U.S. Sanctions Erode Its Foreign Influence
A few days ago the Leveretts looked at the effects of U.S. financial sanctions and the other ways the U.S. pisses off major countries. They find that the current path of U.S. foreign policy will erode the U.S. dollar hegemony and lead to a destruction of the "extraordinary privilege" (de Gaulle) the U.S. has had with the ability to print the world's reserve currency. The political erosion of the dollar will be felt in the commodity markets and especially in energy deals which will then have further effects in foreign relations: Petrodollars, Petroyuan, and the Ongoing Erosion of American Hegemony
Looking ahead, use of renminbi to settle international hydrocarbon sales will surely increase, accelerating the decline of American influence in key energy-producing regions. It will also make it marginally harder for Washington to finance what China and other rising powers consider overly interventionist foreign policies—a prospect America’s political class has hardly begun to ponder.
Sadly, only few will listen to the Leveretts but now Bloomberg picked up the theme: Russia Sanctions Accelerate Risk to Dollar Dominance
While no one’s suggesting the dollar will lose its status as the main currency of business any time soon, its dominance is ebbing. The greenback’s share of global reserves has already shrunk to under 61 percent from more than 72 percent in 2001. The drumbeat has only gotten louder since the financial crisis in 2008, an event that began in the U.S. when subprime-mortgage loans soured, and the largest emerging-market nations including Russia have vowed to conduct more business in their currencies.“The crisis created a rethink of the dollar-denominated world that we live in,” said Joseph Quinlan, chief market strategist at Bank of America Corp.’s U.S. Trust, which oversees about $380 billion. “This nasty turn between Russia and the West related to sanctions, that can be an accelerator toward a more multicurrency world.”
Some five years ago we already looked at this decline of the U.S. dollar as reserve currency and its effects:
So far the U.S. could borrow cheaply and pay back less in real value than the original loan. That privilege is now going away. The trillions the U.S. currently needs to borrow from abroad will have to be payed back in full. That is a major change in its global power status and will seriously decrease its influence in international policy questions.
The European Union which stupidly followed the U.S. sanctions on Russia with its own is also hurting itself:
Financial interdependence offers a powerful opportunity for coercive diplomacy.But the unintended message Europe's leaders sent is that financial interdependence is a source of vulnerability that countries like Russia, but also China, Iran and others, would be wise to avoid.
...
Europe's financial sanctions against Russia likewise add incentives for countries to look for alternative arrangements that reduce financial interdependence.Moreover, those incentives will only increase if the sanctions are successful. Even if Europe encourages the Russian government to change its policy toward Ukraine, the Russian government will respond over the longer term by seeking financial arrangements that leave it less exposed to such coercion.
It will take years until the dollar will lose its reserve status but the decline is already visible. More and more deals are now made bilateral between partners in their own currencies and get settled outside of the financial channels the U.S. tries to sanction, block, spy on or to criminalize.
The U.S. foreign policy reliance on sanctions, pressure and war is sawing off the high branch the U.S. is sitting on.
Posted by b on August 6, 2014 at 16:12 UTC | Permalink
next page »The key of the USD hegemony is in the hands of the US consumer. If that consumer decides - for whatever reason - to consume (much) less, then it will have an adverse impact on the PETRODOLLAR.
One major reason why the US invaded Iraq was the fact that Saddam Hoessein wanted to be paid in EUR for iraqi oil. And that was the kick in the crutch of the US financial system.
Posted by: Willy2 | Aug 6 2014 16:35 utc | 2
The trillions the U.S. currently needs to borrow from abroad will have to be payed back in full. That is a major change in its global power status and will seriously decrease its influence in international policy questions.
Since those obligations are dollar-denominated, I don't see the problem with paying the debts. Beyond that, most of US debt is either domestic debt owed to US citizens via Treasury securities, or owed by one branch of government to another as in the case of social security.
Posted by: sleepy | Aug 6 2014 16:37 utc | 3
@Willy2
Yes, that would reduce the US trade deficit, but also reduce the amount of dollars held by China and the oil producers and the amount of dollars they could recycle back to the US via purchase of US debt.
Regarding BRIC alternatives such as its development banks, RT recently had a discussion on that:
And every precedent we’ve seen in these countries, the five BRICS countries with their own development banks, show that they are indeed very much part of a neoliberal, extractivist, export-oriented, and overconsumptionist to model. They aren’t really going to break and do anything new the way the Bank of the South was purported [to] by Hugo Chavez before he died as a much richer reform that would have really set up an alternative.
http://triplecrisis.com/brics-progressive-rhetoric-neoliberal-practice/#sthash.WceG7qhh.dpuf
Posted by: sleepy | Aug 6 2014 16:51 utc | 4
Putin's war on McDonald's is an interesting strategy, but I don't see why you don't mention BRICS and the West's sheer terror at the cliff-drop when Petrodollar dies a deserved death. The house of cards will decimate the West's economy and heads will literally roll.
Also, few see the dots connected between Sevastapol and Tartus.
Posted by: Ben Franklin | Aug 6 2014 17:01 utc | 5
"...For several years, China has paid for some of its oil imports from Iran with renminbi; in 2012, the PBOC and the UAE Central Bank set up a $5.5 billion currency swap, setting the stage for settling Chinese oil imports from Abu Dhabi in renminbi—an important expansion of petro yuan use in the Persian Gulf. The $400 billion Sino Russian gas deal that was concluded this year apparently provides for settling Chinese purchases of Russian gas in renminbi; if fully realised, this would mean an appreciable role for renminbi in transnational gas transactions..."
http://goingtotehran.com/petrodollars-petroyuan-and-the-ongoing-erosion-of-american-hegemony
And this maybe the primary reason for the unrest in the ukraine. The US would not want to see Russia requesting the renminbi from the EU as payment gas. So what better way than to disrupt the EU russia energy relationship.
Posted by: really | Aug 6 2014 17:08 utc | 6
The trillions the U.S. currently needs to borrow from abroad will have to be payed back in full.
That is never going to happen. Want to bet?
Countries bilaterally trading in their own currencies will eventually experience trade wars without an anchor exchange like the dollar. Unless you replace that anchor with something equally as prodigious and universally accepted, there's trouble ahead for those who engage in substantial trade outside of the dollar.
Posted by: Cold N. Holefield | Aug 6 2014 17:26 utc | 7
I have a question. There are rumors that Obama no longer wants to be President. Supposedly he is doing little but reading out statements prepared for him. So who is actually acting as our President?
Posted by: Tavrik | Aug 6 2014 17:54 utc | 8
the usa will eventually be unable to finance it's multiple wars across the globe if the us$ should lose it's vaunted position.. it will happen.. the various international banking systems, including the imf, international bank of settlements, and etc. etc. which are also set up to favour the us$, will also eventually have to change.
in the meantime financial sanctions from the bully (and it's european/japanese minions) will continue..
quote from above in your article: "Even if Europe encourages the Russian government to change its policy toward Ukraine." heaven forbid that the rest of the world would want to encourage the USA gov't to change its policy towards Ukraine! what has to happen for that to transpire? this is a 2 way street.. usa policy towards ukraine is to rape and pillage under the guise of bullshit imf loans and etc.. it is only a matter of time (BRICS is a step in this direction) when it will run in the opposite direction.
Posted by: james | Aug 6 2014 17:55 utc | 9
U.S. Treasury securities are dollars that pay interest.
The U.S. is the monopoly issuer of U.S. securities and U.S. dollars, both of which are created by keystrokes into a computerized accounting system.
There is near-zero possibility that the U.S. would ever be unable to create the dollars needed to "pay off" the bonds (except for politics). After all, there would be a zero net change in the level of dollar financial assets in the World…dollars that paid interest would be swapped for dollars that don't. The transaction nets to zero on a balance sheet.
This would be functionally equivalent to moving money from a savings account to a checking account.
Finally, the dollar is the worlds reserve currency mainly because it's the only country willing and able to run persistent trade deficits…to the detriment of it's own citizens.
What country is going to carry that hod ($0.5Trillion/year)? That's a lot of aggregate demand for foreign companies. If anyone was willing wouldn't they be doing it already?
Germany? Net exporter
China? Net exporter (currently buying up Treasuries as fast as it can in an attempt to devalue it's own currency)
Japan? Net exporter. It's along list.
That said, I'm in favor of the dollar losing it's reserve currency status, because the U.S. uses it as whipping post for foreign governments.
Posted by: paulmeli | Aug 6 2014 18:02 utc | 10
Yes, that ´s never going to happen, holefield. With the caution China and russia are acting in this topic, what s goin happen is the sharp rise in interests and internal US inflation.
The remainder comes by itself: don t forget that capital and money is the most coward and fugitive elusive thing in the planet. No law, effort or mutual grand agreement will wipe that out.
we don´t need to stick that much together nor to fly out from the consumption world. wE just need to be better and more customer friendly that the bretton woods infrastructure of US domination as upfrom 1948. The US is not the last cookie in the pack anylonger.
And this discovery is so simple that you wonder why it didnt occur before: The world of the
indispensable guys was based on so called MULTILATERAL Agencies... (IMF and so on).But why the heck those multilaterals survived so long acting so UNILATERALLY??????
So who is actually acting as our President?
Since you asked.
Posted by: Cold N. Holefield | Aug 6 2014 18:18 utc | 13
@really
The US would not want to see Russia requesting the renminbi from the EU as payment gas. So what better way than to disrupt the EU russia energy relationship.
I doubt if most of the EU has accumulated enough renminbi through trade to pay for the gas. An alternative of course would be for those countries to sell dollars and buy renminbi, but that would result in an appreciated renminbi and a depreciated dollar which would kill US demand for Chinese goods.
Posted by: sleepy | Aug 6 2014 18:23 utc | 14
Airlift cargo from Eindhoven, The Netherlands to Kharkiv, Ukraine in joint Dutch/Australian MH-17 Recovery Mission.
Australian cargo planes 24/7 continu flights from Eindhoven to Kharkiv loaded with 100 ton goods. Presumably for medical facilities, six ambulances, a humvee armored vehicle. Two planes are in use. Any idee if more than medical/rescue goods are involved?
Facebook RAAF: Operation Bring Them Home
The Royal Australia Air Force contribution to Operation Bring Them Home has continued, with a C-17A Globemaster transporting medical equipment and supplies into the Ukraine on August 1st, 2014. The Australian Government continues to work alongside Dutch and Ukrainian authorities to ensure the swift identification and repatriation of victims of the MH17 tragedy. (See photos}
Two Royal Australian Air Force (RAAF) C-17A Globemasters and a KC-30A Multi Role Tanker Transport, all from RAAF Base Amberley near Brisbane, sit on the tarmac at Eindhoven Airfield.
○ NATO/European Strategic Airlift Capability (SAC). Heavy Airlift C-17 supports MH17 ops
Dutch PM Rutte Abruptly Calls-off MH-17 Recovery Mission
.
Most likely the Dutch government has received intelligence of increased violence in the Donetsk region. Ukrainian war planes straved the city of Donetsk last night. Ukraine has used ballistic missiles in their attack on the anti-Kiev rebels in eastern Ukraine. Russia has advanced 20,000 troops along the border with Ukraine. There is a chance Putin will decide to intervene on the U.N. principle of R2P, the Right to Protect.
Russia has asked for the U.N. Security Council to meet about the worsening humanitarian situation for the Russian-speaking population.
○ NOS: Recovery Mission Stopped and NRC news blog
○ Dutch Safety Board OvV – report of flight recorders delayed by weeks, does not meet official deadline
So why are they doing it? Why is controlling Ukraine important enough to risk the reserve currency status of the dollar?
Posted by: lysias | Aug 6 2014 18:33 utc | 17
@8:
There are rumors that Obama no longer wants to be President. Supposedly he is doing little but reading out statements prepared for him.
That's certainly how he sounds these days. Total lack of affect in his voice, like in the last years of Bush fils's presidency.
But why? What obliges him to say things he does not believe?
Posted by: lysias | Aug 6 2014 18:36 utc | 18
@15 Sociopaths don't know when to stop.
I don't think the White House or Obama's puppet masters if you prefer were heavily involved until McCain and Kerry were dancing with nazis in Kiev. The mess probably was engineered by Ukrainians piggybacking on a few U.S. snakes and the regular mechanisms of empire. When it blew up, Obama and his gang needed to be tough in front of the Russians to as not to look weak, and U.S. politics is a race to the bottom, even news sources have to produce the best image of Putin destroying Alderaan.
Posted by: NotTimothyGeithner | Aug 6 2014 18:43 utc | 19
@16 He fed on the crowd in the glory days. His speeches were bland, nonsense which is why teabaggers used Obama's stuff in their own stump speeches, and if he made sense, it was to say peace is good. Wow, talk about inspiring. Read his 2004 speech or his speech on race. "Turn off the TV!"
Without the crowd to reinforce his emotional appeals with its enthusiasm, he just doesn't get to feed on their energy, and banality of dope isn't receiving the applause it once did as people are wondering when the results are here. At this point, Obama's speeches should be recitations of accomplishments, not whining about ceos not giving him credit.
Posted by: NotTimothyGeithner | Aug 6 2014 18:52 utc | 20
@lysias - #16
ptsd - obama was known for his micro-control and refused to delegate decisions to his cabinet and/or staff. even a young and capable person can meet his limit, feels he is losing control and starts to have difficulty to grasp the major issues. repeated disappointments will lead to incoherence in policy.
○ France24: MH17 search suspended over security concerns: Dutch PM
○ The Guardian: Dutch prime minister calls halt to search for MH-17victims
'PTSD'
Plenty of rumors about cryptic messages to keep him on track. Supposedly his Day-Timer was found in a gutter with a note implying he didn't want to end up like JFK. JFK had the stones to threaten breaking CIA into a million pieces. Not that I think POTUS should have a martyr complex, but how can a world leader not entertain the possibility while recognizing that every day, troops risk their lives for much less.
Posted by: Ben Franklin | Aug 6 2014 20:00 utc | 23
The Dollar Reigns Supreme, by Default
Official and private investors around the world have become dependent on financial assets denominated in U.S. dollars, especially because there are no alternatives that offer the scale and depth of U.S. financial markets. U.S. Treasury securities, representing borrowing by the U.S. government, are still seen as the safest financial assets in global markets. Now that foreign investors, including foreign central banks, have accumulated enormous investments in these securities as well as other dollar assets, they have a strong incentive to keep the value of the dollar from crashing. Moreover, there are no alternative currencies or investments that provide a similar degree of safety and liquidity in the quantities demanded by investors. Therein lies the genesis of the “dollar trap.”The reason the United States appears so special in global finance is not just because of the size of its economy, but also because of its institutions—democratic government, public institutions, financial markets, and legal framework—which, for all their flaws, still set the standard for the world. For instance, despite the Federal Reserve’s aggressive and protracted use of unconventional monetary policies, investors worldwide still seem to trust that the Fed will not allow inflation to get out of hand and diminish the value of the dollar.
Ultimately, getting away from the dollar trap will require significant financial and institutional reforms in countries that aspire to have their currencies erode the dollar’s dominance. And it will take major reforms to global governance to reduce official demand for safe assets by providing better financial safety nets for countries. Such reforms would eliminate the need for accumulation of foreign exchange reserves as self-insurance against currency and financial crises.The dollar will remain the dominant reserve currency for a long time, mainly for want of better alternatives.
Posted by: Cold N. Holefield | Aug 6 2014 20:01 utc | 24
NATO warns Russian 'peacekeepers' could invade Ukraine
(France24) - NATO officials warned on Wednesday that Russia could use the excuse of an humanitarian or peacekeeping mission to invade eastern Ukraine while revealing that Moscow had amassed 20,000 combat-ready troops near the border in recent days.
Moscow has been steadily building up its military forces in recent days, suggesting that Russia could respond to Kiev’s military gains in eastern Ukraine by launching a cross-border invasion.
NATO’s statement said it was concerned Moscow could use “the pretext of a humanitarian or peacekeeping mission as an excuse to send troops into Eastern Ukraine”. The warning comes after the alleged sighting of several Russian military vehicles bearing the Cyrillic insignia for "peacekeeping" near its border with Ukraine.
○ Risk of Russian military deployment in Ukraine has risen, says Poland's PM Donald Tusk
The "rosy future of war" is the U.S. answer to its eroding dollar hegemony. Russia is in the crosshairs now, and China is not far behind with jihad coming to Xinjiang. Then there is the story of ISIS actively recruiting in India, the second largest Muslim-populated nation on the planet. So the BRICS will be broken one by one by an outsourced Salafi army, and it won't even show up as an item in the U.S. budget. Then where will the rival anchor currency come from?
The U.S. will definitely need the jihadis to do the fighting though. Two weeks ago in Mosul ISIS destroyed the tomb of the Biblical Jonah. The U.S. is supposed to be a religious nation, primarily Christian. Can you imagine what the reaction would be if one of the shrines to the Sunni prophets had been demolished by Crusaders? Here in the U.S., not a peep. In the West -- and I'm not trying to be a prude here, just trying to tell it like it is -- we're too busy thinking about cock and pussy and the latest app for our phone (and not necessarily in that order).
Posted by: Mike Maloney | Aug 6 2014 20:03 utc | 26
". Two weeks ago in Mosul ISIS destroyed the tomb of the Biblical Jonah."
Thus proving this has little to do with Islam. They recognize many OT prophets like Moses, as well as Jesus. They are simply psychopaths who have an excuse to murder and plunder, just as some troops join the military because they get a license to kill.
Posted by: Ben Franklin | Aug 6 2014 20:08 utc | 27
You're right, Ben Franklin, Jonah is considered a prophet in Islam. I thought he was too minor a figure. And you're right again, it shows how fringe ISIS is. Nonetheless, based on their wealthy benefactors in the House of Saud, they are being given carte blanche to carve up the Middle East.
Posted by: Mike Maloney | Aug 6 2014 20:26 utc | 28
After Nixon ended gold backing for the US Dollar, many people called it a “fiat currency”, which means a currency that is backed by nothing at all.
In reality, due to Washington’s de facto deal with the Gulf States in the 1970s, where they got security in exchange for agreeing to sell their oil only in US dollars, the dollar became an “oil” backed currency or the world’s “Petro Currency”. That helped mightily to get the world to accept US dollars for their goods and services, far exceeding the goods and services they needed in return from the US .
That means people around the world simply collected US dollars, without any great need for them relative to purchases from the US, assuming that those dollars were “as good as oil” which everyone needs.
A result however, of the Obamanation’s declaration of Cold War 2 against Russia and China, (and the economic sanctions he placed on Moscow), was that he forced Vlad to sell oil and gas to new markets, especially to energy hungry China, outside of the US dollar. As Russia is the world’s biggest oil producer that was and is the beginning of the end for the Petro Dollar.
To read the rest click the URL of Red Pill Views.
Posted by: Robert Gorden | Aug 6 2014 20:28 utc | 29
@25/26
It shows how little we know about the different concepts of Islam
○ Taliban destroyed buddhas in the Hazarajat region of central Afghanistan
○ Sufi religious shrines destroyed in Timbuktu by Tuareq rebels
The same in Libya, Syria, Nigeria, etc.
The URL for the rest of my comments didn't come out. So here it is; http://www.redpillviews.com/tehran-takes-a-giant-step-closer-to-russia-china-axis/
Posted by: Robert Gorden | Aug 6 2014 20:30 utc | 31
On divining the personal thoughts of traitorous war criminals, the waning of US foreign influence and the continued waxing of foreign domestic influence inside the US:
Although it's interesting to ponder what goes on in the minds of serial murderers in the end it's fucking pointless to try and assign actions on the part of fucking murderous US war criminals to their personality traits/profiles especially when the peons daily witness that said war criminals will not speak to obvious and glaring truths and verboten topics such as the apartheid genocidal state of Israel even as it slaughters another 2000 innocent civilians.
Seriously, beyond there needing to be a litmus test for everyone as concerns the false flag event of 9/11 and the subsequent fairy tales concocted to "explain" history since then, I propose that there should be a litmus test for ANYONE serving in ANY public capacity in the US and elsewhere concerning the apartheid genocidal state of Israel.
The test? EVERY FUCKING POLITICIAN must prove their loyalty to the country they supposedly represent by PUBLICLY going on record with at least one comment criticizing and lambasting the apartheid genocidal state of Israel. JUST ONE.
Congressman Traitor Fuckface:...and as I was saying I think this will grow the economy...
Peon: Excuse me, Congressman Fuckface, but before we have to listen to one more fucking word out of your fucking mouth we need you to complete this simple loyalty litmus test for us just to show that you are in fact in control of your own thoughts and words and actually loyal to the country that you purportedly represent, mkay?
CTF:...um, sure, anything for my constituents...
Peon: Fuck off - oh sorry - anyways, while the cameras are rolling go ahead and pick ANY ONE of the terrible and horrendous fucking crimes that the apartheid genocidal state of Israel has committed since its inception - any one, USS Liberty, apartheid, genocide, stealing land, spying on Americans, stealing US military/intel secrets, 9/11 involvement, it's a long fucking list - and tell us how the apartheid genocidal state of Israel must be condemned for said actions.
CTF: Huh?
Peon: Jesus Fucking Christ, what do the Zionists own your fucking ears, too, douchebag? For us to know that you are not putting the interests of another sovereign nation over the one you are supposed to be representing - i.e., being a fucking traitorous piece of shit - you must condemn on the record the apartheid genocidal state of Israel for just one of the innumerable crimes that they have committed since that fuckhole was created. If you can't do that well what do you think we should fucking do to traitorous fucking assholes?
Now obviously American war criminals won't speak to their OWN countries multitudinous war crime litanies and there are topics that said war criminals won't speak to in order to defend their own socio-economic status, however, I do think that there is no reason why these fucking war criminals - be they actors, witting or unwitting dupes, etc - should not have their dupe/actor status called out using the very weapon that they use on the rest of the fucking planet: American exceptionalism.
Peon: Congressman Fuckface, to PROVE that you think America is MORE EXCEPTIONAL than the apartheid genocidal state of Israel, you must pass this test. You MUST tell us what it is about the apartheid genocidal state of Israel that makes it LESS exceptional than America, you worthless fucking traitor whore - oopsie - I mean, Representative. If the U.S. is the SOLE shining beacon on the hill then you must tell us/give us reasons why the apartheid genocidal of Israel is NOT also a shining beacon on the hill.
Yes, yes, I know that these traitorous scum would still support the state of Israel even if they had to take the test but I think using the vaunted rhetorical weapon of American exceptionalism to more expose Zionist treason would be helpful.
Adding:
Yes, the US - being a monopoly issuer of its own fiat currency - cannot run out of money so the issues of the US losing its international dollar hegemony and what would happen domestically vis a vis military spending, etc are somewhat related but directly correlated.
Unfortunately, TPTB in the US have understood this fact for decades while the peons are still stuck arguing over stupid fucking nonsense like the federal debt, the debt ceiling and all of the other malarkey politically cooked up to make it SEEM as if there's no money to better their miserable, exploited lives.
Posted by: JSorrentine | Aug 6 2014 20:30 utc | 32
@25 How would they be different than most religious extremists, with the exception of the Ottomans who had their own quirks? They may not represent the citizens of Deerborn Michigan's faith, but plenty of Romney voters cast their ballots under the impression that a false Christian was better than a black guy...I mean Muslim.
Like the Crusaders before them, ISIS is inspired by Allah/Yahwah/Joseph Smith/Kal-El, and to anyone quoting ancient text, they will just repeat their own version of the devil using scripture for his own ends. In the end, this is still about disaffected youth looking for answers only these extremists seem interested in providing.
Posted by: NotTimothyGeithner | Aug 6 2014 20:32 utc | 33
Posted by: Oui | Aug 6, 2014 2:25:13 PM | 14
Posted by: Oui | Aug 6, 2014 4:01:38 PM | 23
Posted by: Oui | Aug 6, 2014 3:59:33 PM | 20
I see it oui. I saw the story that the dutch were suspending MH17 salvage efforts and how the flight data recorder info being held in limbo for some weeks into the future. I guess kiev and its handlers are having a hard time getting their ducks in alignment. In addition it appears that if putin is considering a humanitarian intervention it appears he understands that a proper investigation into MH17 is not going to happen. Putin may know nato is massaging kiev military efforts on the ground in more ways than just consultation.
Posted by: really | Aug 6 2014 20:33 utc | 34
It's also weird how ISIS considers Shiites apostates. After all, they profess belief in the one god Allah and his prophet Mohammed. Isn't that supposed to be enough for one to be a Muslim? I can see them regarding Shiites as heretics. But apostates?
Isn't regarding someone who believes those things not Muslim itself un-Muslim?
Posted by: lysias | Aug 6 2014 20:33 utc | 35
Should be:
...somewhat related but NOT directly correlated/connected.
Posted by: JSorrentine | Aug 6 2014 20:33 utc | 36
ISIS has been a Zionist roll-out from the fucking beginning meant to further Zionist plans in the ME.
Posted by: JSorrentine | Aug 6 2014 20:35 utc | 37
Why call Putin "Vlad"? That's a Romanian name. The nickname in Russian for Vladimir is "Volodya".
Posted by: lysias | Aug 6 2014 20:36 utc | 38
It is important to understand that the US does not "borrow" from abroad, or anywhere for that matter. The US never needs to borrow the currency it creates. It's borrowing program is a political choice, not a financial necessity. From the sovereign's perspective, that program simply swaps non-interest bearing dollars with interest-bearing dollars.
External demand for a sovereign currency issuer's currency simply keeps that currency's value higher relative to other currencies than it would be otherwise. While that provides that sovereign with added flexibility in the range of economic policy options it has available to it, it is not the source of that sovereign's power. Rather, it is a reflection of it. If the dollar loses its status as a reserve currency, it will not spell the end of US power. But a decline in US power may spell the end of the dollar as an international reserve currency. As another poster mentioned, however, for any other currency to take its place, that currency issuer will have to be prepared to run large trade deficits.
Posted by: ee | Aug 6 2014 20:46 utc | 39
28
"Moscow and Tehran have just made a huge bilateral deal that amounts to a barter system, (outside the US dollar) in which they will be trading all kinds of goods, with Iranian oil especially going to Russia, in exchange for construction and rebuilding of generating capacity, development of power supply network infrastructure, machinery, consumer goods, and agriculture going to Tehran"
Interesting stop-gap until BRICS negotiations finalize. I expect soon all of us in the West will be 'Bartering' for essentilas.
Posted by: Ben Franklin | Aug 6 2014 20:46 utc | 40
NotTimothyGeithner don't you think it is worth noting the difference: American jihadis are finding their way to the battlefield in Iraq and Syria; yet no American Christian fundamentalists, despite close ties apparently between big Evangelical Protestant churches and Israel, are rushing to the battlefield to defend besieged Christian communities in the Middle East.
So it must be about something more than disaffected youth. It must be about networks. And the potent network here is the Wahhabi one. And who funds and supports such a network? It is the Gulf sheikhdoms.
Posted by: Mike Maloney | Aug 6 2014 20:48 utc | 41
@39: A lot of Evangelical Protestants in the U.S. do not consider Catholics and Orthodox -- and therefore presumably also the Middle Eastern churches -- as Christian.
Posted by: lysias | Aug 6 2014 20:50 utc | 42
I had to laugh at this from yesterday: Guardian: Obama suggests US is better partner than China to African leaders
At summit in Washington, US president and top officials hail investment opportunities despite tangled relations and crises.
I know that the United States hands out "free" heavy weaponry and suveillance "capacities" like Green Stamps (or whatever freebie your grocery store used to use to gain customers), but I have read that one of the big benefits of choosing Chinese investors is that with China it's "just business" without any womens/human rights, security, war on terror strings attached -- strings that may or may not cost money but certainly cost sovereignty.
Also curious given those recent stats about plummeting U.S. Investment in Afria -- which raises the other ginormous difference which is that American investiment tends to be that of multinational corporations obsessed with their stockholders and quarterly dividends, while China's state-run economy can invest with much longer term objectives/strategies.
Posted by: Susan Sunflower | Aug 6 2014 20:53 utc | 43
But lysias Evangelicals would certainly side with Christians against Salafis. Remember born again Army Lieutenant General William Boykin's famous "My God is bigger than your God" statement.
Posted by: Mike Maloney | Aug 6 2014 21:01 utc | 44
The chief danger to the dollar's reserve status is the employment of economic sanctions and the Treasury's megalomania.
Most countries are quite happy to continue to use the dollar and to grant the US the privileges implied. They are, after all, generally ruled by clones of the clowns in Washington and are intent on keeping their bourgeoisies happy.
But Washington is not content to allow others simply to follow its economic lead;it insists that they dance precisely to each tune that it has a passing whim to play.
One reason for this is that sanctions are a deceptively easy option, no troops get sent abroad, no coffins arrive in Maryland airports, no wedding parties get bombed, no sound is heard except that of politicians making stump speeches to the effect that they have done the necessary and that no animals were harmed in the making of this movie.
But the long term damage is enormous: gradually the globe's rich, the oligarchs in Russia, the billionaires in China, the German Central Bank, come to the realisation that the US Treasury has arrogated to itself the right to use their wealth as it chooses; to 'keep' the bullion (or to sell it without informing its owners), to seize bank accounts, to impose multi billion dollar fines to deter trade with 'enemies', to use the New York courts to impose judgements it requires and to act, in finance as in diplomacy as if might were right.
Last week The Hague, acting on behalf of the US, ordered Russia to pay shareholders of the Yukos oil scam $50 billion. In New York an obscure judge, acting on behalf of the Department of State and the lowest elements in the Wall St sewers, ordered Argentina to make vast restitution payments to vulture funds which had picked up debt at pennies in the dollar, because the debt was worthless. I've already mentioned the Germans' lost 350 tonnes of gold bullion.
Setting up an alternate system is the last thing that the BRICS want to do- they are part of the current system and doing well out of it. BRICS are not Bolivarians looking for a path out of the imperialist maze, they have no ideological objection to Wall St or the dollar as reserve currency. It is simply that they have no alternative: to continue to rely on the dollar means to sacrifice their sovereignty.
If they wish to be able to resist the US in its seizure of hegemony they have to be able to make arrangements which do not allow US judges (or in The Hague's case Canadian puppets of the US) to make off with their national savings accounts and dictate their budgets. And that is why the current barter and currency swap agreements are likely to grow rapidly into an alternative system to by-pass the US Treasury's megalomaniac diktats.
It is not that they want to but that they have to. And they will.
And, as they do so, as eurasia, based on the Shanghai Cooperation agreement and drawing in Iran, Qatar and increasing numbers of Latin American, African and Asian countries, becomes a semi-autarchical trading bloc, it will rapidly develop into a military and diplomatic alliance which will overshadow the US Empire so that it withers away.
And it will be because of US hubris, the exertion of power without thought of consequences, the sheer thrill of doing whatever the fuck it chooses just because it can, right up until it realises that it cannot. By which time it will be too late.
Sanctions against Russia, following the judgements against Argentina, and France's biggest bank, the confiscation of Libya's carefully built up reserves, the theft of billions of Iranian money, the seizure and sale, over decades now, of long lists of private fortunes and public resources, have reached the tipping point at which change is inevitable. And, in my view, it will not take long.
After all, once they are freed of US control these sovereigns will be free to start imposing controls on the US. Worms are turning.
Posted by: bevin | Aug 6 2014 21:04 utc | 45
lysias @33
It is a wahhabi thing. Right back in the beginning, around 1805, Sheikh Wahhab was insisting that the real enemy was the Sultan in Istanbul and muslims who had not followed the rules of the first caliphs-as wahhab understood them.
Posted by: bevin | Aug 6 2014 21:09 utc | 46
@lysias #36:
It's kind of natural for Anglophones to call Putin "Vlad". And it doesn't seem to be insulting in the least.
It is also possibly intended to be humorous, since, as we know there was "Vlad the Impaler", whom the Dracula character is said to be based on.
Anyway, all that's a lot less derogatory than being called Obomber or Superfly, or Lurch for that matter.
@really #32:
kiev and its handlers are having a hard time getting their ducks in alignment.
Sure looks that way.
As for Russia's intentions, I watched an interview of a Russian Israeli from the Israeli Russian TV channel, who is supposed to be some kind of expert, and he said that nobody knows what Russia's intentions are. The Kremlin doesn't do leaks, it would appear.
The Kremlin probably has contingency plans for sending in peacekeepers, but it certainly doesn't look like the Uki army is going to be able to win a victory over the rebels. Sure, sending in peacekeepers right now would be absolutely the humane thing to do, but that is not what countries base their policies on.
If it's a reference to Vlad the Impaler, how is that not insulting?
Posted by: lysias | Aug 6 2014 21:19 utc | 48
@42:
Evangelicals would certainly side with Christians against Salafis.
Only if they consider those Christians to be Christians.
Posted by: lysias | Aug 6 2014 21:21 utc | 49
@37 ee
Thanks for clarifying the issue.
It is unfortunate that many on the left have taken to heart the rightwing meme that the US-is-broke-and-can't-pay-its-debts.
As you state, there is no reason for a sovereign fiat curreny nation to even issue debt, except to enrich those that trade in the debt.
Posted by: sleepy | Aug 6 2014 21:23 utc | 50
@lysias #40:
American evangelical Christianity is really a new form of Christianity. It is like Americans have to be exceptional in everything, not just their national sports, but also their (Protestant) Christianity.
I'd be surprised if many American evangelicals even know that there is such a thing as Eastern Orthodoxy.
@43 bevin. nice post. thanks for articulating your view. i am not sure the supremacy of the us$ is going to change quickly, but i agree it is going to change..
your quote: "....and (the usa) to act, in finance as in diplomacy as if might were right." this is so true and must be obvious to many.. it is what i refer to as the approach of a bully which the usa has turned into, as opposed as to being a beacon of democracy, freedom and integrity.. it is absent all of these while still claiming to hold the mantle for these traits!! that is the shocker for anyone watching the changes with an open mind.
the yukos example you gave is a good case in point.. looks like rothchilds minion just couldn't take away all of russia's oil/gas resources via yukos, but that won't stop the financial sanctions which are an attempt to bully russia into letting the kelptocrats continue to rape and pillage any countries wealth.. it is bizarre how many will want to go along with this too, so long as it is packaged in the western media as the 'legal' or right way..
Posted by: james | Aug 6 2014 21:38 utc | 52
b wrote:
So far the U.S. could borrow cheaply and pay back less in real value than the original loan. That privilege is now going away. The trillions the U.S. currently needs to borrow from abroad will have to be payed back in full. That is a major change in its global power status and will seriously decrease its influence in international policy questions.
b, with all due respect to your otherwise wonderful insights and reporting here, you do not understand what the US sovereign non-convertible currency on a floating exchange rate is. You do not understand US federal government accounting. (paulmeli above does)
Before I begin, please understand that all US dollars since August 15, 1971 remain within the US banking system by law, with the exception of physical dollar bills that leave with tourists to a max of $10Gs per. This also means that all (global) foreign bank accounts (or correspondent bank accounts) that denominate in US dollars are located in accounts at one of the 12 Federal Reserve regional banks. By law. That's why, and because, we are the reserve currency. If you wire money in US dollars to buy a house in Provence, you are operationally moving the money from your checking account in the US to the French seller's bank at one of the 12 Federal Reserve regional banks for onward forwarding to the French seller’s account. If the French seller wants to keep his money in US dollars, it remains at the Fed, even though he thinks it's in France. If the French owner wants to have EURO, he exchanges his US dollars on the open exchange and the US money changer now has those dollars is his US bank account, and the EURO are wired to France. No US (bank) dollars ever leave the US banking system.
Access to these foreign Federal Reserve bank accounts is why the US can apply sanctions lickety-split. They are located within this country.
Now for some edgakayshun.
1. All US dollars are created by one entity worldwide: the US federal government. It is a completely closed system. No one else has the legal right globally to create them, or it’s counterfeiting.
2. If you’re good at 1 + 1 = 2 arithmetic, that should tell you a federal government surplus equals the private sector deficit to the penny (which is what happened in the late 90s when the government ran a large surplus and the private sector had to take out equity loans to make ends meet because (1) Greenspan didn’t explain federal accounting to Clinton, and (2) Greenspan didn’t give a shit, his real interest was helping his Wall Street buddies accrue citizen debt).
3. The US federal government issues currency (physical dollars, coins, treasury securities). Everyone else uses the currency. These users are foreign banks and govts, state and local govts, all businesses, all households, everyone but the US federal government.
You need to understand that “Debt” is not “Debt”
Federal “debt” is new money, new ‘net financial assets’. The government spends first on goods and services it needs to provision itself. [So does Great Britain, Canada, Japan, and Australia, who also have sovereign non-convertible currencies with a floating exchange rate.] The US federal government creates this spending with congressional appropriations.
AFTER Congress appropriates, the US Treasury tells its banker, the Federal Reserve, to mark up its General Account in the amount of the approved spending, and gives it the names of the vendors to transfer money to through the system.
THEN, the US Treasury issues treasury securities in the same amount of the spending at auction on the 15th of month. The US Treasury issues these securities out of ‘thin air’. They ‘print’ them. Anyone with more than $250,000 in a private bank savings account scrounges to buy them because private banks only insure to the FDIC limit: $250,000. They are typically gone within nanoseconds. Treasury securities offer the safety of the “full faith and credit” of the United States Government up to the amount of the treasury securities, which could be billions.
The money supply is restored to balance. (The federal government doesn’t have to do this, but it does from long-time congressional rules from the gold standard days. The US Treasury also calculates the amount of interest on treasuries needed every year and issues treasury securities to cover that amount as well. Taxpayers are nowhere to be found in this.)
The non-federal government sector “debt” on the other hand---foreign banks and govts, state and local govts, all businesses, all households, you and I---experience what you and I know as real debt. We have to take out US dollar loans with collateral, and repay with interest on a pre-arranged schedule, or we lose the collateral.
The only reason they call money-creation “debt” at the federal level is because it’s a double-entry accounting term. It’s marked in the Liabilities column. It’s as simple as that. The asset side, the other side of the ledger, records the congressional spending appropriation.
The National Debt, that huge $17+ trillion figure, is a record of all the currency created since 1791 minus the amount of currency destroyed (taxes). It is a record of what we own, not what we owe. The National Debt is in the savings accounts and pension funds of businesses, households, grandma’s savings bonds, university trusts, annuity funds, stocks savings plans, state and local governments, foreign banks and govts, etc. To the goddam penny.
The US federal government does not borrow from abroad
The US federal government doesn’t need to borrow from anyone. Period. There is no factory in downtown China manufacturing dollar bills that we borrow.
The Federal Reserve only has four classes of clients: the US government, US banks, foreign governments, and foreign banks. No one else. The Federal Reserve only has two types of accounts: checking and savings (called something more exotic).
When Walmart pays China for 20 million tires at $5 per, it wires that money to China’s checking account at the Federal Reserve. That’s the way the settlement system works.
China has four choices: keep the money in checking basically earning zip, buy something American with the dollars, exchange to yuan and wire it home, or keep the money in the US and earn interest instead.
Let’s say it chooses the latter: keep the money in the US and earn interest.
China instructs the Fed to transfer the $100 million from its checking account to its savings account and buy treasury securities.
When the bonds, bills, or notes come due, or when China wants to liquidate them for whatever reason, it instructs the Fed to sell the treasury securities and move the principal and interest back to its checking account.
The act of moving its principal and interest from savings to checking is called paying off the National Debt.
Nothing more complicated than that.
Posted by: MRW | Aug 6 2014 21:39 utc | 53
American elites have become so lazy. They got so fat from looting and rent extraction that they forgot that the world won't immediately fall in line when they bark out an order. And their point of view is so locked on wall street that they can't think of any other way to solve disputes. Lots of hubris, lots of stupidity, endless cruelty.
Posted by: Crest | Aug 6 2014 21:51 utc | 54
"The act of moving its principal and interest from savings to checking is called paying off the National Debt."
And when the US goes to IMF for relief guess who is stuck with the check? Austerity is their one-trick pony and we see what it has done for Japan and Greece.
Posted by: Ben Franklin | Aug 6 2014 21:55 utc | 55
@8
John Brennan
@16
He is a nihilist, He has never believed anything ... and always said so.
@21
Unlike JFK BOb has been CIA property since day one. He's a company man. A revolutionary waiting his turn with all the rest at the revolving door. No day in Dallas for him.
@43
Oceania has always been at war with East Asia ... and Eurasia? ... oh,oh ... see what happens when you leave the CIA in charge?
Posted by: john francis lee | Aug 6 2014 22:03 utc | 56
The human condition boils down to power, status and wealth. Life is the battle to get it, keep it and reproduce. Humans developed government to marshal power and laws were written to constrain it. Except, in this century, lawless Plutocrats and Multi-Nationals have seized power and rule the world. They have to loot. The written law’s only purpose is to control the masses. America’s wars are fought by mercenaries. Government is neutered; thus, Barack Obama’s funk. He is the teleprompter for the real rulers. He is about to start WWIII; he likely knows it, and can’t do a damn thing stop it.
Vladimir Putin does know what is at play and is delaying intervention into Ukraine as long as possible, hoping the West comes to its senses. But, War is inevitable. To stay in power he will have to rescue the million Russians trapped in Donetsk.
Posted by: VietnamVet | Aug 6 2014 22:10 utc | 57
@51 MRW.. thanks for the articulate view on the nature of debt and the distinctions.. you post very infrequently here at moa.. are you the same MRW from mondowiess? at any rate - what do you think could happen to change the usa's position thanks the bretton woods agreement, whereby the usa would no longer be able to financially bully other countries? i am curious. thanks.
Posted by: james | Aug 6 2014 22:17 utc | 58
VNF; Putin is no hero, but he is crafty and understands his limitations with NATO breathing down his neck, creating havoc and attempting with great effort to isolate Russia. There are 20,000 Russian troops on the border because Russian-speaking Ukes are migrating north by hundreds of thousands.
Much anxiety has been expressed for Gazan genocide, nary a word about natives of Donetsk.
Posted by: Ben Franklin | Aug 6 2014 22:18 utc | 59
Posted by: MRW | Aug 6, 2014 5:39:39 PM | 51
"...You need to understand that “Debt” is not “Debt” Federal “debt” is new money, new ‘net financial assets’. The government spends first on goods and services it needs to provision itself. [So does Great Britain, Canada, Japan, and Australia, who also have sovereign non convertible currencies with a floating exchange rate.] The US federal government creates this spending with congressional appropriations AFTER Congress appropriates, the US Treasury tells its banker, the Federal Reserve, to mark up its General Account in the amount of the approved spending, and gives it the names of the vendors to transfer money to through the system THEN, the US Treasury issues treasury securities in the same amount of the spending at auction on the 15th of month. The US Treasury issues these securities out of ‘thin air’. They ‘print’ them. Anyone with more than $250,000 in a private bank savings account scrounges to buy them because private banks only insure to the FDIC limit: $250,000. They are typically gone within nanoseconds. Treasury securities offer the safety of the “ful faith and credit” of the United States Government up to the amount of the treasury securities, which could be billions The money supply is restored to balance. (The federal government doesn’t have to do this, but it does from long-time congressional rules from the gold standard days. The US Treasury also calculates the amount of interes on treasuries needed every year and issues treasury securities to cover that amount as well. Taxpayers are nowhere to be found in this...."
----------------------------------------------------
So in other words the money merlins just wave their magic wands and whatever they want they print out of thin air. So i guess the money merlins could print infinite amounts of dollars and the system would be just fine?
Posted by: really | Aug 6 2014 22:23 utc | 62
Posted by: Ben Franklin | Aug 6, 2014 5:55:58 PM | 53
Wildly off the mark and completely wrong. You didn't read what I wrote.
And when the US goes to IMF for relief guess who is stuck with the check? Austerity is their one-trick pony and we see what it has done for Japan and Greece.
The US does not need to go to the IMF for relief. Neither does Japan. Japan has been at close to 0% interest for 20 years, its "debt' is close to 200% of GDP, it has one of the highest living standards in the world, one of the world's strongest currencies, their elderly get free 100% health care, their educational system is better than ours, and the bond vigilantes can't touch them because Japan denominates its debt in its own currency, just like we do.
Greece is another story. It gave up its currency to join the EU. It has to denominate its debt in EURO. It is like one of the 50 US states now. It can't create its own currency. It can't pay for things in Drachma, that's gone. It has to borrow on the open market from bond vigilantes who charge exorbitant interest and demand the country's resources as collateral, which it is dying to get its mitts on. Why do you think Victoria Nuland, et al, want the Ukraine to join the EU/EURO? So she and her husband's friends can steal Ukraine's natural resources when the loans fail.
Use your head.
Posted by: MRW | Aug 6 2014 22:24 utc | 63
Posted by: really | Aug 6, 2014 6:23:22 PM | 60
Really, really. This system of ours has been in place since 1934 domestically and since 1971 internationally. You'd think it would have been shown to be a problem before now.
So in other words the money merlins just wave their magic wands and whatever they want they print out of thin air. So i guess the money merlins could print infinite amounts of dollars and the system would be just fine?
We've been printing money out of 'thin air' for 80 years, just like Benjamin Franklin did starting in 1727.
Sure, the "money merlins could print infinite amounts of dollars," but then the price of everything would be sky-high, wouldn't they? And no one around the world would be able to afford to pay for anything American. Yes, the government could print up $500,000 for each citizen annually, but what would that do to the price of a house, or a car, or a roofing job?
You didn't read what I wrote carefully enough. I said we have a sovereign non-convertible currency (meaning not convertible to metal) WITH A FLOATING EXCHANGE RATE. That is the global control.
Posted by: MRW | Aug 6 2014 22:37 utc | 64
We need to move aside the childish notion that the US and NATO are seeking peace in Ukraine.
If the US and NATO were seeking peace, they wouldn't have pumped $5 billion into Ukraine in support of a "democracy movement."
The US and NATO are trying to cut off Russian gas pipelines that flow through Ukraine into Europe to weaken the Russian economy and strengthen the petrodollar.
Once the Russian gas stops flowing to Europe, the only remaining option for Putin will be to sell it to Asia. Therefore, the reasoning behind Obama's "pivot to Asia" becomes much clearer.
Only through the US and NATO encircling, threatening and weakening both Russia and China is there any possibility for the US Dollar to remain the world's reserve currency for the mid-term future.
The US Dollar is the foundation of the US Empire. Once it loses its role as world reserve currency, the might of the US Empire, its ability to project military dominance around the globe and control major trading markets will collapse.
Posted by: Cynthia | Aug 6 2014 22:39 utc | 65
@56 james
Yeah, it's the same me from mondoweiss. I come here twice a day to get mental relief by reading b's posts and the comments. b pulls me down off the chandelier. ;-) MW never seems to let my posts on the monetary system get through. Occasionally, though.
I don't know what you mean about the Bretton-Woods thing. Bretton-Woods died on August 15, 1971 when Nixon wisely took us off the gold standard internationally after he discovered the French were running every $US35.00 it could get its mitts on to trade in for an ounce of gold. Was there a recent Bretton-Woods agreement?
Posted by: MRW | Aug 6 2014 22:50 utc | 66
"use your head'.
My point related to austerity. Whether Japan's currency is internally distributed or not, austerity has been disastrous for their stagnant economy, and the Fed will surely collapse like the Petrodollar. Then where will the US go?
Posted by: Ben Franklin | Aug 6 2014 22:53 utc | 67
http://www.social-europe.eu/2013/01/japan-abandons-austerity/
The oligarchs in Ukraine won't foot the bill. Joe Lunchbucket gets the Butcher's Bill.
Posted by: Ben Franklin | Aug 6 2014 22:59 utc | 68
@22 Cold N. Holefield
The Dollar Reigns Supreme by Default
Written by the IMF, an organ of the U.S. You do realize, don't you, that the article is basically the U.S. congratulating itself?
Twenty years ago -- hell, even ten years ago -- the article would not have been needed. It was obvious to everyone in the world -- then -- that the dollar was unchallengeable.
It is far from unchallengeable now. Which is why the article sounds like the captain of the Titanic reassuring the passengers that all is well.
Posted by: Cyril | Aug 6 2014 23:06 utc | 69
MRW, MoA - 2014
Why do you think Victoria Nuland, et al, want the Ukraine to join the EU/EURO? So she and her husband's friends can steal Ukraine's natural resources when the loans fail.
Karl Marx, The East India Company — Its History and Results - 1853
The subsidiary system or the system of so-called subsidiary agreements-a method of turning the potentates of Indian principalities into vassals of the East India Company. Most widespread were agreements under which the princes had to maintain (subsidise) the Company’s troops stationed on their territory and agreements which saddled the princes with loans on exorbitant terms. Failure to fulfil them resulted in the confiscation of their possessions.
Some things, like the colonial system that Ukraine (a weak state, severed from its historical hinterlands and convinced of what a great thing it is to be "Ukrainian") is now falling into, never change...
Posted by: guest77 | Aug 6 2014 23:10 utc | 70
@65 Ben, and @63 Cynthia,
Ben, Japan’s new government, run by Shinzo Abe, has ditched austerity. The Financial Times reported last year:
Shinzo Abe has great expectations for his stimulus package. Japan’s new prime minister thinks his Y10.3tn ($116bn) fiscal boost will provide a “rocket-start” to the economy, leading to fast economic growth and rapid job creation. So far, investors appear to agree with him: when the plan was unveiled last Friday, the Nikkei index rose by 1.4 per cent.
Cynthia:
The US Dollar is the foundation of the US Empire. Once it loses its role as world reserve currency, the might of the US Empire, its ability to project military dominance around the globe and control major trading markets will collapse.
We weren't the reserve currency during the 40s, 50s, and 60s. Nothing collapsed then. Canada isn't the reserve currency, but it has the same sovereign non-convertible currency we have, and it's doing fine.
Look, the only thing that is going to make us NOT be the reserve currency is if countries don't want US dollars. So they won't sell things to us in US dollars, because they don't want them.
That's why what this numbskull president is doing, forcing China, Russia, Iran, Brazil, and others to trade in other currencies. China is building the institutional infrastructure to trade in Yuan, just like what we did in the 40s-60s. But until China offers the kind of trillion dollar equiv. bond market that our treasury securities do, there's not much chance of us losing reserve status just yet.
Posted by: MRW | Aug 6 2014 23:17 utc | 71
If anyone is interested in reading Marx, the articles from the Daily Tribune are an excellent place to start.
It's not unlike reading our host b's output in some ways - it is timely (for the times) and focuses on easily grasped issues like economics and foreign affairs, something everyone here is certainly interested in. They're a joy to read, and cover the Opium Wars against China, British Colonialism in India and Ireland, Rothschild banking in France, the class system and politics of England, and last but not least - the Civil War in the United States.
Worth reading. And certainly more easily digested than Capital.
Posted by: guest77 | Aug 6 2014 23:21 utc | 73
The day you see countries want to sell their goods abroad for Yuan (or something similar), then you'll know the US dollar is finished.
Posted by: MRW | Aug 6 2014 23:25 utc | 74
@ Cyril #67.
Was just planning to point out same. Folks should realize that Cold N. Holefield has more than a few characteristics of a troll, spinning counterpoint.
Posted by: erichwwk | Aug 6 2014 23:28 utc | 75
Posted by: guest77 | Aug 6, 2014 7:21:27 PM | 71
Thanks for that treasure trove link! Marx was the best explainer of capitalism, btw, believe it or not.
Posted by: MRW | Aug 6 2014 23:28 utc | 76
China loves the US dollar again as America roars back
China’s central bank has radically revised its view of US economic and strategic power, predicting that the dollar will remain the world’s paramount reserve currency for decades to come.Jin Zhongxia, head of the central bank’s research institute, said America’s energy revolution and export revival had shaken up the global landscape and would lead to a stronger dollar over time. “The dollar’s global dominance will continue,” he said.
Dr Jin said the world was moving to a “1+4” system, with the greenback serving as the anchor of global payments, supplemented by “four smaller reserve currencies” – the euro, sterling, yen and yuan.
“Compared with the euro area, the dollar zone has much greater resilience to shocks. The debt crisis in the euro area has demonstrated the structural weakness of this currency,” he wrote in a paper for the February bulletin of the Official Monetary and Financial Institutions Forum.
The comments suggest a profound shift in thinking about the US since the financial crisis five years ago, when premier Wen Jiabao questioned if Chinese holdings of US Treasuries were “safe”, and the central bank issued a paper calling for a “global currency” run by the International Monetary Fund.
Posted by: Cold N. Holefield | Aug 6 2014 23:45 utc | 77
"he comments suggest a profound shift in thinking about the US since the financial crisis five years ago, when premier Wen Jiabao questioned if Chinese holdings of US Treasuries were “safe”, and the central bank issued a paper calling for a “global currency” run by the International Monetary Fund."
That's either a clever negotiation ploy directed at Russia, or they don't understand it will be years before natural gas exports reach any utility. They are furiously building CNG ports with funny money but exports of that nature will have to wait. Now on XXl pipeline it seems to be dying an Obama death. That means it won't even start until 2017 and that will be with a Republican POTUS.
Nice try though.
Posted by: Ben Franklin | Aug 6 2014 23:51 utc | 78
@64 MRW.. i always enjoyed your humour at mondoweiss. i don't go their very often, at least for the past few years and i don't post their anymore.
thanks for the additional comments. read this for a partial understanding of how the bretton woods agreement is still giving an unfair advantage to the us$ as i understand it. the nature of the imf, world bank and bank of settlements continue to favour the us$, europeans and their private banking system, more then china or russia for example. i think this is based on the special privileges extended to the usa as a result of it's role in ww2..
these 'international' structures continue to favour us banks. let me explain. my understanding is that the imf and world bank have been an international vehicle used primarily by private western banks to financially benefit from challenging financial dynamics in countries that run into trouble financially. the unfolding situation in ukraine at present is a good example of this.. while ukraine is seeking more money from the imf, who are the private banks that are benefiting from it's present crisis on a financial level? my understanding is it will be these same private american and european based banks that benefit at the expense of the ukrainian people.
maybe i am getting way off topic, but i do believe international financial systems and mechanisms are an important part of getting a better understanding of what is at work on the ground. feel free to educate me or challenge me on any of this, as i continue to want to understand the intentionally opaque area of banking and world finance. i believe it has a huge role in many historical events and is largely overlooked or ignored when it could shed more light on a number of topics, such as why BRICS is an important step or not for example..
Posted by: james | Aug 6 2014 23:53 utc | 79
Some excellent news:
Ex-president Saakashvili faces criminal indictment in Georgia
Posted by: guest77 | Aug 6 2014 23:53 utc | 80
@73 cold... i wonder what the chinese think 1 1/2 years after the article from right wing rag 'the telegraph' dated feb 2013.. BRICs suggest something different..
Posted by: james | Aug 7 2014 0:18 utc | 81
Well, it looks like that "Hamas" guy "admitted" to "killing" those 3 Israeli teenagers.
What's that? He was tortured, you say?!!
Didn't you hear Obama, assfaces?
This is no time to get all "sanctimonious" about legalities and such shit ESPECIALLY when the Israelis a la the Americans post-9/11 were probably just weally weally scared and couldn't help themselves.
Nice.
Posted by: JSorrentine | Aug 7 2014 0:20 utc | 82
@80 jsore - ot "The latest Israeli rampage was set off by the brutal murder of three Israeli boys from a settler community in the occupied West Bank. A month before, two Palestinian boys were shot dead in the West Bank city of Ramallah. That elicited little attention, which is understandable, since it is routine." guess who is quoted as saying this?
Posted by: james | Aug 7 2014 0:49 utc | 83
@80
Yup, they are scripting after the fact the pretext to mercilessly bomb the hell out of gaza. How about bibi one upping colin powell with the powerpoint presentation. I am sure they are yucking it up with cognac in the mahogany libraries over that one.
Posted by: really | Aug 7 2014 0:50 utc | 84
Cyril @ 67: Saddam Hussein was well ahead of the game: IIRC, in 2002 he proposed use of the € in petroleum sales. Ghaddafi ditto in 2010. Hoping RF and PRC can see the game through...
Posted by: Cortes | Aug 7 2014 0:50 utc | 85
Oh no, james. Chomsky is still a phony fake leftist. The evidence is all there - Chomsky just rants and raves about Israel's crimes on the internet... while JSorrentine, well he...er...uh....er....uh...
;)
Posted by: guest77 | Aug 7 2014 2:26 utc | 87
fakey lefty hey? i thought i would see if i could get a rise out of mr sore, lol..
us sanctions on the financiers of ISIS, lol... one can just see the usa sanctioning saudi arabia, qatar and kuwait! they might even have to sanction themselves!
Posted by: james | Aug 7 2014 2:34 utc | 88
@erichwwk 73:
Was just planning to point out same. Folks should realize that Cold N. Holefield has more than a few characteristics of a troll, spinning counterpoint.
Yes, Cold N. does appear to be a troll.
He's doing it again in message 75 ("China loves the U.S. dollar again"), hoping that nobody realizes the article was written more than a year ago, before the Ukrainian crisis accelerated events to warp speed.
After all, it is in the interest of every country not named the U.S.A. to abandon the U.S. dollar as reserve. When the Fed does "quantitative easing", the latest euphemism for printing money, it is basically stealing tens of trillions of dollars of wealth from the rest of the world. Why would anybody outside the U.S. stand still for such robbery?
They won't, of course. I expect Cold N. to be louder and louder and more and more desperate in the coming months.
Posted by: Cyril | Aug 7 2014 3:20 utc | 89
@MRW 69:
But until China offers the kind of trillion dollar equiv. bond market that our treasury securities do, there's not much chance of us losing reserve status just yet.
That won't take long. When the Russians and/or Chinese put up a few satellites to set up a global communications network far beyond the U.S.'s reach, the bond market will be up and running.
Posted by: Cyril | Aug 7 2014 3:32 utc | 90
I suppose it would be trite to talk about inconsistencies and hypocrisy of USA sanctions but there is something odd about the champions of free enterprise and capitalism punishing not so much the government of the sanctioned country but of its capital and free movement thereof. Aside from not being able to recognize oligarchy in one's own country, the notion that Russian oligarchs will influence the government one way or another for the benefit of US foreign policy is plain delusional.
Nest step what? Sanction medicine for children (as in Iraq)? Travel restrictions for citizens (Cuba)?
At a certain point it does become a pain in the butt to adhere to sanctions and that will create new pathways for flow of money. Whether that's dollars or not is not all that significant unless you happen to own the printing press.
Posted by: YY | Aug 7 2014 3:32 utc | 91
lysias @15
It seems to me that Putin's plan for a Eurasian Union and his plan for a Free Trade Zone from Lisbon to Vladivostok are perceived as threats by the USG.
Arch-neo-con Hilary said:
the Eurasian Union is "a move to re-Sovietise the region", adding ominously: "We know what the goal is."
Then consider that other arch-neo-con Brzezinski's view found in The Grand Chessboard that Ukraine "enhances Europe's geo-strategic depth" and "without Ukraine a [Russian] imperial restoration is not a viable option." On that view, to assure long-term US dominance of Europe Ukraine must be independent of Russia and a part of Europe. Brzezinski thinks that if Ukraine is part of Europe then Russia has to make a choice: either become part of Europe, too, and fall under American leadership, or become a Eurasian outcast. Either choice would satisfy the USG and its oligarchs' interest.
Posted by: ess emm | Aug 7 2014 3:33 utc | 92
For what it's worth, China invests in U.S. bonds because they're the safest investments one can make. The political stuff is a bonus.
As MRW was saying, USA is a currency sovereign, it cannot go broke because it can print its way out of any problem. So the bonds get paid no matter what.
Posted by: Crest | Aug 7 2014 3:33 utc | 93
FATCA has made if very difficult for Americans living abroad (law abiding ones) and many are divesting their US citizenship, their property and their investments in the USA. And thus, the dollar. For financial institutions the compliance rules are a nightmare and the witholdings and penalties outrageous.
The Economist:
In a piece of extraterritoriality stunning even by Washington’s standards, the new law requires banks, funds and other financial institutions around the world to report assets held by American clients or face a ruinous 30% withholding tax.
http://tinyurl.com/qyt2e46
Longer:
Btw the numbers of ppl renoucing US citizenship one can read in the press (or on Gv. website) are fudged, they include only a small particular set: those who pay exit tax, and imho not all of them either. In 2013, 900 Americans turned in their US passports in Switzerland, a postage stamp country. (Out of the ambassador’s mouth.) In some US embassies, the wait time for the procedure has stretched to 18 months...(from press.)
I thought Vlad, because a Brit tabloid called him Vlad the Lad, in a sort of humorous way - he is tough, does martial arts, etc.
The Yukos case is truly hallucinating, mind boggling. No time for it now though.
Posted by: Noirette | Aug 7 2014 9:44 utc | 94
Alex G. @Alex_d_Grosse 27m
@AndersFoghR just landed in Kiev.
Same time madian goes up in flames again.
Not even the best conspiracy writer can make this up...
-------------
AndersFogh RasmussenVerified account
@AndersFoghR
Just landed in Kiev. I'm here to offer #NATO's political support to #Ukraine and President Poroshenko
i tweeted Fogh this:
does @AndersFoghR know Kievs junta are fascists? http://www.salon.com/2014/02/25/is_the_us_backing_neo_nazis_in_ukraine_partner/
Posted by: brian | Aug 7 2014 9:45 utc | 95
When the Fed does "quantitative easing", the latest euphemism for printing money,
This is false — a lie spread around by gold bugs just as this potential loss of the dollar as the global reserve currency is.
I've shown in several posts at my blog that quantitative easing is not "printing money" — and in fact actually decreases the amount of money in circulation rather than increases it. To contend the opposite is unequivocal and duplicitous bullshit. Where's your blog to backup your bullshit claims? Nowhere, that's where, so you're the propaganda troll.
USA is a currency sovereign, it cannot go broke because it can print its way out of any problem. So the bonds get paid no matter what.
Correct, and what makes it more enticing as a safe-haven for investors is that it doesn't print its way out of it, at least not yet, even though it could. It's called trust. It's managed to avoid printing and high inflation. A magician's trick? Perhaps, but they're the only ones who can do it and they do it well. All the elite (WWON) of other countries know this, and therefore all this bluster about the declining dollar and the potential loss of it as the world's reserve currency is so much wishful-thinking bullshit spun by gold bug con artists and those who have an eternal ax to grind.
Posted by: Cold N. Holefield | Aug 7 2014 10:53 utc | 96
pmsl, that's funny, another line to push from mother Russia???
wake me up when the ruble becomes a credible currency...which is never, unless you live in some shithole in the Urals
Posted by: Another Jeff | Aug 7 2014 11:34 utc | 97
Boo hoo!
So the EU is saying they will go to the WTO concerning Russia's ban on the import of agricultural products. They can dish it out, but they can't take it. Therei is a good opinion piece in Itar-Tass about the bans Russia might introduce. For example, a Russian analyst said that replacing Microsoft software, which is being used in government structures, is one possibility. Banning fast food chains and creating their own, more healthful chain, is another.
As far as EU politicians taking their case to the WTO?
“The United States and the European Union have no intention of confining themselves to the sanctions that have been introduced already. For that reason Russia may eventually declare its walkout from the World Trade Organization and within a six-month deadline to cancel its obligations to foreign partners in view of force majeure circumstances,” the analyst pointed out.
http://en.itar-tass.com/opinions/1857
Posted by: madisolation | Aug 7 2014 11:38 utc | 98
The US' problem is that it can ill afford losinfg this "privilege". If ever, it is now more necessary than ever. It can keep interest rates down as long as others still use the dollar in transactions and thus buy it even if it has zero interest. Generally speaking, all other factors being equal, a currency appreciates if interest rates in that denominations rise and vice versa. Had not the Euro zone equally driven rates into the ground, the dollar would already be struggling mightily. Then no one, esp. not the Chinese will buy US bonds and -although you think it may still take years for the rot to manifest itself openly- look at what happened when the British central bank speculated against Soros. They never regained their health since. This thing can collapse any moment and equally it may take years.
Posted by: Colm Barry | Aug 7 2014 12:32 utc | 99
@ Gatekeeper Fucking Chomksy and the fake left fan boy club:
Wow, I couldn't have asked for a better example of how the fake left fanboys are led around by TPTB and their gatekeeping bitches like Chomsky.
Oh, so even though Chomsky has ridiculously and shamelessly excluded discussion of Israel from nearly EVERY single series of events involving the ME over the last two years regarding Syria, ISIS, etc and spent the greater part of his professional gatekeeping life absolving Israel from the long-term plans - e.g., Yinon Plan, etc - that were are seeing made manifest before our eyes right, now, NOW that he hews to the story some Palestinian boys were murdered at some point before the latest Gaza conflagration - which btw, deflects attention AWAY from the murder of the settlers being an Israeli false flag to begin with - now I guess we are all supposed to get in line and wait for you fake lefties to get finished sucking off this old gasbag?
mmmm...you taste so good, Noam!!! Don't you think so, guest? Doesn't he taste like intellectual integrity? Don't his balls smell like honesty and integrity? I can't wait to toss his salad!!!
All because - after a LIFETIME of gatekeeping - he puts out one obvious statement no matter how late to the fucking party he may be. Wow, NC, you're just blowing our minds!!
Holy fuck, you guys are cheap dates!!
And then people wonder why nothing will change in America...it's because fanboy fake left whores - beaten into submission by their masters - are just so excited when one of their fake left heroes says something that makes them want to man-munch their way to dinner.
I also really like the girl-school clique-ishness on display:
james: (teehee) Now what do you have to say about my idol, JSore? (munchmunch)
guest77: (giggle) Yeah, you tell him, james! What do you have to say NOW? (lickcuddle)
Hey, Obama mentioned that the US tortured people over the weekend? Will he get a rimjob from you guys too now?
Embarrassing.
Posted by: JSorrentine | Aug 7 2014 13:03 utc | 100
The comments to this entry are closed.
The U.S. foreign policy reliance on sanctions, pressure and war is sawing off the high branch the U.S. is sitting on.
Yep, thanks for this morning LOL. It's moving in slow motion but it is moving.
Posted by: jo6pac | Aug 6 2014 16:17 utc | 1