Article

2008-05-11 Home Front Economy

Beijing and Riyadh will call the shots on ailing dollar's future

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Posted by gorb 2008-05-11 16:36|| || Front Page|| [8 views ] Top

#1 Russia catches Portugal - the end of civilization as we now it!

Posted by Harcourt Jush7795 2008-05-11 17:28|| 2008-05-11 17:28|| Front Page Top

#2 Rubbish. What are China and Russia going to say to Bernanke? Raise the value of the dollar or we'll drive it even lower?

In fact, the problem is going to be that the Fed has flooded the world with so many unwanted dollars that there is nothing they can do except grow our way out of the crisis or contract so much they precipitate depression. So there is little to be done about the situation except to show patience and consider who Bernanke's replacement will be by the next President. And remember what happened when Carter got to nominate a Fed chairman.

The other problem is that the world economy has changed so much that the central banks, even the Fed, can no longer control much. The IMF might have grown into an institution which could perform such functions, but it would be to far ahead of the political institutions and consensus needed to support it and in any case, it has become to powerless and despised.

Interesting times.

Posted by Nimble Spemble 2008-05-11 17:42|| 2008-05-11 17:42|| Front Page Top

#3 So the Russians will be as wealth as Portugal in 2014, huh? That means that they will still be poorer than Slovenia. When the Russians catch up to the Italians, let me know; until then, they are simply trying to dig themselves out of the hole that 70 years of Soviet misrule dropped them in.

Posted by Shieldwolf 2008-05-11 19:17|| 2008-05-11 19:17|| Front Page Top

#4 By the way, I will worry about the viability of the dollar on the day that the world's major drug cartels stop accepting it as standard payment. Until then, the dollar is the world's medium of exchange with minor fluctuations attached to it.

Posted by Shieldwolf 2008-05-11 19:19|| 2008-05-11 19:19|| Front Page Top

#5 It appears that the herd is rampaging towards the proverbial cliff. Almost time to re-align the wagers in the ol' Forex account.

Posted by AzCat 2008-05-11 20:59|| 2008-05-11 20:59|| Front Page Top

#6 I am convinced that we have been systematically driving the dollar down for some very strategic reasons. First of all, note how in the article it says several times that the US hasn't been punished in this deal.

To start with, the Chinese have been undervaluing their currency, the renminbi, and we warned them that it was going to cause a crisis. By slamming down the dollar, we are forcing them to revalue, which is also slowing down their economy.

In turn, their economy is a bubble economy, and if it slows, the bubble may burst. While this would cause a collapse in many world currencies, the US is insulated, because there would be a flight to quality, the USD.

Another reason is oil, several reasons right there. We are buying oil to protect ourselves in case there is a ME shutdown, but most of our purchases are a fixed contract prices, not the sky high spot market. This means as the dollar sinks, those low fixed prices are worth far less to OPEC.

The high speculation prices mean that they make their money off the spot market instead of from us.

Thus, if oil from the ME is cut off, the rest of the world will be in disaster, and the US will have at least two months reserve. This means two months of beating the snot out of the Iranians and restoring the flow.

Posted by Anonymoose 2008-05-11 21:04|| 2008-05-11 21:04|| Front Page Top

#7 I will worry about the viability of the dollar on the day that the world's major drug cartels stop accepting it as standard payment.

I am soooo stealing that one.

Posted by DarthVader">DarthVader 2008-05-11 21:09|| 2008-05-11 21:09|| Front Page Top

#8 In the past many oil producing countries took in dollars for their oil and invested those dollars, often here in the US.

What is now happening is that the second largest importer of oil (Iran) is unable to manage dollar denominated accounts because of US pressure on global banking. So ... they sell the dollars causing the price of dollars (value of the dollar) to go down and they buy other currencies such as the Euro causing the Euro to rise (even more than it already has from the dollar that was depressed by the initial selling). The result is a double-wammy on the dollar. We are betting that we can take it longer than Iran can since they nee d to purchase refined products which are valued in dollars on world markets. Every time they pressure the dollar, it makes their kerosene and food more expensive.

We are just betting we can take more pressure for longer than Iran can apply it without bankrupting themselves.

Posted by crosspatch 2008-05-11 21:48|| 2008-05-11 21:48|| Front Page Top

#9 We are just betting we can take more pressure for longer than Iran can apply it without bankrupting themselves.

At current prices, Iran's oil exports are about $110b a year, a little less than 1% of our annual domestic output.

Posted by Zhang Fei">Zhang Fei 2008-05-11 22:15|| http://timurileng.blogspot.com]">[http://timurileng.blogspot.com] 2008-05-11 22:15|| Front Page Top

#10 Iran is the second largest importer of oil, crosspatch? Is that a typo, or am I missing something critical?

NPR did a big report on what used to be the subprime market crisis, and is now being called the credit crisis. A key point the reporter made is that the extent of investor losses is still not known, but definitely at least 50% of invested funds... the amount of which investments is still unclear. The other key point, to me, is that the investors are mostly formerly poor countries like China that have made so much profit off of sales to the U.S. that they had to park it somewhere, but U.S. Treasuries gave such a poor return that they looked toward AAA rated mortgage bonds for higher returns in what was purported to be nearly as safe an investment. Those countries are now back to chasing U.S. Treasuries, which should prove interesting. If I understand this correctly, China's currency has been de facto revalued, however slightly. Am I close?

Posted by trailing wife">trailing wife 2008-05-11 23:16|| 2008-05-11 23:16|| Front Page Top

23:54 trailing wife
23:52 twobyfour
23:41 USN,Ret. (from home)
23:30 Frank G
23:29 Abdominal Snowman
23:16 trailing wife
23:03 Pappy
22:40 Barbara Skolaut
22:15 Zhang Fei
21:48 crosspatch
21:45 Zhang Fei
21:36 Zhang Fei
21:35 RD
21:35 Zhang Fei
21:31 RD
21:30 JosephMendiola
21:29 RWV
21:17 Zhang Fei
21:16 JosephMendiola
21:11 Shieldwolf
21:09 DarthVader
21:09 JosephMendiola
21:05 Anonymoose
21:04 Anonymoose