Subscribe to Common Dreams News Updates
Most Popular This Week
Popular content
Today's Top News
US Dollar Set to Be Eclipsed, World Bank President Predicts
United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency, says Zoellick
Speaking ahead of the World Bank/IMF annual meetings in Istanbul, he said it was time for a "responsible globalisation", in which decision-making was shared between the old powers and developing countries such as China and India.
Ever since the post-second world war Bretton Woods agreement, which cemented the dollar's ascendancy over sterling, Americans have been able to rely on borrowing cheaply from the rest of the world as governments banked on the dollar as a safe bet. But Zoellick said the greenback's status could be under threat from the growing strength of the Chinese yuan and the euro.
"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency. Looking forward, there will increasingly be other options to the dollar," Zoellick told an audience at Johns Hopkins University in Washington. From now on, he said, confidence in the US currency – and its economy – would have to be earned. "The future for the United States will depend on whether and how it will address large deficits, recover without inflation that could undermine its credit and currency, and overhaul its financial system."
Zoellick's comments came as Beijing launched the first yuan-denominated bond available to outside investors, as it gradually makes its currency more exchangeable on international markets.
"I expect China will inevitably be drawn outward," he said. "Over 10 to 20 years, the renminbi [yuan] will evolve into a force in financial markets."
Several countries, including China and Russia, have repeatedly raised what they see as the problem of excessive dollar hegemony.
G20 as a steering group
Zoellick predicted that the tumultuous events of the credit crunch would eventually lead to a radically different world economic order. He welcomed the expanded role of the G20 group of nations, agreed by leaders at their summit in Pittsburgh last week; but warned against excluding bodies such as the World Trade Organisation and the International Monetary Fund, which have a much broader membership. "The G20 should operate as a 'steering group' across a network of countries and international institutions," he said.
Claire Melamed, ActionAid's head of policy, said the decision at Pittsburgh to shift economic decision-making away from the G8, which includes Italy and Canada but not China and India, could reverberate for decades. "The shift from the G8 to the G20 … has the potential to be hugely significant, breaking not just the power of the US but that particular group of countries that have had everything their own way for so long," she said.
Developing country governments have blamed the US, with its deregulated financial markets and decade-long borrowing binge, for dragging the world to the brink of the abyss over the past 12 months. Zoellick said all countries would have to learn to rely less on rampant American consumption to drive growth in the world economy.
"A more balanced and inclusive growth model for the world would benefit from multiple poles of growth," Zoellick said. "With investments in infrastructure, people, and private businesses, countries in Latin America, Asia and the broader Middle East could contribute to a 'New Normal' for the world economy."
Leaders in Pittsburgh also agreed to transfer some of the voting rights of over-represented rich countries at the IMF to under-represented developing economies, but detailed negotiations about how the balance of power will change – and which countries will agree to give up some of their votes – will go on until 2011.
At this week's meetings in Istanbul, which will be attended by the chancellor, Alistair Darling, and Mervyn King, Bank of England governor, the World Bank is likely to ask donor governments for more funding to mitigate the impact of the credit crunch on the world's poorest countries.
The IMF, meanwhile, is expected to give more details of how it will spot future crises and urge governments to take preventative policy measures – tasks set for it by the G20 last week.
- Posted in
61 Comments so far
Show Allfrom the article:
"A more balanced and inclusive growth model for the world would benefit from multiple poles of growth," Zoellick said. "With investments in infrastructure, people, and private businesses, countries in Latin America, Asia and the broader Middle East could contribute to a 'New Normal' for the world economy."
the last thing we need is more growth...we need the opposite...a 'new normal' economy? 'new', as in, 'without planetary resources'?
the dollar has been propped up for ages...economic concerns must take a back seat to ecologic...
Let me say this, if the dollar goes down and it is likely with the policies being used now and the foolish proposals by this government, you will see more growth and pollution, more resource depletion than you could ever imagine.
The new normal this idiot envisions is a fantasy. It will be a very unbalanced "world economy"
Do you notice something about the currencies (and governments) considered "ascending" and those declining? The ascending ones are backed by a "real" economy. Ours is now a management economy, and mostly what we manage is the global circulation of our currency. Few people openly discuss just how precarious what's left of our economy actually is. Certainly nobody in Washington of either major party. Certainly not Rush Limbaugh, or Keith Olbermann, and certainly not the common folk who are most in danger. You know, Main Street, Obama's Wall Street-funded, Madison Avenue crafted campaign mantra.
When we went off the gold standard, most informed people understood that gold was unnecessary for currency valuation, since there was an entire economy full of dollar-denominated assets backing our currency, and having just one asset define the currency was too constraining. Now the only dollar-denominated asset we have left is our real property, which is why land, buildings, and waterways are getting grabbed up by foreigners, especially sovereign wealth funds in oil-rich nations, where they're understandably getting antsy about holding too much of their cash reserves in dollars and are rushing, in cycles, to send them back to us. You only hear about it when we over-reach in trying to keep our currency stable by selling something to Arabs that scares us, like ports, and there's an outcry, but it's happening every day to other less security-sensitive property. Once we run out of real property to sell, that's when the collapse sets in, unless we hastily change our trade practices so we actually manufacture things for export again.
Demand for any currency is entirely dependent upon demand for goods sold in that currency. That's the part Thomas Friedman never tells you about when he's selling globalization to liberals. The only goods we export are weapons, of the armed forces and personal types, and that's why we can't stop proliferating arms -- without arms, we've got no consumer products that call back dollars when sold.
Our currency is hanging on by two fingernails -- one is real property, the other arms. Very tenuous situation. But if it all goes south, don't worry, because Obama's bailed out Wall Streeters will do just fine -- they'll trade whichever currency is in demand, because they're currency traders, and aren't trapped by dollars like the rest of us down on Main Street. In fact, Wall Street will come out better if the dollar plunges, because they only owe the taxpayers specific dollar amounts, even if the dollar is only worth 1% of what it was worth when they borrowed it.
It's the historic plight of the propertyless. Capital is mobile. Every trade agreement we've passed over the last 30 years has been to increase the mobility of capital, and they keep telling us it's good for everyone, and we keep believing it. But humans are not mobile. We not only have an economically hard time moving, but many of us actually like our home regions and want to stay. A piece of machinery doesn't have any attachment to the land. People do. We should have all known from the start that globalization was anti-American, but we tend to believe what the powerful tell us, because most of us identify with them more than with those with whom we hold everything in common. We think patriotism is what the mobile people tell us it is, rather than what's in the interest of the static people. We've been fleeced, and the people on Wall Street who fleeced us aren't going to get us out of it -- they're tied up completely in saving themselves, with our loans to them. They owe us money, not loyalty, and devalued money is all we'll get from them.
It was Bill Clinton who made the Democratic Party into the institution that facilitated this process. It's amazing how 8 years of Cheney left so many good people teary-eyed for Clinton. Ralph Nader told us this was happening in the mid-1990's while it was happening. Read his articles on Common Dreams, send him an email apologizing for blaming him for Florida 2000, write another to Eric Alterman telling him to go stuff himself, and start taking Nader's advice about things we can still do -- before the collapse, while we can still do them.
Steve Greenfield
"People do. We should have all known from the start that globalization was anti-American"
Could it be that people are beginning to realize they have been sold down the river by the very people and institutions you mention? Do people finally begin to get a glimmer that without real jobs, manufacturing jobs and the jobs those generate there is no real economy. That you are accorded 2nd degree status and the wealth your people is handed to others? That advocating and helping these people send our jobs and industries over seas while importing cheap labor here to force down wages and benefits is the action of idiots and fools?
"Demand for any currency is entirely dependent upon demand for goods sold in that currency. That's the part Thomas Friedman never tells you about when he's selling globalization to liberals."
Could it be that folks are beginning to figure out that we don't have wealth by right? That it was earned and we have been betrayed as a country by our own leaders, our own government?
"Once we run out of real property to sell, that's when the collapse sets in, unless we hastily change our trade practices so we actually manufacture things for export again."
Will folks still allow the intellectual elite to lecture them about one world, global this or that as other countries go their merry way laughing at fools that would believe fairey stories peddled by the likes of Thomas Friedman?
RR started the removal of protections for our economic markets, Clinton made it possible, Bush and Cheney allowed it to happen and Obama is making it worse. Time to start telling the truth.
We still have quite a bit of intellectual property to sell, unless it's 'borrowed.' However, with less and less emphasis on education, I imagine this will likely go into decline also.
although i certainly don't understand enough...my understanding today of economics and world events and policies is better than say, 20 years ago.
yet I recall that 20 years ago - i used to tell friends, from my own limited understanding view :
"the USA has become almost completely a SERVICE economy..one consisting of paper pushers..bean counters..glorified domestic servants of all definitions: "customer representative", nurses, health aides, doctors, accountants, "managers", "supervisors", "dispatchers", drivers, "hosts", "event planners", lifestyle designes, "leaders", "presidents of boards", "board members", "service staff", house cleaners, gardeners, etc....and above all: FINANCIERS, Finance Planners and managers, brokers, sellers of houses, "agents",
but everything is about "SERVICE ECONOMY" - nothing produced that is actual material commodities ..
or at least they are services that are quite normal and needed BUT do not correspond to a society that actually produces wealth of "growth" ..and yet the United States emphasises "Growth" -- -but must do so by borrowing , and "creating" wealth based on phantom "creations"...
but one problem of course is that MOST of the population in this service economy ALSO does not really get the wages or earnings in keeping with its MAJORITY in the population.
its value as "service" is diminished and the resulting "wealth" this "service economy" produces is eaten UPWARDS and nothing "trickles down" or as it should have begun with - spread more equitably among the majority of the "service economy".
and when that service economy has gained very little out of its "service" in its majority - it is forced to go into debt - reflected in government debt, corporate debt, business debt...because it has no REAL consumers that can REALLY afford what it "produces" or "services".
i thought, then, long ago - although just from that limited view that the USA had become nothing more than a glorified "servant" economy - serving an elite of "masters"...
that it would all collapse on itself - or come to a disastrous point.
"wealth" can not be sustained forever through the PRETENSE of "wealth" that is not REALLY there but only in the accounting books that are made out of thin air.
i also thought that the american system will become largely a system of redundancies...full of paper work , each step of the way , "creating" a new "profit" level or "product"
but really achieving no real wealth - and just exists for its own sake - just to push paper.
Excellent analysis, Mr Greenfield, and one which well articulates our current dilemma.
I agree overall with your post, I just thought you got out your biggest paint brush when you started saying that we all bought into the globalization crap starting with Clinton. I can tell you neither myself or my wife bought into any of that stuff starting with Mr. Bill and I doubt the two of us are all that unique. If you really thought about it none of it made any sense as far as improving the lives of average people. But then a lot of us knew it was never about improving the lives of lowly folks like us.
But other than that I think you made some great points in post.
Yes, the Clinton brush was pretty broad. Not everyone bought it when Clinton was selling it. There's just one problem, though. Since the only other "viable" candidates were selling as bad and worse, almost all of us sucked up and did our part in the voting booth, over and over again, regardless of how well-informed we were on the matter. Those of us who stood by principle in 1996 and 2000 were harshly sidelined from the new century's progressive discourse as "responsible for Florida 2000," so I have trouble not reaching for my Clinton brush -- especially when most progressives put their full force behind genitalia and skin color as stand-in for progressive politics during the 2008 Democratic primaries, which had some actual progressive choices available. I swear I heard Obama talk about substantial revision or elimination of NAFTA as a top priority throughout the campaign. Not a peep out of him since, and not a peep out of us for not hearing a peep out of him. So again, it's hard for me to keep my Clinton brush in the box. Sorry.
There are other things going on. Military spending cannot be sustained as a stand-in for actual economy-boosting fiscal policy because since it doesn't produce a productive product, its net impact is inflationary, and the size of its portion of annual new capital formation is so huge that the Fed has to constantly fight inflation, which can only be done by disincentivizing borrowing through higher interest rates, which slows the economy and raises unemployment. So much so that now federal interest rates to the credit sector are zero, and we still can't get the economy off the ground, because we've killed off the population's power to consume. That sector of government spending is an economic snake eating its own tail, but we're trapped in that, unless some of you have realistic (realistic) ideas for how to stop it. There's also no such thing as supply side economics, and there's no such thing as a service economy. There has to be stuff, the economic equivalent of collateral. Tangible goods. They teach this stuff in any Intro to Macro at any community college. None of us have to be bogged down in Nobel-prize caliber equations or give up Monday Night Football to have these discussions in a workably informed manner. The biggest problem in post 1960's American political processes is that elections professionals have determined that most of us care most about "pocketbook issues," but hardly any of us know (or care to know) how they work, so we just pick who we trust and/or who has the hookiest economic catchphrases, and swear by it like received wisdom.
I honestly don't know how to make that stop. Unlike the other life forms on Earth, humans uniquely lack the capacity to see the point when they need to shift behavior into survival mode. I've heard (and even contemplated myself) all kinds of fantastical solutions about "movements" and "media" and all kinds of things (you'd be amazed how many people say the first thing we need to do is build a good Facebook page), but when you move ahead to the nuts and bolts, none of the short-answer solutions are realistic -- all pie-in-the-sky, or of help to the enemy. This wasn't built in a day, and it's not going to be unbuilt in a day, or a week, or a year -- especially with all the accumulated ill-gotten cash reserves in the hands of the people who built the system we're fighting, and the unprecedented transfer of wealth from the population at large, and federal treasury, to the monied interests that took off due to the policies of the first DLC President -- you guessed it, Bill Clinton. I'm despondent over all this. I'm looking for a glimmer of hope, and whenever I think I see one, it turns out to be the reflection off a slamming door. It's not enough for people like me and you to know what's wrong, and how it got that way. Something has to be done. We may need some broad brushes if we're going to paint our way out of this corner. Again, my apologies. Please see www.commonplans.blogspot.com and www.eisenhowerproject.org.
Steve
Steve Old Boy,
Don't take all this so hard. We've all done this to ourselves by letting big biz phuck us every which way but loose. We should have all turned off the boob tube and rioted in the streets when the first Toyotas and Chinese crap showed up, putting us out of work, but we didn't. Instead, we laughed at the "foolishness" of the protectionists and bought into the lie of anti-union propaganda from Harvard and Yale.
Now we're in a shidt sandwich. We have no jobs and what little money we have is worth nothing. And if a recovery happens, inflation will explode through the roof as soon as Bush's SEVEN TRILLION dollars of phoney bank robbery money gets into physical circulation and hits the fan. We may have just been through the wringer, but that's nothing if these fake derivatives are ever exposed to the light of day. Nothing can cover them, because they are negative 100 trillion dollar fantasies being sold off and traded like actual assets. Just wait till this bubble pops! The smell will be so bad the whole world will pass out! Personally, I hope this whole Wall Street Ponzi Scheme goes on for another twenty years just like old Bernie Madeoff's one did, but all the culprits have already abandoned ship, which is not a good sign: Cheney's moved to Dubai, Jim Rodgers has sold off everything in dollars because he sees a trainwreck coming, Detroit won't even report auto sales in real time to Yahoo, because they're are'nt any. Another 95 banks have bit the dust just this year alone..... The CPI and Unemployment numbers are so cooked they are meaningless..... I could go on all day, but the point is we're screwed, imho.
Here's a sample of what I mean:
Up until the Boskin/Greenspan agendum surfaced, the CPI was measured using the costs of a fixed basket of goods, a fairly simple and straightforward concept. The identical basket of goods would be priced at prevailing market costs for each period, and the period-to-period change in the cost of that market basket represented the rate of inflation in terms of maintaining a constant standard of living.
The Boskin/Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival. The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that.
The Boskin/Greenspan concept violated the intent and common usage of the inflation index. The CPI was considered sacrosanct within the Department of Labor, given the number of contractual relationships that were anchored to it. The CPI was one number that never was to be revised, given its widespread usage.
Shortly after Clinton took control of the White House, however, attitudes changed. The BLS initially did not institute a new CPI measurement using a variable-basket of goods that allowed substitution of hamburger for steak, but rather tried to approximate the effect by changing the weighting of goods in the CPI fixed basket. Over a period of several years, straight arithmetic weighting of the CPI components was shifted to a geometric weighting. The Boskin/Greenspan benefit of a geometric weighting was that it automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price.
Once the system had been shifted fully to geometric weighting, the net effect was to reduce reported CPI on an annual, or year-over-year basis, by 2.7% from what it would have been based on the traditional weighting methodology. The results have been dramatic. The compounding effect since the early-1990s has reduced annual cost of living adjustments in social security by more than a third.
Translation: We're getting conned by massaged gov CPI fakery. Great charts and discussions here: http://www.shadowstats.com/
So inflation and unemployment have been sky high for a long time. Looks like we are experiencing an unreported short term trend of deflation right now, because of the depression, imho's. (if their chart is correct.)
But, like the bushmonkey, my forte is not economics. Anybody got anything to add?
TJ
"All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson
It sure is a dilemma we are in.
Do you really think the government can afford to borrow the money it would take to print 7 trillion dollars and every few years recycle the old bills with new?
Most of the money that the Fed creates is electronic credits... it is not inflationary like real money but it raises the debt which comes out as inflation later.
Now the comments here started out with "we don't need growth!" Well, considering overpopulation and all, that is reasonable.
But without new young workers and new jobs for the unemployed, who will pay for Social Security and Medicare, bridges and the infrastructure?
As it stands now we can't even borrow enough for that and we don't need more debt so DILEMMA for sure.
Without growth how can we make products to sell? Without growth how do people get jobs to pay for the stuff... food, housing, medical and more.
As we can see from the G20, the world is tired of relying on the falling Dollar, but it is incentive for the rich to buy us out.
Nader is hoping for the Super Wealthy to save us. That would be a first.
Also unions are great yet the developing countries can produce much cheaper, so how could we compete anyway?
Maybe it is the squeeze of our own making, but reality is what is happening now ...any ideas that will work?
I think Peace is the biggest answer. Maybe there is more... any Ideas besides blaming Clinton?
Yes we need more Yes men!
Yes we need more Yes men!
Take a breath sweetheart you are wearing me out. Listen I haven't got twenty years to wait and I have been holding my nose much longer that the rest of you. I want to be here to see it and say I told you so.
And what about in an earlier post …this freakin’ stuff about ….”It can be made cheaper overseas”. Come on…however did we get by in the olden days?
I believe it’s all slightly more intricate than the above comments suggest. Once producing in a country with zero wages and then shipping the goodies home became cheaper than producing at home, there was no way to stop the erosion of the production base of western economies. The digital revolution managed to slow down the process, but finally the only effective short term solution was creating value out of nothing, in other words over-value what already existed. Everybody owning stock or real estate, everybody making more money than the absolute required minimum was involved in the scheme. And those who stayed out of it knew they only did so to put their minds to rest, because their restraint didn’t have any impact whatsoever. It’s not just the elites that have trampled us, we were all involved. Let’s rejoice it will soon be over and in the meantime stay put.
Amen
Napoleon said: "Never underestimate the power of incompetence".
Napolean should know!
Napolean should know!
Napolean should know!
If you want to enjoy the Apocalypse du Jour, check out Dmitri Orlov being interviewed by Marina Portnaya (in English) on Russia Today.This guy is indulging in a great Russian goof,deadpanning all the way, as he describes the coming collapse of America.I especially like his vision of sailboats supplying farmers' markets on the East Coast, in post-collapse America.Gogol would be proud.
Currencies "time in the sun" come and go. It was true of the Greek Drachma, Roman Denarius, Spanish pieces of eight, etc. That the USA's main imports are weapons and entertainment, not durable manufactured goods, speak quite ill of the US$'s future. On the other hand, if one has the time and money, a long term hold of Chinese Yuan is good bet. The Euro, Swiss Franc, Sterling, & Yen are all currently bad buys with US$. Conversely, if you are fortunate enough to be in the position, demand to be paid in the currencies named above except for the Yuan (it is still artificially undervalued by the Chinese government to drive imports).
I've posted this a couple of times in the last few days but few people seem to appreciate either the size or the implications of this story. In terms of the dollar it means the end is neigh, and if or when it drops it will do so like a stone it can certainly have devastating repercussions, a real financial tsunami.
Here is the small story which some may not see the relevance of but I think makes one realize how hopeless the US situation is, and this has been completely hidden by the MSM or if referred to implied forgery without any evidence:
http://www.bloomberg.com/apps/news?pid=20601092&sid=afX0BWHToC1g
This means that two lots of bonds have been seized on the Italian Swiss border, one of $134 billion and this one of $100 billion. Those of you who say these must be forgeries must answer two questions. Why does it take the secret service from July to September to study the matter? Why any forger would be so stupid as to waste his time on a document that can be easily traced. The third question must be has anybody met a stupid Swiss banker?
Yes, no mistake BILLIONS : These are the astronomical amounts that have been caught by the Italian financial police. How much has passed through and where is it destined? You cannot cash these bonds in at 500 million a pop. You can lodge them as security, perhaps, if you can find the right banker.
What this means is in fact that the dollar as a reserve currency is finished, at least as far as the owners of these bearer bonds are concerned. Once the dollar starts its implosion it will collapse very quickly.
The G20 is floating a delusion that the crises is over and the recovery has started. The reality is that the players at the casino lost, then borrowed to double up, and now are about to loose again.
After having stolen your future, they are gambling away your assets, but they have lost before the dice are cast. They have lost because they forgot that “money” has only a value when it circulates widely and to replace the asset they invented and destroyed in the banks of the world, they had to vacuumed all the capital and call in every marker.
Now banks look good but can't lend, defeating their reason for existence in the capitalist system. But, I like many don't even want to borrow. Like most people in the world, I want to honestly earn my daily bread and to do so I just need what is mine by right; my future and my freedom. Both have been stolen by the banks and their paid government cronies who say we must follow them or else!
"Once the dollar starts its implosion it will collapse very quickly."
,,,And who else will it take with it? Remember Thailand?
The end is neigh? From which end of the horse might we expect it to issue?
When all the horse manure is deleted, what is to be expected? We have witnessed the collapse of speculative capitalism, and seen a two prong effort result in trying to restore it to verticality. One was the reinfusing of capital into the system. The other seems a massive effort to keep those who funded that bail out in their place, so that they don't become too 'uppity' and adopt 'socialist' programs to strengthen their stake. We see the profit lines increasing on the Dow, and are left to hope for 'trickle down'. A vast new movement has been prospered to curse the darkness and divide America into those choosing to attach themselves to 'trickle down' and the benevolence of elites, and those who would use government as a gardener for the common good. The desperate, weeping moguls have reengaged, and their bottom line is swelling, but the truth for most of us is that a slower, less materialistic life style will be our lot. We need not allow ourselves to be caught up in the torrent. We need not reengage the treadmill and be marched in a great frenzy churning out fresh thick linings for the speculators' pockets. We ought focus on our needs. Housing, education, health care, election laws which do not require millions of dollars to represent us in office. We need to soberly consider whether we want bling or substance. Our economy should serve human need, not human greed. It will happen one small step, one brick at a time. For what end is our daily effort made?
JoannafromCanada
Two words: Local Currency.
saddam's real crime?
trying to sell his oil for euros.
the buck ain't worth two bits.
Great comments, but they tend to wilt off with Clinton's broad brush to eventually drown in the midevil pedagogery of Henry8. When faced with the actual choice between Barrack Obama and Sarah Palin, Ralph Nader is hardly the answer. History still speaks of direction rather than perfection. I I disagree with Clinton's NAFTA/globalization drift, and can only barely tolerate the bail-outs by holding my nose. We should have put our federal funds into federal financial infrastructure and let the failed institutions fail. But ceding our government by "Going Rogue" is a bad joke with real consequences. I'm willing to paddle from both sides of the canoe because the alternative is a silly and arrogant swap of reality for ideology, which seems to be marked olifactorily in lock step with purity.
I didn't read all the comments, but it would have to be a global currency to move away from the dollar. There is no currency in the world that could support the transition, not even the Euro. US GDP over $13 trillion with wealth well over $50 trillion. Not in my lifetime and I'm only 29.
So you see from where you fall and to where you economy will regress from the avarice of recent adventure! Expanding Special Drawing Rights SDR to become some kind of a supper currency is just creating another massive global bond issue, another promise to pay by central banks all without assets, or assets of their people which are sharply loosing value, whether in Euros, Yen or Pounds. It will be a temporary speed bump on the road down the mountain because of the linkage of a global economy.
The system depends on a growth to support expanding money supply and the myth of fractional banking, the alternative is the accumulation of assets as exponential money without growth needs to support its asset value. It can be called a capital black hole!
Lucitanian,
you may be right. But I wonder about the fact that both China and India still have expanding economies. It's no secret that much of the Fortune 500 moved their operations over there as an end-run around labor law in the US. Right now we are fighting a war in Afghanistan for India's oil needs. Until at least 2014 when the trans-Afghanistan pipeline will be completed.
So maybe the Event-horizon is still a few years away?
No doubt though, you are right: This Ponzi Scheme requires constant growth to keep paying off. Just like the Enron "Raptor" funds, the first serious downturn could see it all unravel.
TJ
"All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson
TJ, You write:
"both China and India still have expanding economies"
Yes, but at what costs? I'm sure you have seen the article here by Arundhati Roy and perhaps listened to her on Democracy now yesterday ;
http://www.democracynow.org/2009/9/28/author_arundhati_roy_on_conflicts_and
As far as China is concerned the problems of Xinjiang and Tibet and the many other rural uprisings answered with military/police fortitude is just the symptom of the black hole vacuum cleaner at work.
I agree with those that write that what is needed is a new political and economic language which treats human needs rather than institutions as the fundamental. Millennium Goals and Human Rights sounds nice but cannot be applied in a system that only rewards institutionalized sociopathic behaviour and corporate greed.
should i at least be glad that the socialists won the election in portugal?.......
Yes, I didn't know that.
One segment of China's population of over 300 million, which is larger than the entire U.S. population, live on less than $5 a day. They have no social welfare system, no health care system, and no human rights. Yes, they have made great economic gains especially in the past decade, but people will eventually not just be happy with slowly killing themselves in Western factories so they can buy "stuff" in a consumption economy. Can anyone say Tienanmen Square in the future?
and what is the "social welfare system" of the USA?
it APPEARS like s0 - but in reality the "welfare system" of the USA is for the corporations.
what is "human rights" in teh united states?
they only go SO FAR , so long as they don't INTERFERE with the RIGHTS of the corporation....
TRY trying to REALLY "harm" the corporate state - and see where THAT gets you. why do you think the POLICE are everywhere in the USA?
for the SAFETY of the population ?
NO -- it is to KEEP the population DOCILE so as NOT to disturb the Corporate Fascist State's power structure.
human rights in teh USA?
since when? where were the human rights of the Native Indians? the Slaves? the poor?
oh - wait - they were SUBHUMAN - and are sacrificial goats for the RIGHTS of Capitalism and its overlords.
DID the human rights of americans FIGURE in the SELECTION of George Bush JR?
ARE the human rights of americans to a decent wage of ANY concern?
ARE the human rights of those SOLDIERS of ANY concern as FODDER for the RIGHTS of the COrporate Fascist Military State?
human rights in the USA are only as good as APPEARANCE - so long as one does NOT ROCK THE BOAT of what is at its CORE - a REPRESSIVE, COERCIVE fascist state.
here's another comparative way of looking at it:
China has "no welfare system"....whatever social welfare system PRETENSE the USA has - is being dismantled and its "undeclared" VAST CORPORATE WELFARE system is openly being shoved down people's throats - leaving the lower 80 % of americans OUTSIDE of the so-called "recovery" with NO end in sight for the diminishment of their lives.
China has segments of the population earning less than 5$ /day..but recall that it is the US Financial and currency structure, artificially propping up the dollar value against other currencies AND their labor and production and resources that allows americans to "earn" "more than 5 $ a day"...where every dollar is worth more than 5 renminbi in china.." thus
a chinese earning less than 5$ is indeed much poorer than an american that earns 50 $ a day.
BUT within the american economy, by its LIVING price standards...what IS 50$ a day. it is likely that is not much more "valuable" to an american than 5 $ a day is to a chinese IN china.
and AGAIN -- the real reason this is a disparity - is NOT because an American or the american economy grants "better value" to a particular human being...it is so only because the Dollar Hegemenony ENFORCES upon other nations such as china much CHEAPER labor value in order to function within the global "market" structure imposed by the USA.
where america DISMANTLES ANY pretense at health care for the people, or social welfare...in favor of Corporate Welfare...
china, realizing its overdependence on this USA-led and imposed cheapening of China's OWN labor and products to KEEP it "export -dependent" mainly upon the USA or similar nations following this model for "last resort consumers" that NO LONGER CAN REALLY AFFORD even the cheap products they buy because of the USA"s OWN dogma of FALLING WAGES....
china has been using part of its Sovereign credit and savings to invest IN ITS neglected INTERNAL economy -particularly the western , inner provinces.
what has the USA been doing?
INVESTING in its ZOMBIE BANKS and CoRPORATIONS and its WAR MACHINERY as it continues to try to STEAL RESOURCES and LAND from other countries in the name of "Democracy".
what is the USA doing to ITS and WITH its people, at the very least a full 80 percent of them?
in contrast to CHINA trying to enhance the WAGES of its people and creating a more nationally expanded social welfare AND health care system -
the USA is "arguing" about "reforming the health care system and financial system"
UPWARDS ......
can anyone call any of these by the USA "freedoms?"
"human rights?"
point, bottom line:
IS CHINA a MODEL nation? a perfect NATION? FAR FROM IT.
DOES THE USA have or EVER earned or deserved the SELF-APPOINTED "right" to LECTURE other countries about things in the world: economically, morally, civilizationally, politically, judicially, legally?
you can bet on the sun rising tomorrow -- a big fat NO.
Americans MISTAKE the "prosperity" and Power of the USA - artificially and deceitfully attained as it is, with the RIGHT to call the shots or define how things ought to be...
EVEN IF the larger truth is that -- THIS VERY SAME "prosperity" and Power which is LIMITED to a FEW thousand families in the USA at the expense of 80 % rest of the population - a TRUE FASCISTIC culture -
has CAUSED MORE DAMAGE and HARM to the REST of the world in all the political and economic crises and upheavals
BECAUSE of ITS IMPERIAL HABITS.
americans mistake "american power and prosperity and system" with
being the SOURCE of prosperity ELSEWHERE....even if whatever prosperity elsewhere arose DESPITE the ASSAULTS BY the USA upon other economies that somehow found a way to defend themselves...even if the TRUE nature of USA policies IS to IMOVERISH and SUBJUGATE nations in order to gather MORE and MORE of them
into a collection of people SUPPORTING the USA's so-called "prosperity" at THEIR expense.
cases in point?
ARgentina, Peru, Colombia, Venezuela, Honduras, Panama, Mexico and That's JUST south of the USA...
"WHAT AMERICANS DO NOT REALLY UNDERSTAND OR ADMIT IS: we are living our lifestyles, our prosperity, ONLY BECAUSE it is part of a VERY , VERY VICIOUS system of exploitation that Dehumanizes and Enslaves People EVERYWHERE...
"our foreign policy is designed to render other nations, especially weaker nations PERMANENTLY SUBJUGATED to our will and the will of our CHAMBER OF COMMERCE...
"we have Gotten away with Building this Empire through Manipulation, Torture, Assassinations, Covert and Overt Wars, Destabilizing and isolating uncooperative countries, Blackmail, and plain THEFT of their resources...i was part of that Project of American Empire."
JOHN PERKINS, Former CIA "economic hitman".
I'm sure you meant China's population of 1.33 billion people, more than four times that of the US....
The problems their are multiple already!
"THE TRUE WEALTH OF NATIONS IS PEOPLE..NOT money...without people there is NO economy....the solution is simpler and quicker and stabler than people think but needs political will:
establish or create or promote , through the Sovereign Credit of every nation, which ALONE is answerable to its people who ALONE are the TRUE owners of wealth, and through sovereign credit which is NOT debt....economies of FULL EMPLOYMENT at EVER RISING HIGH WAGES.".
"an economy such as this creates populations who are ALL wealthy..and where everyone is wealthy, WEALTH becomes IRRELEVANT".
HENRY CK LIU.
capitalism is the OPPOSITE of this FULL EMPLOYMENT AT HIGH AND EVER RISING WAGES".
And by the way I appreciate all you wrote in reply to Steve Greenfield above.
Thanks, Luc,
if that was to me. I enjoy your posts immensely. Please post more.
TJ
"All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson
That's confederate money.When I was your age, the dollar was worth six times more than it is today.That's just one huge change in our economic status in the world.We're going the way of all empires in decline, but a lot faster than you might think.Sooner, rather than later, all that phoney 'wealth' you talk about is going to evaporate.A lot of it already has, or haven't you been paying attention?
Confederate money? The dollar was worth more before globalization really took off. It's much more competitive today as you know. And yes, I've seen what the economy has done and the wealth lost in the past 18 months. It's all cycles though. I assume you're older than I am and witnessed downturns before. It always comes back and it will again, providing you were not planning on retiring in the next 2-3 years or suddenly die so it wouldn't matter much anyway. The phony wealth is not exactly evaporating like you think, although wealth is down, it was just primarily shifting especially during the G.W.B years. Wealth was not evaporating it was just leaving the middle class to the upper class.
"We're going the way of all empires in decline." You may be true, but this only happen in the case of another world war or nuclear war where we have many enemies attacking us all at once. Otherwise, Rome didn't fall overnight.
It took the Romans a couple of hundred years to go down the tubes. The Spaniards took a bit longer, perhaps three hundred years. The Brits were in relative decline since about 1900, and then got the stuffing knocked out of them in WW11.After which, their decline was rapid.All of these empires suffered from the same dynamics,imperial over-reach, endless wars (see over-reach), and eventual bankruptcy.The same things did in the Soviets, but there things happened really fast-maybe things just move more quickly these days.There is still an Italy, a Spain, and a UK, all of which have done pretty well in recent years.Russia hasn't done too badly either.All of them, in their day, believed that they were the exception to the rule.That history was on their side, that they would always prevail. So do we.The US may not collapse, but it will be a smaller player in a multipolar world.That doesn't seem like a bad outcome.The country is bankrupt, and so is it's model-it's just a matter of time.And yes, I'm older than you, and I've seen a lot of boom and bust cycles, and the economy always comes back-for some people-but we're not going to have a 'normal' recovery this time.
After WWI, empires didn't have to go downhill on horseback. I wonder if collapse won't be even faster digitalized.
US debt $13 trillion
UK $12
Ger $4
Fr $4
The discussion about whether capitalism is good or evil or whether Marx had it correct is not really relevant here. Past history about the Romans, Spaniards, or any other imperial regimes is also not really relevant either. We're in a 21st century with a 21st global economy so the rules are different. I'm obviously a progressive because I visit this site, but I'm also a pragmatist. We are not socialists or communists, we are capitalist like it or not and the US has executed that model far greater than any other nation state in history. With that said, I'm not immune to the complexities of capitalism; the uneven playing fields, manipulating markets, currencies, trading policies, workforce, etc. But I don't buy into the idea that the dollar will fade as the international standard because our economy is inflated wealth and we do not "make" things anymore. As you can see above our national debt is nearly 3 times larger than Germany or Frances', and so is our economy/GDP.
I guess ya all do not listen to Tom Hartmann. He has explained it better than anyone else I know. America does not make anything anymore. Real wealth is in the things you make and sell. Everything is now made offshore. The stock market is a phantom (my words not Tom’s) and it is exists like liquid mercury in your hand.
"it's all cycles though" is often the classic explanation of Capitalism .
but that is the PROBLEM with capitalism . it is INHERENTLY UNSTABLE and eventually will be replaced. whatever replaces it.
the "cycles" historically have turned out to be exactly what Karl Marx predicted:
"EACH NEW CYCLE larger and broader than the ones before- until capitalism's "success" sows the seeds of ITS own destruction".
THIS is what capitalists forget - thinking that "cycles" are just the "natural way". but that's Capitalist DOGMA..to JUSTIFY the CRISES that IT creates...as in this case :
the present version called "bubble economy". producing MAKE BELIEVE wealth.
led by the United States. it is ALSO used by the USA capitalists to JUSTIFY an UNJUSTIFIED and UNEARNED "primacy" and its Dollar Hegemeony, which is an ARTIFICIALITY imposed by the USA upon the world after world war 2 when nations were in chaos as a result of CAPITALIST OVER PRODUCTION that created the conditions for wars ...
and which is the BASIS of the USA's SUPPOSED "inevitable and necessary" primacy -- but which ITSELF is a highly manipulated system that has no bearing the USA's TRUE economic worth, when its MAKE BELIEVE WEALTH is subtracted from its REAL economic worth --
and its REAL economic worth ALONE , let alone its make believe wealth, is itself DEPENDENT on MAINTAINING the MANIPULATED system of finance and economics to give the USA
its UNEARNED and UNJUSTIFIED "dollar power" over other nations by forcing them to "earn dollars" (by the USA's FLOODING the markets with Dollar printed out of thin air backedup by FAR LESS than the amount of dollars in value) - in order for those nations to be able to "service" their trade and transactions through the dollar.
THAT is the Dollar Hegemony . which is protected by the USA through WARS , INVASIONS, DESTABILIZING of other countries, FORCING them into submissive positions so as NOT to CHALLENGE the DOLLAR - and REMOVE the dollar from USAGE in their inter-economic commerce.
the REAL reason the USA invaded Iraq was BECAUSE HUSSEIN was beginning to ABANDON the DOLLAR and switch to EURO.
should other economies TURN THAT WAY - regardless of there being NO SINGLE MAIN CURRENCY - but enough regional currencies that can be made to effectively DIRECTLY TRANSER VALUES between regions and currencies (for example: EURO transacting with the YUAN, or MIDDLE EASTERN PETRO DOLLARS transacting with South American PESOS, etc)
and SIDESTEP THE DOLLAR as Transactional INSTRUMENT and "holder of value" - as the dollar ECONOMY OF THE USA keeps LOSING its DEPENDABILITY for the USA , private and public economy to PAY BACK ITS DEBTS and GUARANTEE such debts from LOSING VALUE (as the chinese are worrying) --
the DOLLAR as HEGEMON IS FINISHED.
and WITH IT the USA's UNEARNED and UNJUSTIFIED EMPIRE.
which by the way - is indirectly propped up BY this Dollar Hegemony structure..which is a way for the USA to GET AWAY with MAKING OTHER COUNTRIES PAY for their ENSLAVEMENT by the USA THROUGH the ARTIFICIAL "high value" of the US DOLLAR....
UNEARNED and UNJUSTIFIED power of the USA DOLLAR and EMPIRE.
in short - the USA and its DOLLAR
are really the "Great power" that is ON WELFARE from the REST of the world -- even if it has been achieved through the decades through MANIPULATION, DECEIT, WARS , INTIMDIATION
and NOTHING AT ALL Based on the MYTHICAL
"American PRODUCTIVITY" that is SUPPOSEDLY more "efficient" and "valuable" than the rest of the world's countries.
THE USA - is like the NATIONAL version of its INTERNAL class relationships:
Where the RICH CORPORATIONS and Classes are REALLY ON WELFARE supported by the DIMINISHED "valuation" of labor of the ordinary people in their great majority...
THE USA is the International relations VERSION of
":THE RICH PERSON supported BY WELFARE FROM teh other nations".
other nations simply have to REMOVE that Magic Carpet from under the USA...however it is done.
and the USA "superpower" WILL COLLAPSE like a house of cards.
this is the meaning of TRADE TRANSACTIONS already being gradually processed between CHina and ASIA -- and South America in YUAN and other national currencies.
they are simply realizing a SIMPLE TRUTH:
"WHAT IS THE NEED FOR THE US DOLLAR as INTERLOPER in OUR transactions? all we have to DO is RECOGNIZE each OTHER's CURRENCIES as SUFFICIENT holders of value and debt and credit to EACH OF OURSELVES...and the DOLLAR is IRRELEVANT".
that is ALREADY happening. it is just a matter of time of putting the process FIRMLY in place, even as DAILY transactions OUTSIDE of the dollar are already being made.
the world DOESN"T necessarily need a SINGLE "main currency"
it is SUFFICIENT for regions to come together (such as asia is already doing attached to the chinese yuan) - to create regional transaction instruments taht DO NOT WASTE THEIR NATIONAL SAVINGS AND EARNINGS "buying the US Dollar as reserves to use as transactional payments....
and the MORE there are - they can EASILY coordinate a global regime where WITHOUT even a GLOBAL currency - the regions and nations attached to them can simply agree to recognize the agreed-upon "values" and "translations" of their different currencies for a standard "transactional value"
regardless of whether it's BETWEEN YUAN and EURO - or Yuan and Saudi Petro Dollar - or Ruble and South American pesos.
in ALL THAT PICTURE - as the world turns away from the dollar -
EXACTLY where is teh US DOLLAR - WRITTEN IN STONE ANYWHERE in teh UNIVERSE that it is EVEN NECESSARY for transactions BETWEEN COUNTRIES that are not doing particular business WITH the USA?
in other words:
the time WILL come when the salient question worldwide is:
"WHO NEEDS THE US DOLLAR?...we GOT OUR OWN currencies!"
I don't disagree with a lot of what you say, but you sure do seem to have a lot of time on your hands.
i do -- a LOT of time outside of work - which i use to READ and Inform myself..rather than be ENTERTAINED.
if one really counted the hours - we ALL have "lots of time" it is a matter of CHOICE what to do with it, i prefer to inform myself, and then discuss it .
five minutes of that is equal to five minutes of watching TV .
"have lots of time on your hand" is better applied to those that THINK they are "TOO BUSY" but ACTUALLY spend most of it "hanging out"....SITTING in their CARS....LISTENING to their LATEST I-pod downloads...WAITING for their next fancy DATE...looking at themselves in the mirror and primping...spending their "PRECIOUS" time shopping, parking their car, LOOKING for parking,
it all adds up , u know, about the SAME as much as I and some SPEND on LEARNING and INFORMING ourselves and talking about it.