The U.S. Dollar is kaput. Confidence in the currency is eroding by the day.
A report in The Sydney Morning Herald stated, "Australia's Treasurer Peter Costello has called on East Asia's central bankers to 'telegraph' their intentions to diversify out of American investments and ensure an 'orderly adjustment'....Central banks in China, Japan, Taiwan, South Korea, and Hong Kong have channeled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down interest rates,' said Costello, but 'the strategy has changed.'"
Indeed, the strategy has changed. The world has come to its senses and is moving away from the green slip of paper that is currently mired in $8.3 trillion of debt.
The central banks now want to reduce their USD reserves while trying to do as little damage to their own economies as possible. That'll be difficult. If a sell-off ensues, it will start a stampede for the exits.
There's little hope of an "orderly adjustment" as Costello opines; that's just false optimism. When the greenback begins listing; things will turn helter-skelter quickly.
In September, we saw early signs that the dollar was in trouble. The trade deficit registered at $70 billion but the Net Foreign Security Purchases (NFSP) came in at a paltry $33 billion. That means that our main trading partners are no longer buying back our debt which puts downward pressure on the greenback. The Fed had two choices; either raise interest rates substantially or let the currency fall. Given the tenuous condition of the housing bubble and the proximity of the midterm elections, the Fed did neither.
A month later, in October, the trade deficit hit $69.9 billion but, then, without warning, a miracle occurred. The Net Foreign Security Purchases skyrocketed to a "historic high" of $116.8 billion; covering both months' shortfalls almost to the penny.
Coincidence?
Not likely. Either the skittish central banks decided to "stock up" on their dollar-denominated investments or the Federal Reserve (and their banking-buddies) is buying back its own debt to float us through the elections.
This is exactly the kind of hanky-panky that people expected when Greenspan stopped publishing the M-3 last March keeping the rest of us in the dark about what was really going on with the money supply.
Are we supposed to believe that the skeptical central banks suddenly doubled up on their T-Bills while they're (publicly) moaning about the dollar's weakness and threatening to diversify?
That's a stretch.
According to the Wall Street Journal the Chinese Central-bank governor Zhou Xiaochuan stated unequivocally that "We think we've got enough." The Chinese presently have nearly $1 trillion in USD and US Treasuries.
"Enough"?
The United States runs a $200 billion per year trade deficit with China. If they've "got enough" we're dead-ducks. After all, it doesn't take a sell-off to kill the dollar, just unwillingness on the part of the main players to stop purchasing at the same rate.
Of course, everyone in Washington already knew that doomsday was approaching. That's the way the system was designed from the very beginning. It's all part of the madcap scheme to "starve the beast" and transfer the nation's wealth to a handful of western plutocrats. That's explains why the Fed and the White House whirred along like two spokes on the same wheel; every policy calculated to thrust the country headlong toward disaster.
The administration never created a funding mechanism for the $400 million tax cuts or for the 35% expansion of the Federal government.
... including Iran are set to trade outside of the dollar, indeed America is creating these very problems by trying to seize assets of nations in illegal manner as we saw with Syria.
If Iran does move its oil transactions to the Euro or worse still to the Rouble as now suspected may be the case, then America is going to be dealt an economic blow as it is likely that Venezuela will follow on that lead as well.
Asian and European bankers are trying so hard to keep the dollar afloat but sooner or later one will take to panic and once the dollar starts to get junked it will happen in a day and that is the end of the dollar as any sort of sustainable currency.
It has of course been suggested that Saddam brought his own downfall literally by switching to Euro's and the very first act Paul Bremer did was switch Iraq trading back to dollars even though today it is questioned as being illegal and it has cost the Iraqis a 17% loss of revenue by switching from a backed currency straight onto the crippled dollar.
Even though today Bush is still running around and threatening at least two countries that could deal America a deadly economic blow, should not America be seeking to rein its neck in somewhat and build up confidence once again rather than using gun boat diplomacy on countries who with a flick of a switch cause the US economy to fail utterly?
I suspect that Chavez will not do this as yet because he knows that he will certainly be attacked in short form but Iran has powerful allies in China and Russia, China has declared it will also protect its imports from Iran and has a large fleet in the area as well.
Once the Russians move into Syria proper as well, we are going to see a very swift change of strategic power in the Middle East and America will be forced out of the area one way or the other and I doubt very much that Israel will protest over much either especially as Russia has always promised some very dire consequences for too much aggression by that country.
Ancient One
http://votao.blogspot.com
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Ancient One (1 articles, 0 quicklinks, 0 diaries, 13 comments) on Monday, Oct 30, 2006 at 8:24:20 PM
We may remember that in the same circumstances two centuries ago the rational French acted with laudable promptness against most of those responsible for their misery.
Unfortunately they missed the few ultimately causing it. This time when we rise all over the world we have to include the primemovers and most of all finally smash forever the tool by which they have corrupted and impoverished the world for the last five thousand years - their fiction of money.
Headsman . . .
by
amazin (34 articles, 0 quicklinks, 12 diaries, 400 comments [12 recommended, 0 rejected]) on Tuesday, Oct 31, 2006 at 5:11:50 AM
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