Baseball91's Weblog

July 6, 2009

Those Milwaukee Bucks

The story over the next 3 years will be about the value of the U S dollar.

If drugs continue to be injected which mask symptoms rather than address the disease (medicine in the form of debt destruction), the likelihood of a seismic readjustment increases in kind, writes Todd Harrison, about the dollar. “As governments take on more risk—as they price assets on behalf of the market and transfer debt from private to public—the common denominator, or release valve, becomes the currency.” Asset classes will, as a whole, deflate, and my economic condition measured in greenback will appreciate. And so will my taxes. To pay for it all.

The seeds of discontent have been sowing under the surface for years, with the greenback off 30% since 2002.

With quantitative easing came a concern for flight of capital from the U.S. A position paper was written by the Federal Reserve a few years back, discussing the option of a two-tiered currency, one for U.S. citizens and one for foreigners.

Joining the growing chorus questioning the U.S. dollar’s unofficial position as global reserve currency, in India, chairman of the Prime Minister’s Economic Advisory Council, Suresh Tendulkar, is urging India to diversify its foreign-exchange reserves and hold fewer dollars, according to Bloomberg News.

Zeng Peiyan, the head of China Center for International Economic Exchanges and the former Chinese Vice-Premier, in a speech in Beijing on Friday called for a new system to ensure the stability of the major reserve currencies. China Daily reported.

Tensions mounting between the People’s Bank of China’s economic concerns over China’s holdings of dollars, with the earlier call by central bank chief Zhou Xiaochuan for the development of a new super-sovereign currency largely taking the place of the dollar, and the Chinese government, with their “diplomatic reasons” for toning down their criticism, said Stephen Gallo, head of market analysis at Schneider Foreign Exchange. The Chinese government is still more happy to play to the tune of the Bernanke-Geithner camp which sees leaning against the wind in order to protect the U.S. dollar as a necessary evil,” Gallo said.

There is a palpable likelihood that the global balance of powers will fragment into 4 primary regions: North America, Europe, Asia and the Middle East, with ramifications which would manifest through social unrest and geopolitical conflict, writes Todd Harrison at Marketwatch.com.

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