More bad news for the dollar. The head of the World Bank says the importance of American currency will continue to diminish in relation to the euro and the Chinese renminbi.
"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency," the World Bank president, Robert B. Zoellick, said in a speech at the School for Advanced International Studies at Johns Hopkins. "Looking forward, there will increasingly be other options to the dollar."New York Times article here.
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I'd hope so
I thought this was fairly well understood and accepted by now.
What I'm more interested in is what happens when you have an economically tripolar (plus a few) world. Do you end up with China, the US and the EU stockpiling equal amounts of each others' currencies?
The US currency is, in my experience, fucked. I've spent about half of my life living outside of the US, and am quite aware of the cyclical fluctuations. But a recent trip to Oz was a bit of a wake-up call, with simple staples like my morning 20oz Diet Coke costing ~$3.
The USD's volatility with a downward trend has really screwed over the New Zealand dollar. Our dollar buys around 71 US cents at the moment. I remember when it was around 40c, and even under that for a few days. Our exports are hurting badly, and as a small nation which makes most of its money through mass agriculture exports, this isn't very good.
I suppose everyone will have to get used to this change. It's going to mean a lot of re-organisation.
And this affects me, how?
Would that be adho mukha rupyakam in Sanskrit?
Antinous, LOL.
I am always finding it interesting that everyone not just pegs their currency off the US dollar but expects their exports to be good in the US and if the US fails currency wise we freak because that means exporting to them will cost more and they will buy less. Can you say #thefaultofhavingalleggsinonebasket ? Its not just the US who have caused this situation, but the blind following of their market, but then again they were willing to $Buy$ it all, and export the making of it all to the rest of the world. You'd think we would have been smart enough to figure that wasn't exactly sustainable. (Not An American)
You can almost hear the glee in Zoellick's words.
You say that as if it's a bad thing that the dollar would fall, but a strong dollar is not a good dollar! We should be rejoicing at a fall in the dollar as it will improve our balance of trade.
Didn't Iran just dump the Dollar for the Euro?
AKA "we're so getting bombed" soon.
This is a popular fantasy, unfortunately, there are only so many candidate currencies that might serve as replacements and each of them has problems. You can rule out the ruble or renmibi right off the bat. Given legal and political structures in Russia and China it isn't even clear what it means "to own" something. You might consider the British pound, but it has most of the same problems as the dollar. The Euro is also promising, but it is a mixed bag. It was created for an economically united Europe for an economically united Europe, so it is still an untested currency.
Remember, there are a lot of good reasons you don't want your currency to be used as a reserve currency. If nothing else, it limits your options and alters your economics. Of course, once your currency has become a chosen reserve, it takes serious work to change this.
Like the return of Jesus H. Christ, there has been a lot of talk about the dollar vanishing as a reserve currency, but as with Mr. Christ's return, I'll believe it when I see it.
@5....when the USD is worth less, stuff the US imports gets more expensive....no more cheap cars, TVs, oil.
Does this include Disney Dollars?
Vietnam has the best named currency ever
Here is the conversion from dollars:
"If you convert 1 US Dollar into Vietnam Dong, you'll end up with a total of 17,843.00 Vietnam Dong's"
We should invest in Dong, it only stands to go up. ;)
adho mukha rupyakam = "I remember the gentle kiss of your lips." Excellent, Antinous.
Johnny Cat - unless you're being deliberately obtuse, I think the joke Antinous was making derives from the Yoga position Adho Mukha Svanasana, or "Downward Facing Dog," relating it to the title of the post.
I may just be that dude who ruins the joke, though.
Nope.
It's Canadian Tire currency that is destined to rule the world.
http://corp.canadiantire.ca/EN/AboutUs/Pages/CanTireMoney.aspx
This is great. I am Canadian and 3 years ago I was paying $1.46 for an American dollar. I travel to the US once a month for fun. So, each time I went out for a a $13 dinner it would cost me $19, a drink for $4 would be $6, $120 hotel room would be $180.
So, a weaker US dollar and having the Canadian dollar on par with the US (which it is now) is wonderful!
What they don't mention is that Bernanke is pursuing currency swaps with other central banks. All these boats are lashed together, to sink or float together. So the dollar won't drop all that much in comparison to other currencies, they'll all just drop in relation to real stuff, mainly oil.
#8 Anonymous
The problem is not in selling things to the US. Most international trades to ANY country occur in USD. Australia is NZ's biggest trading partner, the US in well down the list. We sell to Singapore, we sell in USD, we sell to Malaysia, we sell in USD, we sell to Australia, we sell in USD
Yep, here we are... after 8 years under republican rule...
Well, we let the republicant's lead us down this horrible path and now we are in near financial ruin... can we please stop listening to these absolute idiots and at least turn around health care?
Today is a critical day in the saga of the public option. Democrats Charles Schumer (New York) and Jay Rockefeller (West Virginia) are introducing an amendment to include the public option in the bill to be reported out by the Senate Finance Committee
Today, Tuesday, September 29th, 2009 is the day to call and email the Senate offices of Democrats Max Baucus (Montana), Tom Carper (Delaware), Robert Menendez (New Jersey), Kent Conrad (North Dakota), Jeff Bingaman (New Mexico), John Kerry (MA), Blanche Lincoln (Arkansas), Ron Wyden (Oregon), Debbie Stabenow (Michigan), Maria Cantwell (Washington), and Bill Nelson (Florida) -- telling them you want them to vote in favor of the public option amendment. And get everyone you know in these states to do the same.
http://tpmcafe.talkingpointsmemo.com/talk/blogs/robert_reich/2009/09/the-public-option-lives-on.php?ref=mp
Can we please stop the republicans from ruining everything in America? They had their chance and they BLEW IT.
Nice troll COWICIDE. I can safely say that haggling around the margins with health care has fuck all to do with the value of US currency. At most, if you really screw the pooch with the health care budget you might be able to devalue the dollar with excessive debt, which I am pretty sure wasn't your point.
As someone already mentioned, the alternatives to the USD are actually fairly slim. The euro is pretty much it. All of the other "big" players really just are not trusted. Would you really want the value of your reserve currency in Putin's hands? China has some potential of being a reserve currency at a later date, but not until their economy finds a little more stability and they convince people that they are serious on a political level to not screw around with world trade (though I think they are getting close to doing that).
The reason why the USD has held its power for so long is because the US makes up an absurd portion of world economy AND it is stable. You really need both size so that your currency can handle the absurd money transfer that go one, and you really need stability. For all of the ups and downs of the US, it is amazingly stable. It is one of the oldest continuous governments in the world and has a pretty good history in terms of avoiding currency manipulation. You really can't find that anywhere else. Even the EU, while comparable in size, can't boast the same sort of stability as the US. China certainly can't boast of long term political or economic stability. China's economy is too explosive and new to be fully trusted, and while their political system is looking far more stable these days, it is still in a great deal of flux.
I bet you will see more diversity in currency reserves, with increasing use of the euro and perhaps "bread basket" currencies around the edges, but I think for time being the USD is going to continue to dominate.
Starting off by insulting me and calling me a troll... real classy.
You say health care has nothing to do with the value of the dollar then you immediately turn around and say health care has something to do with the value of the dollar.
You are a very confused person.
Yes, that’s actually the long term goal of a Single Payer System. I’m part of a cartel of evildoers that hopes that one day we can put the former KGB man in charge of American “death panels” and finally kill your grandparents with polonium-210.
------------------------------------------
Once again, face it. Republicans have failed our country and our economy is a wreck after following their lead for 8 years.
Why should we follow these idiots lead any more when it comes to health care? A nation of healthier people in the United States will certainly help the economy and a healthier economy most certainly will contribute to a healthier dollar.
We voted you idiots OUT. YOU FAILED. Time to let us drive.
A non-argumentative +1 to Cowicide. And Rindan, I think the reason Cowicide draws a loose connection between health care and the declining dollar is because (if I may extrapolate a bit) people other than Republican astroturfers generally aren't as vocal about healthcare reform as they should be. Hence its good to point out new developments even when they aren't 100% relevant to the topic at hand. People in the U.S. need to learn how to get outraged again., and as I see it, Cowicide is doing just that.
That's my theory anyway.
8#
".. I am always finding it interesting that everyone not just pegs their currency off the US dollar.."
Can you name one? You're about 20 years off mate. Plus, pegging currencies is not the same as a country having a foreign currency reserve. Yes this has up until recently been very much US dollar based, but currently such reserves are usually a mixed bag of various currencies. Common sense really.
Moreover, I cannot really see how this is 'bad news' for the yanks or how it will affect them much on a daily basis. Plus it has little to do with the exchange rate which appears to be the main topic in this thread.
This is why I keep all my assets in Papal indulgences and Martian real estate.
Wait a minute... who do we need to bomb to change this? Iran? Okay.
If anyone is interested, the art/politics magazine mute did a piece about the rise and fall of the dollar in ordinary language not long ago.
The problem of the falling dollar is not so much for the U.s., but for China and other Asian countries who hold the bulk of dollars in reserve.
Sorry if the link is broken. I haven't left a html link in a while.
Ah! how's this, I'll just leave the address: http://www.metamute.org/en/content/the-buck-stops-here
YAY! and just in time for the holidays!
Time to go down to the states and buy me some Hanukkah presents!
*sings*
Please help me I'm fallllll-ing...
Moriarty,
Paypal indulgences?
What can I say, I am a classy guy.
Let me go ahead and un-confuse you. There article is about the dollar being used as a reserve currency. You some how manage to turn that into a rant on how we need public option health care. I point out that the two have abso-fucking-lutly nothing to do with each other unless you believe that public option health care costs are going to result in high debt that weakens the dollar (which I am going to go ahead and assume you don't believe). This would be the exact opposite point that any pro public option person would advocate. So I'm sorry, what exactly was your point again? Try and articulate it in reference to the dollar being used as a reserve currency. There is a fear of the dollar is not going to be used as a reserve currency so the answer is... public option health care? Right.
I said:
You said:
Try giving that one a read one more time. This time read all of the words in the paragraph, preferably in the order they were written. Let me give you a hint. After dismissing your off topic babble about health care in the first paragraph as off topic and unrelated, I actually went on to go ahead and not talk about NOT health care in the other three paragraphs. It is almost like your eyes glazed over when you realized that health care wasn't what I was talking about and you thought "ahh fuck it, I'll just rebut a Glenn Beck article I read".
Remember the VP debates during the presidential election? Recall how Palin babbles like an inane idiot and answers questions no one asked because her talking points don't cover the question? Not to throw low blows, but you kind of sound like that. "Oh shit! This is on currency reserves... uh... health care sounds close enough. They both have money, right? Quick! Pull out that health care flash cards!"
Yeah, I know, I am being classy again. Like I said, I am a classy guy.
@ #26starfish and coffee:
Sure. The Big Oil currencies (United Arab Emirates dirham, Qatari riyal, Lebanese pound, Venezuelan bolívar); almost all the Caribbean currencies; some Asian currencies like the Hong Kong dollar; and a smattering of other currencies, like the Djiboutian franc and many Middle Eastern currencies like the Lebanese pound, the Omani rial and the Jordanian dinar.
A bit of research mate...
..."Lebanese pound" above was quoted twice, and is not a Big Oil currency. Feel free to replace it with something like the Saudi riyal...
The dollar is screwed, but so is every other currency.
A contrarian view would suggest that the dollar is currently bottoming, and we're about to have a major rally on the currency. This will probably happen when stock markets finally go through a correction.
This the short term. On a longer time horizon, the dollar is doomed indeed and the best way to protect your holdings is the purchase of commodities and commodity stocks, especially silver and gold.
Because keeping the pound strong worked SO well for Britain after World War I.
As Kieran O'Neill said, this has been coming for a while. It's still bad news.
Kieran:
IMO, you're way too optimistic. Sorry about that.I think they'll stockpile some, but it'll be nothing like their current reserves of US dollars.If there's one reserve currency, everybody moves in the same direction when Some Bad Thing happens: they buy dollars, and the price of the dollar goes up. If you're overseeing your country's economy, you want a good big stash of dollars so you won't someday find yourself having to buy them at inflated rates.
If there are multiple reserve currencies, you don't have everyone trying to buy the same thing at the same time, and the market has more friction and flexibility. I believe that in that case, you'd get the same results from smaller total holdings of multiple currencies.
It's an interesting question, but it isn't distracting me enough from the gloominess of the news.
Rindan @34, you're wrong, and your language would be excessive even if you were right. The way we structure health care has a lot to do with the health of our economy, and by extension with the strength of the dollar and its status as a reserve currency. If you've missed knowing that, go read up on it.
Cowicide, when you forget to explain the connections, you leave yourself open to being accused of political opportunism. I know that's not what you're doing, but it's still a good idea to avoid the appearance of it.
#40 POSTED BY TERESA
Hi Teresa! [cow flaps hooves wildly] -- I guess part of my point was to desperately (and opportunistically) bring attention to the public option issues that are running out of time (today). But, as you also know, I really think the economy (and therefore the strength of the dollar) would drastically improve down the road with a Single Payer system in place.
We can all quibble about treating the symptoms of a downward facing dollar, but we would be better served by looking into prevention and cure of the disease that causes the symptoms. I don’t detach our miserable health care system from the economy. I think that’s ludicrous.
And, as everyone knows, I’m also tired of ludicrous, conservative blowhards (after all this time) still trying to convince us that they know better after proving themselves udderwise. You had almost a decade... you blew it, chumps.
@#34 Rindan babbles:
If you did not talk about not health care then that means you did not talk about anything else but health care. I disagree with you, I think.
Here, I will try to speak “babble” with you...
Anyway, you’re right... the important point is that you tried not to talk about health care because you don’t think health care is related to the economy in any shape or form and/or the value of the U.S. dollar isn’t related to the economy in any shape or form unless you consider unhealthy people make awesome workers in an economy that has nothing to do with the value of the dollar and an economy that has nothing to do with productivity and of course the public option has nothing to do with anything unless it is... bad.
Right?
Now I understand your babble! Awesome!
I will continue in your babble-speak so you can not NOT understand me...
Yes! I believe your point in the first place even though I don’t believe it! And, therefore, I should apply your moot point to my points and therefore mootify a public option and somehow start advocating opposite points because I just sincerely believe your moot point. Thanks for setting me straight!
This babble stuff is classy!
Cowicide,
Pretty much everything is somehow "related to the economy." Hence, by that logic, pretty much nothing is off-topic, on any given thread.
Also, there is not a simple healthy economy = more valuable dollar relationship.
@#42 POSTED BY MORIARTY
Ah yes, this is all much too complex for a simpleton like me to understand. See, I don’t get that when investors & speculators buy or sell a specific currency, they tend to do so because they expect the value of the currency to go higher relative to another currency at some point. Since the US dollar is the most actively traded currency in the world, its valuation tends to be reflective of the direct outlook for the US economy.
Therefore, the plunging dollar and plunging economy have nothing to do with each other. Just a complete coincidence... [cough] Please, can we get real here?
I’m not interjecting my feelings on badminton here, dude...
Let’s “pretend” for a moment that the health of the dollar has something to do with the health of our economy, m’ kay? (just humor me please since this is obviously a ludicrous, simpleton connection that no one should make)
If health interests aren't an extremely significant factor in our economy (if not one of the most important) then how the hell is it the number-one lobbying force in Washington, D.C. bar none?
The major health interests have spent an average of $1.4 million per day to lobby Congress so far this year and are on track to spend more than half a billion dollars by the end 2009. The pharmaceutical lobby alone spent $733,000 per day in the first quarter of 2009.
Since 2000, the industries have spent over $3 billion on lobbying, with the total increasing every year and rising more than 142 percent over the course of the decade.
In each of the past four years health interests have been the number-one lobbying force in Washington, measured in expenditures, and have averaged over $1 million per day.
Please explain to me how this current bullshit payoff system helps our economy? Oh... that's right... the general health of the economy has nothing to do with the general health of the dollar... the plunge of both is a remarkable coincidence. [cow rolls eyes]
Implementing a single payer system will affect nearly every man, woman and child of every color and creed in this country. It will have an absolutely tremendous effect on our economy as productivity soars and billions in payoffs (that's milked from our citizens in the first place) goes into our economy instead of wasteful coffers.
We can finally have our citizens get to fucking work instead of being perpetually sick and caught up in a corrupt, corporate bureaucracy that is currently slowing US ALL down on a nationwide scale... it’s killing us AND our economy.
Now, I don’t want to get complex or anything... but have you tried factoring in things like having millions of U.S. citizens trapped into jobs they are overqualified for? Jobs they stay with for fear of losing insurance? What a waste of their education. Now, I don’t want to get even more complex... but considering how much education costs in this country, shouldn’t we also calculate that wastful expenditure that goes down the shitter for these people?
The economic ramifications of our current, despicable health care system are absolutely enormous and I'm just scratching the surface here... but...
Ok, nevermind.... the economy and the value of the dollar have nothing to do with each other anyway... and this is all too complex for my pea-brain so I'll stop here.
Does this mean that we don't have to spend trillions on defense and project American power all over the world to keep the world safe for the rich anymore? Now that we're just one of the guys, can we now shed our empire and go on with life like Sweden or Switzerland?
Moriarty, many of the effects are far more direct than you're implying. Are you aware of what a large fraction of our total expenditures now goes for health care? Every projection says that's going to get larger. We have to deal with this. Just for starters, it's the only way we're going to get our costs under control.
Also: a system where employers have to provide health insurance creates all kinds of distorting effects, and can be devastating for small businesses. Also: employers trying to avoid paying for insurance by setting employee work hours just under the cutoff (Wal-Mart is a major offender on this one) throw a disproportionate burden onto state, local, and emergency health care systems. Also: health care is cheaper when people go to see the doctor before it's an emergency. It's also cheaper when they can afford prenatal and pediatric care. Also: dealing with an uninsured illness or injury is one of the biggest single reasons working families fall into bankruptcy, thus generating an endless cascade of intractable and expensive second-order problems. Also: a phenomenal percentage of our health care dollars go to pay for all the clerical, accounting, filing, billing, database managing, debt collecting, insurance adjusting, red-tape-festooned recordkeeping required by our Byzantine payment system. Also ...
Do you want me to go on? I can probably give you another dozen of these without stopping to catch my breath.
#37
I believe this is the correct short-term reality.
As soon as the stock market corrects - and a without massive and dramatic increase in company earnings in the near term it should - there will be an exit of money which needs to go somewhere. A lot ends up back in USD based assets and commodities.
The long-term view will be very different, as many countries are now actively seeking an alternative to the USD as the global currency.
A low USD benefits the US in terms of economic recovery, as it inflates asset prices in a climate where possible "firesales" could occur as part of the massive deleveraging process brought about the GFC. (In addition to improved balance of trade and ability to finance deficit). The Fed has abandoned the strong dollar policy of the first part of this century as it seeks a way out of what is a large and very opaque mess.
Now, back to healthcare ...
Therefore, the plunging dollar and plunging economy have nothing to do with each other.
Pretty sure I didn't say that. I just said it's not a direct relationship, and you implied it was. I'm right. Furthermore, a devalued dollar is not even a clear negative - we'll start exporting more.
As for healthcare, obviously it makes up a big part of the economy, and is in need of fixing. Ok. So?
You're wrong. I never implied it was a direct relationship; just a relationship (albeit, important one). I also never implied it was all "simple".
Right. That's why everyone in the US is absolutely thrilled about our devalued dollar and prays to jesus it goes down even more. We'll all be set if we can make it absolutely worthless and then we can export the dollar as an alternative for firewood.
or
Ok. So?
Well, you're right... since the value of the dollar "is not even a clear negative" - Who cares, right? Why fix what doesn't matter. Maybe we can just never resolve health care and continue to destroy the economy and devalue the dollar and we can start exporting dead Americans for firewood.