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Obama's Former Chief Economist Calls For An End To US Dollar Reserve Status
Authored by Jared Bernstein, originally posted Op-Ed at The NY Times,
There are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?
But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.
The reasons are best articulated by Kenneth Austin, a Treasury Department economist, in the latest issue of The Journal of Post Keynesian Economics (needless to say, it’s his opinion, not necessarily the department’s). On the assumption that you don’t have the journal on your coffee table, allow me to summarize.
It is widely recognized that various countries, including China, Singapore and South Korea, suppress the value of their currency relative to the dollar to boost their exports to the United States and reduce its exports to them. They buy lots of dollars, which increases the dollar’s value relative to their own currencies, thus making their exports to us cheaper and our exports to them more expensive.
In 2013, America’s trade deficit was about $475 billion. Its deficit with China alone was $318 billion.
Though Mr. Austin doesn’t say it explicitly, his work shows that, far from being a victim of managed trade, the United States is a willing participant through its efforts to keep the dollar as the world’s most prominent reserve currency.
When a country wants to boost its exports by making them cheaper using the aforementioned process, its central bank accumulates currency from countries that issue reserves. To support this process, these countries suppress their consumption and boost their national savings. Since global accounts must balance, when “currency accumulators” save more and consume less than they produce, other countries — “currency issuers,” like the United States — must save less and consume more than they produce (i.e., run trade deficits).
This means that Americans alone do not determine their rates of savings and consumption. Think of an open, global economy as having one huge, aggregated amount of income that must all be consumed, saved or invested. That means individual countries must adjust to one another. If trade-surplus countries suppress their own consumption and use their excess savings to accumulate dollars, trade-deficit countries must absorb those excess savings to finance their excess consumption or investment.
Note that as long as the dollar is the reserve currency, America’s trade deficit can worsen even when we’re not directly in on the trade. Suppose South Korea runs a surplus with Brazil. By storing its surplus export revenues in Treasury bonds, South Korea nudges up the relative value of the dollar against our competitors’ currencies, and our trade deficit increases, even though the original transaction had nothing to do with the United States.
This isn’t just a matter of one academic writing one article. Mr. Austin’s analysis builds off work by the economist Michael Pettis and, notably, by the former Federal Reserve chairman Ben S. Bernanke.
A result of this dance, as seen throughout the tepid recovery from the Great Recession, is insufficient domestic demand in America’s own labor market. Mr. Austin argues convincingly that the correct metric for estimating the cost in jobs is the dollar value of reserve sales to foreign buyers. By his estimation, that amounted to six million jobs in 2008, and these would tend to be the sort of high-wage manufacturing jobs that are most vulnerable to changes in exports.
Dethroning “king dollar” would be easier than people think. America could, for example, enforce rules to prevent other countries from accumulating too much of our currency. In fact, others do just that precisely to avoid exporting jobs. The most recent example is Japan’s intervention to hold down the value of the yen when central banks in Asia and Latin America started buying Japanese debt.
Of course, if fewer people demanded dollars, interest rates - i.e., what America would pay people to hold its debt - might rise, especially if stronger domestic manufacturers demanded more investment. But there’s no clear empirical, negative relationship between interest rates and trade deficits, and in the long run, as Mr. Pettis observes, “Countries with balanced trade or trade surpluses tend to enjoy lower interest rates on average than countries with large current account deficits, which are handicapped by slower growth and higher debt.”
Others worry that higher import prices would increase inflation. But consider the results when we “pay” to keep price growth so low through artificially cheap exports and large trade deficits: weakened manufacturing, wage stagnation (even with low inflation) and deficits and bubbles to offset the imbalanced trade.
But while more balanced trade might raise prices, there’s no reason it should persistently increase the inflation rate. We might settle into a norm of 2 to 3 percent inflation, versus the current 1 to 2 percent. But that’s a price worth paying for more and higher-quality jobs, more stable recoveries and a revitalized manufacturing sector. The privilege of having the world’s reserve currency is one America can no longer afford.
* * *
Strawman? De-Dollarization goes Domestic...
* * *
Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.
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Yep, they must get the Euro=dollar, this should help.
The cost of losing the world reserve currency status will be much higher than the article assumes.
It would cut the value of the dollar in half. That means everyone in the U.S. would lose half their
wealth. That ain't gonna happen without a fight from the .01%, and by fight I mean 'war'
90%, but otherwise I agree.
Pissing off the bankers and the MIC is bad for your health.
Mayhaps where the .01% and the Cloward-Pivonistisas Diverge, no?
Read the first 175 or so pages of The Rise and Fall of the Third Reich.... Same scenes different names. The bankers and industrialists, the creme de la creme, thought they could control an ever authoritarian megalomaniac.
Dude, you're quickly becoming the voice in my head.
You post what I think.
thanks
Which is exactly why they are "diversified" out of the dollar.
The .01% are invested in things that won't be affected by the dollar's demise or runaway inflation (ie. property, oil, gold, etc.).
What's going to happen when the world starts cashing in those bonds to buy in some other currency? Is Belgum going to buy it all???
It's going to be a blood bath when it hits critical mass....
Not only will it be higher than the article assumes, It'll be more than just half as you're predicting. Shit, even with reserve currency status, the USD has lost 2/3 to 3/4 of its value in the past 15 years as measured by gasoline or gold. Plug the start and end prices into the formula and that says the US rate of inflation over the past 15 years was ~7.5% p.a.
No reserve currency means we can't export our inflation. Our massive deficit hits a lot less hard when it's financed by Treasruy sales spread over a global economy instead of the 20% the US represents. Our current deficit is about 2.8% of global GDP (hey, that looks a lot like the official inflation number!)
Import that inflation back into the US by losing reserve status, and if we just maintain the status quo (we won't), the current defiit will be 13% of US GDP. Every year. And growing. And that's in addition to current inflation. Yeah, just a taaaad bit inflationary. We're realistically looking at inflation rates pushing 20%. Oh, you want to raise interest to stop that? Good luck with servicing the current $17T debt.
We're about to enter the 1970s 2.0, the post-Bretton woods phase. Remember, we fucked the world back then by closing the gold window, and this time we do it by dumping reserve status.
A few little factoids for those of you who missed those glorious years:
Gas, 1970: $0.36 1980: $1.25 (+247%)
House, 1970: $26.6K 1980: 76.4K (+187%)
Milk, 1970: $1.15, 1980: $2.16 (+87%)
Gold, 1970: $35, 1980: $615 (+1657%)
The ten-year average is around 12% inflation or so -- meaning the 13% number based on the deficit probably isn't a bad lowball estimate, and 20% isn't insane. Except this time, we're not going to be seeing 15% yields because it would blow up the banks, and we're not seeing wages increase to keep up, either. ZIRP is out to fuck anyone that saves or earns money. Here's your fucking wealth tax.
Let's see what the world looks like in 2024, then:
Gas will be about $10 a gallon (assuming supply and demand stay constant)
Median house price is $600K. (remember, little to no wage increases. We're probably looking at multifamily households and interest-only loans as the norm.)
Gold would be at $3400 (same assumptions as gasoline.) If you put the current price of gold ($1270) in a bank savings account at the current return (0.05%) you'll earn $6 in interest by 2024, while the purchasing power will be roughly 30% of what it is today.
Prepare.
thanks for the info
very interesting....
Very concise and clear analysis. Unimaginable consequences!
no shit columbo... and to you, what the fuck is acting for years....
Lets see know why not say we want de dollarixation before every quites using the dollar so we can say thats what we wanted. Is this because Putin wont start WW3 so we can blame him for our collapse? Looks like something big is comming
Lets see know why not say we want de dollarixation before every quites using the dollar so we can say thats what we wanted. Is this because Putin wont start WW3 so we can blame him for our collapse? Looks like something big is comming
Fuck you and the horse you rode in on... Everything's a burden when you have to make up numbers every week. What's the matter? You can't lie anymore.. Your friends and peeps I. The press are asking questions about your bullshit? Don't say this... Tell the truth .. You suck, Krugmab sucks and everything you we're taught and you foisted upon us Americans is wrong ... What's that? Crickets? Fuck you!
But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles.
This is impossible for me to get past. New research. Give me a fucking break. This is total disgusting bs and somone should ask for the white paper research that doesn't exist. Someone writing an opinion paper is not research. The loss of reserve currency status will be the single worst thing that could happen to our economic outlook. Bar none. How about first cutting the government spending to zero you dumb prick. Instead you backed the mf'er who doubled out debt in six years. There is a special place in hell for people like this littel dipshit.
Research must be based on Common Core.
yes ...no kidding. It is like.....OK, we are going to loose the Petrodollar...lets talk to our PR team and ask them what to say....The PR team says "just pretend that you really didn't want it anyway...because you have lost it and you are falling into disrepair but just say...it is a bag of shit and it has been a burden and thank's to stupid China..they can take it and run with it".That works.
Cutting loose King Dollar is just another correlate of cutting loose the American middle class. Sink or swim, baby....
The decision-makers are well-hedged.
Reposted from:
http://2012portal.blogspot.ca/2014/09/planetary-situation-update.html
Monday, September 8, 2014Planetary Situation Update
Clearing of the Chimera group is proceeding according to the plan. The focus is slowly shifting from the removal of strangelet bombs towards dealing with top quark/antiquark condensate anomaly.Negative scenarios of the strangelet explosion predicted in the following link:
http://cerntruth.wordpress.com/2001/10/10/totalitarian-principle/ have mostly been removed.Most of Chimera entry/exit locations have been cleared, with two remaining Chimera strongholds being Long Island and a classified central European location. Long Island is the location of past Montauk space/time anomaly experiments, of Cold Spring Harbor cloning lab and of Brookhaven National Laboratory. Brookhaven was a major entry point into a system of underground tunnels and caverns that spread below the majority of Long Island going towards New York. That subterranean area was a prime underground real estate sought after by various extraterrestrial races and various factions, both positive and negative ones. This is where I have seen an Andromedan ship in a hangar back in 1977. Brookhaven is also the location of Relativistic Heavy Ion Collider (RHIC), where the Chimera want to start production of strangelets: http://www.science20.com/news_articles/have_strange_baryons_been_found-142927 Although the Black Nobility Archons keep losing power daily, their Jesuit minions keep infiltrating the Eastern Alliance and the Dragons, hoping to create a new world war between the East and the West. Their plans will not be successful, as key people within the Eastern Alliance and the Dragon groups are well aware of the infiltration. It is interesting to note that people in countries of the BRICS alliance have the most positive outlook on their life from all countries on this planet, according to this poll:
http://www.ipsos-mori.com/researchpublications/researcharchive/3369/People-in-western-countries-pessimistic-about-future-for-young-people.aspx
This indicates that something positive is going on there.
The Eastern Alliance is proceeding with its plans to dismantle the petrodollar system: http://www.examiner.com/article/jim-willie-saudi-s-are-on-the-verge-of-joining-russia-non-dollar-oil-sales The cracks in the matrix of the financial system of the Cabal are already appearing. First, the cyber attacks on the JP Morgan bank: http://www.forbes.com/sites/leoking/2014/08/28/wall-street-cyber-smash-triggers-fbi-investigation/ http://www.bloomberg.com/news/2014-08-27/fbi-said-to-be-probing-whether-russia-tied-to-jpmorgan-hacking.html JP Morgan is the banking institution where the central server of the financial system is located and the Reset will be triggered from there. Cyber attacks on the banks of the Cabal are constantly ongoing and will increase: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10359563/Every-minute-of-every-day-a-bank-is-under-cyber-attack.html http://spectrum.ieee.org/aerospace/military/electromagnetic-warfare-is-here On the other hand, there are pockets of Light already appearing within the financial system: http://peoplestrusttoronto.wordpress.com/2014/08/09/over-100000-homeless-people-have-been-moved-into-homes-it-isnt-stopping-there-one-of-the-most-profound-movements-ever/ http://incyprus.philenews.com/en-gb/Blogs/4324/42658/guaranteed-minimum-income-approvedhttp://www.vice.com/en_uk/read/a-german-guy-wants-to-give-you-a-bunch-of-money-for-nothing
Planetary meditation initiative did not trigger a response the Light forces were anticipating. I hope people like Deepak Chopra, David Wilcock, Ram Dass, Oprah, Eckart Tolle, Children of the Sun, Drunvalo Melchizedek, Gregg Braden…were contacted as I did not receive feedback from any of them. If a critical mass of people would meditate even for 5 minutes at the same moment every Sunday, great coherence could be achieved.
Another planetary situation update will follow as soon as certain operations of the Light forces are completed. Disclaimer: Contrary to the predictions of some people, there will be NO major false flag event of the 9-11 proportions, nor in the next few days nor later in the future.Posted by Cobra at 2:00 PM
fuck you witcher
These guys are Nazis.
Occultist Nazis.
Uh huh....
Same process as Germany late 30's
Exactly the same shit
Too late to buy physical?
Something's up, none of these puppets get "truthy" without explicit orders to do so.
Just had a thought, maybe he is pissed cause they have to print 10x the scrizz to have the inflation effects they want, because 90% of it leaves the country?
pods
Hahaahahahahhhahhahahahhahahaahha!
That will go over swimmingly when all the SS/Medicare bills come due!
Pull the other one.
<still laughing>
lolololooooololol.
Wow that one is rich. Almost pissed myself.
pods
You mean like the following pods?
The $205 trillion fiscal gap is enormous. It’s 10% of the present value of all future GDP. Equivalently, it corresponds to 10% of GDP year in and year out for as far as the eye can see. To raise 10% of GDP each year we could (a) raise all federal taxes, immediately and permanently, by 57%, (b) cut all federal spending, apart from interest on the debt, by 37%, immediately and permanently, or (c) do some combination of (a) and (b).
http://dailyreckoning.com/205-trillion-in-unfunded-liabilities/
That is exactly what I mean. :)
pods
For several years, to all those on the far wings of the political spectrum, I've suggested the 50% solution. Not that it will "fix" the problems, but would represent one heel of a start.... but alas and alack, they all find it unacceptable and return to the red/blue nitfuckingpicking...
Take the federal budget (Since about 50% is borrowed)
Cut it on half. (that's where the 50% comes from)
No, I didn't say every program, I said the budget.
OK, here's your finite fixed amount of dollars to spend.
Have fun.
Nobody can handle the idea, meaning nobody is serious about the problem
Works wonder when you start hearing the noise-some blathering about who has the right ideas, energy independence, raising taxes, etc.
Nothing will do it except shrinking the Leviathan.
Nothing
And once they start rattling on about how whateverthefuck will do it, remind them of the 50% solution. They'll say it can't be done, then tell them to STFU
(D) Follow the Greenspan plan "We can guarantee cash benefits as far out and at whatever size you like, but we cannot guarantee their purchasing power."
(E) Let it all go to shit and point the finger at Russia.
The Russians caused this! Their fault! Must attack soon!
http://www.bbc.com/news/world-europe-29109398
MH17 disaster: Russians 'controlled BUK missile system'~~~~~~~
/gag
Given that the U.S. and a couple of other countries just signed a Non-Disclosure agreement so that the details of MH17 are kept secret, I'm thinking that the propaganda campaign didn't work. My guess is that there is ample evidence that pins the blame on the Kiev gov't actors. EIther way, has anyone ever heard of such a fucked up situation as having the US gov't covering up the details of a civilian jetliner crash in a foreign country with a foreign airline? What a bunch of arrogant fucks.
The propaganda is working pretty well on a fairly large number of those who call themselves "true conservatives". I just don't get it how people eat this shit up.
The cheesepope-vampires, having sucked one group of humans dry, are now signaling to each other - time to find another group somewhere else.
That's the problem when you run out of other people's money, all that is left to take is their assets.... and that is coming (why do you think the Fed has been buying Mortgages). or you force the people into servitude (why do you think we now live in a police state), and if all that fails, you cull the herd (why do you think the world is in revolutionary flames, and pandemics) This is all a wet dream for the socipathic elites. When there is nothing left for them to steal from the masses, they will turn on each other. That's when you know the end game is here.
Prisoner: Cell Block H.
That is some stupid shit right there.
It's up there with Mr Freeze does Fukushima. I wonder of there isn't some consulting for Tepco that Jared Bernstein isn't leaving off his CV.
Did someone say: New World Order!
or "Reset"
....couldn't see that comin'.
LOL.
not.
If "Murika" cannot count in dollars, do you really expect them to learn Yuan, Rubles, or even Pesos?
he meant to say - ABOLISH THE FUCKING FED...
..but he really said REPLACE THE FED WITH THE IMF!!
Gee, it's almost as if Drake, Hudess and Neil Keenan are right (rolling eyes.)
Naaaaaaaaaaaaaaaaaaa that's just "tin foil"
Forward really meant Backward.
I think I will raise my Gold Ask to $15,000USD.
Never trust a person who's name ending *stein
Samuel Palestein
George Washingstein
My roomate Mitch Cumstein
-Tye
Or you will end in a big shitstein.
But also beware silverstein and samuel goldbergstein. And goldman sachstein.
Another "former/retired" coming clean.
The government is going to help the middle class.
YeeeeeeeeeeeHaaaaaaaaaa.
Run it up for a couple of days first. Let me get my precious orders in.
Wow, for academics they seem kind of slow. I think the reserve currency problem has been understood for a while.
https://en.wikipedia.org/wiki/Triffin_dilemma
Of course Upton Sinclair noted that "it is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
So it i s no surprise that the Central Bankers have had a hard time with it.
--
WW
Right on WW. Maintaining the reserve currency makes our government feel powerful, our politicians happy, Wall Street delirious, and our middle class disappear.
Kyle Bass interview about killing the dollar still rings.
They've been trying, but the rest of the world keeps propping the mother fucker up, no matter how many holes we poke in it. For some reason people still consider our toxic currency a safe haven. Just look at today, gold and silver down and the dollar soaring. It's a mad world out there.
Those holding oodles of it, like China, aren't going to let it collapse without their savings (denominated in US$) converted to the new currency first. The US can trash the US$, but can't make China (and the rest of the world) accept another currency controlled by the West for their trade.
So it is being managed so that the BRICS countries will have enough say in controlling the value and volume of the replacement (SDR) before letting the USD crash. If they don't get what they want, they will hold the USD up until the BRICS bank is ready and let the USD sink while they announce the BRICS currency for international trade.
Why would anyone want to listen to one of Joe Biden's ex flunkies?
"ex" flunky?
:) my bad
"what was once a privilege is now a burden"
Sounds as plausible as a guy who has polio would scream : "hey take my crutches from me. They keep me from running".
The Reserve Status is the last thing that prevents the red white and blue flag to turn shit brown.
This is the freaking plan.
Jack-up prime banks balance sheets to be the strongest for Basel III - top 20 internationally.
Relativize dollar.
All other institutions fail.
Collapse as much as possible heralding a new International Reserve Currency that sets rates for whomever abides - XDR v2.0.
Meta BIS rules modern industrial economies.
The trick is getting China to go all in.
I just don't think they are going to buy it.
Team Hillary will be the Closers.
It's Obama's job to breed despair in the national economy and otherwise prepare to liquidate all those unapyable baby boomer long term obligations.
You will be lucky to run a hotdog cart in 2 years.
"Team Hillary will be the Closers.
It's Obama's job to breed despair in the national economy "
You can't fault TPTB for not having a sense of humor i.e. They use a 'black guy' to bankrupt the nation and a 'scorned white woman' to ultimately break it. They'll get white male leaders for the next 1000 years.
If the Dems win th election again, I hope the country disintegrates.
If the Reps win, I hope the country burns.
In either event, nuke the Middle East incl Israel. Seriously, would you miss it?
You seem to have anger issues
Perhaps more of the right kind of meds would help
Doubt it though.
China will buy in if it is a win for them. Say, half of Nevada and the rest of the western Federal lands, plus an allocation of US real estate confiscated/taxed as part of the global wealth tax. By the way, please keep your home tidy, in case some foreign 'guests' wish to tour their soon-to-be asset.
who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?
Be careful what you wish for, or you may wind up looking like this guy that everyone ends up hating!!!
Others worry that higher import prices would increase inflation. But consider the results when we “pay” to keep price growth so low through artificially cheap exports and large trade deficits: weakened manufacturing, wage stagnation (even with low inflation) and deficits and bubbles to offset the imbalanced trade.
That's very strange. I "pay" for lower priced stuff by not having a need to produce it myself and all the attendant jobs and payroll I don't have to pay by buying it from someone else.
That's like saying the cost of buying food at the supermarket is that I don't get the satisfaction of having to toil over a garden or in a field to produce my own food. I "pay" for all this free time I have to do what I want.
Holy fuck that's retarded.
Gonna be a lot of "financial" guys blowing apart at the seems soon like a cheap watch. 'specially the guys who walked the straight and narrow for so long. It must really suck not to be able to look outside the box and re-evaluate your "borders", mataphorically speaking. The British have a term for it I believe...."losing the plot". Careful walking around Fraud St, it might be raining banksterz again soon.
I'm grabbin' a bucket of GMO popcorn and some suds.
"new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles."
Ah... I think the burden is the politicians and the FED, it is not our Reserve Status.
When you stink up the economy with free money to banks and billionaires, constipation ensues.
Can't wait for the unwanted enema - it will not be pretty.
William Wics:Of course Upton Sinclair noted that "it is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
Amen. Gonna suck for those who depend on "the skim" for a living.
Ummm. "Peg the value of the dollar to gold and presto poppo" gold becomes the reserve as it always has and always will be!
At what price ?
Back of the envelope says $50k per oz.
That would be my guess
But there's not enough gold! And also gold isn't backed by anything!
/sarc
How bout silver? It can be dug up for $5 though, so maybe not.
How about this ...
1914 - Gold backed dollar issued; same dollar depreciates 98% by 2014 (now worth 2 cents) ...
Gold should go from $28.50 to $57,000.
Or so ... do the math
If they backed with gold it would have to be a small percentage such as 15%.
Yep. $1300 per oz.
I especially like the sentence: " new research reveals"
That is sign of "biggest bullshit online today"
Brilliant ... just Brilliant
dufus finally figures this out after 40 years of offshoring jobs and strip mining the middle class.
Now that US middle class is kaput ... time for "race to bottom" re currency so multi national corps can continue to enjoy big profits (provided by FX gains on overseas earnings)
It's a "burden" to print fiat paper in exchange for foreign products and resources.
It's a "burden" to have foreigners hold piles of depreciating dollars.
It's a "burden" to have the world subsidize the cost of the global Pentagon.
and just for whom exactly is it not a "burden"?
It's a burden not to be a sucker. It's called guilt.
Haha.
Struth, how many times does Barry and the UNCLEAN expect Putin to allow him/ THEM a face saving OUT?
this is the most brilliant piece of economic satire since Swift's Modest Proposal.
"Economic advisor to Joe Biden"?!? LMFAO. You can't make this shit up! What did he advise him on? Rogaine prices?
obviously NOT "Obama's Former Chief Economist"
plugs?
This asshat doesn't have any economics, math or business in his educational background. Music and Social Work - sounds about right for a Biden economic advisor. I wonder if any of the middle class could get a position like this without the correct education. Requirements for thee but not for me.
"Bernstein graduated with a Bachelors Degree in Fine Arts from the Manhattan School of Music where he studied double bass with Orin O'Brien. He earned a Masters Degree in Social Work from theHunter College School of Social Work, and, from Columbia University, he received a Masters Degree in Philosophy and a Ph.D. in Social Welfare."
http://en.wikipedia.org/wiki/Jared_Bernstein
Was that Social Welfare or Social Warfare?
Just give him a NOBEL PRIZE IN ECONOMICS, solve the credential issue if any.
Possibly a prize bestowed on a NEW theory in "Adapting the American Public Toward the New Social Contract in [just fill in the year] Post-EBT And Other Social Programs"
lol. The U.S. would go bankrupt in a year if reserve status was lost.
Interest rates would skyrocket and the $ would be worthless.
P.S. stay out of the "nail gun" aisle when you go to Home Depot.
"The U.S. would go bankrupt in a year if reserve status was lost."
Maybe not. A few years ago Hu said China needed to create 15 million new jobs A YEAR (or else risk unrest) ... still think race to bottom with other countries (they'll still lend to us ... hoo the heck else will buy their junk?)
"Interest rates would skyrocket and the $ would be worthless."
One or the other. If debt denominated in $US. Can "print" till cows come home ... interest rate would be low ... might need a wheelbarrow though going to store ...
tyler, i see what you did there.
honest mistake?
This is propaganda, prepping the 'informed' part of the public for the transition. That way, when the inevitable happens, it will be seen as acceptable and positive, and thus people will more easily accept the explanations for the drop in their standard of living. This is definitely a planned release to direct public opinion.
Not only that, it's NEW YORK TIMES propaganda.
So, I'm now left to wonder exactly what action this is the setup for?
9/11 coming in 3... 2... 1...
That's what makes me so SURE that it's propaganda. NYT only exists as a mouthpiece for TPTB.
I keep on telling everyone you only have until Christmas to get positioned.
Buy PM's before the Shanghai FTZ futures opens on September 26th.
You do not have years here folks, all these resets happen very quickly,with
no warning except to the insiders.This is a warning.
As a reminder,the G20 ultimatum runs out early December 2014.
Either the US gives up GRC status, or it going to be taken away.
Expect a military coup here in its wake.
"New York Times propaganda"
No need to be redundant.
yep ... "they" have sucked all the marrow outta the US bone ... substituting debt for income to the masses can only go on for so long till "no mas"
roberto feeling kinda queezy now ...
Timed no less with the CME announcing new improved rules against market manipulations..........
Look out, the swan is about to turn black.
I think you are dead on correct. It's all about softening the inevitable. Bernstein has been carrying the water for the Obama administration and his economic failures for years now. He is on CNBC more than Becky Quick and constantly has been spinning the piss poor policies of this president.
What a fuckingk Gibbrish. There is not a single line which is true.
The Chinese are forcing down their currency? What a joke.
If hte US Wanted to baalance its trade, it would very very easy.
Bring interest rates to 7%, no one could borrow to consume (no imports) and prices woudl plunge (boosting exports).
Of course that would bankrupt the banks in Wall Street and Bankrupt also teh Gov, but in the long run it would work.
The other way is to ahve the USD conertible at a fixed price by anyone who wants to tender.
Then what would happen is the Foreigners would ask their Gold. At that point in order to retain Gold the Central Bank would need to bring the rates high. After 1847 there was say which was: 7% discount rate at the BoE would pull Gold from the moon.
In order to retain convertibility teh central bank would ahve to keep interest rates positive in real terms. As a result internal prices in the US would not rise, but stay stable or fall a bit. This would stimulate terms of trade and exports. Real positive interest rates would also deter consumption.
realWhiteNight123129,
Excellent Post!
Anyway, I said it before and I will say it again:
When US default, we will be facing something much worse than a financial collapse.
We will be facing a Societal Collapse.
And US Empire won’t go quiet: Prepare for war and civil genocide.
By the way:
Raymond K Hessel is right about SDR, even that Tall Tom doesn’t want to hear it.
Excuse me? It will help if you LEARN TO READ BEFORE MAKING AN ASS OF YOURSELF...
http://www.zerohedge.com/news/2014-09-08/obamas-former-chief-economist-calls-end-us-dollar-reserve-status#comment-5195691
I wrote, "This is a sell out to the Globalists and they are having the US surrender its currency, its sovereignity, and adopt the SDR as the World Currency. But damn it. It is STILL TREASONOUS."
Tom's position is correct. It's his reading comprehension skills with respect to where I was coming from that's his problem.
Escrevement, you're problem is that you're a troll from China or Russia or Cass Sunstein. Either way please go back to trolling HuffPo.
Raymond K Hessel,
From this end here, it seems to me that you have some problems.
One example: Memory
I told you before that I live in America.
And not that I need to remind either of you:
My compensation is in dollars!
Tall Tom
Firstly:
Dollar will still be an US currency.
SDR is a basket of currencies; and that the dollar is part of it.
IMF is headquartered in America.
Secondly:
Directly bi-lateral agreements, that will be more damaging to the US, than SDR, I believe
Thirdly:
None will these matters; wonder why?
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” — Ludwig von Mises
I vote for sooner. My eyes are getting bad and I'd like to see it.
bid the soldier...,
You military is a good point. It will come. But, the military is one, probably the main reason, why Empires collapses.
As well as how a nation became an Empire; but not the point here.
Anyway, the coup, deployment on the streets it’s part of the ‘Complex’ needed to trying sustaining the inequalities, shortages, and the ‘Domestic Population’ away from the throats of the political and economic leaders.
The other important metric (benchmark) is gold.
I believe gold will be the last bubble, but a short lived one. Here is why:
These gold holders, like Central Bankers, will convert gold to jump-start their economies, but soon they will face, I say face because most of these leaders know this already, but, can’t admit it, there won’t be enough oil to grow these businesses.
Here is when, even the low IQ people, will know that their lifestyle, economic security, and their kids future are finished.
All the gold reserves and military coup won’t matter!
I will change my views when I see our leaders addressing these issues. When I see less consumption and saving what we have. When I see more localized solutions.
But I have no Illusions. None of these will happen.
And you can clearly see this, just by reading Zero Hedge.
a
I would say it is the last attempt of an element of the Empire to prevent the collapse.
Then won't il be the last bubble? And btw, I have been saying this since the invasion of Iraq. And since 2009 I have been saying that TPTB have been withholding information from the world that there is much less oil reserves and proven reserves than is acknowledged. The same deceit as the Dutch report on MH17 released today has.
Because the dwindling of the supply of oil is as great a catastrophe for the world's economy as an increase of the sea level of 30 feet, I even suspect that the sup-prime housing bubble was an artificially manufactured crisis by the US government whose intent was to damper the consumption of oil globally, while leaving the US -- with the Feds ability to print money -- in better shape than of the other prosperous nations. But that's another story.
I hope you have something amusing to do while you are waiting.
I totally agree this is BS. This has been discussed at the BIS since the 1960s. Back then the euro was designed to be the replacement reserve. Look what happened.
No change in reserve currency until japan and eu "go greece"... meaning collapse and emerge as a replacement where scared money can go and hide.
A small problem . Military contractors prefer to be paid in a hard currency.
If the $ is no longer a world reserve currency , they might not accept the $ anymore and Really insist on payment .
Something similar happened when Spain went bankrupt during its war in the Netherlands in the 17th century . The mercenaries swarmed and looted over northern Europe for decades.
See http://andreswhy.blogspot.com/2010/05/failed-state.html
Recalculate for Your State
Good luck
Spain went BK investing all their wealth into tulips. The Spanish mercenaries came to loot all those TULIP fields! Going straight to da source of the wealth!
Amsterdam was the center of trade between England and Germany, and to an extent the meeting place for many merchants along the North Atlantic. It was more convenient for Rhine river traffic from Germany (than Antwerp), and easily defensible for a naval power (just sabotage the dykes and turn the country back into an open sea).
You are confusing a reserve currency with a trade currency.
Confusing?
I hate when that happens.
I don't so much disagree with Mr. Bernstein as I agree with others in this string that were bucky to lose its reserve currency status, its value would plummet - and Bernstein admits as much. So, knowing that the 1% (or a fraction thereof) actually run this country/world, would they be willing or anxious to end bucky's rule? I don't think so. I also happen to believe that the underlying reason the U.S. invaded Iraq was to protect bucky. I am surprised the Grey Lady published this as I assume it is a mouthpiece for the 1%.
You are right. But it is a little more difficult to invade China or Russia if they decide to dump the US$. So they are prepapring for a currency regime that leaves them some control while ceding some control to the BRIC nations.
"Carney was a tool but had the largest steel marbles on the block. The “steely” was the most sought after and traded of all the marbles, and Carney was a grand collector. Myths were born from his ability to bully smaller kids into trading their one or two heavy spheres for ten or twenty smaller and bland marbles. At one point I was certain that he had all the steelies in a 1 mile radius.
The afternoon laughter was usually broken by his emergence from the alley and into the field where we kids met every Saturday for the traditional game of marbles. With his girth and weight he would trample the smaller of the lot and settle at the highest edge of the ring.
Everyone hated playing with Carney because you would never win, even if you did. It was a lose-lose proposition which many refused to participate in.
Eventually a small grouping of kids joined together and began to avoid Carney altogether. They would randomly change the location each Saturday and start earlier in the afternoon. With each passing weekend Carney became more upset and angry over missing the games, not because he couldn’t expand his collection of steelies but because he was left out of the game altogether.
A method of separating Carney from his steely collection was soon devised. For each weekend which he wished to play, he had to trade back one large steely for smaller and less valuable marbles. Though not pleased about this at all, his choices were simple now that a group had taken up defense against him. One, he could continue to bully and unfairly trade with the other kids in order to expand his already large steelie collection. Or two, he could trade fairly and still be allowed to play the game with the others.
With the kids no longer divided, Carney’s choice was clear. The feeling of isolation and being left out was more impactful than the feelings of unwarranted reward. For what was the real value of his steely collection if nobody else wanted to play a game that involved them.
Never once in our childhood understanding of events did we question the fact that the real value of the marbles was provided by the parents who would give us the assorted bags and send us on our way. So focused on beating each other and transferring marbles amongst ourselves that we never thought to consider where the marbles were actually coming from.
As we continue on into adulthood there isn’t much that changed. Marbles are replaced with money and we have no idea where it came from. We just seeked to acquire more of it and trade with it."
[...]
Read the rest at philosophyofmetricsThe fat bully got told to leave because no one wants to play with him anymore and he said:
I QUIT!
Tyler - Trade is 1/10 of entire capital flow. What happens when plan A does not work due to not understanding capitial flows? Wash rinse and repeat.....ugg the economists will never learn. Leave nature alone, it will work itself out.
Phantom promises to pay,are phantoms first.
90% haircut is whats coming.
...unless you're already bald
Lol and what comes after dropping the reserve status? hyperinflation and price fixing? this country is going to endup looking like Argentina financially.
We can only hope it looks that good.........
Russia wants to demand payment for oil and gas in Rubles? Hey! That gives me an idea! Let's rename Dollars to Rubles! Problem solved.
Oil trade in yuan or rubles – this is not a rejection of the dollar. It does not change anything for the dollar’s status. This is only a profanation.
Profanation – it is when when trading oil in rubles or yuan, we will be first take the oil price, expressed in petrodollars USA. And then, based on the dollar value of this oil will be determined amount rubles or yuan what necessary to pay for this oil – also of the exchange rate relative to the dollar.
This is a classic cross-rate with the dollar, which quietly stands exactly in the middle between the oil and the national currency, for which this oil is traded. http://s3s.so/iu5 (RUS)
I know. I was just making a joke. Large volume international trade, regardless of the pricing mechanism, often takes place as a virtual transaction with the balance simply being credited and the difference between import/export either being settled, or more likely remaining as a mere record until the beneficiary can figure out what to ask for in return (commodity, property or anything else more valuable than the paper printed out of thin air).
Many things are priced in dollars. Doesn't mean dollars are actually used in the trade. A vendor will go take the USD value, convert it on the fly into local currency and charge the price, applying a margin that's favorable to him (just as you describe).
A country, when conducting trade, may credit another nation as a sign of solidarity. Accumulation of trade surplus or deficit can be done strategically, again, with no money changing hands, just to assist the fixing of interest or influence currency exchange rates on the open market.
silvermail, JuliaS,
So, then, could you please explain to us why:
a) Foreigners hold trillions of dollars in US Treasuries
instead of
b) Purchasing US goods
Anyone?
Most of those trillions were given by Washington to foreign officials and CEOs as bribes and payola and those holders can not explain to their governments where they got so they have to just sit on it.
Happens all the time.
bid the soldier...,
Not quite like that!
a) These nations buy US Treasuries because if they don’t, it will be seen as an attack at the US
b) There aren’t many products made in the US for this much dollars
c) US dependency on about half of its energies from offshore
d) If these dollars stay offshore bidding resources, that too as seen as an attack at the US
The ‘D’ aspect is what is happening. And it will escalate by these nations dumping ‘A’
@ Escrava Isaura
"...
a) These nations buy US Treasuries because if they don’t, it will be seen as an attack at the US
d) If these dollars stay offshore bidding resources, that too as seen as an attack at the US
The ‘D’ aspect is what is happening. And it will escalate by these nations dumping ‘A’ "
Interesting!
I think the c) and d) should be put in one point: "US dependency on about half of its energies from offshore, therefore if these dollars stay offshore bidding resources, that too be seen as AN ATTACK at the US"
about the c) & d) we all know that esp. China is actively using (dumping) her dollars to bid the resources incl energies everywhere... so, is it a clash between the titans?
And of course many oil exporting Arabs must park their oil revenues mainly in the USA (aka. Petrodollar recycle), believe they park the fund in T-bills as well.
burp
Kenneth Austin, has been found dead at his home in kenny bunkport.
his head had been severed and decapitated and cut right off at the neck stump it was rite off
a note left on his rottten carcass stating we are here america isis has landed.
this horror al baggybagdaddi terror comes just 8 hours after the
Chief Economist had Called For An End To US Dollar Reserve StatusThis is pure shilliness for those who support hyperinflation for the peons who get paid in dollars. The author of this idea is a toady to the international interests who want to see the US core Republican values destroyed and replaced with gormless global government. Let the racking of my slide serve as my best response.
This is so stupid. American's benefit from lower interest rates. Housing will tank further when we lose reserve status.
What's also stupid is saying that Fiscal Conservatism without reserve currency is better than Fiscal Conservatism with reserve currency which is what the man implied.
THis is false and Japan and Germany are proof.
This is so stupid. American's benefit from lower interest rates. Housing will tank further when we lose reserve status.
What's also stupid is saying that Fiscal Conservatism without reserve currency is better than Fiscal Conservatism with reserve currency which is what the man implied.
Does that guy now advise ISIL?
This idea is not new.
Robert Triffin (of the 1960 Triffin's dilemma) noted that the exorbitant privilege was really an 'poison privilege' and that was in the 1970s. We have had a long time to digest this and those who's job it is to know...do know.
Ha,ha Europe, you think you can trash your currency? Just watch us in the US! You ain't seen nothing yet!
Bernstein is an idiot! He worked for Biden....just think that you want to prove you are smart...you work for Biden!!!! LOL!!!!
Another present for being "king of the hill"...
4,3,2,1...
But dollar domination has meant decades of massive foreign (over)investment in the US, its companies, real estate, debt etc.
Silicon valley - soon to be silicium valley once again - and Wall Street - soon to be a red light district once again - are but the most famous examples.
I do wonder what happens when you force a diet on a feeding pig. Both the fodder guy and the pig will be pissed. I'd worry most for the pig.