now rely upon the good graces of humanity to bail us out, perhaps the Russians will come to our aid; they seem less of a threat when compared to the US. I think the Iranians gaining a bargaining space at the table tells you where we are these days. The embargo against Cuba is for all intent purposes over and will be formally lifted in a year. Rio got the big vote from the IOC and the US was thrown out on its ass in the first round, we need to pull in our horns in , withdraw and hand the reins to the Chinese it is their time in history, they couldn't do a worse job than we did. The US should formally withdraw from all military treaties and all international efforts. The licking of wounds should begin as any fallen nation is entitled to do ask the Brits they are experts at it and we will learn from them. We have reached full circle with no culture, no education, and no viable skills to offer in exchange for goods and services. The debt we sold might be forgiven and we would gladly trade California or some other viable location to make the deal work. We are down and out for the count the insanity of linking a reserve currency to a military assurance has failed us, we would have been better served sticking with the Pound, now thats an idea give the fucking place back to the English or the Native Americans, and Mexicans we certainly no longer deserve it that is of course unless a World War engulfs the planet and we happen to be around we might show up late as usual.

Posted by: Jimmy at October 9, 2009 04:46 PM

Dollar Reaches Breaking Point as Banks Shift Reserves
http://bloomberg.com/apps/news?pid=20601087&sid=aA6_py_71g_o
The Dollar In Decline
http://www.forbes.com/2009/10/12/dollar-reserves-central-markets-currencies-bank.html
Central Banks' Reserve Shift Ignores Dollar Data: Chart of Day
http://www.bloomberg.com/apps/news?pid=20601109&sid=aaIrWeN0neZw

Posted by: News from the Lynn'o'gram. at October 13, 2009 08:32 AM
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