Federal Reserve attacking Americas friends.

Even the mainstream media are starting to talk about the Currency War that America has unleashed on its friends. The folks at CNN are getting worried.

Ben Bernanke's low interest rate policy has driven down the dollar. America's trading partners aren't happy.

The first Fed side effect, currency wars, is an example of how something good -- stimulating our economy by lowering interest rates -- can have a downside. Cutting interest rates faster and more deeply than most other central banks has weakened the dollar against the currencies of many of our major trading partners. The Fed doesn't exactly run around telling the public that it's happy to see this happen. But that's the case, because a gradually declining dollar encourages job growth in our country by making our exports cheaper and our imports more expensive.

The problem, which reared its head in the run-up to the Great Depression 80 years ago, is that if everyone devalues, no one benefits. Instead, you get widespread instability, fear, and trade wars. The prospect of that makes even a congenital optimist like me more than a little nervous.

finance.fortune.cnn.com...
Coming from Australia I am upset that Bernanke is attacking Australias exporters. Australia and America were supposed to be friends. Japan is furious. Why would America want to attack Japan? I thought they were trying to use Japan to annoy China. Starting a Currency War and causing the Japanese Prime Minister to lash out doesnt seem like a smart move by America. Australias Foriegn Minister Bob Carr voiced concern after Americas dramatic 'fiscal cliff' agreement that America is not doing enough to cut spending and address National Debt. South American nations are outraged by the currency War and were the first to call America out. Why is America attacking the few friends it has left? I know when you are drowning in the ocean you panic and often drown people around you but geez. Attacking friends is not a way for America to solve its economic problems.

The Fed is playing a complicated, high-stakes game here. The dollar is the world's reserve currency, which allows us to suck in money from all over the world to fund our trade and budget deficits without having to balance our accounts. There's a tension between our internal situation (a lower dollar is good) and our role as a reserve currency (a dollar that falls too rapidly risks spooking investors and costing us our reserve-currency status).

finance.fortune.cnn.com...
Its actually not that complicated. Maybe for your average CNN employee or reader. Without the Reserve Status America will experience what is known as hyperinflation. This is bad.

Central Banks are looking to replace USD Reserves with gold and demand for the RMB id high. America got a warning about another Credit Downgrade today. The bad news for America keeps on rolling in. America really has nobody to blame but themselves. They have backed Central Banks into a corner.


moneymorning.com...

Just saw this pop up this morning:

www.abovetopsecret.com...


Germany Takes Back Gold: US Dollar Collapsing

Yesterday, Germany, Europe’s financial leader and owner of the world’s second-largest gold stockpile, demanded the United States’ Federal Reserve return over $200billion dollars’ worth of gold reserves to the German central bank.

reply to post by Libertygal


Thanks

Pretty freaky. I m starting to feel a little worried for America. I hate the American Government but I dont want it to get any worse for regular Americans.

Do you allow for the possibility that other nations bear any blame for the problems the world finds itself with today or is the United States 110% at fault for every last bit of it?

I seem to recall China pegging the Yuan to the U.S. Dollar to the protest of not ONLY the U.S. but other world nations ..MANY MANY years ago. They pegged to ours so they could ride it to the ground and pull all import/export benefits from the trip until bailing out at the end. Well.. We're about at the end now, and sure enough. They're bailing and calling for their own to be the reserve..or if not THAT outright self serving, then a basket or entirely new currency they have serious control over establishing.

The wheels of the bus go round and round and nothing much changes. The 20th was America's Century....and the 21st is shaping up to be China's. China won't be any better...but it will be different and so change for the sheer hope of ANY change is being embraced. (sigh) Never seen that in history before. Nope... This can't go wrong, can it?

Yeah America is so evil for attempting to reduce trade deficits for which the world has benefited from for the last two decades. Our manufacturing base has shrunk to embarassing levels and millions of jobs have been lost while other countries like China keep there currency low to keep there imports propped up. It's time for this country to start taking care of itself. Not going to get sympathy for me....or most Americans for that matter.

Originally posted by HenryNorris

Ben Bernanke's low interest rate policy has driven down the dollar. America's trading partners aren't happy.

I am astounded that the article is based around low interest rates, but it fails to mention the effect that quantative easing had on the strength of the dollar.

Of course the dollar will collapse, it doesn't even belong to the US, all fiat systems stall eventually.

The people that "run" the country are powerless against the people that run the money, it's all very sad.

All we can do is hope that something worthwhile is salvageable from the aftermath.

Americas policy of financial isolation and trade sanctions do put their enemies at an advantage if the US economy is to crash. As with the collateralize debt issues in the previous crisis, those in the know and exposed had some time to send some of their troubles off shore to limit their own liabilities. I would not be surprised if a similar game plan is in the works. I do not expect things to get as bad here in Australia as what they will be in the US as the global reserve status wanes, but with our political and economic ties it is going to cost us.