World economy and the US Dollar

[Lurker]

Some very interesting developments have taken place. The Baltic Dry Index measures the shipping rates for global transport - it is a widely used gauge to measure the health of the world economy. The rates peaked in June as China was on a commodity buying binge. But since June the rates have been in free fall. World trade seems to have come to a standstill. Check out the article below. 100's of cargo ships are sitting idle. Why? Rumors are China and other nations are done with the dollar - they're fed up with us running the printing presses nonstop since it destroys the value of their reserves. You'll hear rhetoric to the opposite - the same people that said the mortgage problem was contained and would not affect growth are saying the dollar is fine - our recession is over and go out and spend. On Friday Fed governor Walsh even stepped in and made comments saying the federal reserve would seek to raise rates with greater force in the future which of course is not true. Can't raise rates on a debt level that's knocking on the 12 trillion dollar door and with trillions more coming due to baby boomers in social security and medicare payments that have been plundered over the years. Last year in October the stock market went into free fall. This October people who I hold up very high are saying the dollar will start a free fall. Even if they're wrong in the short run the longer run picture is clear and everyone needs to prepare for this event.

Here's the headline: The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year

http://www.dailymail.co.uk/home/moslive ... z0RLcNgkkI

[expat2carib]

In a international context.

Suddenly lots of entities and individuals will face a loyalty problem towards the dollar (read USA). It's a dilemma without borders. Knowing the dollar is going to jump down what will you do? Sell dollars and buy Euros and safe your own butt or stay loyal and loose a large part of your reserves/savings.


The more dollars sold the bigger the problem for the US. This will be a million times bigger implosion then Lehman Brothers going broke.

Sounds like a nightmare. I'm concerned.

[Lurker]

Excerpts from a speech by World Bank President Robert B. Zoellick

http://web.worldbank.org/WBSITE/EXTERNA ... 07,00.html

Press Release No:2010/084/EXT

WASHINGTON, September 27. 2009 — The following are excerpts from a speech prepared for delivery on Monday by World Bank Group President Robert B. Zoellick. Entitled “After the Crisis?”, the speech will be delivered at the Paul H. Nitze School of Advanced International Studies of the Johns Hopkins University, in Washington, D.C., in the lead-up to the World Bank/IMF Annual Meetings in Istanbul, Turkey. These excerpts are for immediate use.

“Peer review of a new Framework for Strong, Sustainable and Balanced Growth agreed at last week’s G-20 Summit is a good start, but it will require a new level of international cooperation and coordination, including a new willingness to take the findings of global monitoring seriously. Peer review will need to be peer pressure.”

“As agreed in Pittsburgh last week, the G-20 should become the premier forum for international economic cooperation among the advanced industrialized countries and rising powers. But it cannot be a standalone committee. Nor can it ignore the voices of the over 160 countries left outside. The G-20 should operate as a “Steering Group” that operates across a network of countries and international institutions. It could recognize the interconnections among issues and foster points of mutual interest. This system cannot be hierarchical, and it should not be bureaucratic. If given a push, the topics could be pursued through other negotiating groups, international regimes, or global and regional institutions. The IMF, World Bank Group, WTO, Financial Stability Board, and UN bodies could alert countries to issues, provide analyses, build cooperative solutions, and help execute the policies.”

“We need a system of international political economy that reflects a new multi-polarity of growth. It needs to integrate rising economic powers as “responsible stakeholders” while recognizing that these countries are still home to hundreds of millions of poor and face staggering challenges of development. It needs to engage the energies and support of developed countries, whose publics feel the heavy burdens of debt, competitive anxieties, and feel that the new powers must share responsibilities. It needs to help offer a hand to the poorest and weakest countries, the 1.6 billion people who still live without electricity, and the “Bottom Billion” trapped in poverty because of conflict and broken governance.”

“Bretton Woods is being overhauled before our eyes. This time, it will take longer than three weeks in New Hampshire. It will have more participants. But it is just as necessary. The next upheaval, whatever it may be, is taking form now. Shape it or be shaped by it.”

“The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency. Looking forward, there will increasingly be other options to the dollar.”

“The last 20 years have witnessed a huge economic shift. The breakdown of the planned economies in the Soviet Union and Central and Eastern Europe, the economic reforms in China and India, and the export-driven growth strategies of East Asia all contributed to a world market economy that vaulted from about 1 billion to 4 or 5 billion people. This was a huge shift in a short time. It offers enormous opportunities. But it has also shaken an international economic system still operating through the arrangements forged in the middle of the 20th Century, with patched-up changes in the decades since.”

“Central banks failed to address risks building in the new economy. They seemingly mastered product price inflation in the 1980s, but most decided that asset price bubbles were difficult to identify and to restrain with monetary policy. They argued that damage to the “real economy” of jobs, production, savings, and consumption could be contained once bubbles burst, through aggressive easing of interest rates. They turned out to be wrong.”

“In the United States, it will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority. My reading of recent crisis management is that the Treasury Department needed greater authority to pull together a bevy of different regulators. Moreover, the Treasury is an Executive department, and therefore Congress and the public can more directly oversee how it uses any added authority.”

“Regulators and supervisors of financial institutions were no longer grounded in reality. Financial innovation and competition vastly expanded services – including to companies and families often shunted aside in the past –but the alluringly simple design of “rational markets” theory led regulators and supervisors to take a holiday from the realities of psychology, organizational behavior, systemic risks, and the complexities of markets and humans.”

[RL3AO]

Over the past 4 or 5 centuries, many countries have had the most power for a period of time and then someone else takes over.

Spanish, French, and British all had their moments. Then the Americans took over at the beginning of the 20th century. Now the Chinese are catching and will soon take the lead.

Personally I think our culture is very arrogant. We think "We are America. We're the best. We will always be the best. Everyone else can f...." (well, you know the rest).

Looks like a similar thing is happening with the dollar. Health care is just killing our economy. I don't care how it gets done, but something drastic needs to happen because the money we are paying for health care is killing the future of the economy.

[Lurker]

The part of his speech that really got me was:

“Central banks failed to address risks building in the new economy. They seemingly mastered product price inflation in the 1980s, but most decided that asset price bubbles were difficult to identify and to restrain with monetary policy. They argued that damage to the “real economy” of jobs, production, savings, and consumption could be contained once bubbles burst, through aggressive easing of interest rates. They turned out to be wrong.”

He's basically saying our central bank has lost control and the current system has failed.

[gigabite]

Looks like a similar thing is happening with the dollar. Health care is just killing our economy. I don't care how it gets done, but something drastic needs to happen because the money we are paying for health care is killing the future of the economy.

The price of the U.S. dollar has been artificially high for to long. The cost of labor in US skyrocketed in the golden age of the 1960, and the rest of the world could not keep up. As US manufacturing became to expensive for 98 percent of the world free trade was announced to reduce the cost of exporting.

As the cost of labor which is normally around 60 percent was cheaper anywhere but here the Pacific rim countries started to take up the slack. Much to the chagrin of US labor. Now that the value of the dollar is realigning with the rest of the world’s currency and high tech proprietary technological manufacturing is replacing heavy manufacturing along with the devalued dollar US exports are increasing.

The relative value of the dollar is hardly felt in the US unless you are exporting or importing. What is really cool is that the sooner we get out of Iraq the sooner the value of the dollar will rebound, because of the pallets of the currency we are buying to stand up the government.

Another thing in the pipeline is the government health insurance option. If that gets passed I defiantly want to be holding some REITs.

It looks like the rains are holding up and there is not to much flooding. US had a bumper crop, but will not be enough to meet world demand. There seems to be a direct relationship between the Solar Cycle and the Business Cycle. It has to be a factor of agriculture.

[Lurker]

Some interesting comments Gigabite thanks for sharing them. There has been a tremendous imbalance where the Asians primarily produce and save and the United States primarily spends and borrows. Benjamin Franklin said it best "He that goes borrowing goes sorrowing".

[gigabite]

The Pacific Rim Countries are experience a dramatic shift in there per capatia income, some of it goes into savings as you say, and a good percentage of it goes into quality of life issues like hard white winter wheat. 2/3 of the US production of this species is exported. The decrease of the value of the dollar has made this product a coveted commodity globally. It drives the cost of American pizza up, but it has helped buffer the west Kansas economy from the recession.

[coriolis]

Over the past 4 or 5 centuries, many countries have had the most power for a period of time and then someone else takes over.

Spanish, French, and British all had their moments. Then the Americans took over at the beginning of the 20th century. Now the Chinese are catching and will soon take the lead.

Personally I think our culture is very arrogant. We think "We are America. We're the best. We will always be the best. Everyone else can f...." (well, you know the rest).

Looks like a similar thing is happening with the dollar. Health care is just killing our economy. I don't care how it gets done, but something drastic needs to happen because the money we are paying for health care is killing the future of the economy.

I'm an armchair student of history and what you're saying is quite true. It goes back beyond 4 or 5 centuries, beyond even Rome and Greece. It is reported that even the Assyrian empire became "soft" after some time of being on top. In light of history's backdrop, what is the use in fighting the inevitable, or even complaining about it? The US will go down in history as one of the great experiments. I feel especially priveledged to have seen us at our peak. Whether the decline is fast or slow, we will see.

Considering this, we should take the advice of Seneca and live each day as if it were our last and try to get closer to the good.

Now as far as the comment above "Everyone else can f...." (well, you know the rest)." I say to you RL3AO: "come on, don't you know that cursing is a sign of a limited vocabulary?"