Nothing like tuning into Turner Classic Movies to find the 1936 film “Things to Come,” a version of the H.G. Wells’ novel about a post-World War collapse of Western civilization and rebuilding efforts through that year.
Not very cheery…and neither is the following…
We touched on Timothy Geithner’s “slip” about the dollar, but this article for yesterday’s Guardian details how the proposal China has put forth for a new role for the IMF (International Monetary Fund) is gaining ground. And the RIA Novosti news outlet (government run), is reporting that Russia wants a conference that will remove the dollar as the world’s reserve currency.
From The Guardian:
Thursday 26 March 2009 14.42 GMT
The dollar drops back as China’s proposal for an IMF alternative gains ground
Russia plans to hold an international conference to discuss the creation of a global currency to replace the dollar.
According to the RIA news agency, Andrei Denisov, Russia’s first deputy foreign minister, said: “This proposal is aimed at a practical realisation of the idea about a new global accounting unit or a new global currency. It is a question that should be discussed to create a consensus.”
Denisov’s comments came only hours after the US treasury secretary, Timothy Geithner, shocked the markets by saying Washington was open to the idea, though he later qualified his remarks.
The debate about a global reserve currency run by the International Monetary Fund was sparked by a proposal from China this week.
China’s bold proposal has been made before by independent economists, but it has until now met with resistance from the US and other countries with large dollar holdings. Zhou has acknowledged that such a shift could take a long time.
Zhou says it could “take a long time” but if you heard Peter Schiff last night on the Jerry Doyle show, you would have heard him say that China alone can do the job. They’ve already expressed doubts about U.S. Treasury bonds and we reported a couple of days ago that they are not going to be purchasing any more.
Just yesterday a talking head on FOX’s Shepherd Smith show predicted that the dollar wouldn’t be replaced as the world’s currency at the G-20 meeting, but the agenda of that meeting on April 1-2 sounds an awful lot like what’s coming out of China and Russia. See our prior posts for details (below).
We also covered the Steve Clemons’/New America Foundation-sponsored Economic Policy Symposium held yesterday in D.C. which featured Laura Tyson and George Soros. Unfortunately, every browser I tried crashed repeatedly as I tried to listen and also when I tied to click through the link below to see the agenda.
I guess we have to be satisfied for now with a summary of sorts by someone I know nothing about, a certain Douglas Rediker, which was posted yesterday after the forum was over. But I still would love to be able to read/listen to whatever is on the site, without it crashing!
Here’s an excerpt from Rediker’s short post…I suggest reading the whole thing because it has some hard numbers of interest. He takes a different view than Schiff does on what China can do or will do, but the warning is clear (my bolding):
At this morning’s superb economic event at the New America Foundation and in testimony before the Senate Foreign Relations Committee yesterday, there was a lot of discussion about China’s recent proposal to consider a move away from the US dollar and towards the use of a new “super-sovereign reserve currency.” The intention according to China’s central bank governor, Zhou Xiaochuan, would be to ultimately “create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run.”
…The short term risk is not that China is about to dump its dollar holdings. Rather, it is the trading floors and fund managers around the world, whose job it is to be ahead of the curve, who may well start to re-weight their holdings on the marginally increased probability that this re-weighting might actually occur in the future. As the numbers above suggest, even a relatively small shift could represent a meaningful shift of capital and resulting impact on the dollar’s value.
There are, of course, multiple forces at work in foreign exchange markets and, among the sure-fire ways to lose money in this world are: 1) to play currency markets and 2) to bet against the US and the US dollar. Nevertheless, the fact that this is now likely to be a discussion topic on the agenda for the London Summit, suggests that the US should not take for granted that the US dollar will retain its current role in the world forever. Currencies are traditionally viewed as a reflection of a country’s economic strength. The US cannot lose sight of the crucial role that the “exorbitant privilege” to print the world’s currency provides and do what it can to ensure that this privilege is not lost. We can’t take anything for granted.
Feeling better now? I’m not…
The Scanner–International Edition, March 24, 2009: Say Goodbye to the Dollar? China, Russia Proposing a New World Currency for “Non-Credit” Based Economies, Echo G-20 Agenda of Expanding IMF; China Will “Consider” Buying IMF Bonds; 10th China Develpment Forum Underway (UPDATE 1X–Geithner Supports China Proposal??)
The Scanner-Politics: March 25, 2009 (G-20; Glenn Beck’s “The One Thing” Segment on the Dollar [Video]; “The Big Takeover”; Al Gore Releasing New Book on Election Day 11/3/2009; Augie the Dog Sends a Deposit to the U.S. Treasury)
A Reminder: Live Streaming of the First “Bernard L. Schwartz Economic Policy Symposium” Today (3/26) With a Rather Interesting Group & Agenda (To End “Fumbling” on Economic Policy)
Filed under: Current Politics | Tagged: "Things to Come", Andrei Denisov, China, Douglas Rediker, First Deputy Foreign Minister of Russia, FOX News, G-20 summit, George Soros, global reserve currency, H. G. Wells, IMF (International Monetary Fund), Jerry Doyle Show, Laura Tyson, New America Foundation, Peter Schiff, RIA Novosti, Russia, Senate Foreign Relations Committee, Shepherd Smith, Steve Clemons, The Guardian, Treasury Secretary Timothy Geithner, Turner Classic Movies, U.S. dollar, Zhou Xiaochuan | 15 Comments »