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| Economy | |
| S&P cuts US credit rating, China calls for new reserve currency | |
| 2011-08-06 | |
| I am so sorry. The US is broke. This is before even the $70 billion in unfunded entitlements is factored in. Bill Gross of PIMCO worlds biggest bond trader dumped US Treasuries in March: for a reason. You cannot afford the afghan/iraqi/libyan wars. Bring your troops home and rebuild your economy or in 5 years you will have lost reserve currency status and the dollar will be a worthless piece of paper Please watch the category your posts go in to preserve your posting privileges. Move to non-WoT Also observe posting rules with regard to highlight and spacing. World Reacts to US Credit Downgrade: CNN (CNN) -- International reaction to agency Standard and Poor's decision to downgrade the U.S. credit rating for the first time has been mixed. In China -- which holds large amounts of U.S. debt -- a commentary published by the official Xinhua news agency was critical of the U.S. government and questioned whether the U.S. dollar should continue to be the global reserve currency. "China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets," the commentary said. history shows it is easy to default on foreign creditors or to debase the currency and rob them with depreciation. But they sometimes react with warships eg: britain/german/italy blockade of venezuela in 1902 "International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country." that's the money quote people. China wants the transnational groups to supervise your currency. groups it can control. There are many ways for one country to control another, it doesn't need to invade if it can control your money supply
Still, Australian Prime Minister Julia Gillard urged calm over the U.S. downgrade, pointing out that only one of the three major ratings agencies had taken that decision. look on the bright side, says Big Red. We need a carbon tax to save jobs (!!!) right before she panics Reaction was slow to come out of Europe Saturday, where they are barely solvent and on the verge of currency breakup questions have been raised about how many European leaders -- including the UK's David Cameron, Germany's Angela Merkel and France's Nicolas Sarkozy -- are presently on vacation. inexcusable Asked about China's call for a new global reserve currency, (UK Business Secretary Vince Cable) said it would be "a sensible way for the world to move" but that it would not happen quickly. there you have it folks. Quick as that. you are going to lose world reserve currency status and in case you have any illusions you'd better understand one thing: that is what has buffered the US economy for years. When the Fed prints money and washes it through the system it insulates the US domestically and forces up food and fuel prices in Africa where they use the US$ to pay for things... and it's worth less than before. Africans have subsidised Americans. Lose reserve status and you lose that buffer. The game changes forever. You can no longer afford middle eastern wars that cost you $1 billion a day. In announcing the downgrade, S&P cited "political risks, rising debt burden; outlook negative." More downgrades ahead. I am sorry. I did not want to see this. | |
| Posted by:anon1 |
| #17 WAFF > [WSJ] WHERE IS CHINA STASHING ITS US$3.2 TRILYUHN IN RESERVE CURRENCY? ARTIC = Most Perts think it is most likely mixed in wid [outstanding] US Debt, but the truth remains highly speculative. IT CAN'T BE AT FORT KNOX BECUZ RUSSIA'S VLAD PUTIN SAYS THERE'S NO US GOLD [or ANYTHING ELSE?] THERE ANYMORE??? |
| Posted by: JosephMendiola 2011-08-06 22:34 |
| #16 The top five sources of US crude oil imports for May were Canada (2,006 thousand barrels per day), Saudi Arabia (1,197 thousand barrels per day), Mexico (1,154 thousand barrels per day), Venezuela (895 thousand barrels per day), and Nigeria (808 thousand barrels per day). And Obama is doing his damnedest to restrict Canadian oil sands production and drive them into the waiting arms of the Chinese. |
| Posted by: Eohippus Phater7165 2011-08-06 21:35 |
| #15 Drilling is less than half of it. The US tends to export a lot to the countries from which it imports oil. A far larger problem is the merchandise trade deficit. That's also where lots of people are (un)employed. Oil exploration, drilling, transport and refining - not so manpower intensive. U.S. Trade Balance, by Partner Country 2010 1 China ($278,301.2) 2 Mexico ($97,221.9) 3 Canada ($69,580.5) 4 Japan ($64,211.0) 5 Germany ($36,494.6) 6 Ireland ($27,333.2) (!!! Ireland???) 7 Nigeria ($26,000.9) 8 Venezuela ($22,180.7) 9 Saudi Arabia ($20,199.1) 10 Russia ($19,542.5) 11 Italy ($15,175.0) 12 Israel ($14,496.0) 13 Thailand ($14,406.1) 14 India ($13,220.2) 15 France ($13,819.4) 16 Malaysia ($13,684.0) 17 Algeria ($12,912.8) 18 Taiwan ($11,664.8) 19 Vietnam ($11,244.9) 20 Korea ($11,077.1) |
| Posted by: Eohippus Phater7165 2011-08-06 21:23 |
| #14 But of course, the former is the direct result of the latter, phil. The USD is a reserve currency precisely because it is the currency of trade - and it is the currency of trade because of the volume of trade we do. Time to drill domestically, folks. The oil outflows alone have been overly costly and the oil ticks are overly bloated. |
| Posted by: lotp 2011-08-06 20:32 |
| #13 The USD as reserve currency isn't the big issue. Its the USD as the currency of world trade. Without a single currency to price international trade, multi-lateral trading collapses. And we go to bi-lateral trading which is little more than barter. |
| Posted by: phil_b 2011-08-06 20:08 |
| #12 Goodness. You don't often, S, but when you do it was worth the wait. anon1, I hope it doesn't hurt too much on Monday. |
| Posted by: trailing wife 2011-08-06 19:11 |
| #11 What Matt said. The USN is the final arbiter of all inter-ocean trade disputes, it's not fair, but that's the way it is, this peculiar power belongs to the United States of America. Coal shortage in China? It could get damn worse in 48 hours, Pakistan got a maize shortage? Could get terminal in 72 hours. Shortage of oil anywhere in the damn world we want to happen? 96 hours. $250 oil? LOLA! How about no oil? The US is an oil producer, it's a stunning fact of life, but that's the way it is. Cut out drive thru windows and low-rider parades we're good to go. We got your damn reserve currency right here. |
| Posted by: S 2011-08-06 17:46 |
| #10 anon1, you ask what we're getting out of our military spending. The question you might better ask is what you're getting out of our military spending. Pull out a map and think about the sea lanes Australia relies on; and consider the fact that, however brave and capable their crews, the RAN's surface combatants just might fill the hangar deck of the Abraham Lincoln. Or does your confidence in China's intentions and capabilities know no bounds? |
| Posted by: Matt 2011-08-06 14:02 |
| #9 Anyone who signs up for reserve currency status is also signing up for hundreds of billions in annual trade deficits. This is why nobody wants this poisoned chalice except Uncle Sucker. The Europeans don't want it and the Chinese are certainly not about to stop the currency restrictions and manipulation that keep the RMB's rank at position number 9 in terms of most-used currencies in international trade. |
| Posted by: Zhang Fei 2011-08-06 14:00 |
| #8 As for international supervision over the US dollar, that is a pipe dream of our enemies. It ain't gonna happen. |
| Posted by: Abu Uluque 2011-08-06 13:16 |
| #7 I agree: military spending is not the cause of your woes. But it is the easiest solution. The easiest thing to do? Of course it is. We could have ignored what happened on 9/11 and left bin Laden to continue terrorizing us and you too. It is far more difficult to be responsible with domestic spending especially when most of our politicians are crooked morons. But you can watch your own, thank you very much. |
| Posted by: Abu Uluque 2011-08-06 13:12 |
| #6 One bright side -- China is caught in a trap of it's own making. On the one hand they MUST keep buying US treasuries if they want to artificially depress the Yuan. That's how they manipulate their currency. And yes, that has been the cause of their dramatic rise and the loss of the manufacturing industry: nobody could compete with child labour PLUS an artificially depressed currency BUT on the other hand, the US devalues the dollar then the purchasing power of those bonds declines. Sucked in China The only problem is it will hurt the US citizenry particularly savers and retirees. And just watch the markets plunge Monday. The spread betting indexes are already factoring in a 100+ crash for Australia. |
| Posted by: anon1 2011-08-06 12:50 |
| #5 hey steve it's not my country giving advice and we don't have a carbon tax yet... nor will we if me and my mates have any say in the matter. it's insanity of the highest order. I agree: military spending is not the cause of your woes. But it is the easiest solution. What are you getting out of it? Do you really give a sh*t if some afghani villager lives their life as a free person or an islamist zombie? If they want to change they will and who cares - let them bang their heads on the ground five times a day. it's more important to be strong at home right now as your economy is falling apart. You are right: health care is draining the life out of the US economy it is a crazy system -- how did the US end up with a system where an employer is somehow responsible for heath insurance of a worker crazy Just go like Britain and Australia Britain's NHS is a great system and cheaper to administer arguably once you factor in the waste along the way Australia's Medicare system was also great until a few years ago when they started bringing in bullying "incentives" to force us onto private health insurance for what used to be paid for by taxes. Some things are just cheaper for the government to provide and basic healthcare is one of them. It's cheaper for the country as a whole - you get to simplify the system and wipe out the middlemen. you can still have better quality healthcare for private insurance payers and things like plastic surgery and discretionary items are not covered. just the really necessary stuff like emergency surgery, cancer etc. Anyway I digress. Healthcare only has a small amount to do with this. The big problem is: too much debt The government is broke and this downgrade has come right at the time when Europe is whacked with sovereign debt woes and stock markets are plunging. Lowering the credit rating means the cost of credit rises. Bond yields rise, prices fall, interest rates rise. when the Government has to pay more to service it's debt, it's a downward spiral. |
| Posted by: anon1 2011-08-06 12:14 |
| #4 A country that has a carbon tax is not one to be giving out economic advice. As for the standard lefty trope of military spending being the biggest part of the US budget, that is only true if you break entitlements and health care down into teensy weensy little categories so you can count them all separately. Anon1 is correct that US finances are *bleep*ed, but military spending is not the cause. People aware of Cloward/Pliven and Alinsky strategies might suggest this was the plan all along. |
| Posted by: SteveS 2011-08-06 12:02 |
| #3 Too bad they didn't know how to analyze mortgage backed securities. |
| Posted by: Nimble Spemble 2011-08-06 12:02 |
| #2 Let's stiff China First! |
| Posted by: S 2011-08-06 11:40 |
| #1 hysterical much? |
| Posted by: Frank G 2011-08-06 11:37 |