Let’s start with this:
China calls for dollar to be replaced as global reserve currency
Upset that the U.S. fiscal impasse threatens to trigger a default that would roil financial markets worldwide, Beijing suggests ‘building a de-Americanized world.’
By Jim Puzzanghera
October 14, 2013, 5:23 p.m.
WASHINGTON — Five years after the U.S. financial crisis helped cause a deep global recession, foreign leaders are worried that history is going to repeat itself.
The fiscal impasse that has partially shut the federal government now threatens to trigger a U.S. default that would roil financial markets worldwide, leading an agitated China to suggest replacing the dollar as the international reserve currency.
“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world,” China’s official state-run news agency, Xinhua, said in an English-language commentary Sunday.
There is no viable alternative to the dollar as the centerpiece of the global financial system, and there probably won’t be for the foreseeable future, experts said.
But Washington’s debt limit standoff — coming on the heels of similar brinkmanship in 2011 — could accelerate efforts to find an alternative.
“The U.S. remains the core of the global financial system at this point,” said Nicolas Veron, a senior fellow at Bruegel, a think tank in Brussels. “But the sort of thing happening in the U.S. might move people toward a system less reliant on the U.S.”
China echoed calls from world financial officials urging an end to what it called the “pernicious impasse” in the U.S. over funding the government and raising the $16.7-trillion debt limit.
The Treasury Department has said the debt limit must be raised by Thursday or it will run out of borrowing authority. That would leave it dependent on just cash on hand and incoming revenue to pay the federal government’s bills. Given the world financial system’s dependence on the dollar, a default on payments of interest or principal on U.S. Treasury bonds would be catastrophic for the global economy, analysts said.
Treasury bonds and other dollar-based investments are used as the main form of collateral worldwide, so questions about their security would cause more problems than the financial system failures in fall 2008, said Benjamin J. Cohen, an international political economy professor at UC Santa Barbara.
“It would make the Lehman Bros. episode look like a garden party by comparison,” Cohen said.
The U.S. debt limit standoff was the main topic at the recent meetings in Washington of the International Monetary Fund and the World Bank.
Global finance ministers are worried that the uncertainty surrounding a U.S. default “would mean massive disruption the world over, and we would be at risk of tipping yet again into a recession,” Christine Lagarde, head of the IMF, told NBC’s “Meet the Press.”
Most countries hold their foreign exchange reserves in U.S. dollars because the currency is viewed as the world’s most stable.
“The very fact that more than 60% of central banks’ reserves are in dollars gives them every reason to be concerned,” Barry Eichengreen, a professor of economics and political science at UC Berkeley and a former senior policy advisor at the IMF, said of foreign governments. “If the bank in which you held 60% of your savings was threatening to default, you’d be concerned too.”
U.S. financial markets rebounded Monday amid optimistic reports from Capitol Hill about negotiations between Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) to end the standoff.
China is the largest foreign holder of U.S. debt, with about $1.3 trillion in Treasury bonds, and probably more in other dollar-denominated investments. So the Beijing government is worried about the effect of a U.S. failure to raise the debt limit on those holdings.
The Xinhua editorial took swipes at the U.S. for claiming “the moral high ground” while “covertly doing things that are as audacious as torturing prisoners of war, slaying civilians in drone attacks, and spying on world leaders.”
Although it slammed the U.S. for the Iraq war and military activity around the world, the article focused much of its fire on the U.S. role in the global economy, saying “the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites.”
“Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized,” Xinhua said.
The editorial called for a “a new world order” in which “all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.”
That new order should start with respect for the sovereignty of other nations, the editorial said. It also should include major financial reforms, such as allowing developing and emerging economies to have more say in the operations of the IMF and the World Bank.
China has been pushing since at least 2009 for the dollar to be replaced as the world’s reserve currency. The nation has not only called for a new international currency to be developed but also has been taking steps to make its currency, the yuan, more acceptable as a potential alternative.
“They never lose an opportunity to take advantage of embarrassing behavior by the United States,” Cohen said. China made similar calls in 2011, when a debt limit standoff was resolved at the last minute.
But the Chinese currency and its financial system are not ready to be the world’s reserve currency, experts said. Even the euro and Japanese yen aren’t prepared to do that because they lack the liquidity of the dollar.
Still, the latest Washington crisis could push the world to seek ways to diversify the financial system away from its dependence on the dollar, Cohen said.
“The only thing that can hurt the dollar these days is political dysfunction in Washington. We’re shooting ourselves in the foot,” he said. “The more we play these games in Washington, the less confidence people will have in the dollar and the more incentive people will have to do this diversification.”
The first thing I couldn’t help but notice is how communist China’s demagoguery sounds almost exactly like Obama’s demagoguery. They’re both talking down America hoping that the worst will happen to this country because each (i.e, China and Obama) believes their political goals will be attained through America’s demise. But moving on…
I don’t know whether the Los Angeles Times – which is staffed by liberal ideologue propagandists as opposed to actual “journalists” is simply being incompetent in this story or being the propagandists that they are (i.e., the backstory is that the “default” is the Republicans’ fault, and ergo sum the global meltdown over the “default” will be all the Republicans’ fault, too). But here’s a fact that kind of pees all over some of the main assertions in this story:
From November 24, 2010 (the money quote is boldfaced at the end):
China and Russia have agreed to allow their currencies to trade against each other in spot inter-bank markets.
The motive is to promote the bilateral trade between China and Russia, facilitate the cross-border trade settlement of [the yuan], and meet the needs of economic entities to reduce the conversion cost, according to Chinese officials.
This latest move — a continuation in a series of efforts by both countries to move away from U.S. dollar usage in international trade — further threatens the dollar’s reserve currency status.
The dollar has this status because it is currently the currency of international trade.
For example, when Malaysia and Germany exchange goods, the transaction is often denominated in dollars. In particular, oil — something that all modern economies need — is denominated in U.S. dollars, so the currency is almost as indispensable as oil itself.
The dollar reserve currency status allows the U.S. to run up high deficits and have its debt be denominated in the U.S. dollar, which in turn enables it to print unlimited dollars and inflate its way out of debt. America, understandably, wants to protect these privileges. […]
Meanwhile, China and Russia are gradually revolting against the U.S. dollar. This latest move to shift bilateral trade away from it is significant in itself because China-Russian trade — previously denominated in dollars — is currently around $40 billion per year. For Russia, trade with China is larger than trade with the U.S.
Moreover, as this policy extends to Russian exports of oil and natural gas to China, it threatens the global petro-currency status of the U.S. dollar.
According to the International Energy Agency, China is already the largest consumer of energy, although the U.S. is still the largest consumer of oil. However, China, now the largest automobile market in the world, is expected to rapidly increase oil consumption.
Russia is already the second biggest oil exporter and the biggest natural gas exporter in the world.
In other words, the growing importance of Russia and China in the global energy picture — and their phasing out of dollar usage for trading energy commodities — would marginalize the status of the dollar.
Russian ambitions against the dollar for energy exports go back to 2006. That year, former President Vladimir Putin made plans to set up a ruble-denominated oil and natural gas stock exchange in Russia.
So, in fact and contrary to the Los Angeles Times “reporting,” the movement away from the U.S. dollar as the reserve currency in fact PREDATES the financial crisis – and goes back to at least 2006 (I would argue it goes back even further than that, but I’ve proven my point: the financial crisis happened in late 2008). So the LA Times is simply wrong in its thesis that the debt ceiling issue – which they over and over again hype as a “default” – is just plain bogus.
When we consider that Barack Obama demonized George Bush and ostentatiously voted against his debt ceiling (and didn’t bother to even show up and vote when the debt ceiling was raised other times during the Bush years – such that HE NEVER DID VOTE FOR A BUSH DEBT CEILING INCREASE other than when he voted for TARP – you also see the deceitful and dishonest propaganda that is going on. It’s always “that was then” with these people; it’s always “It’s only fascist when THEY do what we did” with them. Such as the fact that Obama did a press conference demonizing the GOP for not voting for his debt ceiling hike without ever bothering to so much as mention the fact that Obama did the exact same damn thing and how could the Republicans be anything but just as evil as the man who was now demonizing them???
Nor will that same blatantly dishonest media point out that Democrats shut down the government over the debt ceiling EIGHT TIMES during the Reagan presidency. Because that would prove the lie to Obama’s “this has never happened before” and “no party has ever been this bent on destroying America” load of garbage.
Nor will they point out that it has largely – if not exclusively – been OBAMA who has fearmongered the debt ceiling rather than the Republicans.
The dishonesty of the mainstream media is simply breathtaking.
Black’s law dictionary has this to say about “default”: The omission or failure to fulfill a duty, observe a promise, discharge an obligation, or perform an agreement [or observe a promise or discharge an obligation (e.g. to pay interest or principal on a debt when due ].
Come October 17 if our dysfunctional Washington hacks do not raise our debt ceiling, ominous forecasting of imminent default on our $17 trillion burden pound the airwaves. Prevarications foisted by the progressive press-corps regarding the United States becoming delinquent on its Treasury debt are as preposterous as they are disingenuous. Whether premeditated lying or, equally likely, out of a stark darkness of matters economic the result is the usual fear mongering we have come to expect from their rumor mills.
Inconvenient as they may be, some facts are in order. The fiscal 2013 debt service for the twelve months ending September 30 will be somewhere around $420 billion. (Per the Bureau of Fiscal Service the actual figure of 11 months through August was just under $396 billion). IRS revenues for the calendar 2012 tax year will probably be around $2.3 trillion. That equates to over a five and a half times debt service coverage. So having enough money is not even close to the issue. There has been some discussion of what some are naming “prioritization of payments”.
Democrats are truly evil to fearmonger a “default” to falsely demonize and slander their opponents at the expense of the U.S. economy. And Barack Obama is the most recklessly irresponsible president in the entirety of American history to join them in their lies.
To wit, we could easily pay our debt and NOT default. And we could do that for not months but for years to come, if necessary.
If that isn’t enough, Republicans have already done the leg work to prevent any kind of “default”:
Sen. Pat Toomey and more than 30 Senate colleagues will introduce the “Ensuring the Full Faith and Credit of the United States and Protecting America’s Soldiers and Seniors Act.”
The bill is meant to offer a stop-gap if Congress refuses to raise the debt ceiling and the Treasury Department thus falls short of having enough cash to pay all the government’s bills in full and on time.
Toomey’s proposal would require that revenue going to Treasury first be used to pay interest on U.S. debt, Social Security benefits and active-duty military pay.
If there’s not enough revenue available to cover those payments when they’re due, the bill would also give limited authority to Treasury to raise the debt ceiling just enough to borrow the difference between revenue on hand and what’s owed on the priority payments.
I’ve pointed out the fact: if there IS a “default,” it will be because Barack Hussein refused to allow the Treasury to make the interest payment that the United States could in fact make. He has already demonstrated that he is a genuinely evil man who is trying to make the political impasse as harsh and as painful as he possibly can in order to falsely demonize Republicans.
There is one and only one genuine fact in the Los Angeles Times piece: that of China’s demand that the United States be replaced as the reserve currency of planet earth.
That WILL happen soon. Because Democrats WILL NEVER REIGN IN THEIR DEMONIC SPENDING.
The true debt of the United States is not the “paltry” $17 trillion that we keep hearing about; it is actually well WELL over $222 TRILLION. Our actual debt, our “fiscal gap” between our debts and our ability to actually pay for all the crap Democrats keep imposing on America, is going up about one trillion dollars every single MONTH. Because politicians are liars who paper over debts with more debts and then cover those debts up with still more debts.
Democrats are the worst addicts who ever existed. Heroin, coke, crank, meth, crack addicts got NOTHIN’ on Democrats. Because Democrats are addicted to money and the power that their money buys them – and they are addicted to it TRILLIONS OF DOLLARS AT A TIME.
The only reason Democrats can keep this insane game of insane spending going is because America is the world’s reserve currency. The fact that all commodities such as oil are bought and sold in U.S. dollars has given us an unprecedented ability to basically just print money and keep escaping the consequences.
We have been just plain flat-out DEPRAVED in our spending.
As an example, do you know what triggered to insanely-titled-by liberals “Arab Spring” in which Arab regimes fell to be replaced again and again by terrorist-sponsored governments? Food riots induced by Obama’s Fed as they kept printing more and more money and basically just adding more and more zeroes to the Federal Reserve computers. As we printed more money, the Arab states that depended on the stability of the dollar saw massive inflation (because THEY can’t print more dollars their dollars became worth less = worthless).
Well, as Obama’s reverend once said, the chickens are about to come home to roost. And they will roost on a collapsed, doomed, dead former United States of America. And very soon.
One day, soon, the world will have had enough. One day, soon, our stint as being the reserve currency and maximally exploiting that status with reckless and immoral spending that we can’t possibly afford will be ended FOR us.
And China will step in and take ownership. And kick you and our family out of your home in the cold if you can’t pay their “damned American imperialist” rent surcharge.
Our time is coming. We’ll get ours. We’ll get what we deserve as a nation for being wicked enough to elect and then re-elect Obama: we’ll get Dodo bird extinction just like we deserve.
The United States is nowhere mentioned in Bible prophecy; that’s because America will have collapsed and simply be irrelevant as we enter these last days just before the beast of the Book of Revelation comes to impose his mark and doom the world to suffering and hell.