In light of the thread from a week or so ago…I give you Zimbabwe.
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Had the US not had the World’s Reserve currency we would have already experienced MASSIVE inflationary consequences. It didn’t happen yet but I think that the word is out there that the USD might not do so well in the future. Once foreign Nations stop buying up our USD dominated Treasuries it will get interesting. China has US by the balls, they saved for it so they are in that position and they voiced their concern plenty times in the past couple months. Not even a badly dressed Hillary could convince them otherwise…
“China has US by the balls, they saved for it so they are in that position and they voiced their concern plenty times in the past couple months.”
I have to admit that I have been very busy and haven’t been paying as much attention as I usually do. But hasn’t China been printing as well? So if we print, and then they print and the next guy starts printing…what’s the difference? It’s not like anyone is going to run out of paper and ink any time soon. I could be WAY off but this is what it seems like the future holds…at least for a while.
Please rip into this because I respect much of what you contirbute here.
If you look at China, sure they stimulated their economy with some $550B or so but they have savings to do so. They are holding a large amount of USD denominated assets and without them investing in US our currency would have devalued much more alot sooner.
I think people should look at the US (or a country) as a business, a corporation, and the currency is their stock. If you look at 2006, most people didn’t see anything wrong with the US economy or housing. Everything was fine, fine until the days came that things weren’t so fine anymore. The signs were out there but they were ignored by many, but in retrospect nobody could see this happening. It’s always like that, always has and always will.
Back to China, they started voicing concern about the future value of the USD in the fall. It wasn’t a strong voice of concern but it started a good 6 months ago or more. In the recent weeks Wen Jiabao (Chinese Premier) has voiced concern in regards to the US Creditworthiness. Just like other equities, the US is being downgraded by China right now, whether “we” like it or not. China is noticing how we are inflating our way out of trouble and that not only leads to serious inflation down the road, but with it it debases the purchasing power (POWER) of China’s investments. Zhou of the People’s Bank of China also voiced a support for the introduction of a new World Reserve Currency, comprised of a basket of currencies. What a nice way that would be for China to diversify! Of course Bernanke and Geithner rejected the proposal of a new World Reserve Currency. Can you imagine what they would do without the power to inflate at will without dire consequences??!
http://www.marketwatch.com/news/story/Geithner-Bernanke-reject-China-currency/story.aspx?guid={7B77BC42-BCED-4568-9FB4-22493E84CCB2}
They rejected on March 24, 2009 only to be more open about possabilities on the 25th. What a difference a day (and some International Pressure behind the curtain) can make…LOL!
China now also has the support from Russia for a new (currency basket type) World Reserve Currency. The world is not stupid (ok, I’m not saying the world is smart, either), it’s just Obama and many Americans that think that we can indefinitely inflate our way out of trouble.
I think right now China, Russia, and other Nations are sending a clear signal that they are having enough. A couple months ago France and Italy also proposed a new Bretton Woods II type system. Anybody that thinks the USD will remain in power the way it has been over the past 40 years must be asleep. I think the USD is about at the same stage as Housing was in 2006. Things are changing, the market forces are too strong, yet people still believe that it could never happen. There’s no doubt in my mind that the USD is being manipulated by the Fed at this time. They have to do whatever they can to “hold on”. But just like housing, the inevitable can only be prolonged for so long.
Here are a couple of recent articles you might find interesting.
TRADE VIEW-China hints at reduction in US dollar holdings-BoNY
http://www.reuters.com/article/marketsNews/idUSN2461991920090324
China Urges New Money Reserve to Replace Dollar
http://www.nytimes.com/2009/03/24/world/asia/24china.html?_r=1&scp=1&sq=China%20currency&st=cse
MARCH 24
Geithner, Bernanke reject China currency proposal
Head of China’s central bank says a new reserve currency should be created
http://alturl.com/vjb
MARCH 25
Geithner says “quite open” to China’s SDR proposal
http://www.reuters.com/article/businessNews/idUSTRE52O43O20090325
Wow…are you telling us that the world’s most notorious currency manipulator and the world’s most corrupt major government are voicing concern about the integrity of the USD? Bwaahahahahahahahha…
That’s a very funny joke 
Haim
Sure it’s very funny, just like the collapse of Housing was a big joke, did you get the punch line?
Not quite on topic, but I am reminded of Berkshire Hathaway (Warren Buffett) and its shares. Each share is worth some crazy amount (hundreds of thousand of dollars !) so I assume they exist in very limited quantities.
An even funnier joke was the idea of decoupling. The entire world has gotten THAT punch line.
Haim
It’s funny how there are so many economic “rules” that people swear by but we tend to have recessions on a cyclical basis. You would think if people knew the problems, we would never have inflation, recessions or depressions.
Maybe the answer is that people get greedy, prices get inflated and soon common sense takes over so people stop buying, until the prices go down and the process repeats itself.
It’s simple but instead of all the complex theories, maybe everything really comes down to supply and demand and it’s not that complicated at all.
“It’s simple but instead of all the complex theories, maybe everything really comes down to supply and demand and it’s not that complicated at all.”
And that could lead to a discussion on the supply of money and where it came from…
Good question, by someone who already knows the answer(i think).
The USA just electronically printed 1 trillion(1000 million). Your currency straight away devalued against all other currencies by about 10%.
I wouldn’t call it inflation but instantly it means all imported goods bought from outside coutries cost 10% more(it could be termed an inflationary cost). That is unless the outside suppliers can cut costs somehow(by being forced into it by reduced demand).
It sounds like the USA may print a few more trllion in which case your currency will devalue further. The amazing thing is that you r currency was in a strong position when they printed that 1 trillion.
It(USA) is a totally different story from Zimbabwe, where confidence has been totally lost internationally in their bussiness management.
G.
Wow…are you telling us that the world’s most notorious currency manipulator and the world’s most corrupt major government are voicing concern about the integrity of the USD? Bwaahahahahahahahha…
Thanks for injecting a dose of reality. Furthermore, you have Russia who has been periodically closing their stock market because of massive selloffs and whose sabre rattling has significantly quieted with the drop in oil prices. Then there is China, they buy our bonds so we have more money to buy their crap. They need us just as much as we need them.
Do rain and snow really lead to precipitation?
So let’s say you think hyperinflation is coming. What do you do about it?
Some quick ideas:
Others? Not saying I am doing any of the above, just wondering what others thoughts are.