Tag Archives: dollar

China, Russia and South Korea Make Moves Away from Dollar

weak-dollarBRICS (Brazil, Russia, India, China, S. Africa) is the acronym signifying the next generation of economic power houses. Increasingly, these, and nations like them are working to diminish the U.S. Dollar as the World’s reserve currency. This week, China and Russia took more steps towards that goal.

China’s central bank has authorised the Bank of Communications, the country’s fifth largest lender, to undertake yuan clearing business in the South Korean capital, the People’s Bank of China (PBoC) said in a statement.

That action clears the way for China and South Korea to trade in Yuan (Remnibi) for transactions between their two countries thereby releasing them from use of the U.S. Dollar for international trade.

Russia has been working tirelessly with China and other BRIC nations towards the same goal – freedom from the Dollar and the IMF. As more nations set up clearing houses for other than dollar transactions, the Dollar will become less important in international trade.

China, Japan and Russia have already agreed to similar currency use between them. Chinese currency use for trade in Africa is also rapidly increasing.

Next week, Russian President Vladimir Putin will begin a tour of several Latin American countries, including Brazil.  No doubt, decreasing dollar dependence will be on the agenda.

With more than 60% of the World’s currency reserves being held in U.S. Dollars, this increasing trend will have impacts.

The first, and most obvious impact will be massive inflation – in both the cost of goods and the cost of money. The dollar’s value will decline and make food, clothing, gasoline and just about everything else cost much, much more. Interest rates will skyrocket and make borrowing money just about unaffordable.

A portion of the rest of the world envisions a world without America. Some are making sure it happens.

 

Be Prepared: Dollar Sell Off Within 4 Months

It looks like mid-May 2013 is the end of the road. Will this be the end of America?

YouTube Description:

If Congress does not get its financial house in order by the new deadline in mid-May 2013, John Williams of Shadowstats.com contends, “It will be the end of the road . . . . They are not going to have another opportunity . . . they are pushing the limit as it is now.” Williams says he expects, “. . . a negative reaction in the next 3 or 4 months to the dollar.” Williams adamantly continues to predict hyperinflation to the U.S. dollar by the end of 2014. Join Greg Hunter of USAWatchdog.com as he goes One-on-One with economist John Williams.

White House Won’t Rule Out Trillion Dollar Obama Coins to Cover National Debt

In an epic bit of video, conservatives get a glimpse of what they are up against: people who believe that it is even conceivable to mint trillion dollar Obama coins to render debts settled. After all, this is pretty close to what the government does with paper money, which are just state-issued permission slips to trade debts.

But what would happen if the Obama team did just that? People would lose more confidence in the U.S. government around the world, since the dollar would be in danger of  cheapening to the point of uselessness and the debt securities that governments hold would be paid back in extremely inflated dollars.

What next? Let me tell you what next. The dollar that people in the United States use as a symbol of trust that debts for goods and services, labor really, would be paid back would fall to pieces. When that happens, the currency that allows people who don’t know one another to trade with each other will be rendered too untrustworthy and the nation’s economic system will be pulled apart by the seams.

The nation itself would then be in danger of crumbling, as people’s diverse economic interests would send them in multiple directions, as they would be loathe to cooperate with others whom they don’t know and trust.

So next time, Jay Carney, that someone asks you if the Obama administration is seriously contemplating minting trillion dollar coins backing the likeness of our American caesar, just do us a favor and allay the market uncertainty — just say no.

H/T Independent Journal Review

When China Turns Away

It may already be happening.

Recently released US Treasury data shows China has been actively reducing its holdings of Treasury debt. China has cut its holdings by $100 billion over the past year to just $844 billion. China has been seeking new ways to recycle its trade surplus and hold back any rise in the yuan.

“Diversification should be the basic principle,” said Yu Yongding, ex-adviser to the Chinese central bank. China has been buying record amounts of Japanese, Korean, Thai, and Latin American bonds to replace its U.S. debt holdings.[1]

China may not be done dumping U.S. Treasuries:

Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that “end of QE” again?[2]

Where will the U.S. Dollar and the American economy be if they walk away completely?

It may have been in the cards for quite some time:

Sources:
[1] China Reducing Holdings Of U.S. Treasury Debt
[2] China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings

Russia, Oil, & The Utah Sound Money Act & Why It Matters

Theresa FlemingIt’s hard to overstate the concern that American families have regarding the economy, but one thing we all need to pay more attention to is the value of the U.S dollar. Imagine, if you will, what would happen to your families’ savings should the U.S. dollar truly crash, especially when unemployment and underemployment are both high. Families, if they can, are already desperately trying to save as much money as possible. But what if the money families have so carefully saved for a rainy day could no longer buy even the basic necessities? This is the reason behind bills such as the Utah Sound Money Act.

Although to some it may seem extreme, we do need to prepare for the possibility that there may come a day that the dollar’s buying power will be drastically reduced. And the truth is, Utah is not alone in their concern. According to State Representative Galvez, House sponsor of the bill, 11 states have either passed currency related legislation or have legislation in process. Other states passing or considering currency related legislation include: Montana, Missouri, Colorado, Idaho, Indiana, Missouri, Montana, New Hampshire, South Carolina, Tennessee, Vermont, Virginia, Washington…

The truth is that with the decline in the value of the dollar and the rise of U.S. debt,more and more countries are becoming concerned about whether the U.S. dollar is a good investment. And unfortunately, Washington’s printing of more dollars will not only not solve the problem , it may quicken the devaluing of the dollar.

For those who do not believe that the U.S. dollar may be in trouble, please consider the following: according to The China Daily, China and Russia have used a number of currencies in the past, but especially U S Dollars for “bilateral trades”. However according to a report in The China Daily in November 2010, “China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade”. The formal announcement was made by Premier Wen Jiabao and Russian Vladimir Putin.

PutinIn addition, Russia has also been reaching out to Europe. In Putin’s appearance in front of top German industrialists at a business forum in Berlin, he called for closer economic ties between Russia and the European Union. In his speech he outlined his vision for the future and his desire to create a Free European – Russian Trade Zone. However, the most critical part of his speech came when he showed what his true intentions may be towards the U.S. In his speech Putin said, that the “Euro is slightly fluctuating, but as a whole it’s a good , stable world currency that should take its rightful position as the world reserve currency. I think over the last 10 years there has been one wrong aspect that we should definitely eliminate. It’s the excessive monopoly of the dollar as the sole world reserve currency. This is certainly something negative.”

However, whether the dollar remains the world reserve currency is not the only concern at hand. As Senate Majority Leader Scott Jenkins said, a more immediate concern may be the efforts that are being made to decouple the dollar from oil. If that occurs, efforts such as the Utah Sound Money Act may well turn out to produce the solution that we need.

But there is some good news as well…

While news reports by their very nature tend to focus on the negative, there are public servants working hard to find a solution to the problems that we face. Utah Senate Majority Leader Scott Jenkins and State Representative Brad Galvez are working hard to find a solution to protect us, and our children, from the potential fall of the US dollar. As Senate Majority Leader Scott Jenkins said, “inflation is hurting the ability of families to purchase the items that they need. With the buying power of the dollar going down, if we do not act the purchasing power of the American family will continue to suffer. We must begin to study potential solutions and we must act.”

And make no mistake, we can no longer afford to sit on the sidelines and hope that someone else finds the answer. As a country we need elected officials who are willing to act and willing to do the research needed to find the best possible way to protect American families and that is why the Utah Sound Money Act and efforts like it are so very important.

As for the legislation itself, The Utah Sound Money Act will not only allow gold and silver coins issued by the Federal government to be used as “legal tender” in Utah, it will exempt them from capital gains taxes. Although the United States Constitution already allows states this freedom, the Utah Sound Money Act would codify this right in Utah law. The law would not mandate that the coins be used, but simply allows people the choice. The legislation also creates a panel to study how Utah families might use the alternative “legal tender” system for every day purchases such as food or medicine. Since the value of gold and silver constantly fluctuates, a system would have to be designed that would provide a practical way for Utah families to use the new system for daily purchases, which is why the panel is being formed.

As for Utah, there’s a reason Americans may want to start taking a look at how they operate and the recommendations made by their state’s leaders. Utah has been named, “the best managed state in the nation and has been salt lake cityrepeatedly ranked as one of the best states to do business”. And it appears Forbes agree, for in their 2010 look at the Best States For Business, Utah was ranked number one when it comes to fostering growth! Check back for more information on exactly how Utah became the “best managed state in the nation” and what public servants such as Senate Majority Leader Scott Jenkins and State Representative Brad Galvez are doing that is making such a huge difference for their state!

Change is always hard, and sometimes scary, but Utah’s system does not seek to replace our current monetary system. However, what it does do is start the process of designing, and planning for a possibly implementation of a secure money system should the dollar fall. And while, as State Representative Galvaz said, we may not like the changes that have occurred in our economy, our job as parents, and their jobs as legislators, is to do our very best to give our children the best possible opportunities to succeed in the world in which we live. And while many of us, including myself, wish that we could return to a simpler time, the fact is, right now, we can’t. But what we can do, is work together to find the solutions that our children will need, no matter what crisis we face.

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Obama to Hold Jobs Summit and Continue Weakening of Dollar

Ok, he didn’t literally admit to weakening our currency and setting us up for record inflation, but he might as well have.   In the President’s unusually short speech this morning, Obama again touted his fictitious one million jobs saved/created number, the government-sponsored GDP growth in the third quarter and that the new jobs figures that show another half-million Americans out of work are good news.

The President went on to basically admit two things Americans figured out long ago:

  1. He has no idea how to spur the economy and create jobs (or has no intention to)
  2. He plans to continue weakening the dollar

Obama being the politician that he is didn’t say these things as honestly as he could have.  Instead he disguised them as positive moves.

Instead of saying that he’s clueless on how to fix the economy, the President announced that he will hold a jobs summit next month.  Will that summit then be followed by several months of talking with his advisers as in the Afghanistan troop decision?  If a summit was needed, why didn’t he hold this in January or February?  Wasn’t Obama aware that unemployment was an issue back then?

Secondly, the President informed us that he intends to make the dollars we hold, less valuable.  Despite little Timmy Geithner’s remarks yesterday that a strong dollar is “very important” for our economy, it is fairly obvious that the Treasury, Federal Reserve, and Obama are all focused on pushing the dollar into a low-weight currency.  In the President’s remarks this morning, he said that we would be changing our economy from one of consumption of foreign goods to one where foreign countries buy our products.  To create this international trade  reversal would require a massive devaluation of the dollar to make our exports competitive with cheap Asian exports.  The flip side of making our products cheaper for other countries is that everything will get more expensive for us.

Most news outlets are focusing on the short-term jobs summit, but there was much more in what Obama said than just more useless talk about an ineffective gathering of worthless people to come up with a plan that will continue to do nothing.

Is Obama Pursuing a Weak Dollar Policy?

Paul Volcker - Obama's Chief Economic Advisor

Paul Volcker - Obama's Chief Economic Advisor

Within a few days of Obama entering the White House, Tim Geithner stated that a strong dollar is in the best interest of our economy.  The actions taken to date and some historical analysis of Obama’s chief economic advisor, Paul Volcker, would point at a policy of continued weakening of the U.S. currency.  If the dollar continues it’s slide just an additional 5% it will be at be at an all-time low.

Today, the Wall Street Journal published an article stating that, “Pacific Rim government leaders will tell U.S. President Barack Obama about global concerns over the falling dollar and burgeoning U.S. debt at a summit this week..”.  Their concerns are well founded and can be grouped together with those of the Chinese, European Union, Brazil and Canada.

One indicator of the Administration’s desire for an even-weaker dollar is it’s push to have China stop managing it’s currency and allow it to float.  If that happens, the only possibility is a stronger yuan, and therefor a weaker dollar.  Furthermore, on October 31st of this year, Obama said that the U.S. economy should be based even more on exports.  In order for that to occur, our currency needs to greatly weaken against those of countries we have a large trade imbalance with.. like China.

A weak dollar isn’t all bad news as long as the decline is controlled, slow, and has a desired end-point.  When the dollar weakens, international exports from America become less-expensive for others to buy.  This increases foreign demand for American products.  This only works when the American products don’t require components from other countries as those items are imports and will cost much more under a weakened U.S. currency.

One implication of a weak dollar is inflation.  As the dollar weakens, so does it’s purchasing power.  Imports become more expensive which will relieve downward-pressure on domestic products allowing those items to increase in price as well.  The dollar is also how all trades in oil are transacted.  As the dollar weakens, crude gets more expensive.  Considering that petroleum is an input into so much of our economy (fuel for trains, trucks, planes, ingredient in plastics, rubber, etc), it hits Americans both directly in the gas tank and indirectly in stores, restaurants and vacation spots.

Carter era gas lines

Carter era gas lines

The last sustained depreciation of the dollar was during 1977 and 1978.  There are some striking resemblances to that bleak period in U.S. economic history to today.  We have a liberal Administration, we have hostages in Iran (I’m fairly certain that is not linked to the weak dollar), and Paul Volcker is back.  During the late 70’s Volcker was the Federal Reserve chairman and directly orchestrated the dollar’s collapse – on purpose.  Gas, groceries, imports and just about everything else got insanely expensive as double-digit inflation hit the pocketbooks of U.S. citizens.

We’ve seen a too-weak dollar before and it wasn’t pretty.  Now we have some of the same people, trying the same thing, again.

Economic Situation Update

Last updated 10/15/09

Welcome to CDN’s economic situation update.  We constantly add information to this article as the economic situation changes.

Newest updates:

In this post you will find:

  • Opinion Polling Results
  • Information from the Bureau of Labor Statistics (employment/unemployment/jobs data)
  • Links to relevant articles on the economy
  • Actions our government is taking that will impact the economy
  • What’s happening in the global economic theater

Opinion Polling Results


Gallup:

  • Job creation index flat from September (10-11-09)
  • Consumer spending down 30% from year-ago levels and down roughly 5% from last month (10-11-09)
  • Consumer confidence flat (10-11-09)

Rasmussen Reports:

  • 49% believe the economy will be stronger in five years, down from 58% in July and 64% in March (10-09-09)
  • 72% tax hikes for incomes under $250,000 (10-11-09)
  • Consumer confidence falls for 6th day in-a-row
  • 62% oppose another stimulus
  • 36% believe Obama’s plan has helped economy
  • 53% oppose more regulation of corporations

Government Stats


  • Consumer Price Index up seasonally-adjusted .2 percent for September
  • Real average hourly earnings fell .1% from August to September
  • Prices increase by .6% for non-fuel imports on dollar’s weakness
  • FDIC fund balance now negative reserving for expected losses in next 12 months
  • 8% of all residential mortgages now seriously delinquent – commercial mortgages starting to show trouble
  • More than 70% of U.S. GDP is from personal spending
  • $12 trillion in personal net worth destroyed in last 7 months
  • Unemployment increases to 9.8% in October
  • Current employment numbers show that no new jobs are being created (over 263,000 jobs disappeared in last month)
  • Real earnings to be released on October 15th (key to gauging deflation vs. inflation)

Links on the Economy



Recent Actions on the Economy


  • Congress considering second stimulus
  • Bernanke likely to win second four year term as head of Federal Reserve
  • Trade deficit narrows on weak demand for imported oil and weak sinking dollar

Global Economic News


  • Canada and Australia add jobs as U.S. continues to lose them – stunning echos from 1930
  • Dollar being attacked by mid-east and Russia…
  • Central Asian banks buy up greenbacks to support the free-falling dollar – a week dollar means no one to sell to

Foreign Impact on Dollar: A Love-Hate Relationship

In the past few weeks several news stories purporting foreign actions against and for the dollar.  Which is it?

There have been stories that say that China and Russia have been looking to remove the dollar as the predominate reserve currency for the world.  They had to know that such uncertainty would cause mass-selling of the greenback.  Then on Thursday we see that central Asian banks (and Russia) are buying up Dollars in huge quantities.  Of course that will buoy the dollar in these troubling times, but why badmouth the U.S. currency, then prop it up?

They have economies too.  If the dollar gets too weak while it is still the currency for purchasing oil and other commodities, it starts to cost much more to purchase those things.  Many Asian countries are also mass-exporters so a weak dollar means that the largest consumer nation in the world cannot afford their products.  In order to keep their own currencies from getting too strong, they divest in their nations money and put it into the dollar.

In the last week, it has been reported that Russia bought as much as $4 billion U.S. dollars in effort to pull the dollar of it’s lowest point in over a year.  Why would someone so interested in seeing the Dollar replaced by another global currency by floating it?  Timing is everything.

Russia, China, and the middle-eastern OPEC nations would love nothing more than to see the U.S. currency replaced as the global standard.  That doesn’t happen overnight and if they aren’t careful, their economies will be crushed during this coup-de-currency.  They are using backroom maneuvers to position the IMF’s (international monetary fund) global currency, the SDR as the world’s new reserve currency and the OPEC is considering using the SDR for oil purchases.  There is no way to do that quietly so the world has to prop up the failing dollar while the change takes place.  Make no mistake, the change will happen.

The real risk is what happens when the double-dip recession takes hold.  All of these nations are dumping billions into the American dollar and if it continues downward, those other countries lose significant wealth.  There will not only be no American economy to buy their goods, as their currencies strengthen, no one will be able to afford their goods.

It is obvious that a serious push to support the U.S. currency is occurring.  If the dollar continues downward, the second portion of our double-dip recession could be  blood-bath.