Escape From The Dollar: Dollar AT RISK Losing Its Position as Reserve Currency?

[논둑길맨발로]

Escape From The Dollar: Dollar AT RISK Losing Its Position as Reserve Currency?

Post Categories: Canada

MIKE WHITNEY / Paul Craig Roberts | Wednesday, November 6, 2013, 10:52 Beijing

0 views

Comments(0) 

Share on facebookShare on twitterShare on emailShare on printShare on gmailShare on stumbleuponShare on favoritesMore Sharing Services10Print

console.log("0"); console.log("0"); console.log("0"); console.log("0"); console.log("0"); console.log("0"); console.log("0"); console.log("0"); console.log("0"); console.log("101");

console.log("0"); console.log("0"); console.log("0");

Escape From The Dollar: An Interview with Paul Craig Roberts

Paul Craig Roberts thinks the Fed has backed itself into corner. A rise in interest rates would strengthen the dollar, give the dollar new life as world reserve currency, and halt the movement into gold, but a rise in rates would collapse the bond and stock markets and reduce the value of derivatives on the banks’ balance sheets. I asked Dr. Roberts if the Fed would sacrifice the dollar in order to save the banks and what the effect would be on Washington’s power viv-a-vis the rest of the world. His answers to these three questions suggest that Washington’s days of financial hegemony and world leadership are numbered.

Mike Whitney: Is the US dollar at risk of losing its position as reserve currency? How would this loss affect US leadership and other countries?

Paul Craig Roberts: In a way the dollar has already lost its reserve currency status, but this development has not yet been officially realized; nor has it hit the currency markets. Consider that the BRICS (Brazil, Russia, India, China, and South Africa) have announced their intention to abandon the use of the US dollar for the settlement of trade imbalances between themselves, instead settling their accounts in their own currencies. (There is now a website, the BRICSPOST, that reports on the developing relations between the five large countries.) There are also reports that Australia and China and Japan and China are going to settle their trade accounts without recourse to the dollar.

Different explanations are given. The BRICS imply that they are tired of US financial hegemony and have concerns about the dollar’s stability in view of Washington’s excessive issuance of new debt and new money to finance it. China, Australia, and Japan have cited the avoidance of transaction fees associated with exchanging their currencies first into US dollars and then into the other currencies. They say it is a cost-saving step to reduce transaction costs. This may be diplomatic cover for discarding the US dollar.

The October 2013 US government partial shutdown and (exaggerated) debt default threat resulted in the unprecedented currency swap agreements between the Chinese central bank and the European central bank and between the Chinese central bank and the Bank of England. The reason given for these currency swaps was necessary precaution against dollar disruption. In other words, US instability was seen as a threat to the international payments system. The dollar’s role of reserve currency is not compatible with the view that precautions must be taken against the dollar’s possible failure or disruption. China’s call for “a de-Americanized world” is a clear sign of growing impatience with Washington’s irresponsibility.

To summarize, there has been a change in attitudes toward the US dollar and acceptance of US financial hegemony. As the October deficit and debt ceiling crisis has not been resolved, merely moved to January/February, 2014, a repeat of the October impasse would further erode confidence in the dollar.

Regardless, most countries have come to the conclusion that not only has the US abused the reserve currency role, but also the power of Washington to impose its will and to act outside of law stems from its financial hegemony and that this financial power is more difficult to resist than Washington’s military power.

As the world, including US allies, made clear by standing up to Washington and blocking Washington’s military attack on Syria, Washington’s days of unchallenged hegemony are over. From China, Russia, Europe, and South America voices are rising against Washington’s lawlessness and recklessness. This changed attitude toward the US will break up the system of dollar imperialism.

Mike Whitney: How is the Federal Reserve’s Quantitative Easing impacting the dollar and financial instruments?

Paul Craig Roberts: The Federal Reserve’s policy of creating large amounts of new money in order to support the balance sheets of “banks too big to fail” and to finance continuing large budget deficits is another factor undermining the dollar’s reserve currency role. The liquidity that the Federal Reserve has pumped into the financial system has created enormous bubbles in bond and stock markets. US bond prices are so high as to be incompatible with the Federal Reserve’s balance sheet and massive creation of new dollars.

Moreover, central banks and some investors have realized that the Federal Reserve is locked into the policy of supporting bond prices. If the Federal Reserve ceases to support bond prices, interest rates will rise, the prices of debt-related derivatives on the banks’ balance sheets will fall, and the stock and bond markets would collapse. Therefore, a tapering off of quantitative easing risks a financial panic.

On the other hand, continuing the policy of supporting bond prices further erodes confidence in the US dollar. Vast amounts of dollars and dollar-denominated financial instruments are held all over the world. Holders of dollars are watching the Federal Reserve dilute their holdings by creating 1,000 billion new dollars per year. The natural result of this experience is to lighten up on dollar holdings and to look for different ways in which to hold reserves.

The Federal Reserve can print money with which to purchase bonds, but it cannot print foreign currencies with which to purchase dollars. As concerns over the dollar rise, the dollar’s exchange value will fall as more dollars are sold in currency markets. As the US is import-dependent, this will translate into higher domestic prices. Rising inflation will further spook dollar holders.

According to recent reports, China and Japan have together reduced their holdings of US Treasuries by some $40 billion. This is not a large sum compared to the size of the market, but it is a change from continuing accumulation. In the past, Washington has been able to count on China and Japan recycling their trade surpluses with the US into US Treasury debt. If foreign willingness to acquire Treasury debt declines and the federal budget deficit does not, the Federal Reserve would have to increase quantitative easing, thus putting even more pressure on the dollar.

In other words, in order to avoid an immediate crisis, the Federal Reserve has to continue a policy that will produce a crisis down the road. It is either a financial crisis now or a dollar crisis later.

Eventually, the Federal Reserve’s hand will be forced. As the dollar’s exchange value declines, so will the value of dollar-denominated financial instruments regardless of how many bonds the Federal Reserve purchases.

Mike Whitney: How is China likely to respond to America’s changing economic position?

Paul Craig Roberts: When I met with Chinese policymakers in 2006, I advised them that there was a limit to how long they could rely on the US consumer market as jobs offshoring was destroying it. I pointed out that China’s large population provided policymakers with the potential for an enormous economy. They replied that the one-child policy, which had been necessary in early years to keep population from outrunning social infrastructure, was blocking the development of a domestic consumer economy. As peasant farmers no longer could rely on multiple children for old age insurance, they hoarded their earnings in order to provide for their old age. Chinese policymakers said that they intended to develop a social security system that would give the population confidence to spend more of their earnings. I do not know to what extent China has moved in this direction.

Since 2006 the Chinese government has let the yuan appreciate 25% or 33%, depending on the choice of base. The increase in the currency’s exchange value has not hurt exports or the economy. Moreover, the US no longer manufactures many of the items for which it is dependent on China, and other developing countries do not have the combination of the technology that US corporations have given to China and China’s large excess supply of labor. So it is unlikely that China faces any threat to its development except for US policies designed to cut China off from resources, such as the new US military focus on the Pacific announced by the Obama regime.

China’s large dollar holdings are the consequence of the technological prowess that China acquired from Western corporations offshoring jobs to China. What is important to China is the technology and business know-how, which they have now acquired. The paper wealth represented by dollar holdings is not the important factor.

China could destabilize the US dollar by converting its holdings into dollar currency and dumping the dollars into the exchange markets. The Federal Reserve would not be able to arrange currency swaps with other countries large enough to buy up the dumped dollars, and the dollar’s exchange value would fall. Such an action could be a Chinese response to military encirclement by Washington.

In the absence of a confrontation, the Chinese government is more likely to gradually convert its dollars into gold, other currencies and real assets such as oil and mineral deposits and food businesses.

Quantitative easing is rapidly increasing the supply of dollars, but as other countries move to other arrangements for settling their trade imbalances, the demand for dollars is not rising with the supply. Thus, the dollar’s price must fall. Whether the fall is slow over time or sudden due to an unanticipated Black Swan event remains to be seen.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

http://www.4thmedia.org/2013/11/06/escape-from-the-dollar/

Demise of US Dollar: World Still Needs a Toilet Paper Money as ReserveCurrency?

Post Categories: Canada

Matthias Chang | Thursday, November 7, 2013, 20:29 Beijing

273 views

Comments(0) 

Share on facebookShare on twitterShare on emailShare on printShare on gmailShare on stumbleuponShare on favoritesMore Sharing Services2Print

“The Entire Fiat Money System is Bankrupt: Demise of the Global US Fiat Dollar Reserve Currency”

Do you still think the world needs a US$ toilet paper money as a reserve currency?

It’s been a while since I last wrote an article on the on-going financial crisis. I don’t write for the sake of writing, as others do because they have to do so, on account of their subscribers who pay hefty subscription fees and demand their money’s worth.

Major issues or trends do not change on a daily or even monthly basis. A trend may take a few years to run its course and unless there is a major factor that may affect the trend, there is hardly any need to comment any further on the trend or outcomes.

The events unraveling post Bernanke’s decision not to taper QE is most significant because it confirm‎s our analysis that the banking crisis has not been resolved in any significant way after five years of money printing and massive asset inflation.

The fiat money system has but one outcome – total collapse. It will also mean the demise of the global US dollar reserve currency.

There are no solutions at hand.

Bernanke is totally discredited and his continued tenure as Chair of the FED would only accelerate the realisation that the FED and all central banks have failed. Hence, the need to change the “leadership” at the FED, but the same policies would be followed with some cosmetic changes to hoodwink the ignorant masses.

It is analogous to the transition from the second Bush presidency to that of Obama and all the theatrics of “change” propaganda. In fact, Obama is Bush 2 on steroids! Yellen will be Bernanke on steroids. Why are we so certain of this outcome at Future Fast-Forward?

Our reasons are as follows:

Prior to the Global Financial Tsunami of 2008, I had written several articles exposing the global Too Big To Fail (TBTF) banks as financial rapists and predators and they would cause untold havoc to the financial system.

Post the crisis, I had also warned that these global TBTF banks are all insolvent and the toxic assets on their balance sheets would exceed US$20 trillion at the minimum. The entire fiat money system is bankrupt. Printing toilet paper money by the trillions does not make the system solvent. It is a clear admission that the system is totally broken.

The banking Humpty-Dumpty has fallen from the wall and shattered into a thousand pieces! The confirmation for this is the fact that all central banks led by the FED have only one aim – to create massive asset inflation. How can a stock market of a bankrupt nation be at an all-time high?

The FED and central banks the world over are not interested in resolving the unemployment problem because record unemployment would not collapse the fiat money system. It may trigger massive social unrest but that can be put down by a militarised police force, supported by a battle-hardened military as is happening in the US.

In the circumstances, we need to ask the US$ Trillion question – Why are all the central banks focusing on asset inflation via creation of money out of thin air?

The answer: THE FIAT MONEY SYSTEM IS THE ECONOMY, STUPID!

It used to be that the Petro-dollar was the linchpin of the global economy. However, when the derivatives market took off and became a US$800 Trillion global casino, the US$ toilet paper became the currency in global financial trading and speculation.

All the TBTF banks were leveraged to their eyeballs and the collaterals were hypothecated and re-hypothecated so many times over, it became an inverted pyramid joke.

The collaterals were bundled up into CDOs etc. rated AAA by corrupt rating agencies and traded. We need not repeat this old story. The point we are making here is that not only are the collaterals junks but they are supporting a mountain of debts in the trillions.

Therefore, when collaterals are impaired the TBTF banks are in a shit-hole from which they cannot get out. The FED and other central banks have no choice but to bail out the TBTF banks if a systemic failure is to be avoided.

If all the junk collaterals were to be off-loaded at once in the full glare of public scrutiny, there would be a run on all the banks. So, what was required was a stealth rescue effort. The TBTF banks were allowed to unload the junk collaterals bit by bit by the various schemes of the FED culminating in the US$85 billion a month purchases of treasury bonds and mortgages by the FED.

Additionally, newly “minted” collaterals were used to replace the junks so as to clean up the balance sheets of the TBTF banks. I have stated earlier that the minimum amount of toxic assets needed to be mopped up is US$20 trillion. After five years, the FED has just scratched the surface.

It is debatable how many US$ Trillions the FED has actually pumped into the system directly and indirectly. How much and how long more can the FED continue to pump US$ toilet paper into the system without creating a massive loss of confidence in the dollar? When the balance sheet of the FED reaches US$7 Trillion or maybe US$10 Trillion? It is anybody’s guess.

For sure, there will be a point when another US$100 Billion is created on top of the stash of US$ toilet papers which will tip the scale and collapse the entire system. It is a catch-22 for the FED. If it stops creating fiat money out of thin air, the fiat money system would collapse immediately.

If it continues with more money creation, it merely postpones the inevitable and more devastating end-game. This is the price we all have to pay for allowing the fiat money system to hold sway for so long.

The world was conned into accepting the biggest Ponzi scheme in the history of banking and finance – the US$ Global Reserve Currency Ponzi Scheme.

This scheme was created on a sand castle of debt, specifically US Treasury Bonds. The world does not need a Global Reserve Currency. Global trade can be conducted in any currency in accordance to the needs and resources of a country.

Why should there be a special privilege given to only one country to have its currency as the sole reserve currency for purposes of trade? It makes no sense as it is the result of US imperialist policies under the pretext of the Cold War.

The con was based on the propaganda that the US$ should be the preferred currency and the US Treasury Bond is the “safest asset” to have in the event of an outbreak of war between the Western Imperialist camp and the Soviet bloc. We were told this arrangement was necessary if we are to enjoy the protection of the mighty US superpower!

Yet, when the Soviet bloc collapsed no one questioned the need to perpetuate the system.

Another spin was propagated. The US was the linchpin in the new era of globalisation as the US market was the biggest consumer / export market. Everyone was caught in this web of deceit. The US market was a market built on a mountain of debt.

Adding insult to injury, the US consumers paid for the goods produced by millions breaking their backs with US$ toilet paper money!

Some so-called currency experts have asserted that no other currency can replace the US$ toilet paper as the global reserve currency because no other country has a bond market like the US bond market, dominated by the US treasury bonds.  What an idiotic statement!

If a country is not in debt, there is no need for any bonds to be issued. A bond is an I.O.U. A bond is a mere paper pledge to repay a debt.

And anyone who says and continues to perpetuate the myth that a US debt is a better debt and is more secure is ignorant and misinformed!

Why would anyone want to work and produce goods which are sold and paid in US$ toilet paper and then use the surplus US$ toilet paper to lend to the US government who repays the debt by merely printing more US$ toilet paper?

So, do you still think the world needs a US$ toilet paper money as a reserve currency?

By Matthias Chang, Future Fast Forward

Global Research

Tags: crisis currency FED Global Reserve Currency money US

http://www.4thmedia.org/2013/11/07/the-entire-fiat-money-system-is-bankrupt-demise-of-the-global-us-fiat-dollar-reserve-currency/

How America Was Lost

by Paul Craig Roberts / November 7th, 2013

No legal issue arises when the United States responds to a challenge to its power, position, and prestige.

– Dean Acheson , 1962, speaking to the American Society of International Law

Dean Acheson declared 51 years ago that power, position, and prestige are the ingredients of national security and that national security trumps law. In the United States democracy takes a back seat to “national security,” a prerogative of the executive branch of government.

National security is where the executive branch hides its crimes against law, both domestic and international, its crimes against the Constitution, its crimes against innocent citizens both at home and abroad, and its secret agendas that it knows that the American public would never support.

“National security” is the cloak that the executive branch uses to make certain that the US government is unaccountable.

Without accountable government there is no civil liberty and no democracy except for the sham voting that existed in the Soviet Union and now exists in the US.

There have been periods in US history, such as President Lincoln’s war to prevent secession, World War I, and World War II, when accountable government was impaired. These were short episodes of the Constitution’s violation, and the Constitution was reinstated in the aftermath of the wars. However, since the Clinton regime, the accountability of government has been declining for more than two decades, longer than the three wars combined.

In law there is the concept of adverse possession, popularly known as “squatters’ rights.” A non-owner who succeeds in occupying a piece of property or some one else’s right for a certain time without being evicted enjoys the ownership title conveyed to him. The reasoning is that by not defending his rights, the owner showed his disinterest and in effect gave his rights away.

The Failure of Laissez Faire Capitalism

Americans have not defended their rights conveyed by the US Constitution for the duration of the terms of three presidents. The Clinton regime was not held accountable for its illegal attack on Serbia. The Bush regime was not held accountable for its illegal invasions of Afghanistan and Iraq. The Obama regime was not held accountable for its renewed attack on Afghanistan and its illegal attacks on Libya, Pakistan, and Yemen, and by its proxies on Syria.

We also have other strictly illegal and unconstitutional acts of government for which the government has not been held accountable. The Bush regimes’ acts of torture, indefinite detention, and warrantless spying, and the Obama regime’s acts of indefinite detention, warrantless spying, and murder of US citizens without due process. As the Obama regime lies through its teeth, we have no way of knowing whether torture is still practiced.

If these numerous criminal acts of the US government spread over the terms of three presidents pass into history as unchallenged events, the US government will have acquired squatters’ rights in lawlessness. The US Constitution will be, as President George W. Bush is reported to have declared, “a scrap of paper.”

Lawlessness is the hallmark of tyranny enforced by the police state. In a police state law is not a protector of rights but a weapon in the hands of government. [see Roberts & Stratton, The Tyranny of Good Intentions] The accused has no recourse to the accusation, which does not require evidence presented to a court. The accused is guilty by accusation alone and can be shot in the back of the head, as under Stalin, or blown up by a drone missile, as under Obama.

As a person aware of the long struggle against the tyrannical state, I have been amazed and disheartened by the acceptance not only by the insouciant American public, but also by law schools, bar associations, media, Congress and the Supreme Court of the executive branch’s claim to be above both law and the US Constitution.

As Lawrence Stratton and I show in our book about how the law was lost, liberals and conservatives chasing after their favorite devils, such as child abusers and drug pushers, and prosecutors, judges, and police devoted to conviction and not to justice, have gradually eroded over time the concept of law as a protection of the innocent, With the atmosphere of threat created by 9/11, the final destruction of the protective features of law was quickly achieved in the name of making us safe from terrorists.

The fact that we are no longer safe from our own government did not register.

This is how liberty was lost, and America with it.

Can liberty be regained? Probably not, but there is a chance if Americans have the necessary strength of character. The chance comes from the now known fact that the neoconservative Bush/Cheney regime took America and its puppet states to war in Afghanistan and Iraq entirely on the basis of lies. As all evidence proves, these wars were not the results of mistaken intelligence. They were the products of intentional lies.

The weapons inspectors told the Bush regime that there were no weapons of mass destruction in Iraq. Despite this known fact, the Bush regime sent Secretary of State Colin Powell to the UN with fabricated evidence to convince the world that Saddam Hussein had “weapons of mass destruction” and was a threat to the world. Even if such weapons had existed in Iraq, many countries have them, including the US and Israel, and the presence of weapons does not under the Nuremberg Laws justify unprovoked aggression against the possessor. Under the Nuremberg Laws, unprovoked military aggression is a war crime, not the possession of weapons that many countries have. The war crime was committed by the US and its “coalition of the willing,” not by Saddam Hussein.

As for the invasion of Afghanistan, we know from the last video of Osama bin Laden in October 2001, attested by experts to be the last appearance of a man dying of renal failure and other diseases, that he declared that he had no responsibility for 9/11 and that Americans should look to their own government. We know as a reported fact that the Afghan Taliban offered to turn over Osama bin Laden to Washington if the Bush regime would provide the evidence that indicated bin Laden was responsible. The Bush regime refused to hand over the (non-existent) evidence and, with support of the corrupt and cowardly Congress and the presstitute media, attacked Afghanistan without any legal justification. Remember, the FBI has stated publicly that it has no evidence that Osama bin Laden was responsible for 9/11 and that that is why the crimes for which the FBI wanted bin Laden did not include responsibility for the 9/11 attack.

The war propaganda campaign was well prepared. Yellow ribbon decals were handed out for cars proclaiming “support the troops.” In other words, anyone who raises the obvious questions is not supporting the troops. Still today insouciant Americans sport these decals on their cars unaware that what they are supporting are the murder of foreign women, children and village elders, the death and physical and mental maiming of American soldiers, and the worldwide destruction of the reputation of the United States, with America’s main rival, China, now calling for a “de-Americanized world.”

A country with a population as insouciant as Americans is a country in which the government can do as it pleases.

Now that we have complete proof that the criminal Bush regime took our country to wars in Afghanistan and Iraq solely on the basis of intentional lies, how can the legal institutions, the courts, the American people possibly tolerate the Obama regime’s ignoring of the obvious crimes? How can America simply accept Obama’s statement that we mustn’t look back, only move ahead? If the US government, which has committed the worst crimes of our generation, cannot be held accountable and punished, how can federal, state, and local courts fill up American prisons with people who smoked pot and with people who did not sufficiently grovel before the police state.

Doubtless, the Obama regime, should it obey the law and prosecute the Bush regime’s crimes, would have to worry about being prosecuted for its own crimes, which are just as terrible. Nevertheless, I believe that the Obama regime could survive if it put all the blame on the Bush regime, prosecuted the Bush criminals, and desisted from the illegal actions that it currently supports. This would save the Constitution and US civil liberty, but it would require the White House to take the risk that by enforcing US law, US law might be enforced against its own illegal and unconstitutional acts by a succeeding regime.

The Bush/Cheney/John Yoo neoconservative regime having got rid of US law, no doubt the Obama regime thinks it is best to leave the situation as it is, rid of law.

Without accountability, America is finished. Not only will Americans live in a police state with no civil liberties, but the rest of the world is already looking at America with a jaundiced eye. The US is being reconstituted as an authoritarian state. All it takes is one failure of accountability for the police state to become entrenched, and we have had numerous failures of accountability. Does anyone really believe that some future government is going to make restitution to persecuted truth-tellers, such as Bradley Manning, Julian Assange, and Edward Snowdon, as was done for Japanese Americans?

Now that we know for a certain fact that the invasions of Afghanistan and Iraq were based on propaganda and lies, Congress and the world media should demand to know what was the real secret agenda. What are the real reasons for which Afghanistan and Iraq were invaded?

No truthful explanation for these wars exists.

Paul O’Neill, the Bush regime’s first Treasury Secretary, is on public record stating that at the very first cabinet meeting, long prior to 9/11, the agenda was a US attack on Iraq.

In other words, the Bush regime’s attack on Iraq had nothing whatsoever to do with 9/11.

What was the Bush regime’s secret agenda, kept secret by the Obama regime, that required an illegal, war criminal, attack on a sovereign country, an action for which officials of Hitler’s government were executed? What is the real purpose of Washington’s wars?

It is totally and completely obvious that the wars have nothing to do with protecting Americans from terrorism. If anything, the wars stir up and create terrorists. The wars create hatred of America that never previously existed. Despite this, America is free of terrorists attacks except for the ones orchestrated by the FBI. What the fabricated “terror threat” has done is to create a thorough-going domestic police state that is unaccountable.

Americans need to understand that they have lost their country. The rest of the world needs to recognize that Washington is not merely the most complete police state since Stalinism, but also a threat to the entire world. The hubris and arrogance of Washington, combined with Washington’s huge supply of weapons of mass destruction, make Washington the greatest threat that has ever existed to all life on the planet. Washington is the enemy of all humanity.

Paul Craig Roberts is an American economist, author, columnist, former Assistant Secretary of the Treasury, and former editor and columnist for corporate media publications. He is the author of The Failure of Laissez Faire Capitalism. Read other articles by Paul, or visit Paul's website.

This article was posted on Thursday, November 7th, 2013 at 11:25am and is filed under Anti-war, GWB, Legal/Constitutional, Obama, Security, War Crimes, Whistleblowing.

http://dissidentvoice.org/2013/11/how-america-was-lost/