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But on the other side of the coin, foreigners continue to soak up tons and tons of our debt, which they will probably spell "tonnes and tonnes of debt of the world's biggest idiots who think that they can make an economy out of borrowing and spending money for imported consumer items and having their governments borrow more and more money to spend more and more money on more and more people!", and last week the official holdings of these foreigners at the Federal Reserve exploded by another $16 billion. In one week! I don't know if this is a new weekly record or not, and I don't care, because if I did care, then I would have to do actual work to answer the question, but you know how I feel about work, and if you don't, then ask me to do some and see what happens. The only thing that matters is that it is a lot of money, and the humongous sum total of American government they have stashed at the Fed IS a new record, $1.572 trillion!
If I looked it up correctly, in 1995 the banks' reserves were about $60 billion, insuring against $206 billion in loans and leases, and $87 billion in savings. M3 was $4.3 trillion.
Now, in 2006, notice the amazing difference! Today, required reserves are only a measly $41 billion (down almost 33%!) as a cushion against a whopping $5,540 billion in loans and leases (2,700 percent bigger than in 1995) and an astonishing $5,150 billion in savings (5,900 percent bigger)! M3 is now $10.3 trillion.
As of 2004, Social Security was a $10 trillion off-balance-sheet liability. Medicare is a $64 trillion liability. The Social Security fund will begin to run in the red around 2015. The Medicare fund is already operating in the red, a situation that started in 1992. The combined $74 trillion off-balance sheet IOU to Americans is more money than is available in all the stock and bond markets of the world. This means life or death will be determined by your wallet, not your doctor.
Originally posted by Regenmacher
The thesis is simply wrong for many reasons, not least that war on Iran has been in planning since the 1990s as an integral part of the United States' Greater Middle East strategy.
Launch of Iranian oil trading hits wall
Oil exchange unlikely to begin till at least midyear
Despite repeated reports over the past 18 months or so that the planned bourse would finally open for business on March 20, 2006 -- and go head to head with the New York Mercantile Exchange and the ICE Futures Exchange in London -- the start date has been postponed by at least several months and maybe more than a year.
"In the middle of 2006, we are able to start the bourse," Mohammad Asemipur, special adviser on the project to Iran's Oil Minister, said when reached in Tehran. The plan is to trade petrochemical products first, with a crude oil contract coming last, a rollout that likely will take three years, he said.
"Oh, crikey, it's at a much earlier stage than people would think," said British consultant Chris Cook, who claims credit for coming up with the idea for the exchange in the first place and is a member of the consortium headed by the Tehran Stock Exchange that is charged with bringing the project to life.
"You can rest assured, there will not be a crude oil contract, Gulf-based, in my opinion, within a year -- and that would be really pushing it," Mr. Cook, a former director of ICE's predecessor, the International Petroleum Exchange, said when reached in Scotland.
Read the rest here: www.theglobeandmail.com...
As the nuclear standoff pitting Iran against the West continues, some conspiracy theorists are more focused on another plan that the Middle Eastern nation is pursuing.
But they are jumping the gun if they still figure Iran is within days of launching a new international oil exchange that would sell its own and other Middle Eastern oil producers' black gold in euros rather than U.S. dollars -- and which, the theory goes, could ultimately torpedo the greenback and the U.S. economy.
The electronic exchange is to be located on Kish Island in the Persian Gulf, an Iranian duty- and tax-free zone.
There has been far less talk about the planned bourse in the mainstream media than on the Internet, particularly on websites aimed at gold bugs and other economic conspiracy theorists.
The theory is that all trades through the new bourse would be made in euros, not the U.S. dollar, which for decades has been the world's primary reserve currency, as well as the one in which oil and most other commodities have been priced. As a result, European nations and other countries, especially Middle East oil producers, tired of having to buy billions of now weakening greenbacks to pay for their energy purchases, would no longer have to do so.
This, the conspiracy theorists contend, would knock the stuffing out of the U.S. currency and hasten the decline and fall of the American Empire, all the while allowing Iran to stick it to the Great Satan.
But, the theory continues, Washington will pre-empt all this by using Iran's nuclear ambitions as a pretext for attacking the country.
Kamal Daneshyar, chairman of Iran's Majlis [parliamentary] Energy Commission reportedly told the Iranian Students News Agency in December that the exchange would at first operate in both dollars and euros, but gradually move to the European currency exclusively. He was also quoted as saying that this would enable Iran to get even with the U.S. for the economic damages it has inflicted on the Islamic republic.
Dr. Asemipur, meanwhile, was noncommittal on the currency question, saying market participants, not the Iranian government, would make the decision. He also denied the planned bourse could harm the U.S. economy.
Mr. Cook dismissed the idea that Iran's goal is to use the bourse to sabotage the greenback. "I have a technical term for that," he said. "Bollocks!"
As for trading oil in euros, he said the Iranians likely would find it very difficult, at least in the next several years. "Basically, there aren't enough euros in circulation, and nor are there likely to be," he said.
Mr. Cook cited a recent article on Hong Kong-based Asia Times Online by William Engdahl, who specializes in the geopolitics of oil.
"For the euro to begin to challenge the reserve role of the U.S. dollar, a virtual revolution in policy would have to take place in Euroland," Mr. Engdahl wrote. "First the European Central Bank . . . would have to surrender power to elected legislators. It would then have to turn on the printing presses and print euros like there was no tomorrow."
A full challenge to the U.S. dollar as the world central bank reserve currency, Mr. Engdahl added later, would entail a "de facto declaration of war on the 'full-spectrum dominance' of the United States today," and that is something no country or group of countries is yet willing to launch.
Getting Serious about the Twin Deficits
Twenty years ago, the United States was the world’s largest creditor nation, unsurpassed in its ownership of assets outside of its borders, even after deducting what foreigners owned inside its borders. Yet over the past two decades, America has been transformed into the world’s largest debtor nation.
“A striking cautionary note regarding America ’s current path is provided by Britain ’s loss of military and political primacy in the twentieth century; that development followed a shift from creditor to debtor status. Similarly, a prolonged decline in the dollar’s value and increasing indebtedness will erode America ’s dominance in political and security spheres. These trends threaten the dollar’s role as the global currency that facilitates international trade and finance, something the United States has gained immeasurably from over the years. A weaker dollar also reduces American leverage in international financial institutions such as the World Bank and International Monetary Fund (IMF). Finally, a diminished U.S. currency means that each dollar’s worth of military and development assistance has less impact at precisely the time when the nation faces the greatest challenges. Those threats we ignore at our own peril.”
The Second Great Depression: Starting 2007, Ending 2020
Warren Brussee, Author
The Second Great Depression is a frightening book. It shows how massive consumer debt will trigger the next depression, starting about the year 2007. Most of the logic used to support this premise is based on the government's own published data.
With interest rates increasing, savings rates near zero, and debt at its maximum; many people will be pushed over their debt limit, having homes foreclosed by the banks or going into bankruptcy. Others will heed the warnings and reduce spending, causing a dramatic slowing of the economy.
In this depression, the United States will be brought to its knees. But not unlike the mythical bird Phoenix that dies in flames and is then reborn out of its own ashes, the United States will also be reborn. However, it will be a poorer and less arrogant country that emerges from its own ashes.
Originally posted by mbkennel
Trading oil in dollars versus euros is entirely equivalent and can be arranged with a euro/dollar forward.