The Dollar as the Reserve Currency is a Disease to Economic Recovery

When I read all these articles on how the Reserve Currency is being called into Question as the solvency of its status of trust between World Trade nations , why are we not addressing these concerns , bring debate to accomplish all interests as the solution for Monetary Policy changes that reflects all in the world of Finance and Trade of Human Needs ?????

 

Yesterday the Federal Reserve completed the latest meeting of its Federal Open Market Committee.  It re-affirmed its plan to purchase by the end of the year some $1.8 trillion – yes, $1.8 trillion – of US government paper, comprising of agency debt, agency mortgage-backed securities and US Treasuries.  That’s nearly $6,000 for every man, woman and child in the United States. 

While $1.8 trillion is a gargantuan amount of money, the actual amount is of secondary importance to the essential, piercing question.  Namely, where is this $1.8 trillion going to come from?

The answer is not pretty.  These dollars will come from the same place that all other dollars are created these days, namely, out of thin air.  Here’s how Mr. Bernanke explained this monetary sleight-of-hand before he was appointed as chairman of the Federal Reserve.  “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

Like most central banker statements, this one is based on half-truths. How can there possibly be “essentially no cost” to creating all these dollars?  We all know that there is no free lunch in the real world, so there must be some significant cost to creating so many dollars, right?

Please read Mr. Bernanke’s statement again. There may be essentially no cost to the US government, but here is what he doesn’t tell you. There is a very real and huge cost to everyone who ends up holding these dollars that were created ‘out of thin air’.  It is the cost of inflation; it is the onerous cost burden arising from the reality that the purchasing power of the dollar is being continuously eroded. And the more dollars that are created beyond the need for dollars in normal commerce, the worst the inflation becomes. The $1.8 trillion the Federal Reserve will soon be creating should cause those remaining deflationists still arguing their point of view to recognize that they are looking down the wrong road.

They argue that deflation is inevitable because credit is contracting.  However, contracting credit is not deflation. Rather, contracting credit causes wealth destruction, but does not necessarily cause deflation in a fiat currency world. 

Deflation arises when the quantity of dollars contracts, as it did when credit contracted in the Great Depression.  But the quantity of dollars is not contracting today.  It continues to grow, regardless what measure one uses, M1, M2 or M3 (which John Williams of http://www.shadowstats.com estimates to have grown +7.3% over the past 12 months).

Percent change at seasonally adjusted annual rate

M1

M2

  3 Months from Feb 2009 TO May 2009  

  9.4 

  4.2 

  6 Months from Nov 2008 TO May 2009  

  9.5 

  9.5 

  12 Months from May 2008 TO May 2009  

  16.2 

  9.0 

Source: http://www.federalreserve.gov/releases/h6/current/h6.htm

What’s more, the trillions of dollars created out of thin air for various bailout schemes as well as this latest $1.8 trillion planned purchase by the Federal Reserve will make sure that the quantity of dollars continues to grow.  The result will be that the purchasing power of the dollar will continue to be inflated away.

It has become increasingly apparent that the US dollar has caught the fiat currency disease, where too many units of account are created.  This disease is fatal, and hundreds of fiat currencies buried in the fiat currency graveyard throughout history have succumbed to it. 

By creating too many units of account out of thin air, the Federal Reserve has sealed the dollar’s inflationary fate.  Own gold and/or silver to protect yourself and your family from this inevitable outcome.

 

Increasing SDR Issuance... Beginnings for a New Reserve Currency - with Obama’s Blessings?​   http://forex.explainedhere.com/beginnings-for-a-new-reserve-currency-with-obamas-blessings/​​ http://www.kitcocasey.com/articles/2822/daily-pfennig-6-25-09:-increasing-sdr-issuance.../
I came across something yesterday that I yelled across the desk to make certain everyone knew... Recall at least a month or so ago, I told you how China had called for a new reserve currency, replacing the dollar with SDR's (special drawing rights), which would be a basket of currencies. This news received a ton of publicity... But one thing that didn't receive a ton of publicity was the fact that President Obama agreed at an economic summit in London that SDR's should now be used to help stabilize the balance sheets of nations struggling to combat the current crisis.

Now... On the outside that looks harmless, right? Just helping these struggling nations... But! Could this also be a baby step toward a global currency? Could this be a baby step toward a further devaluation of the dollar, and it's signed off on by the president?

OK, now here's the thing that really caught my eye... The IMF is going to issue $300 billion worth of SDR's. That's 10 times... That's right, I said 10 times the amount of SDR's that CURRENTLY EXIST!

Could this be the facility for China to quietly exchange dollar reserves for SDR's? Come on! Somebody has got to see this the same way I do!

I mean, it was just LAST WEEK that the countries of Brazil, Russia, India and China (BRIC's) called for a "more diversified international monetary system"! Why, yes, Chuck, it was... Just last week! And then this week, the IMF "just happens" to be issuing 10-TIMES the amount of SDR's that CURRENTLY EXIST! Hmmmm...  

New International trade currency needed to balance wealth redistribution of International markets

This ETF traded fund is a start of a new way of valuation of currency trade to help counter balance the trend of different valued currencies trading in the same markets , and their devaluing effects that happen when lower valued currencies trade in the same markets as Higher valued ones , with the inclusions of Precious metals markets acting as balancing counter measures .  http://www.wisdomtree.com/library/pdf/materials/WisdomTree-Case-for-Emerging-Currencies-CEW-570.pdf
 But today what this calling of the change of the Reserve Currency status that the dollar represents by Chinas willing to negotiate the change , is that this gives the USA a better way to Negotiate with China and Russia ways to curb the violence in Radical regimes like Iran and Korea , what a Position to be in !

But to focus on issues relating to Cap and Trade , to the Negotiate for Human rights in the 3rd world , finding ways to increase   wages that have not kept up because this has forced competition in labor pools around the world to compete with the Lowest labor pool , and this is devaluing all the currencies towards the cheapest , and we call this Gresham's Law of the 14th Century , and its time for a Intellectual Debate on this topic ,The High Cost of the China-WTO Deal
Administration's own analysis suggests spiraling deficits, job losses
 by Robert E. Scott   http://www.epi.org/publications/entry/issuebriefs_ib137/    ; this independent analogy of how the USA and European Economies would crumble under the tariff Free trade agreements is a direct example of Gresham's Law of the 14th Century ; read  here ;   http://www.columbia.edu/~ram15/grash.html         , which we should argue with the professor here in the thesis over the fact that it " DOES " indeed lead to the devaluation of the higher valued currency , like the Dollar and Euro , so engaging in alternative financial " Revaluation investments like the Wisdom Tree ETF fund can counter the effects of a Fiat currency system thats designed with this devaluation flaw thats devaluing even the lowest economies in the WTO trade partnership !!!!!!!!!!!!!!! 
  Different valued currencies trading in the same markets , lower valued currencies  devaluing the higher valued ones , too the point that it has even exhausted credit , as this function working in the supply - side system with Technology in manufacturing reaching a production speed  , has come to the point of the world not being able to consume fast enough what a industrialized developed world can produce , but at the same time , certain raw materials we need to produce vital needs with are showing signs of shortages at current methods of producing these requirements , and these needs are in locations around the world , that if trade policy and Currency relationships are not carefully crafted to generate agreeable Trade relationships with WTO trade partners , Isolation of nations could result from a reject of one nations currency wanting to trade for resources from another that rejects that nations trade currency , like is starting to evolve with China wanting to change the Dollar out of the reserve currency positions and replace it with the basket of all WTO trade partners currencies , guaranteeing these currencies with Precious Metals markets around the world .

  Take a look at this 30 plus year chart of the Gold market ;   http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx      , it reflects the way Inflation was running in the US and UK  in the 1970s , then Reagan came into office and was able to take what was a domestic Inflation issue and dissolve it into the 3rd world with opening of trade , that lasted till now . Today we have came full circle back to where we were with facing domestic inflation and now have a Phenomenon of Worldwide Inflation , as the world now has reached a level of development that will drive demand for Quality of Life improvements , and if this demand is suppressed in anyway , civil unrest will grow as the developed nations push for a better way of life .

    China ready to discuss , as well all in the world should be rallying around this needed debate , and together chart a course that's beyond the past history lessons that showed no sustainability either , but in this new century a new reserve currency at G20 summit would be something that if all trade partners can find the paths that would make the future manageable then growth can be manageable as well .  ; http://en.rian.ru/world/20090323/120689432.html
 
  If China and Russia would be willing to negotiate peaceful resolutions with world adversaries like Iran , and Korea in exchange for transitions of the dollar out of the status of reserve currency , what position !  http://en.rian.ru/world/20090323/120689432.html   .
 
http://www.wisdomtree.com/library/pdf/materials/WisdomTree-Case-for-Emerging-Currencies-CEW-570.pdf
 
 Dissolve this deficit into an averaging of the value of the Creation of the ETF of Currencies like has been proposed by the Chinese , that can then be restructured and paid for over the course of time as the world harnesses Inflation as the new world growth mechanism changing this negative and turning it into a positive for a progressive way forward for all humanities needs .
 
 This can address all forms of categories of life's needs , healthcare , as well as all of life's fundamental valued needs , setting standards of quality as the way we value the price we pay for advancing standards of sustainable living .

Bank Stress Tests: The Government Isn't Going Far Enough

Banks paying back TARP at 78 billion , a Mere drop in the Bucket to the Commercial real estate default issue coming 1 trillion dollar unsustainable debt ....

http://www.businessweek.com/investing/wall_street_news_blog/archives/2009/06/there_are_a_cou.html

 

""" There’s also the massive problem of commercial real estate assets and loans—none of which have been calculated into the mix. Banks hold some $1 trillion of these loans, the report notes. Research out of Deutsche Bank shows that the majority of losses on these loans (never mind the derivatives and securities created off of them) won’t show up for another few years. The default rate of U.S. commercial real estate bank loans has already reached its highest level in 15 years and is not expected to peak until 2011, according to another new report by Real Estate Econometrics. """

  Subject: http://www.usdebtclock.org/ USA DEBT CLOCK

 http://www.usdebtclock.org/    

 

Posted by: Mara Der Hovanesian on June 09

There are a couple of things that strike me as odd and even disturbing about the new congressional oversight report on the recent bank stress tests.

First, the “adverse scenario” on these 19 banks isn’t adverse enough. Didn’t we already know that? There were plenty of folks raising the specter of double-digit unemployment long ago. Only now that unemployment has climbed to a rate of 9.4% is the government suddenly saying it has “serious concerns” that perhaps the tests weren’t rigorous enough.

There’s also the massive problem of commercial real estate assets and loans—none of which have been calculated into the mix. Banks hold some $1 trillion of these loans, the report notes. Research out of Deutsche Bank shows that the majority of losses on these loans (never mind the derivatives and securities created off of them) won’t show up for another few years. The default rate of U.S. commercial real estate bank loans has already reached its highest level in 15 years and is not expected to peak until 2011, according to another new report by Real Estate Econometrics.

Two very respectable professors helped Congress put together the recent report and gave their blessing on the “solidly designed working model” of the stress tests, backing them up with the usual econometric hieroglyphics and mathematical models. The report recommends that banks and their regulators continue the stress tests. That seems reasonable: No doubt that we want to know if our banks are healthy and able to withstand tough economic headwinds.

But we also want to know if they are getting into trouble enough to take down the whole system. The 168-page report by the Congressional Oversight Panel reminds us that our regulators are still not able to assess that properly. The ability to understand the interconnectivity among banks and the risk they present, especially in the derivatives market, is still a big fat unknown. And the regulators and mathematical geniuses have yet to figure out a way to monitor or measure that risk.

Seems we’re still flying in the wind.