Central banks 'shunning dollar'

[ze_dscherman]

Many of the world's central banks are starting to look to the euro to fill their currency reserves instead of the dollar, a survey suggests.
The poll carried out by Central Banking Publications found 39 nations of the 65 surveyed raising their euro holdings, with 29 cutting back on the US dollar.

The dollar's sharp fall in the face of huge deficits could be one cause of the switch, the report says.

The survey was sponsored by the UK's Royal Bank of Scotland.

SNIP

http://news.bbc.co.uk/1/hi/business/4200811.stm


Also
Dollar at mercy of central banks

By Chris Giles, Economics Editor
Published: January 24 2005 02:00 | Last updated: January 24 2005 02:00

During the past few years the US has become dependent, not so much on millions of investors around the globe but on a few individuals in a few of the world's central banks.

In 2003, the most recent year with full international statistics, central banks financed 83 per cent of the US current account deficit, with Asian central banks accounting for 86 per cent of flows.

A similar picture is emerging for 2004. Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, central banks came to the rescue again. The People's Bank of China has let it be known that China increased dollar reserves by $207bn (€159bn) in 2004, financing nearly a third of the US current account deficit, estimated at $650bn.

Self-interest has supported much of this flow of cash. The US has lapped up cheap finance to fund its unquenchable appetite to spend. Asian governments have until now been keen to oblige, in order to keep their currencies from appreciating. But all investors have their limits and they may start worrying about their degree of exposure.

SNIP

http://news.ft.com/cms/s/bd52ee06-6dad-11d9-ae0d-00000e2511c8.html

[flyingfysh]

1. Can you blame them?

Bush is ruining the dollar.

[dbt]

2. Not only is he ruining the dollar,

but you can bet a few of Poppy's friends are getting obscenely rich from it!

:argh:
dbt

[sweetheart]

3. the dollar collapse is all over but the cryin'

The inertia has built up, and nothing will stop it. Bye bye bushie
baby. Sadly, it takes tanking the dollar to send the Bbbb message.

[SHRED]

5. What happens?

Excuse my ignorance butI am "finance market challenged".

If the dollar tanks, how does that affect us? Inflation?

:shrug:

[Spazito]

7. yes, inflation and interest rate hikes would be in the cards...

inflation because the US imports most of it's needs hence the huge trade deficit and interest rate hikes to try and make the US dollar more attractive to investors again.

Another effect would be the increased cost of servicing the debt, as the value of the dollar goes down, it will take more to pay just the interest on the debt never mind even getting near reducing the debt in any way. The US debt will skyrocket even more than it is now.

[sweetheart]

9. How it affects the common person

If you never leave the USA's borders, and the dollar tanks like it is
continuing to do, interest rates will rise, to compete with other
nation's markets for investment (keeping a parity). Purchasing
power will decline, and there will be a disruptive effect on businesses
that are based around fixed-offshore or multinational contracts..
basically, when they signed the deals, there was a presumption of
dollar stability. With the crashing, this whole presumption goes out
the window, and though it makes US products cheaper abroad, it as well
makes offshore manufacturing more expensive, and weakens the US buying
power. It means french wine will cost more in america, and american
wine will get cheaper in france.

American wine will get more expensive in america, as the wineries will
have to pay more interest on borrowed capital to produce the wine, and
the cost of transporting it will rise.

The worst effect is difficutlt to describe, but the whole history of
america since ww2 has been that of currency stability and the world's
"reserve" currency.... as this melts away, the dollar is marginalized
from all markets.. (watch petrol to follow on), and this will weaken
the military empire, as in the end, like with rome, empires cost a lot
to maintain, and with diminishing buying power, there is a natural
effect.

Were a similar currency regimen in place back round WW2 times, and
the level of international interconnectivity that we have today, then
to prevent an imperial japan or germany, simply tanking their currency
would have been an option before military intervention, as it would
have frozen their economies, much as how walmart will be not a very
good place to shop if it can't afford to pay its bill to china.

This global recession would be like a new great depression, the
"grand disillusionment" and an end of american imperial power.
Once this collapse happens, there will be no resurrecting the past
"washington consensus" and future democratic administrations will be
left with a broken economy AND a fiscal meltdown... leading to the
sorts of tough decisions other countries like russia, korea and
argentina had to take with defaults, and humiliating arrangements with
creditor nations.

Property will generally keep its value, as will some commodities...
paper, stock, bonds and "virtual commodities" will be very exposed.
To avoid being taken too deeply to the cleaners, invest in substance
you can touch.

"The economist" ran a great article about this not long back, and
if you want to keep track of this issue, i suggest getting an economist
subscription at www.economist.com. They are much better qualified
to discuss this issue than i, with much more backup details and
information, like specifically how it will affect mortgages,
social security and individual retirement accounts, 401k's and whatnot.

The dollar tanks, means the credit rating of the USA is crap and the
result is, just as when you don't pay your credit card, hardship
for all involved, pissed of creditors and not an easy time reestablishing
said credit.

Had the american people not voted for an insane incompetent, surely
this cold have been avoided... now, however, there is only bbbb.

[muriel_volestrangler]

12. The most obvious effect is the oil price

Since international markets are demanding more dollars for the oil. There's a graph of page 5 of this PDF (15 pages) comparing the oil price in dollars and euros since 2001. In euros, it's varied between 22 and 40; in dollars, between 18 and 50 (this is Brent crude, a typical international standard). Since most of the oil exporting countries import more goods from the Eurozone than the USA, they're more interested in keeping the euro price steady than the dollar price. Oil pricing in euros has sort of arrived by stealth.

[Dan]

20. There is a positive

Bush's desire for a global empire will just die...

It will become increasingly questionable on the ability of the US to spread democracy around the world.

Remember, there was some conversation that if the foreign powers had not chosen to finance Germany's war machine during the later part of WWII, then the war would have ended about two years earlier.

Effectively, as the dollar loses value and other issues kick in - we can't afford our war machine....unless...unless they are able to turn a profit for the empire. But that is another conversation.

[Strelnikov_]

21. I Would Love For The US To Spread Democracy Around The World

Problem is, Boosh has no intention of 'creating' democracies. It is just a part of the Potemkin Village constructed to dazzle the proles while they attempt to build a world wide petro-oligarchy.

You can defend democracy at a point of gun (see WW II), but you can't create democracy at a point of gun.

[StClone]

24. Preemptive attack by World through Currency War

The idea that the World would do whatever it could to choke-off the USA war machine has been predicted here for nearly two years.

I hope Global Climate Change doesn't use even more vigorous deterrences to entice us to change ways. It's all about the physics.

[Strelnikov_]

22. Inflation, High Interest, Proles Can No Longer Afford To Shop At Wal-Mart

once the Chinese unhook their currency from the dollar.

See Great Depression.

(Note: At what point do Democrats in Congress point out how the low-wage GOP has sacrificed national security for cheap consumer goods. My gut tells me that the current dollar drop has less to do with Iraqnam, and more to do with foreign investors realizing that USEnron has sold off all of it's real assets.

See Montana Power->Touch America
http://www.montanariveraction.org/sorry.saga.mpc.html).

[indepat]

6. But, but , but, we are an island to ourselves and don't need their help

[wildwww2]

4. Huge deficits could be one cause of the switch. No freaking Duh..

I`d like to be able to just spend money I don`t have and never have to pay it back. Like the Bu$h Nazi`s are doing. The king won`t suffer. The peasants will pay the bill.
Peace
Wildman
Al Gore is My President

[Gman]

8. At this rate the Peso will be stronger than the dollar

maybe that's what they want.

[Art_from_Ark]

10. Believe it or not, at one time one peso was equal to one dollar.

In fact, our dollar is based on the predecessor of the silver peso, that is, the 8 reales or "piece of eight". And when Mexico started switching from reales to pesos in the 19th century, one gold peso was equal to one gold dollar.

Hmmm.

[hadrons]

11. At least gays can't marry ....

or can they now that Dumbya has lost interest in the issue

[conflictgirl]

13. A question...

If the dollar is about to collapse, is it a good idea or a bad idea to buy a house in the next few months?

[MadisonProgressive]

16. Probably not a bad idea if you can get a low FIXED rate

[The Zanti Regent]

14. 59 million plus pinheads who voted for Bush don't care!

Because Jesus is coming in a week or 2 to take them away.

I wonder how they will feel when Jesus flips them the bird?

[reprobate]

18. Joshua. His name was Joshua. The greeks mistranslated as Jesus.

[Name removed]

15. Deleted message

Message removed by moderator. Click here to review the message board rules.

[reprobate]

19. Just one problem with that scenario. It's China making the computers.

So it's china that will profit, not OUR computer industry.

And walmart is in huge trouble if china uncouples from the dollar. Wave bye bye wally.

[Strelnikov_]

23. The Low Dollar Jumpstarting The Economy Only Works If We Manufacture

value added products, which we no longer do in quantity relative to our trading partners.

You may want to read the following:

U.S. Tech Exports Slide, but Trash Sales Are Up
By: Floyd Norris
The New York Times
Published: January 14, 2005

http://www.nytimes.com/2005/01/14/business/14norris.html?ex=1106715600&en=a1dea979776de42d&ei=5070

. . .

"In the late 1990's, those who counseled Americans not to be worried about the growing trade deficit pointed to "advanced technology products" - a category tracked by the government that reflects what it calls leading-edge technologies. The United States was running a sizable trade surplus in that area, and shipments of those products were rising much more rapidly than other exports.

"All that has changed. In November, the United States had a record trade deficit of $5.8 billion in advanced technology products. For the most recent 12 months, the deficit was $36.9 billion, also a record."

. . .

"Compare the annual levels of exports in those two areas with those of 1999, and you get a stark picture."

"Exports of advanced technology products are down 21 percent, while those of scrap and waste are up 135 percent. To some extent the technology decline reflects the bursting of the bubble, but imports of technology products are up 28 percent, indicating that it's not just the bubble at work."


You wouldn't be John Snow, would you?

"The trade gap reflects two things: that our economy is growing at a fast pace and we are growing faster than our trading partners," -John Snow

[Up2Late]

17. Here's another one, from the Guardian

1:45pm
Move to euro hits US finances

Mark Tran
Monday January 24, 2005

Central banks are moving out of dollars and into euros, a shift that will make it harder for the US to finance its huge current account deficit, it emerged today.

According to a survey sponsored by Royal Bank of Scotland, almost 70% of the 65 central banks that provided details of changes in their reserves said they increased exposure to the single currency over the past two years. Meanwhile, 11% said they reduced exposure to the euro.

Any sudden move away from the dollar, which has fallen in value for the past three years, spells trouble for the Bush administration, as the US depends on the willingness of foreigners to hold US dollars to fund its huge current account deficit.

Robert Pringle and Nick Carver, authors of the study conducted by Central Banking Publications, wrote: "Many central banks have increased exposure to the euro over the last two years. Diversification from dollar-denominated to euro-denominated assets appears to be taking place more rapidly than had been anticipated."

more at <http://www.guardian.co.uk/usa/story/0,12271,1397461,00.html?gusrc=rss>

But I think this is sort of a "fair and final warning" that is being sent.

My advice: Buy Canadian Dollars (or put your money in Canadian Banks,

OR Even Better!

Buy stock in 'Hydrogenics Corporation'!!! A very cutting edge, up and coming company that is making great progress in Hydrogen Fuel Cells AND :bounce: is Canadian!!!! <http://www.hydrogenics.com/>

[ally_sc]

25. Wonder what our illustrious leader has to say about this...

my employer wants to decrease my pay...time to start looking else where...
i noticed gas went down about a quarter now it is on it's way back up again...oh well ain't life grand...:wtf: