Posted on 04/05/2009 9:42:15 AM PDT by Candor7
At the G-20 summit on April 2, President Obama helped China gain power at the IMF which could assist them with their plan to get their reserves out of dollars before the coming dollar collapse.
China may want to follow up on the statement made on March 23 by Zhou Xiaochuan, head of the People's Bank of China. Zhou's idea was to turn the International Monetary Fund's (IMF's) SDRs (Special Drawing Rights) into an international reserve currency that would be guaranteed by the IMF to have a value based upon the average value of a basket of currencies. It was clear that Zhou was anticipating the coming dollar collapse when he said:
And when a country's currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability.
China realizes that trade will have to get more balanced in order to get the world out of this great recession. America could balance its trade by adopting Warren Buffett's Import Certificates plan, but China would much prefer that U.S. trade get balanced by a dollar collapse. America continues to stand in the way of China's territorial expansion and continues to advocate the democratic philosophy that threatens China's totalitarian rulers. A dollar collapse would quickly reduce American power.
China's problem is that they have approximately $1.7 trillion worth of dollar reserves which would become nearly worthless when the dollar collapses. Thus, they need to get their reserves out of dollars before the dollar collapses. They can't sell their reserves outright without causing the dollar collapse, so they are looking for a transfer, negotiated with the IMF, of their dollar reserves into SDRs. At the G-20 summit this week, President Obama helped them gain power at the IMF so that they could proceed with this plan.
Just before the summit, Democrats on the House Ways and Means Committee urged Obama to get tough with China's currency manipulations, which violate Article IV of the International Monetary Fund Articles of Agreement. China's currency manipulations have directly caused China's trade surpluses and America's trade deficits, resulting in millions of good-paying American jobs moving to China.
But Obama gave China more say at the International Monetary Fund without even requiring that they comply with IMF rules, as described by Joe McDonald in his Associated Press story:
President Barack Obama and his Chinese counterpart, Hu Jintao, stuck to areas where they agree in their high-profile first meeting in London, trying to avoid fueling global economic fears by airing disputes over currency and stimulus plans....
Obama handed Hu a diplomatic victory when, according to a senior American official, he agreed on the need to change the International Monetary Fund to give China and other developing countries "an appropriate role." Beijing wants a bigger voice in managing the world's finances and has suggested its contribution to a global bailout fund might be contingent on receiving it.
President Obama was very pleased in how well the summit went. He called it a "turning point" for the world economy. Indeed the summit was a turning point, a turning point toward a dollar collapse.
two currencies, it has to come.
from wiki:
Import Certificates are an idea for governmental economic intervention to fix a country’s trade deficit. The idea was first proposed by Warren Buffett. In the United States, the idea was first introduced legislatively in the Balanced Trade Restoration Act of 2006. The proposed legislation was sponsored by Senators Byron Dorgan (ND) and Russell Feingold (WI), two Democrats in the United States senate. Since then there has been no action on the bill.
[edit] Concept
Buffett’s plan proposes creating a market for import certificates that would represent the right to import a certain dollar amount of goods into the United States from other countries. These certificates would be issued to US exporters in an amount equal to the dollar amount of the goods they export, and can be sold to importers, who must purchase them in order to legally import goods. The price of an import certificate is set by free-market forces, and therefore ultimately is dependent on the balance between imported and exported goods through supply and demand.
Proceeds from the sale of import certificates would encourage exporters (who would gain that extra money in addition to the proceeds of their exports) and discourage importers (who would need to pay the additional cost to acquire import certificates as well as the cost to acquire the goods they are importing)
This system would essentially create a broad-based tariff on imports to the United States. Unlike traditional tariffs, however, this would not favour any particular industry or punish any particular country. Market forces would also keep the tariff at exactly the amount required to achieve trade balance, eventually eliminating it when it is no longer necessary.
As a theoretical concept, the idea could apply to other countries besides the United States, but Buffett argues that practical realities make it unlikely to succeed elsewhere. In particular, for any country which maintains a trade surplus the import certificates will be valueless.
I wouldn’t call the banks “Leftists,” I’d call them Internationalist or Trans-national. They don’t try to hide this; they promote and extol it.
It seems like a fair bet for the banks. But I wonder how it might fail? Surely I’m not the only one wondering about this scenario.
Let’s say people jump the gun, and purchase foreign currencies before the banks have a chance to convert: soon the banks are spending already de-valued currency— simple supply —demand comes into play and the payout diminishes.
There’s also inflation. If 0 thinks they were raising hell in Europe, he hasn’t considered what we could do. Leave people with nothing, and they have nothing to lose.
This hinges on a couple of questions: How quickly can banks convert the massive sums without triggering a panic? What are the legal constraints? What are they willing to dare? What if 0&co. wake up and and take full account of political and financial constraints?
I’m not sure I’ve got this, but:
with two currencies, we’ll need to protect our currency and productive capacity. But if our currency is already worthless, what is a tariff doing besides aggravating inflation? Revenues? At the risk of political chaos?
Where’s the gain for 0 & co. ?
Its just too simple in some sense.But it will make a vast difference to many who do not see this coming.
It will fail because the US economy will not produce value fast enough to keep the standard of living to which Ameircans are accustomed. It will get ugly, violent, especially in the cities.And food will become scarce as bulk farms no longer have the ways to finance mass crop growth.
This is very heavy stuff. But as usual there is money to be made, if you can see what's coming and know what to do.
It also might mean war with China eventually.
This all seems very innocuous, but who gets the certificates and whho does not?There is the rub. This is essentially non free market control .Its fascist, and Buffet a=is assuming we have an innocuous governemnet without a poitical agenda. Thats just untrue, as rick agoner and the natuon now know all to well.
No one is interested in this idea. It gives away freedom of the economy.
Especially since they've shut off domestic oil drilling.
War with somebody is a strong probability if tariffs are introduced. At the very least there will be reprisals barring our exports.
Wonder where India figures in this? I gathered that W. was cultivating a relationship with them as a strategic military and economic buffer.
I'm sure you're right about money.
I'm just hoping and praying some wild cards will come into play--and to our advantage.
One final note:
I don’t think Fascism explains 0’s actions.Yet
I don’t think Chavez started out to be a socialist/fascist. Circumstances—of his own making—turned him into one. Hell, Herod built a great temple. Even he wanted love.
Fascism is socialism in jack boots. Socialism is the nanny who wants you’re love, fascism is when the nanny removes the apron and shows you her jack boots.
The point is: 0 hasn’t gotten to Fascism yet, and there’s a chance he won’t. Right now it seems the best we can do is consider his actions as rational, self-interested, and in conformance to some inscrutable notion of benevolence.
Best, I think, to view this as a chess match, and look for a coherent rational. At this point.
Jonah Goldberg Liberal Fascism: The Secret History of America’s Left, from Mussolini to the Politics of Meaning Reference bump! ;-)
A lot of countries have run a 2 currency system when their own becomes worthless.
Currently, Zimbabwe does with Zim dollars (worthless) and US dollars.
The soviet union was the best example. If you had a free market, the ruble was worthless. So they rationed goods to keep inflation down. That is you had a lot of money/rubles and it could buy stuff, but only a certain rationed amount and only certain goods. So inflation was “controlled”.
Now if you wanted more stuff, you needed US dollars.
When liberalization occurred in 1998, the ruble became worthless “overnite” (actually, it was worthless all along but it was disguised as having value by rationing).
So now the US may follow the same road with US dollars to buy rationed stuff domestically (think ruble), and these import certificates (us dollars in the old soviet union) to buy imported stuff like crude oil, or electronics.
Hi Staytrue, and thanks for your reply.
Russia and Zim are good examples.
But has a government ever exploited its own currency collapse to reduce financial debt accrued by commercial entities? Why else would 0 & Geithner agree to the Chinese proposal to abandon the dollar.
If the Banks swap dollars for some other currency before the collapse, they can pay down their debt for cents on the dollar after exchanging their new currencies for deflated dollars. Maybe the new administration is agreeable with this.
The problem with this scenario is that the Chinese paper is in US dollars, and they’ll take a hit. So the theory is problematic.
And like I say, I’m pretty ignorant of this and just trying to get wise.
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