Dollar loses reserve status to yen & euro

Ben Bernanke's dollar crisis went into a wider mode yesterday as the greenback was shockingly upstaged by the euro and yen, both of which can lay claim to the world title as the currency favored by central banks as their reserve currency.

Over the last three months, banks put 63 percent of their new cash into euros and yen -- not the greenbacks -- a nearly complete reversal of the dollar's onetime dominance for reserves, according to Barclays Capital. The dollar's share of new cash in the central banks was down to 37 percent -- compared with two-thirds a decade ago.

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Fed boss Ben Bernanke may be forced to raise rates in order to restore faith in the dollar — and help bring the euro and the yen back to earth.

Currently, dollars account for about 62 percent of the currency reserve at central banks -- the lowest on record, said the International Monetary Fund.

Bernanke could go down in economic history as the man who killed the greenback on the operating table.

After printing up trillions of new dollars and new bonds to stimulate the US economy, the Federal Reserve chief is now boxed into a corner battling two separate monsters that could devour the economy -- ravenous inflation on one hand, and a perilous recession on the other.

"He's in a crisis worse than the meltdown ever was," said Peter Schiff, president of Euro Pacific Capital. "I fear that he could be the Fed chairman who brought down the whole thing."

Investors and central banks are snubbing dollars because the greenback is kept too weak by zero interest rates and a flood of greenbacks in the global economy.

They grumble that they've loaned the US record amounts to cover its mounting debt, but are getting paid back by a currency that's worth 10 percent less in the past three months alone. In a decade, it's down nearly one-third.

Yesterday, the dollar had a mixed performance, falling slightly against the British pound to $1.5801 from $1.5846 Friday, but rising against the euro to $1.4779 from $1.4709 and against the yen to 89.85 yen from 89.78.

Economists believe the market rebellion against the dollar will spread until Bernanke starts raising interest rates from around zero to the high single digits, and pulls back the flood of currency spewed from US printing presses.

"That's a cure, but it's also going to stifle any US economic growth," said Schiff. "The economy is addicted to the cheap interest and liquidity."

Economists warn that a jump in rates will clobber stocks and cripple the already stalled housing market.

"Bernanke's other choice is to keep rates at zero, print even more money and sell more debt, but we'll see triple-digit inflation that could collapse the economy as we know it.

"The stimulus is what's toxic -- we're poisoning ourselves and the global economy with it."

Comments:

1. Sorry guys, but you Americans just don’t get it. Your notion of the “fed” still is off? Greenspan, Rockefeller and all the other corrupt guys made you get to ands tay where you are...
If you think it was Obama, regardless of whatever else is wrong with him, then you are still narrow minded un-intellectual stereotypical Americans. Going blind thru decades of being used and now after only 10-months of Obama it should be all his fault.
On this newspaper I thought i would find more interesting comments but i see that the USA/fed republic is still blinded.

I feel sorry for you guys. The world is changing and the problem is not republican or democratic... its that the USA/ America who cannot believe that its not cool anymore to be American and all the other world is not using stars and stripes on t-shirts anymore. How awful the rest of the world is making their own game without the USA; step by step. It started with the euro and will end with a weak dollar.

Doesn’t the CIA report that the weak dollar is the biggest terror fear for the USA?

Its a matter of time till the last guy will see it on the dollar currency.

Cry load America. nobody cares out there. Its time to get rid of American terrorist governments including their war politics.

You need to change… And you need to look at the Fed, Bernanke, Greenspan, the Rockefellers, Gaithner… all of them. Wake-up of parish!

2. Look at it this way. Average business men have been predicting this crash since the mid 90's. The smartest economists on the planet have been in charge. Is it not obvious that all this was planned? Does it not make you wonder who is really in charge? You want to fix this? Vote against anyone the D's and R's run, especially if they're backed by a Party. They are all bought and paid for. Come on, if you have "Billions" you can buy anyone! Don't elect professional politicians! We need smart businessmen who VOW to protect the constitution and return America to Americans. Term Limits, Term Limits, Term Limits! No more than 8 years at ANY level of government. AND being a government employee should be a bottom feeder job. Why do they all have 100% paid health care when WE their EMPLOYERS can't afford it ourselves. Look it up on the net. Average pay for Gov. employees. It's ridiculous! What our nation needs right now are people who know how to bring a failing company out of the red. At the same time we need to realize there is a very large group of dumb people out there that think their check is in mail. What's happening in California right now is the movie trailer of what's coming for all of us. Oh ! and you right wing born againers better rethink the logic about only voting for someone because they "SAY" they're against abortion. Vote for the rights of America and the rest will come in time. By not voting you let this hack scum bag get in the W.H.. You should all be ashamed.

Comment on Whodunit? -

1. Any time that there is something very fishy going on in the financial world, you can bet that George Soros - son of satan - has his dirty rich hand in it. After all, he financed Obama's campaign and paid billions to ACORN, SEIU and other organizations to help get Obama elected. Soros also was most likely behind the 2008 financial crisis. He did the same thing in England a few years ago.
Remember that McCain was ahead in the polls before that happened? Rahm "dead fish" Emanuel even says, "can't let a good crisis go to waste."

2. If what you have surmised about the gold traders is true, sounds like they are more likely gold TRAITORS to America. Add them to the heavy list of traitors to our nation - including the current bogus POTUS, Congress, The Supreme Court, and the courts throughout the land who refuse to take the Obama ineligibility lawsuits to trial.

Apparently, money talks. If that doesn't work, them Obama thuggery takes over the task.

God help our nation - only He can rescue us from the Marxist tyranny being inflicted upon us by our current gangster government.

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Whodunit? Sneak attack on U.S. Dollar – Updated

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Glenn Beck on the Demise of the Dollar?…

The Independent (UK) is reporting that Arab states are in talks to work towards the end of using US currency for oil trading. Especially troubling when this movement is coupled with the Obama global apology tour and the UN's call for a new global reserve currency. The rest of the globe is making a power play, and they are trying to knock us down a peg or two...or ten. Glenn talks about what this attack on the dollar means for you. (Transcript of discussion on Glenn’s Radio Show)

In this video commentary Dick Morris discusses how the United States, at the G20 conference, put itself under the guidance and, ultimately, control of the International Monetary Fund even as it succeeded in turning more power in that organization over to debtor nations. The Declaration of Independence is being repealed before our eyes.

To access the video - Go here!

The demise of the dollar

In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

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The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.

Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.

Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.

By Robert Fisk - Tuesday, 6 October 2009

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Proposals on New World Currency

Russia and China are coordinating proposals on a new global currency that could replace the US dollar as a reserve currency to prevent a repeat of the global economic crisis, the Kremlin said on Monday.

"We have received proposals from our colleagues in China, detailed proposals," President Dmitry Medvedev's top economic adviser Arkady Dvorkovich said. "Our positions are very similar.

"We have similar positions on the development of the international financial architecture," he told reporters.

Ahead of the Group of 20 summit in London later this week, the Kremlin has published a raft of proposals to overhaul the global economic order, including plans for a supra-national currency that could replace the US dollar.

China has come forward with similar ideas.

US President Barack Obama has said he does not see why the dollar should be replaced and British Prime Minister Gordon Brown said the summit would have more immediate issues to discuss.

"So far, not everybody is ready for that," acknowledged Dvorkovich. "We will insist on that at all levels."

Medvedev has said the international community should have a say when the world's richest countries make decisions with global implications, as in the US financial crisis, sparked by the collapse of the market for subprime or higher risk mortgages.

Moscow also understood however, that many countries were not ready to undertake additional "political obligations," said Dvorkovich, expressing hope that major economies would at least be open to consultations on the subject.

Dvorkovich said he hoped Russia and other major developing economies would also get an equal say and the attention they deserve during the G20 meeting.

"We are hoping that our voice will be heard but I would like to stress that we do not have a desire to pit our voice against that of our partners," he said, referring to developing economies Brazil, India and China who join Russia in what is known collectively as 'BRIC.'

"There will be no separate joint (BRIC) communique, nor should there be," Dvorkovich said. "This is the summit of the leaders of the G20 countries."

Critics have suggested China and the United States, whose economies are closely intertwined, would likely steal the show by promoting their own agenda and turning the G20 forum into a 'G2' summit.

Dvorkovich said the US and China would have ample time to discuss bilateral issues on the summit's sidelines

Separately, Dvorkovich said Medvedev would meet Australian Prime Minister Kevin Rudd on April 1, just before the summit. Medvedev was also scheduled to meet US President Barack Obama, China's Hu Jintao and Britain's Brown that day.

Source:  AFP

Posted:  Daily Thought Pad - Proposals on New World Currency

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