Posts Tagged ‘u.s. dollar decline’

China’s Leadership Is Increasingly Worried Over U.S. Fiscal Imbalance

November 10th, 2009 Comments off

In an earlier post, I reported on the statement Chinese premier Wen Jiabao made at a press conference regarding his anxiety over the security of his nation’s vast investments in U.S. securities due to Washington’s wild and crazy fiscal policies. Well, it appears that his nervousness regarding the United States economy is growing rather than receding.

Premier Wen is touring Africa, where China in investing sizeable amounts of cash in strategic acquisitions. While in Egypt, and again at a news conference, Wen made the following statement to the international press:

“I hope that as the largest economy in the world and an issuing country of a major reserve currency, the United States will effectively discharge its responsibilities. Most importantly, we hope the U.S. will keep its deficit at an appropriate size so that there will be basic stability in the exchange rate that is conducive to the stability and recovery of the world economy.”

With the value of the U.S. dollar continuing to plummet as gold prices rise, and America’s massive deficit spending continuing unabated, I wonder how China will react when the Obama administration decides on a new stimulus spending package, as will almost certainly be the case in early 2010. Perhaps Beijing may be reluctant to continue acting as Washington’s revolving credit card. But without China’s largesse, who then buys U.S. Treasuries, and most importantly, at what bond yield?  I believe that the days when Washington could fund its deficits at absurdly low interest rates may be about  to leave us for good.


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Is the U.S. Dollar Decline Good For The American Economy?

October 20th, 2009 Comments off

As the  American dollar slides inexorably downward  in value relative to other major currencies, there are those heralding this  development as marvellous news. Many of these cheerleaders can be found within the camp of the Federal Reserve and U.S. Treasury, despite their public protestations that they are true believers in a strong U.S. greenback. But away from the T.V. cameras and open microphones, these guardians of American finance and economics believe that a weak dollar means an improved balance of payments. American exports are helped by being cheaper for overseas customers, while imports become more expensive, dampening the American appetite for goods originating from foreign sources.

Actually, a balanced dollar is good for the American and global economy, but a weak dollar in the long-term is not such good news. True, American exports become cheaper, initially. However, commodities and value add derived from overseas sources comprise a large component of American exports, so in the long-term a weak dollar does not provide a permanent advantage in terms of cost-competitiveness.

More important than exports, the center of gravity of the American economy is foreign-sourced oil and natural gas. With more than two thirds of American oil consumption based on imports, a collapsing dollar will raise energy prices in the United States to a level that is not sustainable for many consumers. Now, Messrs Geithner, Bernanke and Summers; tell me how this benefits the U.S. economy?


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website,

The U.S. Dollar is on the Endangered Species List

October 9th, 2009 Comments off

The conspicuous decline in the American dollar these last few days, coinciding with the rise in gold prices to well above a thousand dollars per ounce, is apparently another nail being driven into the greenback’s monetary coffin. As I noted in an earlier post, the U.S. dollar is being used increasingly as the currency of choice in the carry trade. Just look at the current ratio of yen to dollar, a clear marker of fundamental weakness.

It is apparent to me and many others that the U.S. dollar is now living on borrowed time as the world’s predominant reserve currency. The Chinese, the Russians, the Gulf State Arab countries, the Europeans, even the United Nations, are all talking openly about the need for a new global reserve currency mechanism. When the dethronement of the American dollar as the world’s reserve currency occurs can only be guessed ; it could happen 5 years down the line, perhaps longer, but even more likely much sooner than anyone can imagine.

The rhetoric emanating from the mouth of U.S. Treasury Secretary Geithner on the Obama administration’s commitment to a strong dollar is beyond meaninglessness. Nobody takes anything Geithner says on behalf of a supposed strong dollar policy seriously. The die is cast. It is only a question of when and how the reign of the American greenback as the universal global currency is terminated.