The dollar could be replaced as the world’s reserve currency

The Spectator (UK) ^ | 10/16/2003 | Simon Nixon

[Willie Green]

I've got news for you: there's no such thing as a "current account deficit" . . . that money is simply our trade deficit coming back home.

Yep, it's used to purchase the T-bills issued by the Treasury to finance our Budget Deficit.
Last I looked, something like 18% of annual federal revenue was spent just to service interest on the National Debt.
I don't particularly care for my taxes going to foreign governments, but I can certainly understand why a Canadian sees nothing wrong with it.

"Think what you do when you run into debt;
you give another power over your liberty."

-- Benjamin Franklin (1706 - 1790)

[arete]

European economies are in the toliet mainly and not improving as fast as the US.

It is all relative to the FED and the Treasury Dept. printing presses. The Euro will be forced up because the dollar will be force down by massive FED and Treasury market flooding liquidity interventions.

Richard W.

[AndyJackson]

Well, at least you seem to understand the answer to the question at the beginning of the article: It has always been hard to imagine what the problem must be to which the answer is the euro

As you point out, it takes no imagination at all. Greenspan is merely trying to print his way out of a problem, and the rest of the world has caught on to the fact that Alan is counterfitting his own currency.

[arete]

The cause of these problems is not demographic--it's socialistic.

Both Germany and Japen are now involved in major fiscal reform movements. Germany is cutting and reducing welfare state policies and Japan is going to privatize their Postal system. The US is still promising its citizens a free lunch.

Richard W.

[AndyJackson]

Go anyplace in the world and offer someone a handful of Euros or a handful of American dollars, which one do you suppose they would take?

You need to get out more. Increasingly it is Euros. My suppliers who used to quote in dollars now quote in Euros, leaving it to me to factor in the contingency for exchange rate "fluctuations."

[RS]

"Hell, look at Japan. Rememeber when they were going to take over America"

I eremember they were buying up property here like crazy - paying wild prices - then their economy tanked and we bought everything back at bargain prices.

[Matchett-PI]

THE BILLIONAIRE WAGING WAR ON GWB: Soros sends dollar to brink of euro parity (background)
Independent UK ^ | 6.29.02 | Philip Thornton
Posted on 10/01/2003 12:22 PM EDT by Liz
http://www.freerepublic.com/focus/f-news/993039/posts

[huck von finn]

I don't have a problem with some free trade and am no isolationist. I doubt you are either. But things have gotten too far out of control (outsourcing for example), and our trade practices have to be revamped.

[harpseal]

Ping

On or off let me know

[Paul Ross]

Actually, they can do highly destructive things to our economy with that hypothetical dollar. Things which in fact the Chinese are doing not just hypothetically, but concretely. They buy our factories, and relocate them to their country. So the trade is a one-time 'fix' and is not sustainable by us.

Plus, They send their PLA-trained 'students' to our country, get almost a free ride on Uncle Sam's grants-in-aid, and squeeze out all the legitimate U.S. citizen 'consumers' of education in the fields of high technology, and help accelerate the inflation which no one talks about...Education is ripping along at 11% per year. Meanwhile their grad students here kype every imaginable new technology that could give Mother China a trade or Military advantage...using every trick in the book, from feigning innocence, and harmlessness, to sophisticated computer hacking to get into security-compartmentalized information.

Further, they can buy our companies outright, and have, with Magnequench being a prime example...then they tried to buy Global Crossing until finally sanity prevailed at the White House. They can also buy our securities...and essentially start calling the shots at our own Treasury Dept. and the White House. (Look how insulated the Saudi Arabians have been because of their US Bond portfolio for instance). These are not healthy exchanges, and lead to the ruination of our country's future...and thereby the very future of the world.

[Alberta's Child]

Buying U.S. securities (especially government bonds) does not necessarily give a foreign nation any leverage over the U.S. In fact, I would contend that the exact opposite is the case -- owning U.S. government bonds makes a foreign nation utterly beholden to the U.S. and gives them a vested interest in seeing to it that the U.S. economy remains solvent.

If you don't believe me, try to imagine yourself in the position of a bank that has extended a $200,000 mortgage for a nice home and is watching the owner slowly turn it into a pile of crap. The bank may think they have all the leverage in the world, since they do officially own the home -- but owning the home won't mean anything if the guy walks away from this mortgage and leaves the bank with an Arkansas mobile home worth $20,000.

[Paul Ross]

if the guy walks away from this mortgage and leaves the bank with an Arkansas mobile home worth $20,000.

This illustration crashes and burns because the U.S., if it defaults on its securities, will see a complete collapse of the entire economy, its foreign trade agreements, its ability to defend the country, etc. as the streets swell with rioting unemployed people demanding to know who to blame in D.C.

We have to live in that trashed house. So thanks for the input, but take it elsewhere. It is nonapplicable.

[GreenHornet]

If the euro replaces the dollar as the world’s reserve currency — and reports from Russia last week suggest it might — there is likely to be a high price to pay.

Just to be on the safe side, send all of your dollars to me before it's too late.

[Alberta's Child]

I have a better application for that illustration. The owner of the house does not trash it -- in fact, he makes a lot of improvements to it. He builds an addition, upgrades the wiring and plumbing, etc. So much so that the bank assesses the home at $500,000 and lends the owner an additional $200,000 on top of the $200,000 he already owes.

But a few years later it turns out that the addition was built with popsicles, the new electrical work was done with exposed wiring, the new plumbing is nothing more than plastic straws, etc.

Oh, and there can be no riots in D.C. over this, either. It wasn't the fault of the "contractor" that the improvements were built like sh!t . . . We Americans are the owners of this house -- and the contractor built it exactly the way we told him to build it.

[Travis McGee]

Stupidity, treason, or both?

[TopQuark]

but we need congresscritters with backbone and those are very few and far between.

So, you think the government is responsible for the U.S. economy?

[Alamo-Girl]

Thanks for the heads up!

[JesseHousman]

So, you think the government is responsible for the U.S. economy?

Now who would think a foolish thing like that?

Coould it possibly be because the Federal Reserve is a governmental agency that plays God with interest rates and the supply of Monopoly money? Could it be because congress enacts the severely flawed NAFTA and WTO and spends this nation into an abyss of debt?

Don't you honestly believe our bloated goobermint is complicit in the severe economic problems we now face? They experiment with the tax system, redistribute wealth and fritter away billions upon billions of dollars on worthless, egotistical follies without any concern about anyones's future.

Yes damnit I believe the government is responsible because I know full well that I'm not!

[ARCADIA]

This illustration crashes and burns because the U.S., if it defaults on its securities, will see a complete collapse of the entire economy, its foreign trade agreements, its ability to defend the country, etc. as the streets swell with rioting unemployed people demanding to know who to blame in D.C.

This is an interesting fiction. If the US defaults on its securities, or simply flushes the whole portfolio, remarkably little will happen.

No one is going to repossess our assests, the people are not going to rise up in panic; most of them wouldn't even notice the difference except perhaps for the immediate reduction in tax burden - they are already unemployed or underemployed. We wouldn't take the step unless global trade had become impossible, so there wouldn't be much to lose there. Good-by worthless global trade agreements and our dubious allies that helped to trash our economy in the first place; who needs them.

[Held_to_Ransom]

Everything being equal I think most would still take the American dollars

Yes, but if they had taken the Euro a couple of years ago, they would have made a whole lot more money than if they took the dollar. Do you think anyone noticed?

Actually, this whole confabulation has been advanced as the primary motivation for the US invasion of Iraq, as Saddam had already converted his oil business in Euro's. Not surprisingly, Iraq does oil business now in dollars.

The nation that sets the leading key market interest rate in the world has a distinct edge to play, and it's foolish to think the EU doesn't know this, and that it wouldn't want to have that edge. The question for the US is 'is it really worthwhile pumping up huge deficits to hold onto this edge by the use of military force, or should we be looking to deal with the matter in more productive and competitive economic approach?'