Will the US Dollar Collapse?
A thought-provoking piece from the Asia Times – apparently China is drawing on hidden forex reserves to purchase real assets such as stakes in resource companies – diversifying away from the US Treasury bubble in a non trivial way and perhaps setting the stage for a collapse of the US dollar.
That’s a good article. How this affects Canada is open for debate. For example, would we be free to sell all sorts of resources to China, unimpeded by the protectionism we face on softwood? And does anyone in Alberta care if they sell their oil to China instead of the US? Given that our banks are safe, would we be a beneficiary of the diminished view of the US dollar as a safe haven?
The author seems to be an anti-inflation hawk, which is often an accurate litmus test of neocon monetarist delusions. For example, surely there is a middle ground between monetary tightening and hyperinflation. If a central bank can be credible at keeping inflation around 2%, couldn’t they do a perfectly good job of keeping inflation around 6%?
Nobody seems to have considered the possibility that the US could increase taxes, tolerate higher inflation, and start running a surplus shortly after the toxic assets have been cleaned up. When a commentator assumes that the world will end and neoconservatism won’t budge an inch, it’s always tempting to say “poor baby, raise taxes.”
I know I posted a comment the otehr day stating that the US dollar is secure as it is the international reserve. However, there has been a spate of evidence piling up that may indeed suggest otherwise. Similar to your post above, the Daily Telegraph reported that the Chinese central bank announced it felt the US dollar acting as a international reserve may have out grown its usefulness.
Some quite bold statements posted on the Chinese central banks website. (see article)
I find it ironic that in my rereading of Polanyi, over the past few days, he overwhelming underlines, that when the gold standard fell apart, the great depression hit a ferocious speed in economic dislocation for many countries.
So how do we interpret this Statement prior to the G20 meeting. Is it a call to arms by the Chinese that it is tired of the US printing more and more money to inject into its banking system and stimulus plans, in a seemingly bottomless pit. Each time the Fed prints the Chinese reserves of US dollars shrinks in value relatively speaking.
So I guess this means the Chinese central bankers are starting to play hardball and threatening to throw the international system into jeopardy unless some alternatives make there way to the G20 stage. Given the last G20 meeting and the seemingly asymmetrical and half hearted response to stimulating the global economies, (Canada for example) one must consider this as a quite a real danger.
More instability is the last thing we need on the international stage. However the Chinese economy is suffering and given the unrest that apparently is congealing, potentially there are motivations that western leaders must not underestimate.
Its not just the Chinese. Russia want’s to switch to IMF special drawing rights (essentially Keynes’ Bancors).
The USA has proven for decades that it cannot handle the benefits of being the reserve currency and petrodollar. It uses those along with devaluation of the currency to not only tax the rest of the world but also to rule over any country naive enough to borrow US currency to purchase oil.
The U.S. dollar is doomed. The nation is up to its eyeballs in debt. Some are even claiming that total financial obligations are currently $70 trillion. check it out: http://www.goldworld.com/articles/born-into-debt/379