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)

Democratic Delegates Should See Gore Vidal’s “The Best Man” (1964) Before They Make Their HUGE MISTAKE Tonight…

Late on Sunday night (August 24), Turner Classic Movies aired “The Best Man,” the 1964 film based on Gore Vidal’s 1960 play about a power struggle for the Presidential nomination. The movie stars Henry Fonda playing Secretary of State William Russell, an intellectual in the Adlai Stevenson mode (Vidal said JFK was part of the blend) and Cliff Robertson, who plays Joe Cantwell, a brash Senator running as a populist who is maneuvering to stop Russell from winning the nomination (some reviewers think he’s “Nixonian.”)

Neither candidate has enough delegates on the first ballot, so watching this film is like experiencing “deja vu all” in many ways.

Along the way, the viewer witnesses all sorts of political shenanigans, which includes the hiding of a broken marriage, an attempt at blackmail through the threat of revealing a medical history of one candidate, and the revelation of the homosexual past of the another. (Cheating on a wife, however, is of little consequence in the scheme of things, unlike today.)

There are some great lines in this flick, many coming from the dying former President Hockstader who is reinvigorated by the battle for his endorsement; at one point he says, “There’s nothing like a low-down political fight to put the roses in your cheeks!” One of the best scenes involves  Hockstader and Cantwell.  Cantwell, who believes the ends justify the means of getting into office, including taking his positions based based on polling, is told by Hockstader that “there are no ends, Joe, only means.”  Hockstader also tells the stop-at-nothing Cantwell that if he begins to believe his own “myth” and then gets to the Oval Office without having any real ideas of his own, he’ll be creating a recipe for disaster. As the plot unfolds and Cantwell threatens to reveal a secret from Russell’s past, Hockstader has another great line: “It’s not that I mind your being a bastard. . . . It’s your being such a stupid bastard, I object to.”

At another point in the film Hockstader, reflecting on how times have changed since his campaign days,  observes that when he ran “you had to pour God over everything, like ketchup.”  Back in 1960, the issue of Kennedy’s Catholicism came up, but today, we’re really back to the “ketchup” days with religious groups being pandered to by the Democratic Party like never before.

Howard K. Smith, then a real network anchor, appears in the scenes covering the Convention which makes it seem even more realistic.  This is a real rough-and-tumble affair…and the votes swing quickly at the surprise ending. This film sure made me wish that we were back to the old-style conventions! As a kid, I remember Mike Wallace prowling the conventions and the genuine excitement on the floor.  There was much less polish and a damned site more more grit and excitement.

You’ll see how little has changed in nearly 50 years with respect the status of women in the Party beyond the lack of concern over the philandering of a candidate.  Ann Southern plays Mrs. Gammadge, who despite here flighty image, is a savvy women’s leader who knows all the players and knows her own power as she drops hints to the rivals about how they should appeal to women.  But the scene at the pre-Convention dinner clearly displays where the REAL power lies.  During his pre-Convention speech, Hockstader says to the delight of the men in the crowd that after the Party takes care of a couple of constituencies, which includes the “colored” folks,  “then we’ll take care of the downtrodden majority, the ladies” to a roomful of appreciative laughter.

Last on the list then…and last on the list now…So, have we really come a long way, baby???  If you ever get to see “The Best Man” you’ll probably say, “NO!”

If the delegates could tear themselves away from the trendy “eco-food” for a couple of hours before tonight’s fake “roll call” to view “The Best Man,” they might be in for a shock and realize that they could use their power to right a ship that’s taking on water.  But they’d have to really face themselves and be brutally honest about who they’re all falling in line for.   Sadly, as they struggle to stay in the “no-fry” zone and eat their fruits and veggies, they won’t have time to really think about doing the right thing, which tonight  should be nominating “The Best Woman.”

****

SPOILER ALERT

For an excellent rundown on the plot (which doesn’t give away the ending), check out this essay.

If you want to know who actually wins the nomination, check here.

****

For a brief bio on Gore Vidal which explains his family ties to both the Gore and Kennedy families, and his runs for the House and Senate,  see here. Gore Vidal actually ran for Congress in 1960, the year “The Best Man” was first produced on Broadway.  For a picturesof Gore greeting JFK when the latter attended a performance as President-elect, click here.  According to historian Michael Bechloss, Kennedy “blinked nervously at the references to Russell’s infidelities, which he (correctly) presumed to be based on his own.”