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Mohamed El-Erian Says We Can Not Assume The Dollar Will Retain Its Reserve Currency Status

Tyler Durden's picture




 

Mohamed El-Erian made one of his regular media appearances today (in addition to his almost daily Op-Ed, released earlier) appearing on Bloomberg Surveillance with Tom Keene and talking the developments in the Maghreb. While the full highlights are presented below, there are two items of note. El-Erian once again hits on what we believe will be the keyword of 2011: stagflation. To wit: "we have to appreciate that in the west, what is happening in Egypt and North Africa results in stagflation in the short term. So higher inflation and lower growth because of higher oil prices that take away purchasing power and transfer wealth somewhere else; because of higher geopolitical risk, which tends to diminish animal spirit and therefore impact investment; and let's not forget that the Middle East is a market, particularly for European exports. So from an economic perspective, it is important for the west to understand that these are stagflationary winds that have been added to the global economy." It is important, but not necessary: as long as the manipulated, liquidity glutted market continues to misrepresent the true state of the economy, nobody will care until it is too late. And speaking of "too late", validating our sarcastic observations over the past several weeks that the dollar is no longer the "flight to safety" currency (that would be the PM complex, and the swiss franc if anything), is the Pimco CIO's suddenly very dour outlook on the weakening US Dollar: "It is a warning shot to America that we cannot simply assume flight to quality, flight to safety. That people are starting to worry about the fiscal situation in the U.S., worrying about the level of debt and what they're hearing about states and municipalities. I would take this as a warning shot that we cannot assume that we will maintain the standing of the reserve currency as we have in the past." That's a given - the question however remains, which fiat currency, if any, is willing and ready to step in and replace the USD? With all eyes continuing to be look at the CNY, how long before China finally takes the plunge to find out just who is the real reserve currency in the world?

From Bloomberg TV:

On unrest in the Middle East:

"I think that a common factor that's been driving all of that is a combination of youth unemployment, high food prices, and political repression. But as you say, Libya is different. The revolutions in Tunisia and Egypt were relatively peaceful. Libya is far from being relatively peaceful.  There is a tremendous amount of human suffering and casualties there, making this protest more unpredictable and more dangerous. In addition, Libya is a major oil exporter, so suddenly developments in North Africa and the Middle East have a systemic impact on the economy."
 
On other oil producers in the region:

"Everyone in the Middle East and beyond understands that this is a movement that has to be taken seriously. That it is better to be ahead of the curve rather than behind the curve. The story of Egypt, Tunisia and Libya have been regimes that have been consistently behind the curve. The lesson that has gone out to not only other Middle Eastern countries but to the whole world, is take seriously these economic and political issues."
 
On political and economic intelligence for Libya:

"On the economic side, the data that you can confirm on the other side, particularly trade data where there is a trading partner and therefore you get another number, tends to be pretty good. It tells you that Libya is an export of about 1.5 million barrels per day, which is not insignificant. This is one of the top 10 or 11 oil exporters. When it comes to internal data--GDP numbers, inflation numbers--then it becomes more difficult. On the political aspects, what we have learned is that western intelligence has been behind the curve in terms of understanding the dynamics in those."
 
On what the western world can do over the next 48 hours regarding the unrest in Libya:

"Three elements. One is the reality that in countries like Libya, the rest of the world cannot do very much other than condemn and try to put pressure, but ultimately that's not going to bear very much.  Second, In countries that have gone to the first phase of revolution--Tunisia and Egypt--the west is able and willing to step in to help the process towards democracy. It is encouraging that the British prime minister went to Egypt yesterday. Thirdly, we have to appreciate that in the west, what is happening in Egypt and North Africa results in stagflation in the short term. So higher inflation and lower growth because of higher oil prices that take away purchasing power and transfer wealth somewhere else; because of higher geopolitical risk, which tends to diminish animal spirit and therefore impact investment; and let's not forget that the Middle East is a market, particularly for European exports. So for an economic perspective, it is important for the west to understand that these are stagflationary winds that have been added to the global economy."
 
On persistent stagflation as the new normal:

"The new normal is just a recognition that the western world is not going to grow as rapidly as before. That unemployment will be a persistent issue. That social safety nets will be very stretched. And that government intervention will continue in the economy. What we're getting on top of that now are headwinds from higher oil prices, higher geopolitical risk, and a concern that one of the reactions to higher commodity prices will be for consumers to stockpile. So I suspect that right now a lot of airlines are likely saying that with oil where it is now, should we be hedging now? What you get is an overshoot, just like we saw in 2008. That is a concern in terms of the stagflation headwinds."
 
On Pimco's strategy and how to react to unrest as an investor:

"Last week, Friday in particular, when the crisis started impacting countries like Bahrain, we recognize that things were morphing. That it would impact commodity prices and oil prices in particular. We identified a process of morphing that went on. When the crisis was focused on Egypt and Tunisia, when those countries were going to their peaceful revolution, they were not systemic in nature. The influence on the global economy was limited.  They were not large economies. They were not major exporters of commodities.  And they did not owe anyone lots of money. When the crisis and turmoil started to hit Libya and Bahrain, this whole phenomenon has morphed.  And it has morphed into something that in the short term means higher oil prices, greater risk aversion, and a somewhat flight to quality.  Although it's interesting to see that the dollar has not benefitted that much."
 
On higher oil prices:

"The global economies are going to have to live with these for a while. That is just a reality of the world we are living in today."
 
On the events in Egypt over the past week:

"They have taken important steps. You've seen ministerial changes, you've seen a timeline announced.  And most importantly, you've seen the protest movement saying that we will be the check and balance. We're going to make sure that this revolution that was started will end up with democracy and greater individual freedom. We're seeing progress. It's a bumpy road that does not happen overnight. But every day we are seeing progress."
 
On what the weak dollar is signaling:

"It is a warning shot to America that we cannot simply assume flight to quality, flight to safety. That people are starting to worry about the fiscal situation in the U.S., worrying about the level of debt and what they're hearing about states and municipalities. I would take this as a warning shot that we cannot assume that we will maintain the standing of the reserve currency as we have in the past."


 

 

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Tue, 02/22/2011 - 16:05 | 986198 Bam_Man
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So that's why Mo gets paid the big bucks. What a genius. I never would have suspected.

Tue, 02/22/2011 - 16:38 | 986294 B9K9
B9K9's picture

Late last year, I repeatedly pledged to eat an FRN if Bernanke actually went ahead and attempted to fully implement his QE thesis aka helicopter drop.

The reason for my confidence that Ben would be physically prevented from initiating such a disastrous policy was quite simple:

  1. The US is a global empire that utilizes its military advantage to control key resources and maintain critical trading relationships which in turn provide a positive feedback loop that supports our international hegemony; and
  2. The US $dollar, as both a store of value & the global reserve currency, is the absolute linchpin in enabling the MIC (DoD, CIA, NSA, et al) to finance & fund all overseas & domestic operations and development programs (read: contractor R&D) necessary  to provide our "national security".

There is no way in fucking hell that Ben or anyone else for that matter is going to be allowed to single-handily destroy this nation's ability to dominate our level of resource consumption habits that deliver the life-styles to which we have become accustomed.

Sure, I have no quarrel with those who counter that this is in fact unsustainable; granted. My point is that the loss of the reserve status will not be performed by one person, but rather will be externally imposed only after a really, long bloody fight.

QE was fun while it lasted - perhaps some got out in time. Our reality has never really deviated from our date with deflation.

Tue, 02/22/2011 - 16:44 | 986306 schoolsout
schoolsout's picture

So, you're going on record that QE is over?

Tue, 02/22/2011 - 17:04 | 986361 DoChenRollingBearing
DoChenRollingBearing's picture

I always read your replies carefully B9K9, one of the sharpest here at ZH.

I am not sure I agree, but you argue with good & clear logic.  Not to mention to take a stand.

Tue, 02/22/2011 - 17:06 | 986372 tmosley
tmosley's picture

You make the flawed assumption that the people in charge have a firm grasp on what is going on.

Sadly, they drank their own kool-aid long ago.  QE will not end.  The dollar will die.  There is simply no stopping this train.  Not without a wholesale slaughter of the political class in this country.

Tue, 02/22/2011 - 17:44 | 986509 CrockettAlmanac.com
CrockettAlmanac.com's picture

And there was much rejoicing.

Tue, 02/22/2011 - 17:57 | 986550 Bob Sponge
Bob Sponge's picture

I agree. In addition, the secret owners of the Fed are likely not American in majority if at all. So, I doubt they give a fuck about America and America is likely disposable to them. BTW, I enjoy your posts (and B9K9's).

Tue, 02/22/2011 - 18:18 | 986616 gmrpeabody
gmrpeabody's picture

+100

Tue, 02/22/2011 - 20:04 | 986897 sporb
sporb's picture

I think you are correct in your first statement, but then I see that you put your tinfoil hat on.

These people are more powerful than you and your cohort are. If they want the USD they will have it. After all, the current economic power in China stems from exactly the same source - from "printing money".

Remember: It hasn't been a "market" for a long time now - but your cohort doesn't want to hear that, and such deaf-blindness can't help their investment strategies... just sayin'

Tue, 02/22/2011 - 20:31 | 986957 tmosley
tmosley's picture

No, power does not come from printing.  Printing is merely the means by which they steal power.  It is the manufacturing base that creates power.  With a manufacturing base, a nation becomes great.  When that power is misappropriated by the government, it damages the manufacturing base.  If you damage it faster than it can repair itself, it goes into terminal decline.  

That is where we are now.

I have no idea who you are talking about when you say "your cohort".  I don't have a cohort.  It's just me.  If it is deaf-blindness to watch reality, and ignore the falsehood presented as truth by those thieves who steal from all who trust them, then the blind shall rule in the land of the comatose.

Wed, 02/23/2011 - 03:45 | 987842 Oracle of Kypseli
Oracle of Kypseli's picture

There is so much chatter about the Chinese Yuan as the new reserve currency and I am wondering if this is just another way, the Fed is trying to de peg it so that the US debt becomes somewhat manageable.

I am afraid that Ben's and Tim's (!) tactics are not working. The dollar will die before any other single currency takes over as it carries a lot of responsibility. Most likely a basket of currencies with a dose of Silver and Gold will eventually be the choice as it will be more equitable or at least appear to be equitable.

Meanwhile, Ben has no option but keep printing, extending pretending and praying for a miracle. (Miracle is defined by scientists as one in a trillion.) But Ben is aproaching quadrillion

 

Tue, 02/22/2011 - 17:17 | 986409 trav7777
trav7777's picture

if so, then massive, cascading bankruptcy will end the USD

Tue, 02/22/2011 - 17:47 | 986519 robertocarlos
robertocarlos's picture

No, there is some guy out there (probably a bum on the street) and he has a fiver in his pocket together with no debt. He probably winds up owning the whole USA. 

Tue, 02/22/2011 - 18:41 | 986682 trav7777
trav7777's picture

yes, the deflationist argument.  Those with a few scraps of paper with the right ink will end up owning everything.

See, such an outcome is improbable simply because it is so inherently ridiculous.  B9 is correct that the system will deflate, but the effects of it will not be as deflationists predict.

Also against the notion that Ben will *not* do QE3 are the japs who are STILL QEing even 20 years later.  QE *can* and *will* continue until ultimate faith in the currency is lost.  Such a discontinuity will happen rapidly and beyond the power of the paper pushers to abey it.

Tue, 02/22/2011 - 21:07 | 987032 Clockwork Orange
Clockwork Orange's picture

And, after 20+ years, not a day too late, Moody's downgrades 'em.  Words escape.

Wed, 02/23/2011 - 06:20 | 987927 equity_momo
equity_momo's picture

Why has the Yen been so strong in this period of Japanese QE? Honest question - i understand Mrs Watanabe's attitudes but it doesnt explain how a country like Japan , dying a slow death , can maintain a currency which has such relative strength to other fiat currencies.   

our system perversely looks as debt as money.  Ultimately , that debt is going to be defaulted on - not through inflation (because that policy prescription quickly leads to hyperinflation and an inflation policy when we are at this stage of the cycle is suicide) but through outright default.  There is so much debt in the World (in dollars) that once that deb is defaulted , dollars are literally vapourized. Bernanke cant print fast enough. And if he tries , commodity prices will quickly put him back into his box. The only outcome i see is asset prices collapse , granted , we can melt  up in certain classes before that happens.   Which brings me full circle to precious metals being the only tangible, portable (that is very important) asset that comes through the worm hole in 1 piece.  It becomes a hedge to inflation or deflation.    If i had more confidence in our "masters" i would balance my gold holdings with dollars , still the only fiat paper that matters.

I guess the defining question is , at what oil price can the global economy function with a growth at all costs mandate? I believe we are and have been for several years in structual decline and DE-globalization , its just not obvious. Corporates are hording cash and not looking to grow organically because they know this. We are literally at the end of the road. Printing money is a futile gesture.

 

Tue, 02/22/2011 - 22:28 | 987252 cranky-old-geezer
cranky-old-geezer's picture

No trav, massive money printing to keep TBTF out of bankrupcy will end the USD.

Tue, 02/22/2011 - 17:36 | 986472 Snake
Snake's picture

+1

Regarding inflation vs. deflation ... the El-Erian talks of

"stagflation", no?  If (I'm asking) I have inflation in, say,

food, and deflation in clothing or houses, doesn't all all even

out in a stagflation scenario?  It seems to me (I said it before,

I am not an economist by any means) the discussion inflation/deflation

is, like many a tech. chart, a remnant of the past.  This time IS 

different, no?  

 

Tue, 02/22/2011 - 17:58 | 986556 asdasmos
asdasmos's picture

Biflation?

Tue, 02/22/2011 - 21:12 | 987049 Clockwork Orange
Clockwork Orange's picture

Biflation, yes.  And the answer to the question is 'it depends'.  If you own zero assets, and all your necessities go up, you have inflation.  If you own a home, you've got deflation that simply makes your necessities inflation hurt even more.  If you own assets such as USO, PSLV, PHYS, POT, FXA, FXC, etc. your answer depends only on the scale of those assets vs. your food and home.  

I doubt food and commodities are going too far south for long.  There's too much demand and too little supply, generally.  And oil going south?  Forget it.  Homes, big-ticket items ... stocks that focus on them?  Oh,oh.

Tue, 02/22/2011 - 17:42 | 986506 slackrabbit
slackrabbit's picture

Again, as my previous posts, many including the Baernak assume a 'closed system'. This thinking is like Gaddafi talking from his 'car' and his 'podium' in front a battered building - it reeks of maddnes and refusal to accept that there are too Black Swan that can throw your plan arwy.

At Zero Hedge we have all complanined about the sheer maniplulation and BS of the market. With rebellions and food riots going on, what will eastern leaders do? Whats about the German and Irish elections this year? The floods in Austrailia and the earthquake in New Zealand....add all those freaks of nature together and ask yourself the Economics 101 question:

How long do give the US dollar to last as the worlds reserve currency?  

That decision may not be chosen or enacted, but simply forced on world leaders by the market, becuase you or I no longer trust it or because you have people starving, or it may simply be propaganda fatique. Like the rebellions in the Middle East, poeple may just  give up on it, and no amount pleading will change anyone's minds. 

Tue, 02/22/2011 - 18:12 | 986593 George the baby...
George the baby crusher's picture

but rather will be externally imposed only after a really, long bloody fight.

 

You hit the nail on the head there.  Now only question, are Americans willing to die for the banksters? 


Tue, 02/22/2011 - 18:53 | 986718 Raging Debate
Raging Debate's picture

The game isn't over yet but I'll take the contrarian bet. B9K9, before we start I must say I do like your insights in general.

China will become the world's reserve currency between 2013-2015. Ben Bernanke is a powerful Chairman but he serves the interests of the banking community at large. The U.S.A. as a nation wasn't going to change to fund the real problem - demographics.  Here is my name:

  Jason C. Rines

 Here is my cell phone: 603-953-3388

 Here is my email: jrines@ragingdebate.com

 If China is the reserve between 2013-2015 you chew your FRN on video and publish here on Zero Hedge. If I am wrong (meaning China becomes reserve but outside range provided) I will chew the FRN on the video.

May as well have some fun out of really crazy situation! The crazy part is the miscalculations of the 1990's and endorsing American banker-sponsored Fascism again (solved by fighting other more violent Fascists in WWII and 60 M lives).

What is tragic is we are now like China, State Run Capitalist or what was known as Fascism in the 1930's. Hope we at least return to fair market (I know, I know hasn't been that way for a long time but U.S.A. was close) after the temporary bloodbath.

Tue, 02/22/2011 - 22:22 | 987229 cranky-old-geezer
cranky-old-geezer's picture

"Our reality has never really deviated from our date with hyperinflation."

Fixed it.

You're welcome.

Tue, 02/22/2011 - 18:16 | 986609 sgt_doom
sgt_doom's picture

Hahaha...me neither!

I mean, the IMF has been pushing Special Drawing Rights (SDR) for how long now???

And the World Bankster, Zoellick, keeps harping on spreading the reserve currency status to China, and those BRIC nations, and.....

Geez, one guesses they just have to trot out a member of The Select, Big Mo, to give the official word on the subject.

Tue, 02/22/2011 - 19:12 | 986762 Raging Debate
Raging Debate's picture

Exactly Sgt. Doom. Not even really "secret" on SDR's just visit BIS and IMF sites on a regular basis. The first banker sponsored global government was the League of Nations. Decentralization occurs alongside debt saturation. The question in my mind is after the next big world war will the people have woken up enough to not permit YET ANOTHER REPEAT?!? If they do, then really I will lose all hope in mankind (at least evolving fast enough to bother worth being alive on this rock).

There are also now world leadership sites that have links to debate areas too. That at least is an improvement over Greenspan stating in 2004 how debate about CB model is off limits to the public.

If the overlords want to continue to rule, they must consider healthy manners of decentralization meaning evolving their model but I am glad they are figuring out that political union without monetary union may leave their own kids hair glowing. Perhaps only 20% die in the coming conflaguration of decentralization CB, Boom/Bust style? That is where I feel it is still worth educating, he who saves one saves the world...   

Wed, 02/23/2011 - 06:32 | 987930 equity_momo
equity_momo's picture

20%? youre wildly bullish.

Whilst we debate inflation v deflation , we have statistical evidence that the World is unable to increase oil production for the past 5 years despite oil trading at 10 dollars in 1999 and now 110 dollars in 2011 (and 40 in 2005)

Whilst we lurch from "financial" crisis to financial crisis , the elephant in the room is how do we support a global population of 7 bil into a globalzied agenda with declining oil production. You have seen the charts of oil production v  population v money supply.   The logical conclusion is we cannot sustain this.   Debt becomes irrelevant , it will be outright defaulted. Millions will die by hook or by crook. Dont shoot the messenger - im just joining the dots. If someone gets a completely different picture to the dots , please enlighten me , im not deaf to a more positive conclusion if its rationale. 

without an exponentially growing population , consuming more and more , the whole economic model we have collapses.

Tue, 02/22/2011 - 16:06 | 986200 TeMpTeK
TeMpTeK's picture

Ummm......

Tue, 02/22/2011 - 16:55 | 986338 jus_lite_reading
jus_lite_reading's picture

Word on the street is both the Euro and US dollar will implode simultaneously in ~2 weeks. I am really worried tens of millions of people in this country and the EU will go hungry very soon. Global famine.

Tue, 02/22/2011 - 17:07 | 986379 SilverIsKing
SilverIsKing's picture

Word on the street?

Which street would that be?

Tue, 02/22/2011 - 17:08 | 986381 TeamAmerica
TeamAmerica's picture

The word on the street is "STOP".   Perhaps you were looking at it upside-down.

Tue, 02/22/2011 - 17:31 | 986460 SilverIsKing
SilverIsKing's picture

and what does that spell?

Tue, 02/22/2011 - 16:10 | 986211 Worker Bee
Worker Bee's picture

DOH!!

Tue, 02/22/2011 - 16:10 | 986213 trollin4sukrz
trollin4sukrz's picture

If Not US Dollars then what? A basket of fiat? That should work wonders in reinforcing consumer confidence.

Tue, 02/22/2011 - 16:19 | 986231 Dr. Richard Head
Dr. Richard Head's picture

Who the F had the balls to junk you?  Pussies.

Tue, 02/22/2011 - 16:33 | 986276 tmosley
tmosley's picture

There is one particularly dumb bastard floating around.  He'll probably see my reply and make a drive by comment having to do with abortions or some stupid thing.

Tue, 02/22/2011 - 16:44 | 986311 Dr. Richard Head
Dr. Richard Head's picture

When I junk someone I always let make sure to part a retort to their stupidity (which is the reason for the junk).  Drive by junkings are for paper holders.

Tue, 02/22/2011 - 16:28 | 986245 AldoHux_IV
AldoHux_IV's picture

Agreed, the solution brought up by the IMF and being championed by Christine Lagarde and the other elit-ards ain't a solution.  I would suggest that it isn't the system inasmuch as it is the people who are running the system.  Start by dissolving those who continue to wreak economic havoc and you begin to create change in the right direction.  First place would be to start with dissolving the fed and issuing our own currency.  Coincidently, by dissolving the fed we would be able to destroy so much US debt that it would be almost like a reset button which would help with the fiscal situation.  Nuke the fed and you inevitably nuke the debt and huge chunk of our fiscal woes.  Then the next step would be to get the right people in congress who can actually recommend sound ways to spend our tax dollars so it doesn't hurt those who need and rely on it the most-- redistribute the wealth and opportunity to the people, but don't make them atrophied in being able to be self-sufficient. Just a suggestion for when the fiscal debate takes a turn for the worse or just becomes a rhetorical masturbatory debate.

Tue, 02/22/2011 - 16:12 | 986216 tony bonn
tony bonn's picture

anyone considering "animal spirit "s as a valid element of economic theory is a tard...i suppose he believes in the 5 elements of the universe's composition...

Tue, 02/22/2011 - 18:30 | 986648 InconvenientCou...
InconvenientCounterParty's picture

Actually, there are just three elements. Rock, paper and scissors. Don't be the last one to own rock.

Tue, 02/22/2011 - 16:13 | 986218 MarketTruth
MarketTruth's picture

And what do the world's cental bank FIAT printers hold as reserve when their own paper product fails.... physical GOLD!

 

Got Gold?

Tue, 02/22/2011 - 17:02 | 986358 DoChenRollingBearing
DoChenRollingBearing's picture

Got mine.

Prepare: diversify and be agile!

Tue, 02/22/2011 - 16:14 | 986221 UninterestedObserver
UninterestedObserver's picture

No shit sherlock - looks like pimpco is fucked

Tue, 02/22/2011 - 16:15 | 986222 Dr. Engali
Dr. Engali's picture

They are questioning legitimacy of the Libya's data? What about the legitimacy of our data?

Tue, 02/22/2011 - 17:37 | 986488 Snake
Snake's picture

"... reality is made of language" (Jacques Lacan).

Tue, 02/22/2011 - 16:16 | 986224 UninterestedObserver
UninterestedObserver's picture


On Pimco's strategy and how to react to unrest as an investor:

"Last week, Friday in particular, when the crisis started impacting countries like Bahrain, we recognize that things were morphing.

 

Trnaslation - we got blindsided by the fucking proles and are feverishly trying to get Benny to buy all of our bonds

Tue, 02/22/2011 - 16:17 | 986226 SwingForce
SwingForce's picture

Whatever, Mo, who's currency does the world want instead? Gimme a break....

Tue, 02/22/2011 - 16:19 | 986236 Dr. Richard Head
Dr. Richard Head's picture

I think the push of PM prices is voicing the want for money over currency. 

Tue, 02/22/2011 - 16:31 | 986268 AZSovreign
AZSovreign's picture

Why does there need to be a world currency anyways? Is it just to make things easier for global transactions?

Tue, 02/22/2011 - 16:34 | 986282 UninterestedObserver
UninterestedObserver's picture

Paper money makes it easier for the strippers too

Tue, 02/22/2011 - 16:41 | 986300 Dr. Richard Head
Dr. Richard Head's picture

Duhhhh. Sluts have slots you know.  Plus a roll of Maples can double as a dildo.  Lulz.  Still can't eat it.....er money that is.

Tue, 02/22/2011 - 16:44 | 986310 trollin4sukrz
trollin4sukrz's picture

we need a world currency to better enslave..er i mean "serve" you.

we r whats for dinner.

Tue, 02/22/2011 - 16:46 | 986314 Dr. Richard Head
Dr. Richard Head's picture

What if the One World Currency was money (i.e. gold and silver)?

Wed, 02/23/2011 - 03:35 | 987834 StychoKiller
StychoKiller's picture

Better have a microscope to see the resulting Gold & Silver coins "They" put in circulation!

Tue, 02/22/2011 - 16:55 | 986345 jus_lite_reading
jus_lite_reading's picture

Starting in a few weeks, bartering for your life will be all you worry about. Everyone has been warned.

Tue, 02/22/2011 - 17:22 | 986429 Idiot Savant
Idiot Savant's picture

Calendar marked, cause word on the street is that USD/EUR are gonna crash in two weeks, right?

Question: when we're all still here in two weeks, will you stop posting your predictions?

Tue, 02/22/2011 - 19:35 | 986819 Raging Debate
Raging Debate's picture

Hey Jus Lite, your like that guy in Russia that stated in 2009 that the USA would break apart in 2010. Being right but years off a forecast will make your insights irrelevant (insert broken clock analogy).

I see it this way, Dollar lands between 2013-2015 .50 of a Yuan (or SDR). What changes is SDR & China peg just reveals how much true net worth a country has and values were artificially pumped vs. what was looted.

So let's say the people figure out half of their net worth was looted. If America creates it's own currency, the value will still be .50 vs. an SDR or Yuan!

The goal of Americans is to liberate itself of the previous debt and audit what is owed in hard amounts AFTER subtracting government subsidies not voted for (the world owes us or here is the American collective middle finger).

Geopolitical risk and major military misadventure/internal deceit is far more concerning as risk than having to trade my Maine blueberries for some meat or potatoes.

Shute, working ten hours a week to barter my stash and slowly trade up vs. working 60 hrs+ with nothing to show for it but paying for every irresponsible individual on the planet for the rest of my life? Hmmm, the Russia circa 1998 model may not be that bad a situation but I guess it all depends on what one considers a quality of life. Freezing or starving? Yeah, if the big red button is pushed. 

Tue, 02/22/2011 - 16:18 | 986229 melachiro
melachiro's picture

OT...what happened with the CCI numbers, I thought they were supposed to be out 10 am est?

Tue, 02/22/2011 - 16:24 | 986240 Sean7k
Sean7k's picture

Check MW. They came out up about 6 points to 70.+

Tue, 02/22/2011 - 16:35 | 986242 AN0NYM0US
AN0NYM0US's picture

the were but for some reason ZH skipped commenting

prior 60

concensus 65

actual 70

 

in my neighborhood things are busy and when you talk with people they are optimistic with the perception that real estate is at or near bottom and their 401ks looking good

 

 

Tue, 02/22/2011 - 16:40 | 986298 Worker Bee
Worker Bee's picture

Im sure the sheep said the same thing in 07

Tue, 02/22/2011 - 16:43 | 986307 Dr. Richard Head
Dr. Richard Head's picture

Shit.  I thought it was so good in 2007 that I bought my current home.  Of course, I only listened to what the TV told me, so I didn't want to miss the boat in housing.  Sad thing is, the TV didn't tell me the boat was heading towards the Financial Ruin Isles.  Oh well. 

Tue, 02/22/2011 - 16:47 | 986318 JohnG
JohnG's picture

Sheeple groupthink is by nature positive.  Party poopers get shunned....

Tue, 02/22/2011 - 22:37 | 987269 cranky-old-geezer
cranky-old-geezer's picture

"... you talk with people they are optimistic  ..."

They don't see the edge of the cliff appraoching ...or they refuse to see it.

They're gonna get slaughtered.

Tue, 02/22/2011 - 16:19 | 986234 apeakunderthehood
Tue, 02/22/2011 - 16:20 | 986238 Sean7k
Sean7k's picture

There is no reason why the globe cannot have competing currencies. This was the situation in the late 1800's until 1910. 

Tue, 02/22/2011 - 16:21 | 986239 redarrow
redarrow's picture

Awesome, I dream of the day when other currencies or a basket of currencies are king.

Tue, 02/22/2011 - 16:24 | 986243 TradingJoe
TradingJoe's picture

Given that we all now know what our FEDs/Gov's are able and Willing to do...

I suspect something will happen, Bucky won't go into the sundown without a good

FIGHT! It is way too complex and too many factors swirling around to assume just yet

that it will lose reserve status soon, eventually yes but even that is still out!

We are all too ready to let go of everything just because it's trendy! Let us keep on

pimping gold and silver and see what happens!

Tue, 02/22/2011 - 16:25 | 986247 bob_dabolina
bob_dabolina's picture

shhhh

CNBC all-stars are on @ the CNBC headquarters.

Tue, 02/22/2011 - 16:25 | 986249 reader2010
reader2010's picture

The ultimate world reserved currency will have to based on food production. 

Tue, 02/22/2011 - 16:25 | 986250 Jason T
Jason T's picture

the currency in the country that has a physical economy ..that makes things.  China's RMB..

Tue, 02/22/2011 - 16:28 | 986252 Caviar Emptor
Caviar Emptor's picture

This is a composite of things we've been covering here on ZH for over a year. And called it dead on. 

Stagflation in the Middle East? Better crank that up a few notches. Unemployment levels 25-50% and hyperinflation coming brought on by the onslaught of higher raw material prices throughout the world. In the developing world, food prices have a disproportionate impact compared with developed countries. Including way higher geopolitical risk as we've seen with the Jasmine Revolution which arose on the heels of higher food prices. As always.

In the US the case is very different. As a result of extraordinary Fed policy to "reflate" a deflating bubble, we have a malignant mix of higher raw material prices but not accompanied by rising real estate and incomes as happened in the 1970s stagflation. I call it biflation because it's totally a different animal: first off you will never see the traditional gauges of inflation lifting off such as CPI, core CPI and core PCE. They will appear tame as Bernank keeps saying but the impact on consumer buying power and business margins is very malignant. Real incomes, real estate, retirement income and employment will continue to deflate. It's important to distinguish this from stagflation because the outcome and potential treatments are totally different than what worked for the Fed during the last 4 decades and which are just making things worse now. A vicious cycle has set in

As for the dollar, I agree. The key line that was crossed was when total debt surpassed 100% of GDP. In addition, there's now a growing consensus that the US can't "grow out" of its debt. And that current Fed policy is on a suicide mission. Gold is your only hedge and that's exactly what central banks around the world are doing, as well as wealthy individuals and small investors. Gold is the only way to preserve wealth and it has proven itself during the crisis

Tue, 02/22/2011 - 17:09 | 986386 DoChenRollingBearing
DoChenRollingBearing's picture

+ $1397

Caviar coherently argues with a verve and style that I admire (and agree with).

Everyone should have some gold.

Tue, 02/22/2011 - 18:20 | 986624 sgt_doom
sgt_doom's picture

CE calls it perfectly, although myself, I'll be stocking up on coffee beans and canned food.

Tue, 02/22/2011 - 19:41 | 986848 Raging Debate
Raging Debate's picture

Me too. Import luxuries like sugar meaning having an decent quality of life as you barter these. PM's are good too, especially gold but the luxuries (and some basics like grain) give complete hedge against geopolitical disaster. History is not on mankind's side during massive decentralization ;(

Tue, 02/22/2011 - 16:27 | 986255 topcallingtroll
topcallingtroll's picture

China does not want the loss of control and transparency required to be a reserve currency.

The new currency will be a version of the sdr or possibly a sdr/bancor hybrid, i.e. an SDR including all g20 currencies plus gold.

Dollar up and treasuries up, as would be expected today.

Tue, 02/22/2011 - 16:33 | 986277 Caviar Emptor
Caviar Emptor's picture

There will be a push to include Gold in the basket because it can't just be inflated away into oblivion. And China, India and others have accumulated gold big time and intend to use that edge. 

Matter can neither be created nor destroyed. Money can only be created and never destroyed. It comes home to roost at times like this as confidence gets lost and everybody's got a lot to spend. Spend while the gettin is still good. 

Despite an over 200 point drop in the Dow there was a a negligible rise in the dollar index

Tue, 02/22/2011 - 16:51 | 986328 topcallingtroll
topcallingtroll's picture

I just hope the dollar drop slows a bit. I dont think we can expect much more.

Wed, 02/23/2011 - 03:24 | 987825 akak
akak's picture

There will be a push to include Gold in the basket because it can't just be inflated away into oblivion.

Is being forced to eat a bowl of 50% pudding and 50% dogshit all that much better than having to eat a bowl of 100% dogshit?

Please just give me the pudding, and hold the dogshit.

Tue, 02/22/2011 - 16:39 | 986292 ciscokid
ciscokid's picture

China does not want the loss of control and transparency required to be a reserve currency.

 

Does the U.S have the transparecy and control????

Tue, 02/22/2011 - 16:30 | 986261 Yen Cross
Yen Cross's picture

 Hey I welcome China into the pool. Their GDP is still 1/6th of the US. I would love to see China forced into a free floating transparent fx trading, non CPI and PPI manupulating system. Their populace will demand higher wages and their cost of producing will rise dramatically. Running to Swissy isn't the answer long term. The only reason the Euro is holding up is because the Middle East sovereigns diversify into EUROs. And the ACB's rinse dollars every night and buy EURO's.

Tue, 02/22/2011 - 16:33 | 986275 topcallingtroll
topcallingtroll's picture

I welcome them too in the revised SDR. They have to float if they want to play with the big boyz.

Tue, 02/22/2011 - 16:38 | 986295 Yen Cross
Yen Cross's picture

 Right on TCT! And that means opening their bond market as well!

Tue, 02/22/2011 - 16:30 | 986262 cranky-old-geezer
cranky-old-geezer's picture

I believe Bernokio wants the dollar to lose WRC status.  His overall plan is to debase the dollar to nothing.  It has to lose WRC status for that to happen.

Tue, 02/22/2011 - 18:24 | 986633 George the baby...
George the baby crusher's picture

I think the Bernank is a dick head and has no idea what he is doing.  If he had a plan it all went to shit a long time ago.

Tue, 02/22/2011 - 20:43 | 986900 cranky-old-geezer
cranky-old-geezer's picture

Actually it's not his plan.  It's his masters' plan.  And yes it's going along well from what I can see.  They've debased the dollar down to 3% of its original purchasing power, not too shabby.  Just that last 3% to go now.

Tue, 02/22/2011 - 16:30 | 986263 bob_dabolina
bob_dabolina's picture

Ok...time to see that trillion in excess bank reserves applied to the stock market...

DOW closes down -50

 

Tue, 02/22/2011 - 16:30 | 986264 Josh Randall
Josh Randall's picture

This guy is just mad about the muni's going to hell

Tue, 02/22/2011 - 16:31 | 986267 Dr. Porkchop
Dr. Porkchop's picture

-210 Dow, will it somehow close green?

Tue, 02/22/2011 - 16:34 | 986280 bob_dabolina
bob_dabolina's picture

I think it will come close.

I have seen this movie before.

Tue, 02/22/2011 - 16:32 | 986269 Leo Kolivakis
Leo Kolivakis's picture

''The world's top 100 arms-producing companies sold goods worth $401 billion (293 billion euros) in 2009, according to figures released by the Stockholm International Peace Research Institute (SIPRI). Most of these arms companies are based in the US and Western Europe, where the recession hit hardest.''

I wouldn't worry about the USD's reserve currency status, it's well protected by the most powerful military in the world. ;)

 

Tue, 02/22/2011 - 16:38 | 986289 Caviar Emptor
Caviar Emptor's picture

Who pays for the military? What do they purchase and import raw materials with? 

 

Tue, 02/22/2011 - 16:32 | 986271 DeweyLeon
DeweyLeon's picture

The US reserve status would've left long ago if the rest of the world wasn't such a dog.

Tue, 02/22/2011 - 16:36 | 986285 Caviar Emptor
Caviar Emptor's picture

It held as long as it benefited a loose alliance of players around the world. And now it doesn't. The list of naysayers will grow. And that's a cycle that feeds on itself because they'll want to spend the dollars they have before their value drops even further. Check mate

Tue, 02/22/2011 - 20:11 | 986917 cranky-old-geezer
cranky-old-geezer's picture

"It's everyone's duty to start the avalanche!"

--- Barley Scott Blair - "Russia House"

Tue, 02/22/2011 - 16:33 | 986278 disabledvet
disabledvet's picture

You're still "talking the market."  That's "2 million Egyptians" in Libya--and from what I've read here "all the good oil goes to Europe."  Cooking oil and no bread for the Egyptians?  I say history has an answer for that and has all along.  You think only Tom Keene celebrates the poverty of the Egyptian people?  It's nothing compared to the Libyans.  And of course "the Egyptians have "a mere" 9000 years of ruling your ass."  Obviously I'm not in the White House or sitting on the board of a bank where it would be verbotten to discuss things in the way i do or any of us do here.  that's why we have the internet and ZH--to consider what can actually happen for real.  the first thing you toss out is "the market" as a predictor of anything having to do with armies or peoples in my book.  ironically it appears the market has tossed it out long ago too.  in short "the market is not money" and boy is that simple fact always ignored.

Tue, 02/22/2011 - 16:34 | 986279 buzzsaw99
buzzsaw99's picture

if bernanke were given a choice between WW3 with three billion casualties or saving the tbtf assholes who own him he would choose the latter. Reserve currency status? Yeah, right, whatever. Bend over PIMPCO.

Tue, 02/22/2011 - 16:35 | 986283 Atomizer
Atomizer's picture

Mr. Mohamed El-Erian, sometimes a perfect circle is formed.

 

What side of the trade are you taking?

Tue, 02/22/2011 - 16:38 | 986286 william the bastard
william the bastard's picture

I don't believe half of what Mohamed El-Erian says. He seems to be making it up on the fly.

He sat out the last 85% of the equities rally and was adamant about not being in since Bubble Ben's speech at Jackson Hole around Labor Day.

Tue, 02/22/2011 - 20:36 | 986972 tmosley
tmosley's picture

Well, no one believes in or cares about what you say.

Except me, kind old generous soul that I am.

Tue, 02/22/2011 - 16:38 | 986290 surfwon
surfwon's picture

funny how pimpco gets religion after their 30 year bond rally ends...........

Tue, 02/22/2011 - 16:38 | 986291 ThirdCoastSurfer
ThirdCoastSurfer's picture

Hand-in-hand with a reserve currency is the reserve language to go with it.

No one is going to want to go backwards and learn to speak Mandarin or Portuguese. 

In computer programming terms English is Windows and everything else is DOS. 

 

Tue, 02/22/2011 - 16:43 | 986305 midtowng
midtowng's picture

In computer programming, Windows sucks and Linux rules.

Tue, 02/22/2011 - 17:18 | 986410 Yen Cross
Yen Cross's picture

We call it (Chinese currency) Yuan and see how many people Reminbi it?

Tue, 02/22/2011 - 16:42 | 986301 midtowng
midtowng's picture

The Yuan will never be considered a reserve currency until they de-peg from the dollar.

Tue, 02/22/2011 - 16:47 | 986320 buzzsaw99
buzzsaw99's picture

Even if china were to be the reserve currency then everyone would do to them like they've been doing to everyone else. China is a bunch of whiny bitchez.

Tue, 02/22/2011 - 20:39 | 986979 tmosley
tmosley's picture

Give them goods in return for paper?

Sounds about right.

HA HA!  I've got all of your IOUs and all it took was twenty years of my labor!  What are you going to do now, then, eh?  Eh?

Tue, 02/22/2011 - 16:56 | 986342 topcallingtroll
topcallingtroll's picture

Exactly!

Why own the derivative when you can own the underlying?

Tue, 02/22/2011 - 17:03 | 986360 youngman
youngman's picture

when they buy up most of the worlds commodities, gold, and silver...then they will depeg....and own us...

Tue, 02/22/2011 - 18:48 | 986697 trav7777
trav7777's picture

war before then...contracts are paper.

Tue, 02/22/2011 - 18:49 | 986698 UninterestedObserver
UninterestedObserver's picture

And the day they de peg their fake economy will vaporize

Tue, 02/22/2011 - 20:54 | 987008 cranky-old-geezer
cranky-old-geezer's picture

What incredible bullshit.

China is the largest manufacturer and exporter on the planet now, anything but a fake economy. Manufacturing & exports is what gives their currency value, just like manufacturing & exports give every nation's currency value.

But America is shrinking its manufacturing & exports while printing trillions more dollars, hence the dollar rapidly losing value.

The true fake economy is America.

Tue, 02/22/2011 - 21:10 | 987044 penisouraus erecti
penisouraus erecti's picture

++

You tell 'em cranky. Kids now days.......

Tue, 02/22/2011 - 21:18 | 987069 penisouraus erecti
penisouraus erecti's picture

A fake economy will vaporize, but won't be PRC

Tue, 02/22/2011 - 20:14 | 986925 cranky-old-geezer
cranky-old-geezer's picture

"The Yuan will never be considered a reserve currency until they de-peg from the dollar."

They will, just give 'em time.

 

Tue, 02/22/2011 - 16:44 | 986309 PulauHantu29
PulauHantu29's picture

Has PIMCO's Main Man been on planet Mars? The dollar has been tottering on plinging off the cliff ever since TurboTimmy preached, "strong dollar."

Why do you think commodities have been skyrocketing in light of a plunging Baltci Index? Many investors are dumping dollars and moving into Hard Assets as Kotlikoff predicted in his excellent book, The Coming Generational Storm."

That being said, it is good to hear a MSM person say it out loud instead of whipsering it behind closed doors.

BTW, has anyone looked at PIMCO's "new" equity fund's numeron uno holding?

Gold.

Tue, 02/22/2011 - 19:31 | 986822 sellstop
sellstop's picture

Why do you think they call it "PIMCO"

Pacific Investment Metals Company.

gh

http://ghickeyblog.blogspot.com

 

Tue, 02/22/2011 - 16:45 | 986313 william the bastard
william the bastard's picture

PMs seem to be moving more on this than the comments of ambulance chaser Mohamed El-Erian:

The precious metals continue to be the 'safe haven" choice of global investors as the Middle-east and African demonstrations continue to threaten the flow of crude oil.

Read more: http://www.ibtimes.com/articles/115092/20110222/daily-gold-and-silver-report.htm?utm_source=twitterfeed&utm_medium=twitter#ixzz1EirhwuQR

Tue, 02/22/2011 - 16:51 | 986321 NOTW777
NOTW777's picture

the other currency is silver and gold

 

"to find out just who is the real reserve currency in the world?"

Tue, 02/22/2011 - 21:06 | 987034 penisouraus erecti
penisouraus erecti's picture

+

Tue, 02/22/2011 - 16:48 | 986322 Seasmoke
Seasmoke's picture

Pimco is going to get Rolled

Tue, 02/22/2011 - 16:50 | 986327 Yen Cross
Yen Cross's picture

 Is any one watching this tool on CNBS. (Dahlberg) This clown seems to think that the valuations are low because of non assisted federal lifelines. This guy has mastered UHHH the art of BS. (every other word out of his mouth uhhh is rediculious!) A bit off topic but applicable. He is definitely the short covering guy we're looking for.

Tue, 02/22/2011 - 16:57 | 986350 arkady
arkady's picture

CNY?  Really?  LOLz.  The dollar may suck, but if anything sucks more it would be the cryptic, mythical unknown CNY - where the unknown is specifically it's monetary base that has been exploding.    China even attempting to criticize our monetary base/situation is ironic at best.  

Tue, 02/22/2011 - 16:58 | 986353 youngman
youngman's picture

It will interesting if more bonds start being tendered to POMO or not....Me thinks many more...get out while you can..and post G20....I bet they said buy them or else...

Tue, 02/22/2011 - 17:00 | 986356 falak pema
falak pema's picture

They are going that way. But they are waiting for EU to first do a strategic deal with them. Th French G20 summit shows that europe is not clear which way to pull. Germany/France want more Yuan transparency before they commit to including china into the monetary club. But if the oil price goes up as a constant, and economic recovery in USA stagflates, then the Benocide QE strategy becomes unplayable. We either have asset deflation: mayhem. Or, sometime later this year everybody gangs up against Obama, tells him to fire Benocide, stop QE, change the fiscal policy of USA : tall order!

Tue, 02/22/2011 - 17:25 | 986443 trav7777
trav7777's picture

it doesn't matter...the oil peak is going to hyperinflate debt instruments to bupkus.  Instruments relying on a future of more must be discounted.

The reason QE won't work is because it doesn't.  But that hasn't stopped Japan...the math makes the currency go poof if you don't print.

Tue, 02/22/2011 - 17:08 | 986380 johnQpublic
johnQpublic's picture

when the elites have finished looting our country, they will simply take their ill gotten gains and move out of country

going mobile

see the police and the tax man miss me,i'm mobile

why do you think gwb bought land in paraguay

 

just so long as the dollar remains king til allied comes and gets their shit packed

Tue, 02/22/2011 - 17:17 | 986406 DoChenRollingBearing
DoChenRollingBearing's picture

johnQ,

I have not seen ANY other references to the alledged Bush purchase in Paraguay for some two years.

Do you have any links with newer info?  That would be of interest to me.  Thanks in advance!

Tue, 02/22/2011 - 17:19 | 986415 wawawiwaa
wawawiwaa's picture

If I get a fake british accent can I get on TV too?

Tue, 02/22/2011 - 18:44 | 986688 gwar5
gwar5's picture

We'll we've been figuring on the USD losing reserve status since it was obvious Bernanke was strictly taking a one way trip with his printing press. This will be his legacy.

The drum beats are beating and getting closer for an end to the USD WRC. Buy gold and the lion sleeps tonight.

Tue, 02/22/2011 - 18:51 | 986709 sellstop
sellstop's picture

It is not so much that "we've had this figured out all along", but now is when the general public is going to start figuring it out.

This link was advertised on CNBC today.

http://www.stansberryresearch.com/pro/1011PSISBBVD/OPSIM222/PR

Today felt like one of those pivotal days.

gh

Tue, 02/22/2011 - 19:05 | 986741 Rainman
Rainman's picture

Riots have a good habit of arousing the attention of the vidiots....like, WTF is going on, man ?? 

Tue, 02/22/2011 - 21:04 | 987030 penisouraus erecti
penisouraus erecti's picture

Probably because it takes away from the american idol viewing time

Wed, 02/23/2011 - 03:51 | 987849 StychoKiller
StychoKiller's picture

You know it's gonna be a bad day when:  They're showing emergency exit routes from the cities on TV! :>(

Tue, 02/22/2011 - 22:16 | 987201 cranky-old-geezer
cranky-old-geezer's picture

Folks, I believe we're witnessing a seachange (if you understand the significance of that word).  For the first time people in high places calling for removal of WRC status from the US dollar. 

If you live here in America you don't want that to happen.  If it happens the dollar will collapse. You're looking at $10 - $15 per gallon gas ...until it goes higher.

 

Wed, 02/23/2011 - 00:06 | 987528 palmereldritch
palmereldritch's picture

They brought the USD into the world as the Reserve Currency so they feel that they are entitled to take it out too...this restructuring is just post gold standard 70’s style stagflation redux with the concomitant pop of an oil shock that makes  the merry go round for the next WRC.  This time a global fiat private central bank with a global IRS!
...to be named in a dramatic reveal not unlike Steve Jobs, I suspect.

“And just one more thing...”

http://www.rightsidenews.com/2011021112812/us/politics-and-economics/imf...

http://www.presstv.ir/usdetail/164779.html

I think I’ve seen this picture before.

Can you say SDR/Bancor bitchez?

Wed, 02/23/2011 - 01:22 | 987683 web bot
web bot's picture

This has to be the most under reported, but globally significant comments of the day.

Putting aside the sheeple rage, El-Erian and Gross are intellectual giants in their field. For this to be in the MSM... should tell you something about the future. 

Wed, 02/23/2011 - 03:55 | 987851 StychoKiller
StychoKiller's picture

Someone call a Doctor!  web bot has OD'd on "Scamagain!"

Wed, 02/23/2011 - 10:44 | 988224 Buyemall
Buyemall's picture

Question mark on the usd relative weakness against the euro by mr el erian.

Is it that the current situation is not about the oil/commodities against the usd but a straight appreciation of price in dollar terms, or is it that there is no point in looking for quality between these two currencies anymore?

Do NOT follow this link or you will be banned from the site!