POLITICS: The Shrinking US Dollar

The US dollar's value is still falling, and fast. Most effects are not felt yet by ordinary Americans, but the big hurt is coming, says MSN's Money Central. The analysis covers four main ways Americans will be affected: imported goods will cost more; prices of goods produced domestically will rise too; interest rates will rise; and the benefit of a weak dollar will be delayed.




The falling dollar - and China's role in propping it up - explains most of the recent anti-China sentiment. It's the new spin: "Blame China - not the Bush administration, the Iraq war, or the bankers."

Traditionally, nations in economic trouble have turned to war to jumpstart their economies. War creates heavy tax burdens, and debt for generations: manna for international financiers. In fact, war is bread and butter for international bankers; it's the proverbial golden goose.

History shows that financiers manipulate politics and public sentiment to create wars. They live very well on the interest payments, and throw their crumbs to the grateful peasants.

Thanks to the Iraq war, the US national debt jumped to $8.2 trillion by November of 2004. Our interest payments:

$ 120,248,160,823.07 (over $120 billion for October, November and December, the first 3 months of Fiscal Year 2005)
$ 321,566,323,971.29 (in 2004)

www.uwsa.com...
www.federalbudget.com...
www.publicdebt.treas.gov...

That's a lot of bread and butter for the bankers, and it's pulling the US Dollar value down.

Remember, it's your money. How would you spend it if you were free to make an informed choice?


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Related AboveTopSecret.com Discussion Threads:
US Dollar hits all-time low against Euro
More tax breaks for the rich! Way to go Bush.
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Soficrow: good news item,but don't be disappointed if it doesn't get much traffic. As long as you don't threaten to take away their guns and friggin bumper stickers Americans not only, don't know, they don't care about anything that isn't right now,even though so much is right now.

I've been watching China's reaction to it's growing econony wondering what it will do with it's currency. Not too many people seem to understand the monster we feed, and the capitalist that do, only care about the dollar to be made today. Our children will understand when it's too late.

Some of us understand... there just isn't much we can do about it. Already arms dealers and drug dealers are starting to deal more in Euros than Us currency. Most people just don't understand that being the reserve currency of the rest of the world is what has made america so strong.

I don't know off the top of my head if there's already a thread for this (I'm sure there is, but didn't find one) but...is this really the end of the U.S. "as we know it?". By that, I don't mean that we'll just fall apart at the seams, but...are things beginning to DRASTICALLY change for us (and if so, is any GOOD going to come of it)????

As an American that DOES care, it just makes me livid to not be able to disagree with your statement Kazi. You're absolutely right, and it makes me sick. I've got folks in my office that don't want to talk about politics, or world events because they either feel that it makes people upset, or because it's just "too much" to take in. Well TOO BAD! There's a proverbial gun being pointed at all of our heads right now that represents our international political/economic/reputable situation here folks! We'd BETTER start caring, before we have nothing left worth caring about. 'Cuz trust me, the rest of the world is NOT going to help us stay at the top like we have. Our recent actions and policies have convinced the rest of the world that we don't deserve that kind of international position, and quite frankly...we're nothing more than a bleeding fish in the midst of a school of sharks. Still don't care? *DINNERTIME!!!*

If you want to read something scary, check out what Volcker has to say about it:

Economist.com
AS THE dollar hit another new low against the euro, briefly breaching $1.30 on November 10th, an increasing number of economists are asking how far the greenback might fall and how its slide will affect the world economy. One of the most alarming answers comes from Paul Volcker, Alan Greenspan's immediate predecessor as chairman of the Federal Reserve. He recently said that he thought there was a 75% chance of a currency crisis in the United States within five years.

The dollar is up a little bit this year but I don't know how long that's going to last.

I've seen predictions that it's going to fall another 5% this year.

The g-7 meeting is in about two weeks. The consensus is that good U.S. economic news will come from this meeting. That is probably so.... however the impact of this news will not help the USD maintain any strength it will receive from the meeting.

Those that are hoping for a stronger dollar especially against the Yen and the Euro will get their good news and the market will move for them. But this will also be a market move that the short sellers will be hoping for too.

One other item that will come from the meeting is China's determination for the Japanese to buoy their currency. The Bank of Japan doesn't want too strong of a Yen because of the export picture. Those in the Euro Zone are wanting the same. The question will be if Japan will hold the line or cave into the pressure. I think there is an export competition heating up between China and Japan. Eventually they will strike a deal that will be good for both.

Is the U.S. export picture really good for the dollar? I mean to help it strengthen? Think about it. NO. Why? Because our trade gap is too large and the time that is needed to shrink the gap is too much for our own economy to help our own currency! We are at the mercy of others.

www.bloglines.com...

mike81859

Three stories related to this issue.

From the Associated Press…

China has lost faith in the stability of the U.S. dollar and its first priority is to broaden the exchange rate for its currency from the dollar to a more flexible basket of currencies, a top Chinese economist said at the World Economic Forum.
Chinese economist says his country wants to diversify out of the dollar and source #2

From The New York Times…

Economists, politicians and business executives voiced deep unease about the imbalances in the global financial system, which are reflected in the dollar's steep fall against the euro and other currencies.
But most expressed skepticism that the Bush administration would reduce the trade and budget deficits, which have fed those imbalances. The White House has said that it does not view these issues as a major problem…

"The U.S. current-account deficit is a problem for the whole world," said Jacob A. Frenkel, a former governor of the Bank of Israel. But, he said, "I don't see the budget deficit being taken seriously."
…

"There's nobody home on economic policy in America right now," said Stephen S. Roach, the chief economist at Morgan Stanley. The twin burdens of household and public debt in the United States, he said, are unsustainable.
Sinking Dollar Dominates Davos Debate and source #2 - requires login

From Boomberg with Commentary at FTW…

It is important to note that unpegging the Chinese currency from the dollar is not the great blessing that the US Treasury and NY Fed suggest. It will most certainly trigger the wholesale dismemberment of America's middle class and amount to a class war of extermination against the poor. These developments (Chinese unpegging/dollar dumping) -- when they happen -- will be the financial equivalent of a nuclear first strike that will "mysteriously" leave the US financial and political elites untouched. - FTW Editorial
…
Here in Malaysia, for example, Prime Minister Abdullah Ahmad Badawi recently said he is seeking ways to reduce the economy's reliance on the dollar for trade. Indonesia has mentioned it is considering trimming its holdings of U.S. Treasuries. The same goes for Thailand, according to the Financial Times.

China also has been in the news as traders speculate that Asia's No. 2 economy may pull the plug on dollar-denominated debt. Such a move by the second-biggest holder of U.S. Treasuries after Japan could send shockwaves through global markets.
…
Confidence in the dollar wasn't enhanced this week by President George W. Bush's record budget deficit forecast of $427 billion for this fiscal year. It belied assurances that the White House will bring one of the world's most worrisome economic imbalances under control.
…
All this has investors turning to the euro. Once Asian central banks do, the dollar's woes will worsen. By buying vast amounts of Treasuries, Asian central banks are delaying the rise in U.S. yields that would typically accompany a falling currency. If Asians pull the plug, U.S. rates could skyrocket.

Asian central banks like China's have become America's bankers, financing its excesses through good times and bad. It's now up to Asia to decide whether to extend the U.S.'s line of credit. The U.S. should be warned that the odds are moving less and less in its favor.
If China Shuns Dollar, Look Out U.S. and original source

China holds all the cards. If the US attacks Iran (or anyone else China has signed energy deals with) and threatens their energy supplies, then China will pull the plug on the US dollar sending it swirling down the drain.

China has been positioning itself to do just that.

See…
NEWS: Canada Signs Energy Deals with China
and
China a Leader in Scramble for Oil

Stick a fork in the US…they’re done. Unfortunately they will bring many others down with them.

edit: added more sources

[edit on 1/28/2005 by Gools]