The dilemma of the diving dollar (there's no currency on the scene that can replace the dollar)

New York Post ^ | 9/10/2009 | Irwin Seltzer

[SeekAndFind]

THERE was a time when the US Treasury secre tary would stand on the steps of the Treasury building and pronounce America's policy of maintaining a strong dollar. No longer -- for two reasons.

First, the Obama administration doesn't seem to have any policy concerning the dollar. And, second, the incumbent secretary, Timothy Geithner, would be paid no attention were he to make such a declaration while simultaneously peddling another huge stack of IOUs as the president's deficits rise ever higher. (This year's red ink is set to hit $1.6 trillion -- and Congress will have to raise the legal limit on federal debt beyond $12.1 trillion sometime next month). And while Federal Reserve Chairman Ben Bernanke continues to print money.

[stop_fascism]

Go back to the gold standard.

[OpusatFR]

Correction: There is no 1 currency that can replace the dollar.

If you begin to view the world as regions, then you can see that there are three currencies that can be used to trade.

There is starting point, not some gigantic inflection point where the ClownBuck just disappears.

It will become one among equals.

[Lurker]

Except there won't be a milligram of gold anywhere near it.

[himno hero]

only one problem, Obama is doing his best to destroy the dollar. He is striving to bebase the currency. Once he does it, the trading world will be pissed at the US for another reason! This is just another program in Obamas relentless “struggle” or his Jiahd against America.

[Darth Reardon]

And the Chinese, stuck with a trillion dollars worth of our paper, aren't likely to drive down the value of that hoard by selling large amounts of dollar-denominated assets.

I am REALLY starting to question this assumption (specifically that they own so much they won't do anything that could devalue what they own). It seems obvious in the short term, but over the long term there may be very good reasons to tank the USD.

Also, are we really talking "only" a trillion? That's like a $1000 per person for China.

[Secret Agent Man]

He does have a policy, it’s called ‘tanking the dollar’.

And if we ever go back to a gold standard, we need to make sure we don’t set up a policy to have foreigners trade in paper dollars for gold. They will be backed by gold but you can’t trade them in for gold.

[JasonC]

"continues to print money"

Another lazy lie. The Fed's sheet peaked on April 23rd and has contracted 5% since then.

[JasonC]

Methinks you are decidedly unclear on the concept "backed". It is just silly what passes for economic thought on the know-nothing populist right these days.

[SeekAndFind]

Another lazy lie. The Fed's sheet peaked on April 23rd and has contracted 5% since then.

Interesting, this brings to mind 2 questions :

1) Where do we get information on the Fed's printing velocity?

2) If the Fed is printing less and less money for the past 5 months, what will happen when Obama and Congress get their way and we have to fund their now healthcare bill ? How are we going to sustain our estimated decade long budget deficit of nearly $10 trillion ?

[Beloved Levinite]

There is no way to track dollars anymore. (M3)

[Beloved Levinite]

Annual U.S. Money Supply Growth – M3 Estimates by ShadowStats

http://www.getmoneyenergy.com/2009/03/annual-us-money-supply-growth-m3-estimates-by-shadowstats/

[JasonC]

MZM is broad money. Nobody needed M3 with MZM available, it was and remains a baseless smear to pretend otherwise.

Also, in case everybody just forgot, the Fed controls only M1 by regulation, private banks control broader money; broader money always grows faster than prices because real wealth increases, it has no tendency to maintain "velocity".

Oh, and the Fed stopping M1 cold for 3 years, spring 2005 to spring 2008, was perfectly sufficient to break all of the bubbles and smash all the inflationary brainstorms behind them to atoms, with $15 trillion in losses to those convinced anything they can hit with a stick is worth more than dollar denominated anything.

[JasonC]

The Fed has not been accomodating the treasury, it has been accomodating the banking system. The treasury has the strongest credit on the planet in the middle of a deflationary smash, it did not require any support to place $1.5 trillion in new debt this year. Because every institution on the planet is trying to reduce their credit risk, by calling in loans to deadbeats on mainstreet in favor of loans to governments that actually pay it back.

I happen to think loans to corporations that also pay it back, and pay more, are an even better idea, but in case nobody noticed it was precisely said corporations that saw their credit so impaired their bonds went to 60 cents on the dollar last year, to yield 15%, and went begging, while the treasury placed T-bills at literally zero, 4 times oversubscribed.

It was a panic. Thankfully, the Fed and treasury did the right thing and intermediated it, lending out to the companies that couldn't raise from the market, the funds the markets were perfectly willing to lend to the treasury.

The emergency loans the Fed extended in the crisis have been repaid to the tune of $750 billion since April. Rather a lot, really.

As for the source of our info on it, the Fed publishes its balance sheet in detail every week. It disclosed more about its finances than any public company, and it is more scrutinized over it by legions of Fed watchers, too. All of the idiot conspiracy smears against it are and always have been utter rot.

What happened when everyone paid the Fed back its emergency loans? Answer, the markets took off like a rocket, that's what.

Ideologues want to believe reckless slanders because they are committed to hatred of their country and its economic institutions, at least whenever they are not obeyed to the letter or their preferred partisans are not in charge. This isn't any sounder or any less disgusting when a populist know-nothing does it over finance issues, than when a leftist pacifist moonbat does it over security issues.

Stop. Smearing. The Fed.

[JasonC]

As for the last portion of your second question, just don't fall for Dem calls to "balance the budget" by raising taxes. They will ask for a VAT, say no. They will ask for a carbon tax, say no. They will ask for higher top marginal rates to "pay for health care", say no. Hold the line on those, and we'll be fine.

Say no to fear, say no to doom mongering, say no to hatred of financiers, say no to appeals to bipartisanship, keep right on bickering, and let the ship right itself. We'll be fine. Everything actually needed was put in place before Bush left office.