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Posts Tagged ‘collapse

Blanche Lincoln Stands Up Against OTC Derivatives

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(Via Felix Salmon)

I’ve written negatively about Senator Blanche Lincoln in the past for her vote in favor of the Iraq War, her frightening views on indefinite detention and torture, her support of warrentless surveillance, and a host of other sins, but I think she deserves major credit for introducing a bill earlier this week that would ban over the counter derivatives:

“Speculators will not be exempted and all trades will be reported to regulators and the public,” Mrs. Lincoln wrote. In addition, any agency that is used for the trading of swaps contracts, including those dealing with energy commodities, will be required to register with the C.F.T.C.

This is exactly the kind of transparency and oversight that could have prevented the crisis, or at least made it softer. I want to stress that the layers upon layers of new regulation that Timothy Geithner intends to add (and which I discussed in the post immediately before this one), will not do anything for public transparency.

Blanche, you’ve voted for some pretty bad things in the past, but this is a bill I can get behind.

Written by pavanvan

April 16, 2010 at 8:50 pm

The Times and China: Pot, Meet Kettle

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The Times has the latest in a string of articles accusing China of “using global trade rules to its advantage” today. With their angry, disapproving tone and several vague references to trade imbalances, one gets the distinct impression that America (and the Times by extension) has a hard time swallowing its own medicine.

Just look at what China is being accused of:

China buys dollars and other foreign currencies — worth several hundred billion dollars a year — by selling more of its own currency, which then depresses its value. That intervention helped Chinese exports to surge 46 percent in February compared with a year earlier.

And:

Beijing has worked to suppress a series of I.M.F. reports since 2007 documenting how the country has substantially undervalued its currency, the renminbi, said three people with detailed knowledge of China’s actions.

Horrific! Tell me, when was the last time China invaded a country for not selling its main resource in its own currency?

As for the Times’ description of the I.M.F – well, it must be read to be believed:

The International Monetary Fund acts as a kind of watchdog for global economic policy but has no power over countries like China that do not borrow money from it.

Astonishing. The IMF’s true role is that of an economic enforcer on behalf of the United States. It compels “poor” countries to take IMF loans, and when they can’t pay them back, forces the debtors to enact “structural” changes to their economy, changes usually geared towards a neo-liberal agenda. This has happened in Russia, Poland, Argentina, Chile, South Africa, Pakistan, Eastern Europe, and a raft of other countries. The IMF is not so much a “watchdog” as a “police dog”, on behalf of the United States and its “Washington Consensus” economic policies.

Then they accuse China’s “beggar-thy-neighbor” policies as being of the same sort that caused the Great Depression:

Two closely related scourges played a central role in the collapse of world trade in the 1930s: protectionism and beggar-thy-neighbor currency devaluations. World leaders set up two institutions after World War II, now known as the W.T.O. and the I.M.F., to reduce the risk of another Great Depression.

But they neglect to mention the role of US banks and the Smoot-Hawley Tariff, which the US congress enacted in 1930 and began the worldwide trend of “protectionism” during the Great Depression. I mean, this is high school level history here.

Now, there can be no doubt by this point that China is, indeed, keeping its currency devalued in order to boost its export sector. This is common knowledge. But for the Times to blame this whole situation on China belies a real bias on their part.

Remember, it would be impossible for China to keep its currency artificially devalued if the US had not run historic deficits in pursuit of tax cuts and murder in the Middle East. A very weak showing from our “newspaper of record”.

Written by pavanvan

March 15, 2010 at 3:51 pm

Homes in Detroit Sell for $10

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Being a Metro-Detroiter myself, this make me cry:

According to Tim Prophit, a real estate agent, the crisis has led to a unprecedented portfolio of homes, but they are failing to sell.

He said there were homes on the market for $100 (£61), but an offer of just $10 (£6) would be likely to be accepted.

Speaking on a BBC 2 documentary, Requiem for Detroit, to be screened on Saturday, Mr Prophit said: “The property is listed by the city of Detroit as being worth $35,000 (£22,000), but the bank knows that is impossible to ask.

Written by pavanvan

March 15, 2010 at 3:19 pm

Posted in Economy

Tagged with , , ,

Financial Quotes of the Day

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“We’ve got strong financial institutions . . . Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”

Hank Paulson, Treasury Secretary, March 16, 2008

“We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses, both small and large, and the very health of our economy,”

Hank Paulson, Treasury Secretary, September 23, 2008

Written by pavanvan

January 31, 2010 at 10:20 am

Dow Overvalued

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Zero Hedge gives us yet more evidence that the Dow is overvalued: industry insiders are selling stock 82 times faster than they’re buying it.

In the most recent data set, $11.6 million in stock was purchased by insiders, while a whopping $957 million was sold. And somehow pundits are still spinning this mass orchestrated sell into the bid by those in the know as a bull market.

For significant holders of stock, now might be the time to unload.

Written by pavanvan

December 9, 2009 at 9:32 pm

Failed Bank Fridays!

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I missed the last three failed bank Fridays, so here are all seventeen that failed in the past three weeks in a row. As always, from the FDIC:

Pacific Coast National Bank San Clemente CA 57914 November 13, 2009 November 18, 2009
Orion Bank Naples FL 22427 November 13, 2009 November 17, 2009
Century Bank, F.S.B. Sarasota FL 32267 November 13, 2009 November 18, 2009
United Commercial Bank San Francisco CA 32469 November 6, 2009 November 9, 2009
Gateway Bank of St. Louis St. Louis MO 19450 November 6, 2009 November 9, 2009
Prosperan Bank Oakdale MN 35074 November 6, 2009 November 9, 2009
Home Federal Savings Bank Detroit MI 30329 November 6, 2009 November 9, 2009
United Security Bank Sparta GA 22286 November 6, 2009 November 9, 2009
North Houston Bank Houston TX 18776 October 30, 2009 November 3, 2009
Madisonville State Bank Madisonville TX 33782 October 30, 2009 November 3, 2009
Citizens National Bank Teague TX 25222 October 30, 2009 November 3, 2009
Park National Bank Chicago IL 11677 October 30, 2009 November 3, 2009
Pacific National Bank San Francisco CA 30006 October 30, 2009 November 3, 2009
California National Bank Los Angeles CA 34659 October 30, 2009 November 3, 2009
San Diego National Bank San Diego CA 23594 October 30, 2009 November 3, 2009
Community Bank of Lemont Lemont IL 35291 October 30, 2009 November 3, 2009
Bank USA, N.A. Phoenix AZ 32218 October 30, 2009

Written by pavanvan

November 21, 2009 at 4:16 am

Goldman and The Government: Strange Bedfellows

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The Huffington Post gives us a nice preview of an insider report in the upcoming issue of Vanity Fair, detailing the secret meetings between Goldman Sachs and the US Treasury at the height of last year’s stock market crash.

Here is a nice little Q&A with the author, Andy Sorkin, to get you warmed up. Look out for this article.

Written by pavanvan

September 30, 2009 at 10:23 pm

An American Rome

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Recently I spoke with a resident of New York City who took much pleasure in declaring it to be “The New Rome.”

It appears to be a fashion to compare one’s civilization to the Roman empire, usually with a minimum of factual basis. But, thinking back on Edward Gibbon’s monumental Decline and Fall of the Roman Empire, it occurs to me that there is more to that comparison than meets the eye. Much of what Gibbon describes during the golden period of Roman Expansion has a mirror today in American expansion. Many of the tendencies and mistakes Gibbon identifies can be observed in American culture today.

The Extent of the Roman Empire: CE 114 - ~260

The Extent of the Roman Empire: CE 114 - ~260

Gibbon’s History is a massive, sprawling monolith which I have no right to condense. His narrative threads entwine with the complexity of a mangrove swamp to form a layered, nuanced argument. It defies quick analysis. But dominant themes emerge, and if pressed, one could offer a short list of  patterns that hastened the demise of Rome. I think it is no coincidence that Gibbon wrote his History during the American revolution and subsequent experiment with the Articles of Confederacy. From his centuries of absorbed wisdom, he may have served as a warning to all future American seekers of Empire. His warnings, unfortunately, have fallen on deaf ears, to the extent that most people I know have not even heard the name Gibbon.

His work must be read in full, for this shall be a vast simplification. But for interested Americans, the causes Gibbon ascribes to Rome’s decline that have direct analogues in current US condition are as follows.

Apathy among the Population

Gibbon describes this briefly as “loss of Civic Virtue”, but it is a common theme throughout his narrative. At first, in the days of Caesar and Augustus (BC 30 – CE 14), the public had its appetite whet for empire and cared little for their ancient liberty. Later, when problems emerged on the borders (~CE 250), much of the public, accustomed for two centuries to a servile senate, an expanding empire, an easy life, was unwilling to join the legion without the promise of plunder and riches. Finally, when Rome itself saw siege, too few of its defenders were actually Romans.

Likewise with the Senate. An assembly that once spoke the law of Rome found itself reduced within the span of 50 years to having a horse (appointed by Emperor Nero) join its ranks. Its swift and sudden loss of power could not have occurred without the tacit consent of the population – and once revoked, such powers were increasingly difficult to reinstate. By 193 AD, Senate seats were literally auctioned to the highest bidder. The public had forgotten there was any other way.

Such behavior finds its American mirror in the profound indifference expressed by the everyday person over such issues as the Iraq War, the control of finance over government policy, or the dizzying cost of running for office. Likewise with Rome, our Senate seats are for sale: either literally, in the case of the Blajojevich scandal, or figuratively, in the form of a multi-million dollar cost of campaign. As with the average Roman, these issues do not place highly on our American list of concerns. Regarding the military, Barack Obama recently remarked to a group of veterans that though our country can boast a population of 300 million, less than one percent of them wear the uniform. Just as the Roman emperors before them, our leaders have had to look to other means to support their empire.

Reliance on mercenaries and other auxiliary forces

With fewer and fewer Romans reporting for service, the Emperors had to resort increasingly to mercenaries, usually drawn from the Germanic tribes. According to Gibbon the use of auxiliaries dates before the Empire, but they formed vast minority. As its borders expanded, first to Germany via Caesar and Augustus (CE 14) and later to Persia and Iraq via Trajan (CE 98-117), the empire found the need to draw from the border civilizations for defense. Needless to say their allegiances were of a dubious sort. They fought fiercely enough when they pay was good, but they were willing to turn on their benefactors as soon as the money stopped. In practice, they did this several times throughout the third and fourth centuries, until finally, in 410, assisting in the Sack of Rome.

Now compare to today’s “military contractors” such as Blackwater (which has been heavily documented), and others (who still operate largely in the shadows). These corporations are nothing more than modern mercenary outfits, whom we currently pay not only to subdue Iraq and Afghanistan, but to prosecute our “War on Drugs”, maintain control in Latin and South America, and carry out our secret assassination programs. Mercenaries have become instrumental to our foreign policy.

Expanding and indefensible borders

The US Empire c. 2003

The US Empire c. 2003

One problem with the empire model is that the returns tend to diminish with increased expansion, but penalties for the failure to expand can become quite severe. Thus Rome, once committed to imperial possessions, had no choice but to constantly add to its collection and to defend its hard-won conquests at any cost. Their economic model based itself on plundering the provinces of their resources; as population and urban consumption grew, borders necessarily had to expand. Soon their borders became so wide as to be impossible to defend all at once. The legions would suppress a Gallic rebellion only to leave the East undefended. It was a classic case of “imperial overreach”.

The similarities to America’s method of expansion; first over the North American continent, then over Asia, Europe, and the Middle East, are readily apparent. Frequently the US ran into trouble (namely, in Vietnam and Iraq), but expansion has continued unabated nearly since the country’s inception. It is not hard to see the drain on resources and energy adventures such as Iraq and Afghanistan pose to the American people. Worse still, these possessions, once acquired, must be kept at any cost. Hence, President Obama’s escalation of the Afghan war, and the constant stream of military aid we supply to nations and dictatorships across the globe.

Debasement of Currency

Debasement (cutting silver coins with less expensive metal – usually iron) was first practiced under Nero (CE 98) and saw wide use under Commodus (CE 180-193). Commodus, portrayed in the 2000 film Gladiator, really did fight in the Roman Coliseum – and he charged the state 1,000,000 silver pieces for each appearance. There did not exist enough silver to furnish this “new and most ignominious tax” (to use Gibbon’s phrase), so the treasury found themselves compelled to debase the Roman currency further. The Roman economy collapsed into hyperinflation only 50 years later; and while subsequent policy alleviated the situation, confidence in the Roman treasury did not quickly return.

Currency debasement finds its American analogue in “quantitative easing” – the mass infusion of printed cash seen recently in response to the financial crisis. Note that much of this conjured money has gone into the pockets of a few powerful banks to be distributed as “bonuses” to their employees: just as much of the inflated Roman currency found its way to the Emperor’s private purse (to be distributed amongst the legions). The trend has its roots well before our current crisis: indeed since 1971, the year Nixon took the US dollar off of the Gold Standard, Dollar debasement has ensued with ever-more vigor. We have the power now, as Rome once did, to force our currency upon conquered nations. But as Rome learned in the Third Century Crisis, this power is easily lost.

All of this is not to say that the US is in danger of imminent collapse, or even that a collapse must occur. All prophecies are wrong, and predicting the future based upon the past is a dubious endeavor. Gibbon also ascribes several causes for Rome’s decline either which I do not have the space to discuss, or which do not bear direct relevance to the current US situation. The above is, at best, a crude comparison of the US and the ancient society of Rome.

Still, however, I find some of the similarities rather disquieting.

Recently I spoke with a resident of New York City who took much pleasure in declaring it to be “The New Rome.” His epithet revealed more, perhaps, than he imagined. Immediately I recalled Edward Gibbon’s monumental History of the Decline and Fall of the Roman Empire, which I read some years ago, and I thought about the social trends it describes. A dismal analogy to contemporary American culture formed.

Gibbon’s History is a massive, sprawling monolith which I have no right to condense. His threads of narration are entwined with the complexity of a mangrove swamp. They defy quick analysis. But dominant themes emerge, and if pressed, one could offer a short list of major patterns that hastened the demise of Rome. I think it is no coincidence that Gibbon wrote his History during the American revolution and subsequent experiment with the Articles of Confederacy. From his centuries of absorbed wisdom, he may have served as a warning to all future American seekers of Empire. His warnings, unfortunately, have fallen on deaf ears, to the extent that most people I know have not even heard the name Gibbon.

His work must be read in full, for this shall be a vast simplification. But for interested Americans, the causes Gibbon ascribes to Rome’s decline that have direct analogues in current US condition are as follows. They all relate to one another in some form.

  • Apathy among the Population

Gibbon describes this briefly as “loss of Civic Virtue”, but it is a common theme throughout his narrative. At first, in the days of Caesar and Augustus (BC 30 – CE 14), the public had its appetite whet for empire and, swayed easily by demagoguery, cared little for their ancient liberty. Later, when problems emerged on the borders (~CE 250), much of the public, accustomed for two centuries to a servile senate, an expanding empire, an easy life, was unwilling to join the legion without the promise of plunder and riches. Finally, when Rome itself saw siege, too few of its defenders were actually Romans.

Likewise with the Senate. An assembly that once spoke the law of Rome found itself reduced within the span of 50 years to having a horse appointed by Emperor Nero join its ranks. Its swift and sudden loss of power could not have occurred without the tacit consent of the population – and once revoked, such powers were increasingly difficult to reinstate. By 193 AD, Senate seats were literally auctioned to the highest bidder. The public had forgotten there was any other way.

Such behavior finds its American mirror in the profound indifference expressed by the everyday person over such issues as the Iraq War, the control of finance over government policy, or the swiftly inflating cost of running for office. Likewise with Rome, our Senate seats are for sale: either literally, in the case of the Blajovietch scandal, or figuratively, in the form of multi-million dollar campaigns. As with the average Roman, these issues do not place highly on our American list of concerns. Regarding the military, Barack Obama recently remarked to a group of veterans that though our country can boast a population of 300 million, less than one percent of them wear the uniform.. Just as the Roman emperors before them, our leaders have had to look to other means to support their empire.

    • Reliance on mercenaries and other auxiliary forces

With fewer and fewer Romans reporting for service, the Emperors had to resort increasingly to mercenaries, usually drawn from the Germanic tribes. According to Gibbon the use of auxiliaries dates before the Empire, but they formed vast minority. As its borders expanded, first to Germany via Caesar and Augustus (CE 14) and later to Persia and Iraq via Trajan (CE 98-117), the empire found the increasing need to draw from the border civilizations for defense. Needless to say their allegiances were of a dubious sort. They fought fiercely enough when they pay was good, but they were willing to turn on their benefactors as soon as the money stopped. In practice, they did this several times throughout the third and fourth centuries, until finally, in 410, assisting in the Sack of Rome.

Now compare to today’s “military contractors” such as Blackwater (which has been heavily documented), and others (who still operate largely in the shadows). These corporations are nothing more than modern mercenary outfits, who we currently pay not only to subdue Iraq and Afghanistan, but to prosecute our “War on Drugs”, maintain control in Latin and South American, and carry out our secret assassination programs. Mercenaries have become instrumental to our foreign policy.

  • Expanding and indefensible borders

One problem with the empire model is that the returns tend to diminish with increased expansion, but at the same time, the penalties for failing to continue to expand increase. Thus Rome, once committed to imperial possessions, had no choice but to constantly add to its collection and to defend its hard-won conquests at any cost. Their economic model based itself on plundering the provinces of their resources; as population and urban consumption grew, borders necessarily had to expand. Soon their borders became so wide as to be impossible to defend all at once. The legions would suppress a Gallic rebellion only to leave the East undefended. It was a classic case of “imperial overreach”.

The stress of constant expansion and constant defense were a continuous drain on Roman resources and output. The similarities to America’s method of expansion; first over the North American continent, then over Asia, Europe, and the Middle East, are readily apparent. Frequently the US ran into trouble (namely, in Vietnam and Iraq), but expansion has continued unabated nearly since the country’s inception. It is not hard to see the drain on resources and energy adventures such as Iraq and Afghanistan pose to the American people. Worse still, these possessions, once acquired, must be kept at any cost. Hence, President Obama’s escalation of the Afghan war, and the constant stream of military aid we supply to nations and dictatorships across the globe.

  • Debasement of Currency

Debasement (cutting silver coins with less expensive metal – usually iron) was first practices under Nero (CE 98) and saw wide use under Commodus (CE 180-193). Commodus, portrayed in the 2000 film Gladiator, really did fight in the Roman Coliseum – and he charged the state 1,000,000 silver pieces for each appearance. There did not exist enough silver to furnish this “new and most ignominious tax” (to use Gibbon’s phrase), so the treasury found themselves compelled to debase the Roman currency further. The Roman economy collapsed into hyperinflation only 50 years later; and while subsequent policy alleviated the situation, confidence in the Roman treasury did not quickly return.

Currency debasement finds its American analogue in “quantitative easing” – the mass infusion of printed cash seen recently in response to the financial crisis. Note that much of this conjured money has gone into the pockets of a few powerful banks to be distributed as “bonuses” to their employees: just as much of the inflated Roman currency found its way to the Emperor’s private purse (to be distributed amongst the legions). The trend has its roots well before our current crisis: indeed since 1971, the year Nixon took the US dollar off of the Gold Standard, Dollar debasement has ensued with ever-more vigor. We have the power now, as Rome once did, to force our currency upon conquered nations. But as Rome learned in the Third Century Crisis, this power is easily lost.

All of this is not to say that the US is in danger of imminent collapse, or even that a collapse must occur. All prophecies are wrong, and predicting the future based upon the past is a dubious endeavor. Gibbon also ascribes several causes for Rome’s decline either which I do not have the space to discuss, or which do not bear direct relevance to the current US situation.

Still, however – the echoes of the past in current US policy are disconcerting, to say the least.

Written by pavanvan

September 1, 2009 at 1:29 am

The Day of the Yuan

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Julian Phillips on the coming Currency Crisis

President Bush’s decision to print $700 Billion, President Obama’s decision to do the same, and Bernake’s recent infusion of an extra $1 Trillion into the economy were met by the public with a collective head scratch. “Well, alright, I suppose…” the thought surely went, “if it’ll fix economy, why not? But I wonder where that money will come from.” The Fed has the power to print money in extreme circumstances, so most have contented themselves with the explanation that the money ‘came out of thin air’.  I believe the technical term is ‘Quantitative easing’. But strictly speaking, this isn’t true. In order for the dollar to have value – for it truly to be money – the rest of the world must perceive it as such. Thus far the world has had no choice but to believe in the dollar’s value.  All the truly valuable things – gold, oil, IMF loans, etc. were primarily priced in dollars, forcing them to do business with the US – usually at a steep disadvantage. Various US military actions, most notably Vietnam, Central America and Iraq, along with covert US support of friendly dictators further ensured the rule of the dollar. However a new day dawns – a new set of circumstances with a growing alternative to dollar hegemony. In light of that, printing money was likely the worst response our leaders could have taken in response to this financial imbroglio.

Up until now the dollar has been the standard reserve currency due largely to a lack of alternative. The US was virtually the last robust economy left after World War II, and shrewdly issued its currency to anyone who would accept it. The dollar was especially attractive then because the US held large stores of gold and promised investors that they could trade $35 for an ounce of it any time they wanted out of the arrangement – the long-forgotten gold standard. More importantly, the US made sure that oil would be priced exclusively in dollars via their interventions in Iran, Saudi Arabia, Egypt, and other countries. This ensured that any nation who wished to have an industrial revolution would necessarily have to go through the US in order to do so.  In 1971, the US reneged on its gold standard obligation, but by then it had ensured the world would be so dependent on the US for economic growth that they had no choice but to remain silent.  Thus the dollar proliferated throughout the world, and the US used all its available military and political influence to ensure that it would be the world’s only reserve currency. So long as that remained true, the US economy would have ultimate insurance – since all other currencies were backed by the dollar, the nations of the world have a strong vested interest in US economic stability.  A dollar collapse would imply their currency’s collapse as well.  When oil inflated in 2008, the rest of the world found themselves obligated to devalue their own currency to bring it in line with the inflating dollar, which they quietly agreed to do during an emergency meeting in September.

Since 2007 the Federal reserve has printed approximately $2.5 Trillion, and has made clear to our financial sector that their mon etarycommitment is essentially unlimited. Many estimates of the total cost of this crisis run into the tens of trillions of dollars. In March, China’s Premier expressed “grave concern” as to China’s investment in US Treasury Bonds, soon after the announcement of another trillion in printed cash. Though the US media gave the Premier’s remarks only perfunctory coverage, these ‘concerns’ have serious implications for US monetary policy. More disheartening are China’s repeated calls for a new global reserve currency. At first such calls were ignored, even laughed at, but as the crisis unfolds they become harder and harder to disregard. At the very least one can say that China is unhappy with its investments in the US Treasury, and it would not be a large stretch to put forth that they may be looking for an alternative, or even to supplant the dollar with their own currency.

But what about the $2 Trillion in US debt of which China is the proud holder? This is the argument commonly put forth by high-level investors with whom I have discussed these issues. They claim that China needs a robust US economy even more than the US needs China to invest in its bonds, that an attempt by China to supersede the US would be tantamount to financial suicide, rendering a bulk of their investments worthless. It is the Mutually-Assured Destruction model for the 21st Century. But it does not hold to scrutiny. Evidently the Chinese leadership does not consider it advantageous to dump their US assets, or they would already have done so. But for how long did my conversation partners think this would remain true?  The time may easily come when China decides to simply cut their losses. Given that the Obama Administration has announced multi-trillion dollar deficits for the next decade, that time is not very difficult to forsee. Depending on the moment and manner in which they dump their US investments,those losses might not turn out to be so great. If, for instance, China can convince the rest of the world to drop their dollar assets at the same time they do, and simultaneously re-invest in the Yuan, the money China loses to US debt will be offset by the influx of new investment from the rest of the world.

This would not be so difficult as it sounds. In fact, with one move, China can simultaneously achieve both of its goals: striking a death blow to US dollar hegemony and installing the Yuan as the new global store of value. All they must do is make two announcements, preferably in one day. First, that they immediately seek to unload their investments in the US government, and second that the Yuan will trade at double its current value in relation to the dollar on a specific day in a few months. Perhaps they’ll read this essay and call it The Day of the Yuan. I admit I am an ordinary, newspaper-reading layman with no special knowledge of macroeconomics, but in my uninformed opinion there would ensue a run on US currency followed by a frenzy for the Yuan, were China to enact such a policy.

Hyper-inflation is a dirty word among business circles. No one I’ve encountered who makes their living by trading money will entertain the notion that the dollar may enter a severe inflationary cycle.  But it is the necessary extension of a collective, immediate disbelief in the value of a currency. Most historical examples of hyperinflation, from Germany in the 20s, to Yugoslavia in the 90s, to Zimbabwe today, were preceded by vast inflationary spending – be it through costly wars or simply printing currency. The US has done the former for decades and has just embarked on a visible demonstration of the latter, but the implications of such actions are widely disregarded. There exists a belief that normal economic rules, even ones learned in high-school, do not apply to the US – a belief of which we are likely about to be disabused.

Written by pavanvan

July 26, 2009 at 7:39 pm

Posted in Economy

Tagged with , , , , ,