[SeaGypsy]

Perhaps the real meaning of a deflationary inflationary depression could well be that you can buy a nice car for the same price it costs to fill up; but when you run to another country they won't even let you in on dollars.

[Ibon]

You guys hear about Argentina's hyperinflation of the 90's? I was regional director for Latin America at that time for a European optical company and made several trips to Buenos Aires and my representative was a friend with whom I traveled the country.

Walking the streets of Buenos Aires and hearing the stories of the locals and how they survived these times was sobering back then. There was a collective depression that was palpable and disheartening.

There was a story that always struck me. Argentina imported Tropicana orange juice from FLorida back then even though Argentina had large orange production domestically. But there was no domestic comparable product available (except of course buying oranges and squeezing them yourself
I was told there was no capital available to buy the equipment and invest in the infrastructure to make a comparable domestic product.

Argentina's debt to GDP ratio back then was even lower than the US today when foreign investors pulled the plug. The US$ role as a global currency and still weakened but robust American consumer are the only reasons China and friends continue to prop us up.

We wont see a pulling of the plug the way foreign investors did in Argentina here in the USA because we are still not an irrelevant small country in Latin America.

But there is a slow process underway that is moving the USA in incremental steps down the path toward this irrelevancy.

We talk about reviving our local industry. I think about that Tropicana story down there in Argentina and wonder how one day the USA is going to relocalize their domestic manufacturing if this would happen after our currency loses a big chunk of its value. We are very dependent on globalization to procure capitol goods required to rebuild our domestic manufacturing. Germany for example is a leading exporter of machinery for manufacturing.

There is still enormous wealth in the USA and leverage in the way our economy is co dependent with trading partners. What is scary is that the inertia we are stuck in seems to be forcing us down a road of further over extending our debt to GDP ratio to the point where we one day will be become as irrelevant as Argentina was to foreign investors.

Here is the irony of all this. We might be forced to buy whole oranges and squeeze them ourselves in a severely weakened economy. And this is exactly what we so often advocate when we promote a less energy and more sustainable economy.

We despair the direction we are heading and yet it is the direction we advocate also in terms of living in a powered down society. There is real cognitive dissonance here that I marvel at.

[Sixstrings]

$this->bbcode_second_pass_quote('Pops', 'W')hy would we care what other countries do with the dollar?

[mos6507]

$this->bbcode_second_pass_quote('', 'W')e despair the direction we are heading and yet it is the direction we advocate also in terms of living in a powered down society. There is real cognitive dissonance here that I marvel at.

[vision-master]

Will we have changed?

Will we have evolved by then?

[SeaGypsy]

$this->bbcode_second_pass_quote('Sixstrings', '')$this->bbcode_second_pass_quote('Pops', 'W')hy would we care what other countries do with the dollar?

[Pops]

$this->bbcode_second_pass_quote('Sixstrings', '')$this->bbcode_second_pass_quote('Pops', 'W')hy would we care what other countries do with the dollar?

[SeaGypsy]

Doubly right. No they will not intentionally destroy their own assets but in the process of locking in oil/ coal/ gas/ uranium/ bauxite/ copper and other metals they will be steering the future of the USA soon enough.

The ball game completely changes for the dollar when it is no longer mandatory to have them if you want to deal in shipfulls of stuff.

It will remain the number 1 consumer currency for years yet to come, more than likely; enough reason to keep some on hand. But minus reserve status the USD takes it's place along with other mortal fiat currencies; where it must compete on the same basis. Bang for Buck.

[rangerone314]

$this->bbcode_second_pass_quote('Pops', 'W')hy would we care what other countries do with the dollar?

We've have the perfect economic system: we loan money to ourselves...

$this->bbcode_second_pass_quote('ZH', '.')..the Fed's official holdings of US Treasury securities now amount to $891.3 billion, which is higher than the second largest holder of US debt: China, which as of September 30 held $884 billion, and Japan, with $864 billion.

[SeaGypsy]

The thing which is easy to underestimate the power of is the hunger for $USD at the grass roots level in poor parts of the world. The US Fed could easily fly planeloads of cash a day around the world for quite a while before anyone would take much notice or there would be any effect on the currency.

Indeed I would be very surprised if this is not already happening.

There is a rumour doing the rounds in south east Asia that some shady dudes are going around doing cash deals so big the guys selling are 100 percent sure the money is counterfiet; but so damn good they are taking it anyway.

[Fiddlerdave]

$this->bbcode_second_pass_quote('Sixstrings', 'W')ell.. let's not overstate this.

This is a deal for them to exchange their own currencies more when trading with each other. I read somewhere that Russia alone actually has more US hundred dollar bills in circulation than exist in the US itself -- talking paper money here, that's in addition to their large on-the-books reserves.

[SeaGypsy]

If China and Russia get away with this; the idea of reserve currency becomes almost obsolete. There is no reason why a trade weighted index can't be used for conversion tables, where the dollar would simply be one of the important currencies measured against rather than counted through exclusively.

All it takes is the OECD to agree to direct exchange with each other, then to extend these terms to favored nations over time. There could be a central exchange basket and regional ones seperately.

[Pops]

This stuff is all way over my head so explain this to me:

If you are going to issue the world reserve currency, you need to issue enough to satisfy demand, right?

And since countries don't usually fly around and dump currency from planes, you'll need a way to get that money out into those international markets, right?

The only way to do that is to run a trade deficit.

China doesn't...

--
The fact that the US$ is the global reserve puts a lot of upward pressure on the dollar, so stuff we make is too expensive to compete in export markets and stuff other people produce too cheap to for us to resist - and that includes cheap interest that allows us to borrow too easy.

So a weaker dollar is a bad thing, how?

[SeaGypsy]

$this->bbcode_second_pass_quote('Pops', 'T')his stuff is all way over my head so explain this to me:

If you are going to issue the world reserve currency, you need to issue enough to satisfy demand, right?

And since countries don't usually fly around and dump currency from planes, you'll need a way to get that money out into those international markets, right?

The only way to do that is to run a trade deficit.

China doesn't...

--
The fact that the US$ is the global reserve puts a lot of upward pressure on the dollar, so stuff we make is too expensive to compete in export markets and stuff other people produce too cheap to for us to resist - and that includes cheap interest that allows us to borrow too easy.

So a weaker dollar is a bad thing, how?

[vtsnowedin]

$this->bbcode_second_pass_quote('Pops', 'T')his stuff is all way over my head so explain this to me:
.....
..

--
So a weaker dollar is a bad thing, how?

[Pops]

$this->bbcode_second_pass_quote('vtsnowedin', 'b')ut first off a weaker dollar will mean the price of oil in the US will go up faster then it does in the rest of the world.

[vtsnowedin]

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('vtsnowedin', 'b')ut first off a weaker dollar will mean the price of oil in the US will go up faster then it does in the rest of the world.

[Pops]

$this->bbcode_second_pass_quote('vtsnowedin', 'T')he route they are taking today is a total disaster in the making and there are much better options. Not easy ones mind you but better.

[vtsnowedin]

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('vtsnowedin', 'T')he route they are taking today is a total disaster in the making and there are much better options. Not easy ones mind you but better.

[Pops]

Since we both know those things will not be done to any significant extent - or increasing revenues either, I take it you mean it's better to just kick the can over the cliff.