Dumping the dollar...

Drudge Report links to an Independent article. ^

[genghis]

You do nothing and let the exchange rates fluctuate.

ya right, 3% of the populattion understands this, and 97%
have no clue that they have no clue.

[JHBowden]

Dude, this is Robert Fisk.

I know, I know, structural deficits will kill investment in this country and jack up the prices of imports, including oil. Politicians will blame this on greed, and will raise taxes, increase spending, and impose tariffs, making our situation worse.

But dude, this is Robert Fisk!

[fujimoh]

“Don’t buy their products.”

You are absolutely correct! The problem is that they don’t teach reading in schools anymore and half the people can’t figure out where the products are manufactured.

[dragnet2]

[SunkenCiv]

[Neidermeyer]

Don’t buy their products.
************************************
I think the oil price will fall for at least the next 12 months on demand... If we had a leader ,, a leader who didn’t hate the USA ,, we would backstop the price for US produced oil at a price that makes shale oil profitable for a fixed number of years (at least 10) and we would encourage the oil companies to get busy drilling here, it’s not free market but we desperately need a secure oil supply ... I could stretch the Constitution that far on National Defense grounds.

[seekthetruth]

BUMP to the top of the page.

I hear-by challenge EVERY FREEPER who has not made a donation to Free Republic to make a donation of just $10 and see what happens to the Freep-A-Thon!

I would think that every Freeper could donate at least $10 to help keep FR up and running! :)

[djf]

http://urbansurvival.com/lastweek.htm

[TenthAmendmentChampion]

US Cedes Economic Independence To IMF
http://www.freerepublic.com/focus/f-news/2355716/posts

[jpsb]

"Don’t buy their products."

Yup, however when the world dumps the dollar, buying thier products will require lot's and lot's of dollars. Imagine the effect of all those many tillions of overseas dollars comming home since here is the only place they can be used.

[driftdiver]

at least Bush was treating him as an equal and not bowing to him.

[In veno, veritas]

Here's a couple of things that might help you think through this problem.

How exactly does a country "dump" it's dollars? Essentially three ways: First, it can purchase American goods, services, or invest (i.e. loan us the money). Surely you can see an increase in exports as not detrimental to us, and if they invest in the US, then the last thing they want to do is see the economy collapse.
Second, they can sell them on the world market for other currencies. The person to whom they sell will then do something in the first category. Sure, a lot on the foreign market will lower our exchange rate, but that means that foreign goods are relatively more expensive so we purchase more domestic goods. And no one is going to buy them at a high price if they think that dollars are being dumped and the price will be lower in the near future. Thus the country that holds a lot of $US and wants to get rid of them loses a lot of money trying to do so.
Third, it can burn the dollars in which case the US made a huge profit printing dollars for goods.

So from these scenarios, it should be seen that dumping is highly unlikely; the country that does so will hurt itself more than us. This is why you do nothing and let the exchange rates fluctuate. Any attempt to keep the exchange rate up will encourage more dumping and essentially pay them to get rid of their dollars.

[MHGinTN]

Destroying the value of the dollar is by design. One of the legs of the obamanation stool of fundamentally changing America is to create such an economic crisis that we the people become serfs in a global economic plan.

Go to this link and listen to the first two segments from 10/5/09, paying close attention to the plan of community organizers (and yes, Rahm Emanuel is a community organizer on the national level, to incorporate America in a global community to which we will be subordiante): http://glennbeckclips.com/

[USFRIENDINVICTORIA]

Please see my post #14, for the truth in the bottom of my wine bottle.

You're right -- floating the exchange rate is the best policy -- in fact, it's the only one that's sustainable. For any other debtor nation, a floating exchange rate means that the debt also fluctuates, in proportion the the changes between that nation's currency & the global reserve currency. In Canada, that meant that the more our $CDN was devalued; the more $CDN we owed.

The U.S. is different from all the others. The U.S. currency is the global reserve currency. If you allow the $US to devalue -- that means that your "real" debt load is reduced accordingly. IOW, your creditors get stiffed.

Good for you so far. Unfortunately, your creditors know that & they have no desire to get stiffed.

Your creditors won't "dump" dollars -- they will simply wean themselves off of them. Your (otherwise spot on) scenario left out one important detail -- the U.S. continues to borrow heavily. You continue to buy oil from Arabia (while refusing to "drill here, drill now"), you continue to buy manufactured goods from China, etc. In the future, you may have to convert the $US to SDRs, in order to complete those transactions. Over time, your debt will be denominated in SDRs, rather than your own currency. That will mean that, as (if?) the $US is devalued more -- your debt will grow proportionately (in terms of $US).

The U.S. could have done something about this -- it could have drilled for its own oil; it could have avoided piling up trillions of dollars in new debt, over just the past year; etc. It's probably too late now.

It seems clear to me that BHO was counting on being able to deflate the $US, to reduce the amount of debt -- and that's what's motivating your creditors to "dump" dollars. Can you blame them?

The loss of reserve-currency status will result in a huge financial hit for the U.S. This is a serious matter -- probably the most serious economic mistake the current Administration is making.

[Antoninus]

In my opinion, parts of our own government are working hand-in-glove with our enemies.

We have allowed our enemies to infiltrate us and will pay the price. Take whatever steps are necessary to protect your family and loved ones--I have this bad feeling it's about to get ugly.

[In veno, veritas]

Purchasing goods is not borrowing, it's trading. When I buy a steak from the butcher, I trade dollars for steak. Now I think we'll agree on the problem: the US monetary policy absolutely stinks. The dollar should hold it's value, but if there is the thought that it won't (such as the US debt obligation being greater than world GDP), then it's natural to switch to something more stable. The problem is that the US is increasing supply of dollars, which will result in inflation. Worst case scenario - the US defaults (I'd say fairly likely to occur).

What drives me nuts are these people talking about the enemies out to hose us. The "enemies" getting out of the dollar isn't a plan to ruin us, it's good financial sense for them since we're spending worse than a bunch of drunken sailors.

[USFRIENDINVICTORIA]

I agree with everything you said — except that when you're buying more than you're selling, you are borrowing the difference (trading money you don't have for goods and services received).

If the U.S. loses reserve currency status; that will mark the biggest economic and foreign policy failure (so far) of the Obama administration. The message needs to get out — Obama needs to be made to own this mess.

[In veno, veritas]

I guess my concern is that you seem to be blending two different issues: government debt and private debt. Government debt is a huge issue and can be associated with the problems with the dollar. But when talking about purchasing oil, that is a private issue and it is not a problem; if a company spends more than it receives, it goes bankrupt and the market takes care of itself. I know many talk about the trade deficits, but that is essentially a useless statistic.

I maintain that it is not bad if the US loses currency status (as long as we let the exchange rates fluctuate). I will state that it is a symptom of other issues that are problems, the mismanagement of monetary policy.

[USFRIENDINVICTORIA]

You're right -- this is a very complex matter; and it's hard to avoid oversimplification, on a forum like this.

We're also agreed about the problem of government debt.

However, foreign oil purchases aren't entirely a private issue for the USA. Obviously, government itself is a major purchaser of oil. There's also the matter of the huge amount of revenue that U.S. governments forgo; because much of your own oil supply remains locked up, by government fiat. Even if you exclude ordinary taxes on workers and producers — governments are missing out on considerable royalty payments. Instead, U.S. consumers are paying royalties to governments of foreign oil producers (on behalf of Canada, I would like to thank you very much for that).

I still maintain that it will be very bad (for the US) if the US loses reserve currency status. Setting aside the matter of seigniorage — there's the considerable matter of paying back your outstanding (government) debt. With reserve status, if the Greenback is devalued, your nominal foreign debt remains unchanged — because it's denominated in $US. Meanwhile — because you're paying back in devalued currency — your real debt has decreased accordingly. If your debt were denominated in (say) SDRs — then your nominal debt (the number of Greenbacks you owe) increases, as your currency is devalued. IOW (and, simplifying), you won't be able to print money to pay back your debts. Loss of reserve status could cost the U.S.A. trillions of dollars.

I completely agree with your conclusion — if the U.S. loses reserve currency status; that will be as a result of mismanagement of monetary policy. This whole issue would never have arisen, if the U.S. weren't so deeply in debt. Also, if the U.S. weren't in debt; I'd agree with you that losing reserve currency status wouldn't hurt very much.
(It will also be a result of mismanagement of fiscal policy — running up monster debts to pay for socialist programs.)