The dollar's decline: from symbol of hegemony to shunned currency

Originally posted by Navieko
Thing is, people are beginning to just buy straight from China.

Don't they have lead in everything there . Seriously, though, I didn't know that. Thanks for sharing!

LOL. China's currency is pegged to the dollar as well.

I want to offer all the alarmists on this thread a little perspective with an appeal to some numbers. The U.S. is still the global superpower and, despite the dollar correction, will remain so for quite some time. Additionally, China has a very long way to go if it wants to catch-up to the U.S.

Does a waning dollar mean a waning American Empire?

Nope.

Let's be realistic. Pieces of paper aren't the determinants are not the "symbol of hegemony" in geopolitics -- armies are.

With this in mind, the U.S. is the uncontested sole superpower, and by a long-shot. The U.S. spends more money on its military than the next 15 most-spending countries combined (source). For those people worried about China, it spends 8% of what the U.S. does on military expenditures per annum (45 billion USD vs. 553 billion USD). The U.S. has about 700+ permanent military bases in other countries (source and map). By these figures, the U.S. doesn't seem like a waning superpower to me (or China the new superpower).

Armies are the real currency of geopolitical power. Since geopolitical power enforces economic power, I wouldn't be too concerned about the comparative long-run health of the American economy (i.e. over the next 50 years).

Is China a contender?

Not anytime soon.

Originally posted by infinite
Also, China is now the third largest economy in the world. It's expected to over take Japan within the decade. Not long before China becomes the largest economy in the world.

Sounds scary... but mainland China also has a about a fifth of the world's population. Thus, GDP (economy size) per capita at purchasing power parity ranks China 86th in the world according to the IMF and 82nd in the world according to CIA factbook (source). This meausre puts the Chinese economy on par with Belarus, Algeria, and Macedonia. Yes, their economy is big, but adjust that the number of mouths to be fed and one has but a developing nation with a very long way to catch-up.

The Chinese economy has grown very quickly in the past 10 years, due to its special trade relations with the United States (hence why it will never drop the dollar). However, if China wants to maintain this growth in the long-run it will need drastic reform of its institutions. What matters for long-term economic growth are institutions such as the rule of law (with a little dab of democracy), transparent and well-developed financial markets, national institutions of innovation, and geopolitical standing. And I don't see the Communist Party changing much in terms of institutions anytime soon...

Perhaps war is, unfortunately, in the future for the American economy, but loosing its economic supremacy to China isn't.

Note: I don't support U.S. imperialism, U.S. hegemony, or war for the sake of economic hegemony, I'm just calling it as I see it. Also, sorry for all the wikipedia sources -- I didn't have enough time.

[edit on 18-11-2007 by ArbitraryGuy]

What good is the world's most expensive and costly to maintain army when you can't pay the troops and your population is rioting over $9 loaves of bread?

Remember the Russian lesson.
When the bubble bursts on an over extended economy, it really doesn't matter how big your army is.

Originally posted by BitRaiser
What good is the world's most expensive and costly to maintain army when you can't pay the troops and your population is rioting over $9 loaves of bread?

I honestly don't see that happening. U.S. bread is produced in the U.S. and bought with U.S. dollars. Thus, a decline in the exchange rate isn't really going to affect the price of bread in the U.S.... or many other basic food staples.

Originally posted by BitRaiser
Remember the Russian lesson.
When the bubble bursts on an over extended economy, it really doesn't matter how big your army is.

Apples and oranges.

Economies are built (over the long-run) on political coalitions (internal and international), institutions, and geography. The Soviet Union collapsed due to political and institutional reasons, which further led to economic collapse. The stagnation and collapse of the Soviet "economy" was the result of political and institutional forces... not the other way around.

The U.S. economy is built upon a comparitively strong (albeit imperfect) institutional foundation. Since a decline in U.S. geopolitical power (or inernal political cohesion) isn't going to happen anytime soon, institutional change isn't on the U.S. adgenda, and geographical change won't happen for millenia... it doesn't seem to me that the U.S. economy is in any long-run dire straits (although there are short-run problems). American armies enforce those international relations and institutons that underlay the U.S. economy.

[edit on 18-11-2007 by ArbitraryGuy]

Economy Esnonomy.

It's who controls the money. Who makes the LIBOR rate? That's who controls the worlds money.

China has a large economy, cause they are large. China, is in debt, big time, to London. China's stake in US economy, is owned by London.

It's who controls the Royal Commonwealth.

Originally posted by ArbitraryGuy
I honestly don't see that happening. U.S. bread is produced in the U.S. and bought with U.S. dollars. Thus, a decline in the exchange rate isn't really going to affect the price of bread in the U.S.... or many other basic food staples.

By loaves of bread, I was referring to general costs to the consumer. Hyper-inflation is starting to take place. I took a trip down south recently to do a bit of shopping with my inflated Canadian currency and was rather shocked by the fact that prices in the US have risen so much since last time I was there. There was very little savings to be had... yet I recall how things used to be so much cheaper Stateside.

Inflation is the natural result of the Government injecting money directly into the economy and a growing national debt. Considering how much money has been borrowed to fuel the war effort and the recent injections into the market, I expect there will be more inflation building up very soon.

Without an increase in general wages (which is unlikely to happen with the slow economic growth), inflation will result in a lower standard of living for the average American. I really can't see the people taking too kindly to this in the long run.

The U.S. economy is built upon a comparitively strong (albeit imperfect) institutional foundation. Since a decline in U.S. geopolitical power (or inernal political cohesion) isn't going to happen anytime soon, institutional change isn't on the U.S. adgenda, and geographical change won't happen for millenia... it doesn't seem to me that the U.S. economy is in any long-run dire straits (although there are short-run problems). American armies enforce those international relations and institutons that underlay the U.S. economy.

The US economy has been drastically inflated by the US Dollar being the trade standard for oil. Losing that status is a major blow. I don't know if it's enough of a blow to bring the whole thing crashing down, but it has the potential to do just that.

Every empire has felt secure in it's domain right before it all fell apart. It's worth remembering that. Greece, Rome, France, Brittan... history teaches us that one sure thing about Empires is that the will eventually collapse.

Is it time for the fall of the American Empire?
History will teach us that too.

Originally posted by BitRaiser
By loaves of bread, I was referring to general costs to the consumer. Hyper-inflation is starting to take place. I took a trip down south recently to do a bit of shopping with my inflated Canadian currency and was rather shocked by the fact that prices in the US have risen so much since last time I was there. There was very little savings to be had... yet I recall how things used to be so much cheaper Stateside.

Hyperinflation is the result of deep structural crisis, most likely brought upon by deep institutional change or political turmoil. The U.S. is nowhere close to Weimar Republic or Mugabe's Zimbabwe. Historically, the U.S. price level has never been so stable.

Originally posted by BitRaiser
Inflation is the natural result of the Government injecting money directly into the economy and a growing national debt. Considering how much money has been borrowed to fuel the war effort and the recent injections into the market, I expect there will be more inflation building up very soon.

There's one very important caveat to the quantity theory of money: money growth will only raise the price level if an economy is at full employment. Given the U.S. labor force participation rate and stagnant real wages, price increases in the U.S. are not the result of money creation.

Rather, increases in price are the result of increases in costs of production. If there are drastic recent price increases in the U.S. (again, I dispute your claims of inflation), they can easily be explained by lack of inernational credit, rising oil costs, health care costs, etc, that raise costs of production and drive up prices.

Originally posted by BitRaiser
Without an increase in general wages (which is unlikely to happen with the slow economic growth), inflation will result in a lower standard of living for the average American. I really can't see the people taking too kindly to this in the long run.

Class struggle has been wiped out in the U.S. Real wage growth has been relatively stagnant for the past 35+ years. U.S. wages have barely risen above early 1970s levels in real terms, despite rapid economic and productivity growth (source). TAnd yet, nobody has risen a stink about it.

Unfortunately, other "issues" such as abortion or gay marriage have dominated U.S. political debate. The powers that be have been care to make sure that standard of living not a political issue. The institutional structure of the U.S. is rigged such that workers have class consciousness, and no voice. Americans merely parrot the ideology that benefits those in power.

Originally posted by BitRaiser
The US economy has been drastically inflated by the US Dollar being the trade standard for oil. Losing that status is a major blow. I don't know if it's enough of a blow to bring the whole thing crashing down, but it has the potential to do just that.

It's a short-term correction without the capacity to affect the long-run trajectory of the U.S. economy.

Originally posted by BitRaiser
Every empire has felt secure in it's domain right before it all fell apart. It's worth remembering that. Greece, Rome, France, Brittan... history teaches us that one sure thing about Empires is that the will eventually collapse.

Each one of those empires lost military dominance before their collapse. They were then unable to hold together the internal and international political coalitions upon which their economies were based.

Again, that's not anywhere in the near future for the U.S. The international system will not collapse, and, as a result, there will be no catastrophic collapse of the U.S. economy.

I'm turning in... have a nice night

[edit on 18-11-2007 by ArbitraryGuy]

reply to post by ArbitraryGuy


I'm crashing too. Managed to scoot past the point of being able to form rational arguments on the topic.

I will say this, you make a lot of authoritative statements. I tend to ascribe by Mr. Chomsky's belief that when people make a lot of authoritative statements on unquantifiable subjects, they should be questioned.

Not to say you don't make good points, but rather that I do not share your level of certainty.

Originally posted by dionysius9
I love this video. Explains everything:


video.google.com...

Thanks for this link. I never saw it before.

A truly excellent and very informative piece of work.

If the dollar keeps going down, the US might start producing more. Hell we might start exporting oil, instead of importing it. Maybe some of those factories that went to Mexico and China because it's cheaper will come back to the states.

The coin has been defaced. The Work ethic of Americans is even worse then there intelligence. I live in Michigan, with the highest unemployment rating in American. Also the unionizing of the auto industry has destroyed itself.

Bureau of Labor Statistics

7.5% in Michigan as of September 2007

National Review Online

The UAW’s auto-plant shutdown and a looming state-government shutdown are more than a coincidence in timing; they are both the product of anachronistic union cultures which hold that guaranteed jobs and benefits are an entitlement.
Democratic governor and staunch union ally, Jennifer Granholm. Gamholm insists on plugging the state’s gaping $1.75 billion budget hole with an 18-percent income-tax increase

It is my opinion based on the these facts that it is not coming back, The Americans think that $50,000 annually, health benefits and a 20 years and out pension plan policy are owed them. I've been in the plants, they're done with there quota by 11 AM, so they sit around drinking coffee, talking and reading books for the rest of the shift. The jobs that are gone are gone for good. Just because the US dollar is declining doesn't mean that it is going to drop below the Peso. The more stable the currency the more expensive it will be to pay your employees. America has no place to go, we can't start over because of the ignorance and lack of work ethic in America and we can't get back what we have lost because of the euro, yen, and rising S.A. banks, not to mention we use 20 million barrels of oil a day.

In the fifties, geologist M. King Hubbert coined the term, "peak oil," to describe the tipping point at which petroleum supply reaches its maximum annual output. Total US oil production reached its peak in the seventies. Now, the question is when the world supply will reach its zenith.

Common Dreams

Our economy runs on oil and the oil is almost gone, when it is, there will be nothing left. Because China's economy runs on oil too. Both the US and China have publicly stated that oil is the staple for there economy and they will both do everything they can to protect it. This means war so as you can see it is a little harder to fix then people realize.

New York Times

Also during times of war and economic struggle gold and other precious medals retain there value well. What made you think that a green piece of paper was worth anything? I save in Gold and Silver bullion I recommend doing the same.

Kitco Market Quotes

Good luck to you all!

reply to post by disgustedbyhumanity


Completely untrue...The value of the Yuan is determined by a "basket" of currencies comprising China's biggest trading partners...

It is in no way "pegged" to the US dollar, tho the US dollar would be amongst that "basket" of currencies...

Peace

All the CTers should do some investigation,on
Maurice Strong resurfaces in China

canadafreepress.com...

"They're world leaders. They have positioned themselves in the world's commodities and stock markets. They've engineered, using their access to stock markets and computers and gold supplies, a panic. Then, they prevent the world's stock markets from closing. They jam the gears. They hire mercenaries who hold the leaders at Davos as hostage. The markets can't close..."

Maurice Strong

Dont cut off your nose to spite your own face, selling out could backfire on ya.

[edit on 113030p://bSunday2007 by Stormdancer777]

[edit on 113030p://bSunday2007 by Stormdancer777]

Its all because of the sub prime mortgage market..monies that havent turned up yet .. the full extent wont be felt till around late feb early march thats when they will know who ended up losing all the dough.. Theres already been a host of high profile heads of businesses world wide who've been feeling the pinch and already have fallen on thier swords but really the big ones not here yet and wont be for another couple of months.. maybe sooner but thats when they say its expected .. The oil price is only up with turkey targetting the nthrn iraqi border.. destabilising the area.. as the gentleman said today if america did something like invading iran then oil prices will go over $200 a barrell.The Opec meeting today that was..

I for one am glad that the American Economy is going to crash soon and let me tell you why.
The biggest threat to world peace and prosperity the American People are facing and indeed the entire world faces is coming from right here in America.
This is not a Democrat or Republican thing. This is an evil thing that calls itself both Republican and Democrat.
For 97% of the folks here in America all is right with the world as long as they have food, water & electricity. No amount of talking or trying to convince them otherwise will work as long as they can stuff their fat faces while watching their precious TELEVISIONS.
I look around me now and I'm sickened and ashamed at what we have become. A nation of obese, self assured clowns who will soon be starving to death because they took everything they saw on the TELEVISION as truth.
And our Army. You know 'the most powerful army on earth'. Will be used against those same fat clowns as soon as their electricity is shut off.

Originally posted by mek12
This is not a Democrat or Republican thing. This is an evil thing that calls itself both Republican and Democrat.

Unfortunately that evil thing masquerading as both Republicans and Democrats will live on as the elite of the succeeding superpower. The only ones that will suffer are the American people and the people of other countries that have America as their largest or one of their largest trading partners.

arbitrary guy

i agree that By GDP numbers the united states multi nation corporation will continue to see solid growth (especially from foreigners overseas) who's cash flow gets counted toward DOMESTIC GDP, and even though i think the service sector is headed toward a STEEP recession, the Total GDP numbers will obviously be above China's for a long time, Japan as well. So shall we throw a party? .......not so fast

but in reality ( for people living here) their is a very significant threat to our standard of living and our consumption. Food prices are rising, Energy prices are rising = less money can be spent in our service sector.
The sector that employs most american's. Housing is dead, more jobs eliminated. I do not consider this merely a short term threat because a long term solution is nowhere to be found (unless house prices can be inflated through the roof again!)

also our stock market and the global financial system is dependant on cheap credit to keep it sustained. Financial institutions leveraging captial to ridiculous levels to manifest gains, as well as a manipulated yen currency which is like crack to the trader junkies may be cut off. not to mention the inflation we are exporting to the rest of the world which is putting pressure on more country's to cut their dollar peg as well as getting opec to talk about oil in basket of currency's. the more we cut intrest rates the more country's pegged to the dollar have to as well, which leads to inflation in those country's. When their currency is no longer artificially surpressed (pegged) , it rises, and so do prices for imported goods here.

but no, we are no where near weimar republic or zimbabwe situations lol
and the word hyperinflation is thrown around way too much lately.

Also a question about our military strength, sure we can bomb anyone to oblivion, but our troops are stretched very thin on the ground, with an inability to occupy many more country's (sans the draft)

so how in the heck could we justify ( in world opinion) a air bombing of someone who threatens our petro dollar hemogeny? ( not to mention denying them the ability to produce cheap nuclear energy, and become free from the burden of IMF and world bank dollar denominated loans needed for their petro bills , cough cough)

I mean what will our strong military do to counter other country's boycotting a currency that is sliding , what can out military do to other country's to stop them from making sound investment decisions (dropping the dollar)? besides selling the public on the iranian boogie man, and the new pakistanian boogie man (who lost bush approval when he decided to stop fighting and killing in the middle east)

the only thing that has a chance is to sacrifice the markets and raise intrest rates, strengthening the dollar. this of course may spook the publlic because they still think the stock markets represent the economy (which is a joke) and when the markets tank the public psychology may kill consumer spending and cause massive layoffs in our service sector anyway. (falling house prices and rapidly rising credit card defaults are already taking quite a toll) could a false flag like zigibinew brsyzenski (sp?)warned about earlier in the year divert america's attention and channel our anger into patriotic determination to not let them "ruin our economy"?

America faces some tremendous tests to it's citizens standard of living and that is the bottom line. This is what the majority of us refer to when we talk about the "economy", not inflated numbers thanks to multi national company's outsourcing employment and selling to foreigners which magically travels back to our domestic GDP numbers.

[edit on 18-11-2007 by cpdaman]

Balanced, well mannered give and take BitRaiser...ArbitraryGuy. Thanks for that

Invoking the spirit of Milton Friedman, it's my understanding that at it's foundation, inflation is always a monetary phenomenon. More specifically, the result of a broad fluctuation in the ratio between money-credit supply....and productivity in the form of available goods and services. Prior to the discontinuation of M-3 reporting in 2006, and in-spite of steady GDP, even the official figures showed money supply increasing at roughly twice the level of US economic growth.

Using the Greenspan era as an example, unnaturally low interest rates allowed for unnatural (artificial) economic growth...growth based on credit expansion rather than actual productivity. Relatively flat wages?...no problem when you have credit-bubble consumer spending supported by inflated housing prices (now leaking air).

Basic rule-of-thumb: In a healthy economy, when US savings rates are net-negative...the cost of borrowing money would be going-up...not down.

They say a picture is worth a thousand words. Regardless of the official spin, the last 75yrs have proven that when the economy is threatened...Dollar-Be-Damned...the Fed will re-inflate.

Core CPI is a lie.

Hyperinflation was Germany's defense against massive war reparations.

Can you think of a better way the good ole boys could sneak the amero in on us by causing the dollar to fail?

Originally posted by Kruel
If the dollar keeps going down, the US might start producing more. Hell we might start exporting oil, instead of importing it. Maybe some of those factories that went to Mexico and China because it's cheaper will come back to the states.

Just some thoughts. Looks to me like a two-sided coin. Maybe it's not all bad.

True, but by the time that those industries return to the USA, our standard of living will be on a par with those countries we have exported our industry to.

Originally posted by NellahB
Can you think of a better way the good ole boys could sneak the amero in on us by causing the dollar to fail?

Of course that's the whole point. The USA must be brought down in order of for globalism to succeed. Bringing down the economy is where it starts. Hope you folks have prepared.