LM has been covering the unsustainable debt that previous and current congresses have saddled us with for many months now. Recently I posted an op-ed pieced penned by Stewart Dougherty (Tea Party Patriots Vs. The Master Class) detailing how the elites are turning all of us and future generations into indentured servants to our government, and China by extension of our debt.
Last week, on 1.28.09; I saw an interview of Steven Moore with Greta Van Susteren for “On The Record” where Mr. Moore made the comment that China now owns more of our debt than the American public does. I have been searching for video tape or a transcript of that interview to post because if I heard Mr. Moore correctly, it begs this question. “Did our Congress, by raising the debt ceiling again, just commit treason by circumventing our national security with an unsustainable debt to China? What happens when China increases the interest rates? Something to think about….
Glenn gets started with the infamous debt clock and what mortgage and credit card debt decreasing actually means (hint: it’s not good).
He then delves into the very issue of the elites and our debt to China with news that this administration “has lowered the priority placed on intelligence collection for China”, even though they appear to be hacking us daily.
The White House National Security Council recently directed U.S. spy agencies to lower the priority placed on intelligence collection for China, amid opposition to the policy change from senior intelligence leaders who feared it would hamper efforts to obtain secrets about Beijing’s military and its cyber-attacks.
The downgrading of intelligence gathering on China was challenged by Director of National Intelligence Dennis C. Blair and CIA Director Leon E. Panetta after it was first proposed in interagency memorandums in October, current and former intelligence officials said.
Part 2, Why didn’t George Bush go after China when lead based paint was found in toys, or poisoned dog food was sold in America? Why did the Obama administration lower the intelligence collection priority on China?:
More Americans than one would think were awake and paying attention during the summer of 2008. They knew what was coming when the bottom fell out of the housing market, and foreclosures started to pile up. They knew, in even the most simple terms, what domino effect was about to happen. These patriots were the ones calling their representatives to register their NO VOTE against the Bush stimulus 1.0, and then screaming about the $787 Billion T.A.R.P. Paulson Bank Rescue, which moved onto the $186 Billion for AIG and truly blossomed under GM and Chrysler.
We did not want any of this money being spent because we knew there was nothing backing those fiat dollars but winks and promises. There surely was nothing in all the money being thrown around for the majority of Americans. Sure, the unions and the banks profited, but at what expense to the rest of us?
We have been watching other nations’ financial ministers speak about getting out of the U.S. Dollar and switching to a world currency, including China, India, and Russia. We have China telling the pResident during his recent trip that his healthcare bill might be too expensive at this time, and now Germany has jumped on the bandwagon. Our government is an addict who is completely blind to the magnitude of their fiscal irresponsibility, and we have foreigners gently nudging our leaders on domestic policy. Jesus, Mary, and Joseph!
Germany’s new finance minister has echoed Chinese warnings about the growing threat of fresh global asset price bubbles, fuelled by low US interest rates and a weak dollar.
Wolfgang Schäuble’s comments highlight official concern in Europe that the risk of further financial market turbulence has been exacerbated by the exceptional steps taken by central banks and governments to combat the crisis.
Last weekend, Liu Mingkang, China’s banking regulator, criticised the US Federal Reserve for fuelling the “dollar carry-trade”, in which investors borrow dollars at ultra-low interest rates and invest in higher-yielding assets abroad.
Speaking at a banking conference in Frankfurt on Friday, Mr Schäuble said it would be “naive” to assume the next asset price bubble would take the same guise as the last.
He said: “More likely today is a scenario in which excess liquidity globally creates a new [sort of] asset market bubble.”
He added: “That low interest rate currencies such as the US dollar are increasingly being used as a basis for currency carry trades should give pause for thought. If there was a sudden reversal in this business, markets would be threatened with enormous turbulence, including in foreign exchange markets.”
We have been watching Ben Bernanke juggle the fiery pins of zero interest rate, monetizing the debt, and running the printing presses 24/7 for well over a year now, and we have been listening to the Russians and Chinese call for a new world reserve currency for months. It is not official yet, but it appears that our dollar is about to be booted from the table. I personally believe that the title of this article from the NY Post is misleading, but the information that it contains shows the trend, and I am looking for corraboration in other sources.
Ben Bernanke‘s dollar crisis went into a wider mode yesterday as the greenback was shockingly upstaged by the euro and yen, both of which can lay claim to the world title as the currency favored by central banks as their reserve currency.
Over the last three months, banks put 63 percent of their new cash into euros and yen — not the greenbacks — a nearly complete reversal of the dollar’s onetime dominance for reserves, according to Barclays Capital. The dollar’s share of new cash in the central banks was down to 37 percent — compared with two-thirds a decade ago. (emphasis mine)
Currently, dollars account for about 62 percent of the currency reserve at central banks — the lowest on record, said the International Monetary Fund.
Bernanke could go down in economic history as the man who killed the greenback on the operating table.
After printing up trillions of new dollars and new bonds to stimulate the US economy, the Federal Reserve chief is now boxed into a corner battling two separate monsters that could devour the economy — ravenous inflation on one hand, and a perilous recession on the other.
“He’s in a crisis worse than the meltdown ever was,” said Peter Schiff, president of Euro Pacific Capital. “I fear that he could be the Fed chairman who brought down the whole thing.”
Investors and central banks are snubbing dollars because the greenback is kept too weak by zero interest rates and a flood of greenbacks in the global economy.
They grumble that they’ve loaned the US record amounts to cover its mounting debt, but are getting paid back by a currency that’s worth 10 percent less in the past three months alone. In a decade, it’s down nearly one-third.
Yesterday, the dollar had a mixed performance, falling slightly against the British pound to $1.5801 from $1.5846 Friday, but rising against the euro to $1.4779 from $1.4709 and against the yen to 89.85 yen from 89.78.
Economists believe the market rebellion against the dollar will spread until Bernanke starts raising interest rates from around zero to the high single digits, and pulls back the flood of currency spewed from US printing presses.
“That’s a cure, but it’s also going to stifle any US economic growth,” said Schiff. “The economy is addicted to the cheap interest and liquidity.”
Economists warn that a jump in rates will clobber stocks and cripple the already stalled housing market.
“Bernanke’s other choice is to keep rates at zero, print even more money and sell more debt, but we’ll see triple-digit inflation that could collapse the economy as we know it.
“The stimulus is what’s toxic — we’re poisoning ourselves and the global economy with it.”
Thomas Palley, economist from New America Foundation believes that the dollar falling is not necessarily a bad event since it will make American goods cheaper to the rest of the world, but I urge you to take everything with a grain of salt. A taste of what New America is after the vid, and ask “who benefits?”
Founded 1999, to “bring exceptionally promising new voices and new ideas to the fore of our nation’s public discourse. Relying on a venture capital approach, the Foundation invests in outstanding individuals and policy solutions that transcend the conventional political spectrum.”
Senior Staff as of October 2006: President and CEO Ted Halstead, VP Michael Calabrese, VP Rachel L. White, and many lesser directors on salary.
The imminent approach of the G20 meeting in London on April 2nd should produce some fireworks considering all the talk about a super-reserve currency, and now, a new global reserve currency put forth by Russia and China. Hmmm…Russia and China calling for a new global currency. Something about that just seems a bit hinky. If you are one of those readers that feel like the economists are talking over your heads, I want to help break it down and make it more manageable. You NEED to understand what has happened and what is happening right now.
For those of you that are not up on this particular topic, a few definitions, (you knew that was coming), are in order:
The G-20 is a forum for cooperation and consultation on matters pertaining to the international financial system. It studies, reviews, and promotes discussion among key industrial and emerging market countries of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organization. Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States.
The International Monetary Fund was created in 1944 [1], with a goal to stabilize exchange rates and assist the reconstruction of the world’s international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. (Condon, 2007)
The IMF describes itself as “an organisation of 185 countries (Montenegro being the 185th, as of January 18, 2007), working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty”. With the exception of Taiwan, North Korea, Cuba, Andorra, Monaco, Liechtenstein, Tuvalu, and Nauru, all UN member states participate directly in the IMF. Most are represented by other member states on a 24-member Executive Board but all member countries belong to the IMF’s Board of Governors.
The President of the Bank, currently Robert B. Zoellick, is responsible for chairing the meetings of the Boards of Directors and for overall management of the Bank. Traditionally, the Bank President has always been a U.S. citizen nominated by the President of the United States, the largest shareholder in the bank. The nominee is subject to confirmation by the Board of Governors, to serve for a five-year, renewable term.[4] (emphasis mine)
Mr. Zoellick is a CFR member, as is Timothy Geithner and most of the people surrounding B. Hussein Obama.
And my personal favorite that I am sure a few of you have heard about by now:
Here is a snippet from their most current recommendations on March 19th, 2009, to the United Nations:
1. A New Global Reserve System 47. The global imbalances which played an important role in this crisis can only be addressed if there is a better way of dealing with international economic risks facing countries than the current system of accumulating international reserves. Indeed, the magnitude of this crisis and the inadequacy of international responses may motivate even further accumulations. Inappropriate responses by some international economic institutions in previous economic crises have contributed to the problem, making reforms of the kind described here all the more essential. To resolve this problem a new Global Reserve System—what may be viewed as a greatly expanded SDR, with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations—could contribute to global stability, economic strength, and global equity. Currently, poor countries are lending to the rich reserve countries at low interest rates. The dangers of a single-country reserve system have long been recognized, as the accumulation of debt undermines confidence and stability. But a two (or three) country reserve system, to which the world seems to be moving, may be equally unstable. The new Global Reserve System is feasible, non-inflationary, and could be easily implemented, including in ways which mitigate the difficulties caused by asymmetric adjustment between surplus and deficit countries.
2. Reforms of the Governance of the International Financial Institutions 48. There is a growing international consensus in support of reform of the governance, accountability, and transparency in the Bretton Woods Institutions and other nonrepresentative institutions that have come to play a role in the global financial system, such as the Bank for International Settlements, its various Committees, and the Financial Stability Forum. These deficiencies have impaired the ability of these institutions to take adequate actions to prevent and respond to the crisis, and have meant that some of the policies and standards that they have adopted or recommended disadvantage developing countries and emerging market economies. Major reforms in the governance of these institutions, including those giving greater voice to developing countries and greater transparency are thus necessary.
49. The reform of the World Bank’s governance structure should be completed swiftly. For the second stage of the reform, focussing on the realignment of shares, three criteria could be taken into account: economic weight, contribution to the development mandate of the World Bank (for example, measured in terms of contributions to IDA and trust funds), and the volume of borrowing from the Bank.
50. For the IMF, serious consideration should be given to restoration of the weight of basic votes and the introduction of double or multiple majority voting.
51. Elections of the leaders of the World Bank and the International Monetary Fund should take place under an open democratic process.
I wonder how the Council on Foreign Relations that has appeared to be the front man for the world central bankers are going to like losing control of the World Bank?
Which brings us to the current situation of Russia, China and TurboTax Timmie all thinking that maybe it might be a good idea.
China is calling for a new global currency controlled by the International Monetary Fund, stepping up pressure ahead of a London summit of global leaders for changes to a financial system dominated by the U.S. dollar and Western governments.
The comments, in an essay by the Chinese central bank governor released late Monday, reflects Beijing’s growing assertiveness in economic affairs. China is expected to press for developing countries to have a bigger say in finance when leaders of the Group of 20 major economies meet April 2 in London to discuss the global crisis.
A reserve currency is the unit in which a government holds its reserves. But Zhou said the proposed new currency also should be used for trade, investment, pricing commodities and corporate bookkeeping.
Beijing has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves. Premier Wen Jiabao publicly appealed to Washington this month to avoid any steps in response to the crisis that might erode the value of the dollar and Beijing’s estimated $1 trillion holdings in Treasuries and other U.S. government debt.
The currency should be based on shares in the IMF held by its 185 member nations, known as special drawing rights, or SDRs, the essay said. The Washington-based IMF advises governments on economic policy and lends money to help with balance-of-payments problems.
Then we all know TurboTax Timmie being open to a new currency and then “clarifying his statement” as the value of the dollar dropped 1.2%. Even I, with no college education would KNOW not to make that mistake, unless I was TRYING to tank the dollar.
FXstreet.com (Barcelona) – The Dollar has shaken strongly across the board after the U.S. Treasury Secretary, Timothy Geithner, affirmed he was open to consider China’s idea of moving towards an Special Drawing Right (SDR) linked currency system. The USD has reached new session low against JPY, EUR and GBP, against CHF, the Dollar has reached the 1.1165 important support.
Geithner said he was open to considering expanding an SDR although he admitted not even reading China’s proposal yet. Furthermore, he added that the dollar’s future role will be determined by good U.S. policy.
WHAT IS IT WITH NOT READING IMPORTANT DOCUMENTS?
And to be fair, here is the clarifying (with bold emphasis mine.)
On a day when the dollar had every right to rally given surprisingly upbeat U.S. economic data, Treasury Secretary Timothy F. Geithner briefly knocked the greenback for a loop.
Geithner was initially asked at a Council on Foreign Relations event in New York about proposals from People’s Bank of China Gov. Zhou Xiaochuan for a new international reserve currency. Geithner said, “As I understand his proposal, it’s a proposal designed to increase the use of the International Monetary Fund’s ‘special drawing rights.’ And we’re actually quite open to that.”
Some currency traders suddenly choked, reading into Geithner’s comments that the U.S. was “open to” the idea of a new currency that might someday usurp the dollar’s role as the preeminent holding of governments and institutional investors worldwide.
Within minutes of Geithner’s remarks, the dollar slid. The DXY index, which tracks the dollar’s value against six major currencies, fell 1.2% before stabilizing and creeping back up. The euro surged to $1.365 from $1.345.
From Bloomberg:
Roger Altman, who worked with Geithner as deputy Treasury secretary in the Clinton administration, later asked Geithner whether he wanted to “clarify” his remarks.
“I’d like to ask one final question, in effect on behalf of the market,” said Altman, founder of Evercore Partners Inc. “Let me ask the question this way: Do you see any change over the foreseeable future in the basic role of the dollar as the world’s key reserve currency?”
Geithner responded by saying that “I think the dollar remains the world’s dominant reserve currency.”
So ladies and gentlemen; get ready for more and ever increasing amounts of stupidity coming our way….have you taken measures to keep your families safe and fed in the months ahead?
I am still working on a post that gives a timeline of what the G20 has been up to, but had to put this up ASAP because this will mean the end of the dollar if it happens. Also note, this is what the G20 has been talking about since last November, and the forthcoming post will be about the “super-reserve” currency now being chatted up.
China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.
In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.
Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.
“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.
Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.
“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.
China has little choice but to hold the bulk of its $2,000bn of foreign exchange reserves in US dollars, and this is unlikely to change in the near future.
To replace the current system, Mr Zhou suggested expanding the role of special drawing rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.
Today, the value of SDRs is based on a basket of four currencies – the US dollar, yen, euro and sterling – and they are used largely as a unit of account by the IMF and some other international organisations.
