China Calls To Replace Dollar With World Currency
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China’s central bank has reiterated its call for a new reserve currency to replace the US dollar.
The report from the People’s Bank of China PBOC said a “super-sovereign” currency should take its place.
Central bank chief Zhou Xiaochuan has loudly led calls for the dollar to be replaced during the financial crisis.
The bank report called for more regulation of the countries that issue currencies that underpin the global financial system.
“An international monetary system dominated by a single sovereign currency has intensified the concentration of risk and the spread of the crisis,” the Chinese central bank said.
The dollar fell after the report was released. The US currency dropped 1% against the euro to $1.4088, and declined 0.8% versus the British pound to $1.6848.
Russia - World Needs New Reserve Currency
Russian President Dmitry Medvedev said Tuesday the world needs new reserve currencies.
Medvedev told a regional summit that the creation of new reserve currencies in addition to the dollar is needed to stabilize global finances.
Medvedev has made the proposal before. It reflects both the Kremlin’s push for greater international clout and a concern shared by other countries that soaring U.S. budget deficits could spur inflation and weaken the dollar.
Airing it at a summit meeting underlined the challenge to U.S. clout.
Medvedev spoke at a summit of the Shanghai Cooperation Organization, which includes China and four Central Asian nations.
Later Tuesday he hosts a summit of the BRIC group of leading emerging economies — Brazil, Russia, India and China.
The Kremlin’s top economic adviser said Russia may put part of its currency reserves in bonds issued by Brazil, China and India.
Arkady Dvorkovich said Russia could make the move if the other three nations reciprocate. Brazil, Russia, India and China are the members of the BRIC group of leading emerging economies.
U.S. Inflation to Approach Zimbabwe Level
May 29, 2009 by admin
Filed under new world order
The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.
Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.
“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”
Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.
“There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “I have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.”
Day Of Reckoning Looms For The U.S. Dollar
The U.S. dollar’s day of reckoning may be inching closer as its status as a safe-haven currency fades with every uptick in stocks and commodities and its potential risks - debt and inflation - are brought under a harsher spotlight.
Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a “serious case of dollar damage” was underway.
“We long warned about the day of reckoning for the dollar emerging at the next economic recovery,” Mr. Laidi said in a note.
Mr. Laidi said economic recovery would weigh on the greenback as real demand for commodities, coupled with improved risk appetite, caused investors to seek higher yields in emerging markets and commodity currencies. This would draw investment away from the U.S. dollar, which was dragged down by growing debt and the risk quantitative easing would eventually spark a surge in inflation.
The U.S. dollar slid against most major currencies Wednesday, hitting a five-month low of US$1.3775 against the euro and pushing the Canadian dollar up US1.21¢ to a seven-month high of US87.69¢.
John Curran, the senior corporate dealer at Canadian Forex, said the U.S. dollar would likely fall further in the next week, with the Canadian dollar likely reaching about US88.35¢, at which point it could break higher to test the US92.35¢ level.
“The U.S. dollar is continuing to slide as investor appetite is gaining momentum,” Mr. Curran said. “People are getting comfortable about taking on a little more risk.”
Brazil and China Eye Plan To Axe The Dollar
Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz Inácio Lula da Silva, Brazil’s president.
The move follows recent Chinese challenges to the status of the dollar as the world’s leading international currency.
Beijing this week, and Hu Jintao, China’s president, first discussed the idea of replacing the dollar with the renminbi and the real as trade currencies when they met at the G20 summit in London last month.
An official at Brazil’s central bank stressed that talks were at an early stage. He also said that what was under discussion was not a currency swap of the kind China recently agreed with Argentina and which the US had agreed with several countries, including Brazil.
“Currency swaps are not necessarily trade related,” the official said. “The funds can be drawn down for any use. What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with renminbi.”
Henrique Meirelles and Zhou Xiaochuan, governors of the two countries’ central banks, were expected to meet soon to discuss the matter, the official said.
Where Are The $ Trillions Going?
Rep. Alan Grayson asks the Federal Reserve Inspector General about the trillions of dollars lent or spent by the Federal Reserve and where it went, and the trillions of off balance sheet obligations. Inspector General Elizabeth Coleman responds that the IG does not know and is not tracking where this money is.
If You Think the Dollar Is Doomed, Read This
Warren Buffett has been called a sage, an oracle, and a genius. So when he says something as startling as the following, your ears should perk up: “In the future, I would predict that the U.S. dollar will decline. … Force-feeding the rest of the world $2 billion a day is inconsistent with a stable dollar.”
This is scary stuff. Except one thing: Buffett made that statement at the beginning of 2008, before (1) the U.S. dollar went on to have a pretty good year versus most other currencies, (2) the U.S. government announced the $800 billion bailout and $789 billion stimulus that will force-feed the world billions of additional dollars of U.S. debt, and (3) China’s central government proposed replacing the U.S. dollar as the world’s reserve currency.
Passing on the buck
Now, we’re not policy wonks, Ph.D. economists, or long-winded talk-radio hosts, so we’ll leave the politics aside and focus on the implications for your bank account instead. By adding to our massive federal deficit, the TARP and the American Recovery and Reinvestment Act of 2009 could have a devastating effect on the
China Has Canceled Americas Credit Card
China, wary of the troubled US economy, has already “canceled America’s credit card” by cutting down purchases of debt, a US congressman said Thursday.
China has the world’s largest foreign reserves, believed to be mostly in dollars, along with around 800 billion dollars in US Treasury bonds, more than any other country.
But Treasury Department data shows that investors in China have sharply curtailed their purchases of bonds in January and February.
Representative Mark Kirk, a member of the House Appropriations Committee and co-chair of a group of lawmakers promoting relations with Beijing, said China had “very legitimate” concerns about its investments.
“It would appear, quietly and with deference and politeness, that China has canceled America’s credit card,” Kirk told the Committee of 100, a Chinese-American group.
“I’m not sure too many people on Capitol Hill realize that this is now happening,” he said.
The Republican lawmaker said that China was justified in concerns about returns from finance giants Fannie Mae and Freddie Mac, which were bailed out by the US government due to the financial crisis.
Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors.
“There will come a time where the lack of Chinese participation may have a significant impact,” Kirk said.
“We should track that, because up until last month they were the number one provider of currency to the United States and now they’re gone.”
With China’s economy also hit by the global economic crisis, Premier Wen Jiabao has openly voiced concern about the status of his country’s investments in the United States.
China has also floated replacing the dollar as the key international currency with a basket of units bringing in the euro, sterling and yen.
via AFP: China has ‘canceled US credit card’: lawmaker.
China Calls For Reform Of Global Monetary System
April 27, 2009 by admin
Filed under new world order
China called Sunday for reform of the global currency system, dominated by the dollar, which it said is the root cause of the global financial crisis.
“We should attach great importance to reform of the international monetary system,” Chinese Vice Finance Minister Li Yong told the spring IMF/World Bank Development Committee meeting in Washington.
A “flawed international monetary system is the institutional root cause of the crisis and a major defect in the current international economic governance structure,” Li said, according to a statement.
“Accordingly, we should improve the regulatory mechanism for reserve currency issuance, maintain the relative stability of exchange rates of major reserve currencies and promote a diverse and sound international currency system.”
As the world’s main reserve currency, US dollars account for most governments’ foreign exchange reserves and are used to set international market prices for oil, gold and other currencies.
As the issuer of the key reserve currency, the United States also pays less for products and can borrow more easily.
Li did not name the dollar but in late March the People’s Bank of China Governor Zhou Xiaochuan said he wanted to replace the US unit which has served as the world’s reserve currency since World War II.
“The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Zhou said, suggesting the International Monetary Fund could play a greater role.
Forget Nukes Watch Out for Economic War
Fought with currencies, embargoes and hackers, economic warfare may lack the “shock and awe” of conventional battles but it could still pose a threat to the U.S., especially in these troubling economic times.
Picture this hypothetical dreamed up by a national security expert obsessed with economic catastrophe:
Angry that U.S. policies aimed at boosting the economy have devalued their $2 trillion of currency reserves, the Chinese decide to stop buying Treasurys just as America tries to finance its massive spending plans.
In response, the U.S. imposes trade sanctions against China, which in turn pushes for a global currency. From there, the U.S. accuses China of manipulating its own currency and things escalate further.
Without a shot being fired, those actions represent a type of unfriendly economic competition that some are very worried about.
‘Unstable Escalation’
“I think it’s very likely the participants wouldn’t call it a war. Each side would say they are acting in their best interest. But this could lead to an unstable escalation,” said James Rickards, co-head of threat finance and market intelligence at consulting firm Omnis.
The struggling U.S. economy and scary financial crisis could make such an escalation more likely and more damaging.
“On the one hand, you could say it [would have] less of an impact because we’re already in a more defensive posture due to the recession,” said Dan Goure, vice president of the Lexington Institute, a nonprofit public-policy research organization. “On the other hand, we’re closer to the edge so we have fewer resources.”
Rickards was more unequivocal, saying flatly, “It definitely raises the stakes which could play out in some financial warfare scenarios.”
Obamas Leap To Socialism - Dick Morris
April 24, 2009 by admin
Filed under new world order
President Obama showed his hand this week when The New York Times wrote that he is considering converting the stock the government owns in our country’s banks from preferred stock, which it now holds, to common stock.
This seemingly insignificant change is momentous. It means that the federal government will control all of the major banks and financial institutions in the nation. It means socialism.
The Times dutifully dressed up the Obama plan as a way to avoid asking Congress for more money for failing banks. But the implications of the proposal are obvious to anyone who cares to look.
When the Troubled Asset Relief Program (TARP) intervention was first outlined by the Bush administration, it did not call for any transfer of stock, of any sort, to the government. The Democrats demanded, as a price for their support, that the taxpayers “get something back” for the money they were lending to the banks. House Republicans, wise to what was going on, rejected the administration’s proposal and sought, instead, to provide insurance to banks, rather than outright cash. Their plan would, of course, not involve any transfer of stock. But Sen. John McCain (R-Ariz.) undercut his own party’s conservatives and went along with the Democratic plan, ensuring its passage.
World Economy In Severe Recession, IMF Says
The International Monetary Fund on Wednesday slashed growth forecasts for every major country and urged governments to take forceful action to ensure the world economy’s recovery from a severe recession.
In its latest World Economic Outlook, the IMF said the global economy would likely contract 1.3 percent this year in the deepest post-World War Two recession by far.
Growth is set to re-emerge at a sluggish 1.9 percent next year but the pick-up depends on aggressive measures to repair a poorly functioning financial system.
“The longer this goes on, the longer and the deeper will be the recession,” IMF chief economist Olivier Blanchard told a news conference.
Just three months ago, the IMF had projected global growth of 0.5 percent, although last month it warned of a deep recession.
The Washington-based institution said it revised its forecasts downward because financial markets appear likely to take longer to stabilize than it had thought earlier.
Freddie Mac CFO Found Dead of Apparent Suicide
The acting chief financial officer of Freddie Mac, David Kellermann, was found dead at his suburban Washington home early Wednesday.
Officer Shelley Broderick of the Fairfax County Police Department in Virginia said there were “no signs of foul play” when police found Mr. Kellermann’s body after responding to a call made at 4:48 a.m. ET. Mr. Kellermann was 41 years old.
Kellermann, a 16-year veteran of the mortgage loan guarantor, was discovered by his wife, who found him in the basement. The two have a young daughter.
Fairfax police spokeswoman Mary Anne Jennings said police were called to the Northern Virginia home outside Washington, D.C., in the early morning hours. A call came in at 4:48 a.m. ET.
Kellermann, 41, was named acting chief financial officer in September 2008 and was a member of the company’s leadership team reporting directly to CEO David M. Moffett, who resigned last month.
Freddie Mac Interim CEO John Koskinen issued a statement Wednesday that the “Freddie Mac family is truly saddened” by the news.
Communities Print Currency
A small but growing number of cash-strapped communities are printing their own money. Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.
The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.
Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.
Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.
