[vtsnowedin]

$this->bbcode_second_pass_quote('Pops', 'S')ince 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.

[Fiddlerdave]

$this->bbcode_second_pass_quote('SeaGypsy', 'I')f China and Russia get away with this; the idea of reserve currency becomes almost obsolete. ...

[Pops]

I'm digesting an article which argues the view that when we cross over into a world of recognizably declining energy the economy will cross a tipping point of systemic collapse, basically the Fan and not the Slide.

I'm feeling a little like we'd be lucky to have an excuse like the end of "Dollar Hegemony" to adjust our sights downward instead walking into the situation blind.

Link in my sig...

[SeaGypsy]

$this->bbcode_second_pass_quote('Fiddlerdave', '')$this->bbcode_second_pass_quote('SeaGypsy', 'I')f China and Russia get away with this; the idea of reserve currency becomes almost obsolete. ...

[radon]

$this->bbcode_second_pass_quote('Pops', '
')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.

[SeaGypsy]

The reason the USA needs to lend currency (cash futures/ bonds @ 0%) all over the show is to support a trade deficit; largely based on oil dependency. Better do a little more reading before jumping in here.

[radon]

$this->bbcode_second_pass_quote('SeaGypsy', 'T')he reason the USA needs to lend currency (cash futures/ bonds @ 0%) all over the show is to support a trade deficit; largely based on oil dependency. Better do a little more reading before jumping in here.

[Pops]

$this->bbcode_second_pass_quote('radon', 'Y')ou do not have to be a reserve currency issuer to run trade deficits.

[radon]

$this->bbcode_second_pass_quote('Pops', '
')But a "supranational" currency is what Keynes suggested back then and China has been calling for expansion of the IMF SDRs way before this...

[SeaGypsy]

1/ The reserve currency is in physical trade much what it is in forex; the hub through which all spokes in the wheel connect. The disconnect is in the fact that there can be forex runs on the basis of rumour, percieved risk in the forex market itself or on that of real physical trade, interest rates and trade deficits.
The physical commodity market is tiny compared to forex but forex has no other real basis. In the long run the better a trade balance sheet looks, the better the currency will do. The inverse is the current situation in much of the developed world. Actual currency movement in any form does not alter the balance sheet until a mark up or down occurs in aquisitions, apart from the direction of interest flows; much the same as private persons conducting international business. Shifting money around is a very novel way of making a profit in that it produces nothing. This has made it a very popular form of gambling among governments, banks, corporations and wealthy individuals; the profits of which are futile waste/ ghost money.

In the long run the only way to close a trade gap is to increase efficiency/ productivity. When your key competitor operates infinitely more efficiently than you do, you are in big trouble. You can trick them into lending to your consumers to keep them buying easy enough for a time; but eventually the fundamentals of prodctivity and efficiency must overwhelm temporal games over currecy valuations/ speculation. In this case the more efficient player will always end up holding the best hand. 'Reserve currency demand' is a hangover from the cold war period; soon to be outdated by free direct currency exchange. The more QE goes on, the more the deficit grows, the longer zero interest or negative interest loans go on, the thinner the veneer of wealth, the more unstable the dollar, the sooner other currencies become percieved as a better risk.

So far reserve status probably adds about 40% to the real value of the USD$; the quicker this status fades the quicker the dollar fades.
No amount of financial product trickery will undo the fundamental equation.
China may have been suckered into aquiring so much US debt; or it may be a risk they can easily afford to take, buying a stakes in their biggest customers.
Chinese growth barely sputtered through the GFC so far, it doesn't look like their moves were too stupid.

I just keep coming back to the efficiency equation, which I see as increasing in intensity in the peak oil period. Chinese efficiency is ruthless when compared to western countries. Working conditions are horrific: 6 12 hour days/ 1 week to 2 weeks off/ minimal medical cover/ minimal representation/ survival wages. That is what the world has to compete with, especially industrialised countries with high consumption to resource ratios like the USA.
The days of fat cat wages for service jobs are coming to an end world over.
The middle class is dieing.
1st victim of peak oil.
Once thoroughly dead, we will see who comes next.

[Keith_McClary]

$this->bbcode_second_pass_quote('Fiddlerdave', '')$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]

Not counting bonds, which are supposed to be as good as cash.
Does anyone know the official current total circulation of $USD? Cash, bonds, certificates and electronic deposits? I am guessing the figure would be astronomical next to the cash only number. I googled around a bit but could only get a 2008 figure of 850 billion $USD cash in circulation.

[vtsnowedin]

$this->bbcode_second_pass_quote('SeaGypsy', 'N')ot counting bonds, which are supposed to be as good as cash.
Does anyone know the official current total circulation of $USD? Cash, bonds, certificates and electronic deposits? I am guessing the figure would be astronomical next to the cash only number. I googled around a bit but could only get a 2008 figure of 850 billion $USD cash in circulation.

[Ibon]

Interesting article on the ramifications of this topic

http://www.financialsense.com/contribut ... -us-dollar

Chinese Premier Wen Jiabao and Russian President Vladamir Putin announced in St. Petersburg, Russia, on November 23, 2010, that they will stop using the U.S. dollar to settle bilateral trade and instead use the ruble or the yuan, according to a report in the state-run China Daily. Bilateral trade between the two countries stands at roughly $60 billion. Put in perspective, assuming two-thirds of international trade is transacted in U.S dollars, this accounts
for 0.3% of dollar usage in a global economy valued at roughly $30 trillion. This agreement, then, is not particularly meaningful in terms of U.S.-dollar utilization, but when we consider the exponential implications, the effects are huge