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jgoose71

How long Till the Dollar gets dropped as the "World Reserve Currency?"

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In an effort to make myself smart on the economy, the value of the dollar and most things financial, the one fact that made me real nervous when I was on my fact finding mission is that the only reason the U.S economy hasn't collapsed under Obama is because of the Dollars unique status as the "World Reserve Currency."

If we were any other country, at this point we would be seeing hyperinflation, rioting in the streets, and an end to life as we know it.

The three other currencies that are closely poised to take over our unique status (just as we took this status from the British Sterling Pound back in the 60's) would be the Euro, South Korean Won, and the Chinese Yuan Renminbi, though their are still some factors limiting them from taking over.

Kind of interested to hear what all the really smart people here have to think...;)
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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Interesting one.

Had to do some reading myself on this one. The important part seems to be that a number of the larger economies, notably China and Japan seem to be actively wanting to move away now.

No idea what the answer is, but the takeaway from the reading I did seems to say that it doesn't really matter what the US does to stop it, if other economies really want to move away they will.
And if they do, the US$ is in for a tough time.
Never try to eat more than you can lift

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Euro is a bad choice as it's used by multiple countries, some of which are destitute or nearly.
Chinese Yuan is a bad choice as China doesn't exactly share their financials. Plus corruption and payoffs are everywhere. Not to mention foreign corporations are gutting their manufacturing with slim profit margins and massive pollution.
South Korea doesn't seem to have the size to be a world standard, not to mention it's crazy brother above it.

Perhaps it shouldn't be a country's currency but a valuable resource next.
Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

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I commend that you want to learn more about finance and economics. However having a little bit of information and “running with it” can be worse than having no understanding at all.

Start with the basics and build on a foundation; don’t start with an assumption and merely seek supporting material and opinions.

Literally, what is money/currency? And how is it measured? (for the USD it’s M1, M2 and M3). If you want to discuss inflation, understanding the difference between monetary and fiscal inflation is a start.

This is skydiving website, by no means a source for economic understanding (have you been reading some of the posts here on the SC thread?)

Here’s a cut/paste of a few books that are written in laymen’s terms that I think stand out:

Want to learn about boom/bust read:
Extraordinary Popular Delusions and the Madness of Crowds - Charles Mackay

Want to learn about the Federal Reserve read:
Secrets of Temple – William Greider

Want some insight into the stock market and its movements read:
Reminiscences of a Stock Operator - Edwin Lefèvre


Dropzone.com: Got a skydiving query; get a skydiving answer. Want to learn about the global economy – You’re in the wrong place mate.
"Pain is the best instructor, but no one wants to attend his classes"

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"Once you institutionalize the notion that a minority party can hold the country hostage to their demands because they view paying off the debts of the government not as a joint governing responsibility, but as a hostage to be taken, then you’re sending the country into dangerous territory.”; Norman Ornstein, resident scholar at the American Enterprise Institute
...

The only sure way to survive a canopy collision is not to have one.

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jgoose71

In an effort to make myself smart on the economy, the value of the dollar and most things financial, the one fact that made me real nervous when I was on my fact finding mission is that the only reason the U.S economy hasn't collapsed under Obama is because of the Dollars unique status as the "World Reserve Currency."

If we were any other country, at this point we would be seeing hyperinflation, rioting in the streets, and an end to life as we know it.

The three other currencies that are closely poised to take over our unique status (just as we took this status from the British Sterling Pound back in the 60's) would be the Euro, South Korean Won, and the Chinese Yuan Renminbi, though their are still some factors limiting them from taking over.

Kind of interested to hear what all the really smart people here have to think...;)



Please explain, "only reason the U.S economy hasn't collapsed under Obama is because of the Dollars unique status as the "World Reserve Currency."

I was not aware it was a certain fact that the US economy has not collapsed because of one reason solely. In my studies of finance and experience the world economy is far more complex. Please help me to understand how that is the sole reason we are not rioting in the streets.
"The point is, I'm weird, but I never felt weird."
John Frusciante

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kallend

"Once you institutionalize the notion that a minority party can hold the country hostage to their demands because they view paying off the debts of the government not as a joint governing responsibility, but as a hostage to be taken, then you’re sending the country into dangerous territory.”; Norman Ornstein, resident scholar at the American Enterprise Institute



Don't be so hard on the Dems.
Please don't dent the planet.

Destinations by Roxanne

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RMK


Dropzone.com: Got a skydiving query; get a skydiving answer. Want to learn about the global economy – You’re in the wrong place mate.



Thank you for your input. I know that the economy is a hugely complex organism that is extremely vast and few people have the mental capacity to fully understand the workings as a whole. I know I don't. That's why for right now I'm only asking about the Dollar as the World reserve currency.

As for asking these guys for advice, this is Speakers Corner!!! They know everything!!! Are you new here?:ph34r::ph34r::ph34r:

(Don't worry, I won't make any investments based on their advice...B|)
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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weekender


Please explain, "only reason the U.S economy hasn't collapsed under Obama is because of the Dollars unique status as the "World Reserve Currency."

I was not aware it was a certain fact that the US economy has not collapsed because of one reason solely. In my studies of finance and experience the world economy is far more complex. Please help me to understand how that is the sole reason we are not rioting in the streets.



Quick answer, please research for more info:

Obama and the Fed are printing about $1Trillion a year in new money to pay for the extreme government spending. If we did not hold the status of "Worlds Reserve Currency" the dollar would have most likely done the same as the Turkish Lira or the Angola kwanza reajustado.

With most of the currency of the world using the Fiat system, you either need a gross domestic product or something else to give your currency confidence.

When most countries trade with each other, they convert their money to dollars to do it (world reserve currencyB|). As long as they continue to do this, there is a demand for the dollar to keep the money the fed is printing into inflating the economy to hyperinflation.

But China is signing deals with other countries to deal directly (in monetary terms), and the Euro zone is slowly expanding.

There is a lot more to it than that, but it's a start to get you looking.
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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Iago

When they talk about a 'dollar collapse' the reference needs to be 'as compared to what?' The exchange rate of the USD to the Euro has held roughly study since this whole mess started. So in other words if the money supply of the largest countries economically doubled they would still be roughly status quo.

Right now by default the one reserve currency is the USD simply because there is no place else to go. Perhaps someday the yuan will be ready for the world stage but it can't see that happening in the next ten years.



Actually, I see the Chinese Yuan taking over. Right now, how they are able to "manipulate" there currency is that they don't freely trade it. The Chinese economy is very strong. They have produced more than they have consumed for many years. The Grand total Trade deficit with the U.S. alone is over $93 Trillion.

If they were to start freely trading, the extreme undervalue of their currency would have everyone selling off their dollars to buy yuan, but to bad you can't unless you are a country that has signed on with them...

I'm guessing their will be a slow phase out of the dollar as China takes over the world. China doesn't want to crash our economy, after all they own most of our debt ($93 Trillion) and if it became worthless, it would crash them too...
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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kallend

"Once you institutionalize the notion that a minority party can hold the country hostage to their demands because they view paying off the debts of the government not as a joint governing responsibility, but as a hostage to be taken, then you’re sending the country into dangerous territory.”; Norman Ornstein, resident scholar at the American Enterprise Institute



How does this apply to the thread? Do you know what you even said? Or are you throwing out random quotes in order to sound smart?

If you don't think printing $1 Trillion a year isn't weakening our status as a nation and our ecomony, please explain why. The economy effects both parties.
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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kallend

"Once you institutionalize the notion that a minority party can hold the country hostage to their demands because they view paying off the debts of the government not as a joint governing responsibility, but as a hostage to be taken, then you’re sending the country into dangerous territory.”; Norman Ornstein, resident scholar at the American Enterprise Institute

Very good, but you left out the part about the minority party printing billions of new dollars to be given to bankrupt cities, unions, special interest groups, and the people who receive more benefits by not working. When they come for your 401K and IRA, Professor, you might take a different slant on this.
Do your part for global warming: ban beans and hold all popcorn farts.

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jgoose71


If they were to start freely trading, the extreme undervalue of their currency would have everyone selling off their dollars to buy yuan, but to bad you can't unless you are a country that has signed on with them...

I'm guessing their will be a slow phase out of the dollar as China takes over the world. China doesn't want to crash our economy, after all they own most of our debt ($93 Trillion) and if it became worthless, it would crash them too...



Total nonsense on the 93T. Trade deficit != debt. They hold less than one trillion in Treasuries.

And if China let the Yuan float to its proper (if based on severe levels of financial corruption) level, then their exports would become more expensive and the primary basis of their economy, cheap manufacturing for Western companies, would disappear. It's not about the US - it's about cheaper labor pools like Vietnam, SE Asia, Central America, ready to take over.

Cheap manufacturing went from Japan to Korea to Taiwan and now mainland China. As each got wealthier, they priced themselves out and had to focus on higher premium goods. The catch for China is their sheer size - they can't do that.

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RMK


Dropzone.com: Got a skydiving query; get a skydiving answer. Want to learn about the global economy – You’re in the wrong place mate.



Is there a right place? Given how little consensus there is on any subject in the "science" of economics, there will nearly always be a countering opinion to the one you hear at a given place.

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kelpdiver



Total nonsense on the 93T. Trade deficit != debt. They hold less than one trillion in Treasuries.


No, not nonsense. I got that number from the US department of commerce who started tracking trade around 1985...
http://www.census.gov/foreign-trade/balance/c5700.html
While the entire debt may not be in treasuries, they have a vast expanse of the U.S.'s former wealth in their banks.
kelpdiver


And if China let the Yuan float to its proper (if based on severe levels of financial corruption) level, then their exports would become more expensive and the primary basis of their economy, cheap manufacturing for Western companies, would disappear. It's not about the US - it's about cheaper labor pools like Vietnam, SE Asia, Central America, ready to take over.

Cheap manufacturing went from Japan to Korea to Taiwan and now mainland China. As each got wealthier, they priced themselves out and had to focus on higher premium goods. The catch for China is their sheer size - they can't do that.


This you are correct on. It is one of the main reasons why China hasn't taken over as the world reserve currency, driving the U.S. into hyperinflation.

And keep in mind, while the Chinese record on human rights is abysmal at best, their financial system isn't that bad. The average joe is not a crook, just the politicians.:D As I stated earlier, they keep their currency in check by not publicly trading it.
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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There are NO alternatives to the U.S currency as World Reserve Currency.

At best, there will be a new "SPG" currency by 2040-2050, but nothing can match the U.S currency in terms of size and stability.

Also, I don't know why this notion of "hyperinflation" keeps coming up. Last time I checked, there aren't any French troops in our economic heartland stealing our coal like 1920s Germany.

...
> Euro: The Euro is completely unstable in its current form
> South Korean Won: Far too small and unstable.
> the Chinese Yuan Renminbi: The Chinese are the ones who most need a "world currency". Their choices are limited to U.K Pound, Japanese Yen and U.S (mostly U.S because U.K and Japan are too small)


p-s: I wouldn't consider the U.K as a "world reserve currency" at all in the 1900s; let alone the 1960s lol... unless if by "world", you mean India.



Cheers!
Shc

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Iago

China needs us more than we need them.

We are the ojes that buy their crap and keep their economy from collapse.



For now...

As we continue to turn all of our manufacturing over to them it won't be a matter of buying stuff from china because we want to, it's cheap. When we have to, then they will have us completely by the short and curlies

As it sits right now go to a store and try to find something that was actually manufactured in the U.S. Nike, Levi's, Starter, etc, while the company may be U.S. owned, the items them selves were manufactured in China.

It's the same thing that happened in the U.S. that allowed us to become a Super Power. After WWII we were the only industrialized nation left, everyone else was bombed to shit. We could charge what we wanted and it lead to several decades of economic prosperity. Then the rest of the world caught up.

With the 1st world countries turning all of their manufacturing over to China, it will be the same for them soon. And they know it. They have already bought all the mineral rights to Africa and the Middle east...
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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ShcShc11

There are NO alternatives to the U.S currency as World Reserve Currency.

At best, there will be a new "SPG" currency by 2040-2050, but nothing can match the U.S currency in terms of size and stability.

Also, I don't know why this notion of "hyperinflation" keeps coming up. Last time I checked, there aren't any French troops in our economic heartland stealing our coal like 1920s Germany.

...
> Euro: The Euro is completely unstable in its current form
> South Korean Won: Far too small and unstable.
> the Chinese Yuan Renminbi: The Chinese are the ones who most need a "world currency". Their choices are limited to U.K Pound, Japanese Yen and U.S (mostly U.S because U.K and Japan are too small)


p-s: I wouldn't consider the U.K as a "world reserve currency" at all in the 1900s; let alone the 1960s lol... unless if by "world", you mean India.



Cheers!
Shc



Once again, the reasons you listed above are why the other countries have not dumped the dollar. That is also the biggest factor for our country not going into hyperinflation.

But we do have inflation. The price of milk, gas, and especially gold is going up. Pumping $ trillions into an economy with nothing to back it has consequences, and also does have other countries starting to look for alternatives.
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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The inflation we have now isn't even comparable to what the US had in the 1970's and early 80's, never mind countries where there is real inflation.

Wendy P.
There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

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Iago



Well first of all we don't need all that crap you mentioned. So if China wants to cut us off from Nike and Levis I say go ahead.

Second it is possible to find that stuff with a 'made in USA' label that is comparable in price. You don't pay Nike $80 for the shoe, you pay it to watch people dance around on TV with a basketball during their ads. I happen to think Nikes suck myself.

Thirdly the US is still the masters of industry. We can retool and restart factories to churn out anything we want.

And when the Chinese start escorting their own friggin' oil tankers through the Gulf they can start talking shit. Until then they still need us to police the ocean.



:D:D:D:D:D

I see.... America, fuck yeah!, right?

Your 'masters of industry' statement is hyperbole. China is much more able to retool its industry as it's (in the most part) less specialized and less sophisticated than US manufacturing. Not only that, but even IF your statement was true, it would still cost more to produce things here so there would be less demand. Give people the option of 'reasonable price, made in the US', or 'cheap, made in china' then most people just don't care enough to buy the more expensive product... If they did we wouldn't be in this situation in the first place.

Chinas economy has responded to world demand - if the demand decreased their economy would change to fit the current requirements. They will never be entirely dependent on the US imports, but the US may be dependent on them until labor laws equalize enough to make it cost s similar amount to manufacture items in both countries.

And while you may not like Nikes, the truth is that the majority of people are sheep led by the media. As long as that doesn't change, there will always be demand for 'trendy' rather than 'high quality' or 'made in the US' goods - but that doesn't really matter to them as clothing and luxury goods aren't the only primary export of the country. Think more along the lines of integrated circuits, cell phones and electrical machinery... try doing without those. ;)

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From Intel's CEO:

It costs Intel $1 billion more to build a factory in the United States than it does in China -- and it is not because of cheap labor. Ninety percent of the difference comes from the Chinese government providing Intel with capital grants, equipment grants, tax holidays and incentives.

"We should offer tax credits in the five- to 10-year range -- or tax holidays -- to companies both domestic and foreign that want to set up or expand a factory in the United States," says the Intel boss. "This will bring more manufacturing back to the U.S. It will employ our workers. It will stimulate the economy -- all at no cost to us. It's time to show the world that America is open for business."

Full Article:
http://www.manufacturingnews.com/news/newss/intel102.html

But what do the rich know about making money?

Jeffery Imelt as Obama's Jobs adviser manage to cut himself (GE) some special deals so he could open "Green Jobs" in the U.S. If they are good for business, why can't they be offered to the companies, including small businesses?
"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

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jgoose71

From Intel's CEO:

"We should offer tax credits in the five- to 10-year range -- or tax holidays -- to companies both domestic and foreign that want to set up or expand a factory in the United States," says the Intel boss. "This will bring more manufacturing back to the U.S. It will employ our workers. It will stimulate the economy -- all at no cost to us. It's time to show the world that America is open for business."



And by no cost to us, he means his company.

And after or possibly during the 5 or 10 year tax credit, the company will demand it extended and also likely expanded threatening to move or may just move if offered a better deal by another locale. The corporations have just expanded this "extortion" to a global scale.
Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

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