Russia-China Proposals; “Rebalancing” Global Currency Reserves: Why the U.S. Can’t Take Anything for Granted Re: the Dollar

~~By InsightAnalytical-GRL

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

Global currency flies with push from Russia and slip from Timothy Geithner

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.

snip

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):

http://www.thewashingtonnote.com/archives/2009/03/rebalancing_glo/

Rebalancing Global Currency Reserves

Thursday, Mar 26 2009, 2:05PM

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.”

SNIP

…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…

***

Related Posts:

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)

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)

~~By InsightAnalytical-GRL

We looked at the upcoming G-20 meeting in yesterday’s post (See: 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), and lo and behold, a few times during the day, I began picking up some items on the TV discussing the meeting, which will be held in London April 1-2.

I caught a few moments of Shepherd Smith on FOX during the afternoon, interviewing a woman who ticked off all the reasons why the dollar wouldn’t be replaced as the world’s reserve currency at the meeting. The discussion was in the context of how it would affect the U.S. economy and how complicated it was, and that’s why it wouldn’t happen. China’s worries about its investments in U.S. Treasury bonds was mentioned and their desire for the dollar to be dropped as the reserve, but the EU was supporting the U.S. There was absolutely no mention of Russia and its release suggesting what China suggested.

Apparently, Glenn Beck wasn’t so circumspect during his morning radio show or his FOX TV show later in the afternoon.  I didn’t hear either but my mother said he sounded EXACTLY like what we had written in our post yesterday.  Since I had printed it out for her to read, she knew what was in it.

Well, what he opined wasn’t EXACTLY what we wrote about, but he touched a whole bunch of bases in giving a general “history” of how we have gotten to where we are today.  It’s like “From Biggest Lender to Biggest Borrower 101.”  Apparently Glenn Beck and IA are on the same page, at least on this one topic.  That’s a bit weird for us, since I think Beck is pretty insufferable, to say the least, but I think the “The One Thing” segment he did yesterday evening was pretty darned clear. This is a very short segment, so do watch it all! (Note: I had trouble inserting the video from the FOX site, so I found it on YouTube. The “title” comes from FOX, however.)

The One Thing

— By Glenn Beck

The incredible shrinking dollar: Where’s the outrage?

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A big hat tip to Uppity Woman who posted about the story by Matt Taibbi in Rolling Stone which actually comes out and talks about the “revolution” that is underway courtesy the big insiders.  Go to Uppity Woman to catch some of the excerpts of note.

And here’s the direct link to the piece:

The Big Takeover

The global economic crisis isn’t about money – it’s about power. How Wall Street insiders are using the bailout to stage a revolution

***

Well,  just in time for the 2009 election is…Al Gore, who issued a press release yesterday about a follow-up book to An Inconvenient Truth.  I loved the film and got a copy of the book as “payment” for my efforts in the not-so-long-distant past at a certain Chicago-based website that went crazy last May.

From the blog, Al Gore:

Our Choice March 24, 2009 : 1:07 PM

From the Press Release:

Today Vice President Gore announced that his next book, Our Choice, will be published by Rodale in the US and by other publishers internationally on November 3, 2009. Picking up where An Inconvenient Truth left off, Our Choice utilizes Mr. Gore’s forty years of experience as a student, policymaker, author, filmmaker, entrepreneur and activist to comprehensively describe the real solutions to global warming. A co-recipient of the Nobel Peace prize in 2007 for his environmental work, Mr. Gore continues to make sense of the pressing issues we face and Our Choice will unquestionably inspire and rally those ready to fight for solutions that were deemed impossible only a short time ago.

I was really ticked when the guy who delivered those stirring speeches about the press and the Constitution during the Bush years turned around and chose to endorse Obama instead of remaining a statesman for the world by staying neutral–the same Obama who took all that money from Exelon and rewrote a nuclear safety bill to please his donors and the Republicans.

So now, Gore will inject himself into the 2009 elections as all the PR push for his book in the period leading up to its Election Day release.  He’s been pretty quiet since the Inauguration and hasn’t talked about energy policy at all, although he’s supposed to be some sort of adviser to the Obama Administraiton.  Elections for governor will be held in Virginia (where Terry MacAuliffe is currently running for the Democratic nomination) and New Jersey (where Democrat Jon Corzine may be facing re-election troubles).  Frankly, I view this “book business” as manipulative and cheesy. And so damned obvious…

***

Finally, on a lighter note…

Augie the Dog and his owner make a statement of sorts about money.  I think it’s appropriate that the bag displayed near the end of the video will be going to the Treasury…Follow this  link and enjoy!