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Originally posted by BitRaiser
Now, I'm not saying that this unified ME currency IS an agressive attempt to knock out the US dollar... but it would sure be an effective strategy if it were.
Foreign lenders to the US: Straining under limits
...Two elements determine how far foreigners will go as lenders to the US. It is becoming increasingly difficult for the US to satisfy either of them...
Doug Casey - Other articles
Wed 11 Oct, 2006
Two elements determine how far foreigners will go as lenders to the US. The first is akin to a credit test. The second is a portfolio consideration. It is becoming increasingly difficult for the US to satisfy either of them.
Foreigners will accept T-bills and other dollar-denominated IOUs only so long as they believe US borrowers can make good on their debts. The concern is not primarily about explicit defaults. It is about the likelihood of a slow-motion default via inflation. It is a concern about the future value of the dollar. Confidence that the dollar will hold its value is strained with every increase in the US budget deficit (which increases the US government’s incentive to inflate) and with every increase in the overall level of US debt to foreigners (which encourages the public’s tolerance for inflation).
It would take a phenomenally slow person, say, a central banker, to have much faith in Uncle Sam’s good credit when the US can’t pay its current bills by a very wide margin — and has trouble saying "no" to new spending plans. But even the faith of a central banker must have its limits.
Foreign lenders to the US: Red ink
Perhaps the central bankers haven’t yet seen the Government Accounting Office’s latest projections of US federal government red ink. Based on straightforward assumptions that (i) regular income tax rates continue, (ii) the alternative minimum tax is adjusted and (iii) discretionary spending grows with GDP; the projection for spending, and thus the budget deficit, flies off the map. By 2040, the yearly deficit grows from the current 3% of GDP to 40%!
The second element in the calculations of foreign lenders is a portfolio consideration. Owning too much of anything is worrisome. So even if the risk of the dollar losing its value were modest (which it no longer is), as foreign holdings of dollar-denominated securities grow, the risk eventually becomes intolerable.
When it comes to foreign holdings of US investments, the numbers are enormous. Japan alone has bet over $1 trillion on the dollar’s ability to hold its value. That’s enough to breed uneasiness in any portfolio manager. And the numbers keep growing because the US keeps importing goods by the boatload and paying with dollar-denominated IOUs. The breaking point is getting closer at a rate of $2 billion per day.
The great irony is that the US is counting on foreigners to invest $2 billion per day...at a time when they are not winning many hearts and minds abroad. The counterproductive and unwinnable war in Iraq is just the unhappiest part of the current picture. Among other reasons why hatred for Americans is rising are:
Foreign lenders to the US: The US a "hypocritical thug"
In short, the American global cop, far from harvesting the gratitude of a world made safer, is perceived as a hypocritical and plundering thug—hardly the sort of thing that makes foreigners line up to invest in America.
US heavy-handedness abroad and the ill will it inspires are dangerous for many reasons, including their effect on the US dollar. War in Iraq and sabre-rattling over Iran are driving the price of the oil and other imports up in the US, which increases the trade deficit, which adds to the pile of dollar-denominated IOUs held by foreigners. And the same belligerence confirms in many Middle-Eastern minds that the US is driven by an anti-Islamic agenda. It gives them a non-financial motive for embracing alternatives to the dollar: the euro, the yen—anything not made in the US Other foreigners see the belligerence as more evidence that the US government is a reckless spender and heedless of the consequences of its growing debt.
Is there anything the US government can do to stop the train wreck? Earlier governments tried sacrificing virgins to the gods to ward off disaster, but the practice seldom worked and isn’t likely to be revived. The Federal Reserve could try raising interest rates still higher, high enough to convince foreign central banks to hold on to their dollar investments, but that has about the same chances of working as tossing gold-laden virgins into deep, water-filled sinkholes did. It might protect the Dollar Standard for a while, but it would turn residential real estate into a financial graveyard and trigger the depression the Fed is trying to avoid. Of course, the Fed could fight a contraction in the economy… by lowering interest rates. But that would bring on a flight from the dollar and a more rapid end to the Dollar Standard. There is no way out.
Foreign lenders to the US: Extreme volatility
If we’re right about a coming monetary regime change, it’s hard to imagine a future for the US that isn’t grim, with plenty of harm splashed around on its trading partners: inflation...currency crisis...dollar crash...government instability...internal conflict for scarce resources...welfare system collapse...skyrocketing unemployment...taxes raised on a population burdened with an uncompetitive US economy...dollar down 40%, 60%, 80%?...emergence of competitive economic battles on too many fronts: China, India, Japan, Russia—and on too many military fronts. End of empire/Fall of Rome redux...the Greater Depression.
We are already seeing extreme volatility in emerging markets as the hedge funds beat a hasty retreat for liquidity. Get used to it.
Remember, never before in history has the unbacked paper currency of a single country been used as the de facto reserves of the world’s central banks. We are truly in Terra Incognita, uncharted territory — and a hair trigger away from a currency crisis that, once begun, will quickly spin out of control.
Daily Reckoning UK edition
There's a well known psychological phenomena called denial. If something is painful to think about, if it causes anxiety, one of the easiest responses just to refuse to think about it
What about economic growth? Can't the United States outgrow its obligations? Theoretically yes, but practically no. The postwar norm is for senior benefits to grow roughly twice as fast as the economy. Yes, there are ways to restructure U.S. entitlements to limit benefit growth and still save the day. But Washington has no appetite for anything radical. Indeed, Washington's concerted approach to our nation's demographic/fiscal crisis is to ignore it.
The status quo, we're led to believe, is the safe bet, the conservative option, the riskless alternative. But when the status quo involves driving off a cliff, maintaining it is the risky, radical, indeed, suicidal choice. The United States is now engaged in such "staticide" - the maintenance of a suicidal status quo. Its policies are driving the country to fiscal, financial and economic ruin. The only question is when the crash will occur and which households and businesses will be in the passenger seats.
Financial markets have, it seems, no inkling of what's coming. But these markets often need a two-by-four across the forehead to come to their senses. This is one of those times. Long-term U.S. Treasury Bonds are yielding 5 percent when, in fact, the United States is facing bankruptcy.
Bankruptcy may seem a strong word, especially when the economy is booming, the deficit shrinking, and the Dow nuzzling 12,000. But economic growth and rising stock markets don't preclude economic collapse. Recall: The Great Depression followed the Roaring Twenties. Or consider Argentina's decade of outstanding growth and stock market appreciation before going belly-up in 2002.
As for the deficit, it's a figment of government fiscal labeling with no economic content. If you want to talk turkey with respect to our nation's finances, consider the U.S. fiscal gap, which measures the present value difference between Uncle Sam's projected future expenditures and tax receipts. It stands at $63 trillion! This figure captures all implicit as well as explicit U.S. liabilities and comes by way of a highly reliable source - the U.S. Treasury.
Another way to assess U.S. insolvency is to consider the immediate and permanent fiscal adjustments needed to close the country's fiscal gap. Here are some options:
a 70 percent increase in personal and corporate income taxes;
a 109 percent hike in payroll taxes;
a 91 percent cut in federal discretionary spending; or
a 45 percent cut in Social Security and Medicare benefits.
Adopting any of these policies or some combination of them would be incredibly painful. Waiting is no alternative. It just makes the requisite adjustments larger and more painful.
Originally posted by BattleofBatoche
This is going to be an economic collapse of the entire West.
Originally posted by BattleofBatoche
Possibly so they can bring in electronic credit & debits via bank cards then the chip. This will be embraced as a saviour to restore people's lifstyles after a depression. People won't take a chip now BUT a couple of months without work, no food, no jobs, it will be a different story.
Originally posted by BattleofBatoche
I've been stocking up on gold & silver & food but we all know they will make it illegal to own it and will confiscate it. People can still buy groceries at safeway with gold and the dentist my wife worked for also excepts gold.
The crash can be deferred, but not stopped
The dependence of foreign central banks on the dollar will defer its crash, but it won't prevent it. Today's snowdrift will become tomorrow's avalanche. The masses of snow are already accumulating at breathtaking speed. The avalanche could happen tomorrow, in a few months or years from now. Much of what people today think is immortal will be buried by the global currency crisis -- perhaps even the leadership role of the United States.
Incidentally, the commission that former US President Bill Clinton created to investigate the negative balance of trade concluded in clear terms that the government has to do whatever it can to put an end to the growing disparity between imports and exports. It demanded that the public give up its optimism and return to realism, that people start saving again and that the state reduce its imports in order to prevent too hard a crash landing.
None of that has been done. In fact, what is being done is the opposite of everything the experts recommended. Debt is growing, imports are increasing and an optimism now lacking every basis in reality has become official state policy. Lester Thurow, a member of Clinton's commission, draws the sober conclusion that no one will believe the US balance of trade could produce a crisis "until it happens."
Pulte lays off nearly a third of workforce
Wednesday October 25, 3:10 pm ET
Pulte Home Corp. laid off almost a third of its workforce Wednesday, the same day the latest figures for home sales revealed a dramatic slowing of the local housing market.
Pulte laid off about 60 workers from a local workforce of a little more 200 people. The Florida Association of Realtors reported Wednesday that sales of existing single-family homes in the Jacksonville area fell 23 percent from a year ago.
A Pulte spokesperson was not available for comment.
Pulte is the second-largest Jacksonville area homebuilder, having built 1,167 homes in 2005.
Published October 25, 2006 by The Business Journal
What they don't talk about is a dirty little secret that everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course and will founder on the reefs of economic disaster if nothing is done to correct it.
There's a good reason that politicians don't like to talk about the nation's long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions.
Originally posted by Rasobasi420
In the event of an economic crash in the US, how would people trade, buy food, etc.? Would it require some form of ID system that would give each individual the ability to "buy/sell"?
Originally posted by bodebliss
The whole world would collapse then!
There would be no US collapse without the world immediately following and the US coming back first and the rest of the world following slowly.
ABU DHABI — The UAE Central Bank may cut its US dollar dominated reserves by up to 90 per cent and is looking at other currencies such as the yen, euro and sterling, Sultan Nasser Al Suwaidi, Governor, Central Bank of the UAE, said yesterday. However, he did not elaborate on the topic further.
"The bank hopes to lower the dollar share of its foreign currency reserves to a range of between 50 per cent to 90 per cent," Al Suwaidi said. At present, he said 98 per cent of the bank's reserves holdings are in US dollars. The foreign currency reserves of the UAE currently stand at over $25 billion. The Central Bank is yet to convert 10 per cent of the total reserves into euros and gold, a decision it took earlier this year.
CMC Markets' analyst Ashraf Laidi said in a client note that traders should be wary of the continuing diversification of central bank reserves away from US dollars.
He referred to comments from the United Arab Emirates central bank yesterday that it plans to increase its holdings in euro reserves by 10 pct, as well as raising its share in sterling and yen reserves while reducing its greenback reserves to as low as 50 pct of the total 25 bln usd it currently holds.
Laidi said the UAE bank comments follow recent statements by the Swiss National Bank that it has added more yen to its 36 bln usd in currency reserves and trimmed the share of US dollars while a few weeks ago Russia's central bank announced it had started buying yen for its reserves.
Costello seeks orderly $US withdrawal
TREASURER Peter Costello has called on East Asia's central bankers to "telegraph" their intentions to diversify out of American investments and ensure an orderly adjustment.
Central banks in China, Japan, Taiwan, South Korea and Hong Kong have channelled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down American interest rates.
Mr Costello said "the strategy had changed" and Chinese central bankers were now looking for alternative investments.
Euro gains as China plans to dump U.S. dollar reserves
By Ottawa Business Journal Staff
Fri, Nov 10, 2006 11:00 AM EST
The U.S. dollar faltered in overnight trading after comments from Zhou Xiaochuan, head of the Bank of China, led to speculation that China is considering divesting its monetary reserves of U.S. dollars.
The effects of these comments were short-lived as the U.S. dollar returned to previous-day levels early Friday morning.
Ottawa Business Journal
Originally posted by Vitchilo
The US now and the Nazi Germany have some similarities...
What caused the great depression for Germany in the 20s?
The printing of money to pay the debt of WW1...
What will cause the great depression for US in 2007/2008?
The printing of money to pay the debt of Iraq, Afghanistan and the militaro-industrial complex.
What this great depression led Germany to?
What the coming great depression will lead US to?
What started this fear of an imaginary threat in Germany?
The burning of the Reichtag by Hitler's SS.
What started this fear of an imaginary threat in USA?
The attack on 9/11 on the Pentagon and the WTC, by the neo-cons.
So I think that in the next few months, maybe 2 years, this will happen:
- Economic krash, worse than 1929.
- Rise of fascism.
- North American Union.
But something that are differents from nazi germany...
- We know the truth about 9/11.
- Internet is a great tool of seeing past the government lies about EVERYTHING.
- A lot of people are armed to the teeth.
- Because we know the truth about 9/11, we know that the real threat is inside the US, not outside, so we'll not give up our constitution as a lot of germans did in the 30s/40s.
So if they want to achieve their fascism in the US, they'll have to:
- Deconnnect Internet, or close a hell lot of website.
- Disarm people.
- Kill all 9/11 truthers.