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Should the US Dollar fall...
The fall of the US dollar will mean everything China has built its economy on, will become worthless assets. A revolutionary situation will arise in both the US and China, and it won't be good for either the American or Chinese bourgeoisie.
To what extent do you agree or disagree with this, and what exactly would happen to the world, should the Dollar fall?
If Russia and Iran actually envisage to start selling oil in Euros, wouldn't this destory the US Dollar, thus leaving the US no choice but to "destroy their nuclear capabilities"(i.e invade them) incase this deal actually does go through?
Source
If the USD fell then yes, China might face problems by losing trade with the US due to higher costs, but I think it's over-exaggerated that it would be disastrous.
edit: hold on, if the dollar falls, doesn't that mean China will make more profit as the exchange rate will increase? I'm confused, it's too late
edit: hold on, if the dollar falls, doesn't that mean China will make more profit as the exchange rate will increase? I'm confused, it's too late
'The Fall of the Dollar' - It just wont happen.
Look at the technicals (price action) of the USD, the USD is about to rebound against a whole basket of currencies. Also have a dig through ft.com and search for 'the mother of all carry trades' - interesting read.
You should be asking about impending ' Rise of the Dollar'.
Look at the technicals (price action) of the USD, the USD is about to rebound against a whole basket of currencies. Also have a dig through ft.com and search for 'the mother of all carry trades' - interesting read.
You should be asking about impending ' Rise of the Dollar'.
edit: hold on, if the dollar falls, doesn't that mean China will make more profit as the exchange rate will increase? I'm confused, it's too late
If the Dollar falls, US conumers and other consumers with currencies pegged to the USD will find their purchasing power has fallen.
Demand for imports falls, or China revalues it currency to sustain previous levels of exports. Overall, *profits* will most likely fall.
Oh, and whilst we are at it, IIRC, the Chinese peg their currency against the USD. The exchange rate is fixed.
iwilson03
How do you mean by the USD 'falling'?
Being outmuscled by the Euro.
If Russia and Iran actually envisage to start selling oil in Euros, wouldn't this destory the US Dollar
1. Euro or USD, it's purely a unit for trading, no effect on exchange rates whatsoever.
2. What happens when the likes of Greece cause the breakup of European Monetary Union and loss of the Euro?
We'll bring back USD. :-)
3. Asia or Latin America will never adopt the EUR as the global currency. It'll always be the USD. There's talk of moving away from the USD, only a political play to tame the beast, the US.
Iranian soldiers 'seize iraqi oil well', link here
Is this another publicity stunt by the US, trying to get nations behind it against Iran? All because of Iran's oil trading currency?
Is this another publicity stunt by the US, trying to get nations behind it against Iran? All because of Iran's oil trading currency?
Stalin
Iranian soldiers 'seize iraqi oil well', link here
Is this another publicity stunt by the US, trying to get nations behind it against Iran? All because of Iran's oil trading currency?
Is this another publicity stunt by the US, trying to get nations behind it against Iran? All because of Iran's oil trading currency?
I found this so ridiculous:
"Its all a bit mysterious but the most likely explantion is that Tehran is sending a message to the world - well to the Israelis and Americans: 'Don't even think of attacking us, you know what might happen if you do'," he explained.
How did they come to that conclusion? How does seizing a disputed oil well, which both sides apparently do frequently anyway, equate to a warning of their strength?
In answer to your question, I think possibly yes. If this really does happen frequently then clearly the Americans have pushed it into the spotlight for a reason.
A few companies might see a bit of reduction in profits but apart from that not much will really happen. The media will overhype it and act as if it is a financial apocalypse and make everyone all scared, much like the recession now. If you didn't read a newspaper or watch TV you, nor anyone else in the world would really notice any difference in anything. It'd be likely that the Americans would get hysterical and try and invade somewhere though.
The dollar is more important than a lot of people ITT recognise. Its much more than just the currency of the USA. The dollar has global domination. Hence why China holds over a $1.5 trillion dollars in reserve - it needs to in order to maintain a fixed exchange rate.
If the dollar fell, the financial markets would collapse overnight because most corporate bonds are held in $.
It would also cause a realignment of the world trade. Currently, the U.S. runs an enormous trade deficit and places like China run an enormous surplus. Rather than spending the $ earnt domestically, China has to accumulate $ reserves to maintain its exchange rate, and Chinese companies use the $ to service their $ denominated debt. The result is an enormous flow of capital from China to the US. This is $ hegemony - it isn't just China that is impacted by this.
Its changing, but very very gradually.
If the dollar fell, the financial markets would collapse overnight because most corporate bonds are held in $.
It would also cause a realignment of the world trade. Currently, the U.S. runs an enormous trade deficit and places like China run an enormous surplus. Rather than spending the $ earnt domestically, China has to accumulate $ reserves to maintain its exchange rate, and Chinese companies use the $ to service their $ denominated debt. The result is an enormous flow of capital from China to the US. This is $ hegemony - it isn't just China that is impacted by this.
Its changing, but very very gradually.
Chinese Yuan is not fixed anymore. It's been also about to rebound against a whole basket of currencies from 2006. However, the thing is, during 2009, the price of Chinese Yuan is down against all other currencies but USD. And obviously, USD is down in the most of time this year. That's why all developed countris' leaders are annoyed and blaming that the Chinese government made this happen.
If USD fall, such as more than 20% in one semester, it will first damage the United States itself. Basically, to Chinese, it means all firms which valued in USD are at least 10% cheaper. OK! Sounds GREAT Ever and Never!!! How much a quarter acre of Microsoft? How much a quarter acre of Google? and How much a quarter acre of the Pentagon?
That's probably the only questions come up in the heads of the top of those Chinese companies. Chinese are not Japanese, won't going to buy some properties and then have a headache on tax bills. To put the bills on those bring more headache to the USA will be a better choice. And it probably will be the most companies choice in the world. In fact, I am saying, the USA is falling, and will not come back in a short term. That's one of many reasons why Bush could only have USD down, but not fall, then even Obama cann't just say "Change!" to it.
Back to the topic, if Russia and Iran are selling oil and gas in Euro, in my opinion, it wouldn't make the USD fall. The amount of oil and gas are too little compared the amount which could bring the USA down.
If USD fall, such as more than 20% in one semester, it will first damage the United States itself. Basically, to Chinese, it means all firms which valued in USD are at least 10% cheaper. OK! Sounds GREAT Ever and Never!!! How much a quarter acre of Microsoft? How much a quarter acre of Google? and How much a quarter acre of the Pentagon?
That's probably the only questions come up in the heads of the top of those Chinese companies. Chinese are not Japanese, won't going to buy some properties and then have a headache on tax bills. To put the bills on those bring more headache to the USA will be a better choice. And it probably will be the most companies choice in the world. In fact, I am saying, the USA is falling, and will not come back in a short term. That's one of many reasons why Bush could only have USD down, but not fall, then even Obama cann't just say "Change!" to it.
Back to the topic, if Russia and Iran are selling oil and gas in Euro, in my opinion, it wouldn't make the USD fall. The amount of oil and gas are too little compared the amount which could bring the USA down.
Isn't this Petrodollar theory?
Ben Bernanke
14th Chairman of the Federal Reserve
Bernanke's Doctrine
The seven steps that the Federal Reserve needs to take are:
1) Increase the money supply (M1 and M2).
"The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost." "Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation."
2) Ensure liquidity makes its way into the financial system through a variety of measures.
"The U.S. government is not going to print money and distribute it willy-nilly ..."although there are policies that approximate this behaviour."
3) Lower interest rates - all the way down to 0 per cent.
Bernanke observed that people have traditionally thought that, when the funds rate hits zero, the Federal Reserve will have run out of ammunition. However, by imposing yields paid by long-term Treasury Bonds,
"a central bank should always be able to generate inflation, even when the short-term nominal interest rate is zero ...[this] more direct method, which I personally prefer, would be for the Fed to announce ceilings for yields on all longer-maturity Treasury debt."
He noted that Fed had successfully engaged in "bond-price pegging" following the Second World War.
4) Control the yield on corporate bonds and other privately issued securities. Although the Federal Reserve can't legally buy these securities (thereby determining the yields); it can, however, simulate the necessary authority by lending dollars to banks at a fixed term of 0 per cent, taking back from the banks corporate bonds as collateral.
5) Depreciate the U.S. dollar. Referring to U.S Monetary Policy in the 1930's under Franklin Roosevelt, he states that:
"This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly."
6) Execute a de facto depreciation by buying foreign currencies on a massive scale.
"The Fed has the authority to buy foreign government debt ... [t]his class of assets offers huge scope for Fed operations because the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt."
7) Buy industries throughout the U.S. economy with "newly created money" In essence, the Federal Reserve acquires equity stakes in banks and financial institutions. In this "private-asset option," the Treasury could issue trillions in debt and the Fed would acquire it - still using newly created money.
14th Chairman of the Federal Reserve
Bernanke's Doctrine
The seven steps that the Federal Reserve needs to take are:
1) Increase the money supply (M1 and M2).
"The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost." "Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation."
2) Ensure liquidity makes its way into the financial system through a variety of measures.
"The U.S. government is not going to print money and distribute it willy-nilly ..."although there are policies that approximate this behaviour."
3) Lower interest rates - all the way down to 0 per cent.
Bernanke observed that people have traditionally thought that, when the funds rate hits zero, the Federal Reserve will have run out of ammunition. However, by imposing yields paid by long-term Treasury Bonds,
"a central bank should always be able to generate inflation, even when the short-term nominal interest rate is zero ...[this] more direct method, which I personally prefer, would be for the Fed to announce ceilings for yields on all longer-maturity Treasury debt."
He noted that Fed had successfully engaged in "bond-price pegging" following the Second World War.
4) Control the yield on corporate bonds and other privately issued securities. Although the Federal Reserve can't legally buy these securities (thereby determining the yields); it can, however, simulate the necessary authority by lending dollars to banks at a fixed term of 0 per cent, taking back from the banks corporate bonds as collateral.
5) Depreciate the U.S. dollar. Referring to U.S Monetary Policy in the 1930's under Franklin Roosevelt, he states that:
"This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly."
6) Execute a de facto depreciation by buying foreign currencies on a massive scale.
"The Fed has the authority to buy foreign government debt ... [t]his class of assets offers huge scope for Fed operations because the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt."
7) Buy industries throughout the U.S. economy with "newly created money" In essence, the Federal Reserve acquires equity stakes in banks and financial institutions. In this "private-asset option," the Treasury could issue trillions in debt and the Fed would acquire it - still using newly created money.
Things like this don't just happen overnight. Anyway, the statement is true, but it also applies to the all other countries holding dollar reserves and any of its citizens/corporations holding dollars. Basically everyone.
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