Posted on 01/24/2005 9:39:05 AM PST by JFK_Lib
Central banks are shifting reserves away from the US and towards the eurozone in a move that looks set to deepen the Bush administration's difficulties in financing its ballooning current account deficit.
In actions likely to undermine the dollar's value on currency markets, 70 per cent of central bank reserve managers said they had increased their exposure to the euro over the past two years. The majority thought eurozone money and debt markets were as attractive a destination for investment as the US.
The findings emerge from a survey of central bank reserve managers published today and conducted between September and December of last year. About 65 central banks, controlling assets worth $1,700bn, took part and the results showed a marked change in attitude over the past two years.
Any rebalancing of central bank reserve portfolios has serious implications for the global financial system as the US has become increasingly dependent on official flows of funds to finance its current account deficit, estimated at $650bn in 2004.
At the end of 2003, central banks held 70 per cent of their official reserves in dollar- denominated assets and central bank purchases of US securities had financed more than 80 per cent of the the US current account deficit in 2003.
(Excerpt) Read more at news.ft.com ...
Great post and very good analysis and excellent data. Thank you.
LOL, problems with a possible panic sell off of dollars today is aleviated because of demographic trends over the next 44 years?
Oh, lord, that has to be the biggest pile of stinkage I have read in years.
What difference does your static analysis of demographics makes if the US$ has gone the way of the Weimar Mark?
Your numbers are irrelevant if we dont make it to 2050.
And besides, just what are we supposed to be doing in 2050 to produce exports if we have sold off all the jobs and capital before then anyway?
Bah, I put my money into Euros and have done quite well so far, and after a few years, I may move them back into US$, but I will ahve to see something better than expected populations in 2050.
*chuckle*
I think his post was a variation of pig + lipstick.
I submit the currency issue is just another front of the war with europe.
The euro is in danger so they are trying to outflank the dollar.
They can't beat the USA with bullets so the eurozone is trying to beat the USA with paper. (its the french revolution all over again, no principles just bloody power grabs.)
Yeah, the Euronauts kinda look downright adversarial these days.
Sure is a good thing we saved them from the Keiser, Adolf and Boris so they could but us in the keister today, eh?
We ought to know better, heheh.
I think of all the brave American boys that died in two world wars saving these ingrates and I cant help but think I dont want my boy going over there for such reasons; no way.
Get the Fed out of the US...let them dump dollars...they will be worth less.....then pay the fed off with those worthless dollars.
Then back our currency with something of value....all the while getting the FED the hell out of here so they cannot drain us of our wealth.
GW Bush is doing the right thing...talking about getting rid of the enforcement arm of the Fed---the IRS.
Doing away with this screwy tax system....getting rid of the FED and the Income tax....The US will become the economic superpower giant of all time......especially if we get of the oil kick and get into other forms of energy.
Why would eurozone need their reserves?
Are they in trouble? Do they need to conceal their problems by moving reserves to areas where they can conceal better? (see two eurostat scandals for false data)
Yes, 2004 should prove to have been our best year ever for exports, beating out even 2000.
Here are the Census Bureau's numbers for the first 11 months of 2004, and for all of 2000:
| Month | Exports | Imports | Balance |
|---|---|---|---|
| January 2004 | 62,660.0 | 111,033.0 | -48,373.0 |
| February 2004 | 65,898.0 | 114,453.0 | -48,555.0 |
| March 2004 | 68,474.0 | 118,405.0 | -49,931.0 |
| April 2004 | 66,898.0 | 118,714.0 | -51,816.0 |
| May 2004 | 69,631.0 | 119,891.0 | -50,260.0 |
| June 2004 | 65,715.0 | 123,546.0 | -57,831.0 |
| July 2004 | 68,232.0 | 121,953.0 | -53,721.0 |
| August 2004 | 68,846.0 | 124,712.0 | -55,866.0 |
| September 2004 | 70,181.0 | 123,869.0 | -53,688.0 |
| October 2004 | 70,128.0 | 128,998.0 | -58,870.0 |
| November 2004 | 67,467.0 | 130,368.0 | -62,901.0 |
| TOTAL | 744,130.0 | 1,335,942.0 | -591,812.0 |
| Month | Exports | Imports | Balance |
|---|---|---|---|
| January 2000 | 62,543.0 | 93,900.0 | -31,357.0 |
| February 2000 | 62,409.0 | 95,901.0 | -33,492.0 |
| March 2000 | 63,135.0 | 99,176.0 | -36,041.0 |
| April 2000 | 63,814.0 | 99,242.0 | -35,428.0 |
| May 2000 | 63,632.0 | 99,651.0 | -36,019.0 |
| June 2000 | 65,997.0 | 103,019.0 | -37,022.0 |
| July 2000 | 65,711.0 | 103,349.0 | -37,638.0 |
| August 2000 | 67,763.0 | 103,665.0 | -35,902.0 |
| September 2000 | 67,562.0 | 106,396.0 | -38,834.0 |
| October 2000 | 66,845.0 | 106,056.0 | -39,211.0 |
| November 2000 | 66,691.0 | 103,993.0 | -37,302.0 |
| December 2000 | 65,816.0 | 103,673.0 | -37,857.0 |
| TOTAL | 781,918.0 | 1,218,021.0 | -436,103.0 |
"I found it interesting that Kofi Annan was vacationing in Jacksonhole with the director of the World Bank this past Christmas. Feel free to correct me if I am wrong."
Did not know that. Why we as the United States feel that we have to still continue to be part of the UN for our "global" image for PR reasons is shocking to me. They made a fool out of our country and made every tax payer in this country pay for their crookedness. The countries that like us admire us for who we are. The rest are already polarized against us, so why waste our valuable resources on nothingness?
OK, lets imagine that your household income was $74k a year, but you spend $133k each year.
What eventually happens?
Year after year, your debt builds up till, finally, one day, creditors say, 'Whoa! Pay up on what you owe before we sell you any more credit!'
That is when the panic on the currency may start.
Our economic debt is about 80% of our income.
That is a disaster long due.
The 10 year bond has been trading at the bottom of a range for, frankly, the last three years. I chuckle every time I see the latest "SKY IS FALLING!" alert.
EHHHH, WRONG ANSWER! The past TWO YEARS American exports have exceeded the previous year.
From http://www.ita.doc.gov/td/industry/otea/usfth/tabcon.html
http://www.export.gov/
Total Exports
2000 1070.1
2001 1006.7
2002 975.9
2003 1020.5
I stand corrected regarding total exports and should have been more specific in my comments.
The export/import ratio has not changed. Therefore, our net exports relative to imports is still the same. Hence, no meaningful change.
Actually, you are right...the export ratio is unchanged. So, I stand corrected also.
Yet, I am right also...total exports are up, and actually the data came out for 2004 this past Tuesday and exports are up for the 3rd straight year, BUT, the ratio is actually down/flat.
It's the trade DEFICIT that is hurting us. Those same '04 numbers show that CHINA actually bested us as Japan's largest trade partner...this is the first time in 25+ years that someone other than us has traded more with Japan. The predominant reason for this was the Japanese ban on U.S. beef exports due to the "mad cow" disease scare. If you ask me, we should pass that on to the Canadians, as their beef is what caused our Mad cow scare...the "tainted" stock came from Alberta. Coincidently, they have found another couple head with "mad cow" livestock in it just last week. Maybe we should ban Canadian livestock?
Fear not though, as we still have the worlds largest economy...by a long shot.
I know this sounds arrogant (not my intention though), but the world (especially Europe) cannot afford for us to fail economically. Without our trade, they die. For historical perspective, just look back at what our "Black Friday" did to the rest of the world in 1929.
As far as the Chinese go...we need to DEMAND that they stop "pegging" the yuan...it hurts the dollar. Also, would they really be the "emerging" economic power if they didn't use what amounts to "slave labor" to manufacture those cheaply produced products we find at Wal Mart these days? I think not.
Lastly, until U.S. manufacturers STOP off shoring their goods production, China will continue to prosper...at our expense. The profit motive is too strong though! Clinton started this whole mess by turning a blind eye to China's horrible human rights record, and "technology exchanges." His adminstration basically handed them the "keys" to the economic machine in the U.S. His NAFTA didn't help us either!
All good points.
Yes, the world does need the US economy. And that is out saving grace.
But, I am very worried about the implied arrogance between that need and our seeming abuse of it. I just wish we would clean-up our fiscal act.
And you are right too. The whole surrent account deficit argument is on its face specious.
What most econoid writers fail to understand is the CAD pales in significance to USA's intratrade.
As an example take any one of a number of US companies, say Walmart, who imports shiploads of seavans full of manufactured goods from Asia. What people don't realize is that the retail price vs. cost of product is so wide that it would not matter to the US economy if CAD doubled, tripled etc.
Take a gadget that costs $1 to make in Korea. Sell it stateside for $20. Where's the bulk of the cash going and staying? That's right, in the USA.
And what are red-blooded Americans doing if they're not performing repeated motions on bench assembly lines in the sweat factories of Taipai?
They're building outlets at home to stock those cheap factory goods. Americans build things to package and store the gadgetry, shoes and Barbie dolls. And when they're not home bulding things, they're overseas in sweatland setting up assembly lines.
Without America, Asia and the world would feel Jimmy Carter's malaise for an indefinite time.
You are completely on the money! Kudos.
Jackal
"We need to cleanup our fiscal act"----I couldn't agree with you more!
What line items do we need to start with though? I for one DO NOT feel we need to start with the defense budget though.
I say this, because I'm a Reserve officer and because I know history. Historically we have ALWAYS cut the defense budget AFTER a "war", AND it has ALWAYS come back to haunt us. Case in point: #1 WWI--less than 100,000 soldiers in the Army at the start. We didn't get involved in WWI because"officially", we were neutral. Unofficially--we had to "ramp up" production AND conscription(think draft), or we would have gotten our a**es handed to us. #2 Pre world war II...same story. #3 Korea---Task Force Smith-completely under manned, under trained, under gunned...significant losses, until Inchon. #4 Vietnam---once again we had to ramp up and conscript. #5 Post Vietnam, carter years---Thank God for Ronald Reagan! If he hadn't of boosted the defense budget, demanded better trained forces, and demanded new weapons systems, Desert Storm WOULD NOT have been a success! #6 Post Desert Storm 1990's---the great "bloodletting" of the Clinton, Don't Ask, Don't Tell administration---Twin Towers bombing #1, Bosnia, Africa Embassy bombings, U.S.S. Cole, WTC/Pentagon 9-11---during this era I saw my beloved Army literally and figuratively "gutted" by Clinton.
Now that the 9-11 commission pointed out the problems between the FBI and CIA leadership, it truly WAS a "gutting" of our total national security assets! Sure, we had a good economy, and prosperity as a NATION during the 90's, BUT, at what cost? If we had the CIA in top form with a fat budget, would 9-11 have happened? If Clinton would have had "warriors" in charge instead of "politicians" would it have happened?
My whole point for my "soapbox lecture" is this: It costs MORE to our national security infrastructure, if we keep taking the notion that, "Oh well, we won that war and the Soviet Union is gone, so we don't have ANY enemies anymore...so let's just cut the defense budget!"
Wouldn't it make MORE sense to keep the budget at a constant level of "buying power"...a constant budget with inflationary increases built in, so that we can research, design, test and then build NEW, and MORE, cutting edge weapons systems, and maintian our troop levels at around 1MM soldiers. I certainly think this way of thinking would save money over time, as you would be funding systems at TODAY's $$$'s, vs. Tomorrow's dollars! The way we do it now with our downsize, ramp up, go to war, downsize, ramp up, go to war mentality is that it costs the American Taxpayer more $$$'s down the road!
I am not qualified to speak regarding specific military program. However, I do remember Eisenhauer's "farewell" speech where he stated to beware of the military industrial complex. I'm not saying that we shouldn't have a military, not that it shouldn't be ready. However, it is important to keep it within limits.
From a historical perspective, any country that has allowed its military to increase in power and influence has eventually lost world power because they devoted too many resources to defense and not enough to civilian prodiction.
In other words, there has to be a balance, but the correct amount is always changing due to world situations.
In my opinion, what is required is nothing short of a complete change in many things. As a simple example, people should save for things instead of relying of credit. My grandfather only had 1 credit card, and that was because my mother had one and he didn't. He never used it. He saved for everything. And he died a wealthy man.
On the governmental level, we are approaching the point where many politically unpalatable decisions must be made. And franky, I don't think anyone has the balls to stand-up and be counted to do the right thing in the long run.
Actually, if we prudently save our money, the lending base will increase, which increases money volocity. This lowers interest rates.
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