American dollar going under????

jedard

Registered
The following is from the Trumpet for those who are inclined:


Prepare for Dollar Collapse, Warns Ex-Bank of England Policymaker
January 8, 2009
After years of unabashed and reckless borrowing, the chickens are coming home to roost.

Americans must ready themselves for a massive devaluation in the dollar as international investors dump their U.S. assets, says a former Bank of England policymaker. Relying on the kindness of foreigners to finance our standard of living may be about to be revealed as irresponsible folly.
The assumption in modern economics that U.S. government bonds are virtually risk-free investments will soon be relegated to myth as investors lose patience with the world’s biggest economy, according to Willem Buiter.
Disenchanted foreign creditors may be about to head for the exits as proposed “borrow and spend your way out of recession” policies undermine the value of the dollar and faith in the U.S. financial system. The national debt is projected to jump by as much as $2 trillion this year—an unprecedented increase—according to the Washington Post.
Professor Buiter, who is now at the London School of Economics, says Americans need to prepare for the onset of foreign capital flight as investors around the world dump U.S. assets.( Hooray Hooray )

“There will, before long (my best guess is between two and five years from now) be a global dumping of U.S. dollar assets, including U.S. government assets,” says Buiter. “Old habits die hard. The U.S. dollar and U.S. treasury bills and bonds are still viewed as a safe haven by many. But learning takes place.” ( Pay back time for all those Freidmanites )

According to Buiter, recent U.S. debt additions and the trillions in banking-sector guarantees, coupled with the proposed future economic stimulus spending, means that there is no legitimate way in which the government will be able to meet its liabilities.
Buiter says the government will inevitably choose to create whatever money it deems necessary to cover its spending needs. “The only alternative is default on the federal debt,” he says. ( just like they forced Argentina to do)

“There is little doubt, in my view, that the federal authorities will choose the inflation and currency depreciation route over the default route.”
But the government trying to inflate its way out of debt by electronically creating whatever money is necessary to pay the bills undermines the value of the national currency. U.S. government bond holders run the risk of being paid back in worthless dollars.( Holy cow! Isn't this what they forced Argentina to do let alone a lot of other developing countries)
Of course, any Americans who have savings will see the purchasing power of their dollars plummet too.( Oh Noooooooooooooooo!!!!

“If I can figure this out, so can anyone in the U.S. or abroad who follows recent economic developments,” said Buiter. “The dawning of the realization will lead to the dumping of the assets.”
The consequences of a society and economy structured around consumption and spending, as opposed to production and savings, may be about to wreak havoc on the dollar and America’s standard of living.
We don't need a degree in economics to understand that History is our greatest educator.

I feel very sorry for my American friends and my many relatives who had nothing to do with this disaster.
Bush, Friedman, Cheny, Rumsfield to name a few who created this monster, they are the ones who should be put on trial by the American electorate. Enroute for personal gain, American Profiteers are no longer clamouring to get access to government, they are now the governing body. Mr. Obama is in for a rough ride to take back his government from them.







 

steveinbsas

Registered
jedard said:
T Mr. Obama is in for a rough ride to take back his government from them.

You haven't noticed that Mr. Obama IS one of them?

If he is going to "take back" anything, I would hope it would be the 350 million already spent in phase one of the "bail out" package.

Not likely, is it?

No, he's just going to spend more (trillions of) dollars that don't even exist, probably helping some (if not all) of the economic predictions you quote come true.

In any case, I wouldn't bet on a strong dollar in the long run, either.
 

soulskier

Registered
How do you think this will play out for the Argentine peso? Another words, it is about 3.45 pesos to the dollar at the moment.
 

bigbadwolf

Registered
steveinbsas said:
In any case, I wouldn't bet on a strong dollar in the long run, either.
That's what I've been saying for years (and putting my money where my mouth is). Yet still it continues to defy gravity. The prognosticators (including myself) are guilty of focusing only on the economics and ignoring the USA's global geopolitical and military might. Even in its twilight, it remains a formidable power. There is no other power waiting in the wings that can take on the task of Atlas and uphold the international order. Until that time, I suspect the dollar will not go under (though further devaluation seems probable).

Postscript: Another doom-and-gloom forecast from Paul Craig Roberts.
 

kersuet

Registered
The value of any commodity like the dollar is a relative proposition. I think you also have to ask yourself how is Europe and Japan are going to pay for their quickly aging population without printing money. Both countries/economic blocs are extremely averse to allowing immigration to help ease the demographic imbalances. I definitely agree that many forces will push the value of the dollar down, but I am hard pressed to see any major currencies whose countries/economic blocs are not going to be affected by some very negative fiscal and demographic trends.
 

Stanexpat

Registered
kersuet said:
The value of any commodity like the dollar is a relative proposition. I think you also have to ask yourself how is Europe and Japan are going to pay for their quickly aging population without printing money. Both countries/economic blocs are extremely averse to allowing immigration to help ease the demographic imbalances. I definitely agree that many forces will push the value of the dollar down, but I am hard pressed to see any major currencies whose countries/economic blocs are not going to be affected by some very negative fiscal and demographic trends.
I would agree. From what I've read many people believe that the big U.S. deficits now aren't necessarily inflationary as the funds are using to replace not augment private sources and that the U.S. debt as a percent of GDP compared to a lot of countries is still basically about average. Its notoriously difficult to forecast exchange rates. Anybody who claims to know will almost certainly be proved wrong.

Unfortunately most of what you are reading in this thread comes from what I call the loony left. The main precepts of their beliefs seem to be:

1. Anti anything American. The U.S. is portrayed as the world bully that is obviously on it's last legs.

2. Anti Israel as it's close ally of the U.S., of lot of this seems to be anti-Semitic in nature.

3. Anti-globalization, although I haven't heard a lot of this on this site.

Usually they are also big supporters of so-called progressive regimes in S.A. like Hugo Chavez and others.

Usually they seem long on ideology and short on facts.
 

mini

Registered
The article doesn't say were "they" are going to put all this money they are pulling out of the US. Anyone know?
 

Johny

Registered
stanexpat,

You hit the nail on the head... Some people on this site love to cite this extreme left-wing 'intellectuals' as gospel truth yet very few seem to present any REAL facts. It´s not too difficult to single these people out... They are usually the ones who support anything as long as it is against the US or its allies.... be it Chavez, Castro, FARC, Hamas, etc... I guess some of these individuals are nostalgic for the golden days of communist oppression...
 

thomashobbs

Registered
Just like in the 1930s every country will struggle to devalue their currency against everyone else's.

Everyone, except, that is, Zimbabwe. They've already gotten there.
 

Stanexpat

Registered
thomashobbs said:
Just like in the 1930s every country will struggle to devalue their currency against everyone else's.

Everyone, except, that is, Zimbabwe. They've already gotten there.
You may be correct. One quote I heard recently is that the dollar is the best looking horse in the glue factory.
 
Top