Why is everyone dumping dollars?

[TheFarseer]

I've heard China is going to quit buying dollars, Iran is doing the same. Seems like I heard Venezuela is doing that also. Saddam probably dug his own grave buy switching to Euros and so on. but why? Is it that people just don’t like us anymore? Or is it because our flagging economy and debt send the message that the dollar might unravel sometime soon? Personally I don’t see that Europe’s economic prospects are much better than ours, but at least they don’t have that debt. Or am I missing something else? What’s the deal?

[stepnw1f]

1. Because The Dollar is Worth Sh*t Thanks to Conservatives

conservative my ass that is....

[Cessna Invesco Palin]

2. Debt, mismanagement of the economy, etc, etc ,etc. n/t

[ixion]

3. The 'deal', IMO, is that

a) this administration has proven themselves fiscally irresponsible in the extreme, and;

b) our economy is not actually 'booming', despite all the rhetoric, and;

c) we've shown the world that we're not to be trusted, and;

d) defecits don't matter, according to Darth Cheney.

[ChairmanAgnostic]

4. In part the US economic plan, in another, US political system.

They are voting no confidence in the Bushistas.

[ProfessorGAC]

11. I Think That's The Biggest Factor

Vote of no confidence! Well phrased!
The Professor

[meganmonkey]

5. I think the debt is the main thing

the value of the dollar is based on very little in reality - we have a huge trade deficit and budget deficit. We aren't manufacturing much. No one wants to be invested in this much debt.

The political situation is related, and makes it that much worse.

We are in trouble, IMO.

[lvx35]

6. My understanding is that its pretty complex.

The dollar is tied into US hegenomy, and the world is not too fond of US hegenomy, or at least a growing section is not, or is threatened by it. I think there is a lot of politics behind that.

[MadHound]

7. I would say that 8 trillion in debt,

Is the main reason. Couple that with being mired down in an unwinnable war that is bleeding us dry, an enormous trade gap, shrinking wages, no savings, massive personal debt, and hell yeah, I'd be dumping dollar too.

The so called economic experts for the regime keep trying to talk up the economy, but it is all a sham. Talk to any non politically connected economist and you will find them scared shitless for our economic future.

Just one figure for you, fifteen percent of our annual GDP goes to servicing the interest payments on that debt. That is just huge, and quite scary.

[TheFarseer]

13. your last sentance

pay off the debt and we can have tax cuts like you wouldn't believe. Why can't someone say that? I suppose because there is no immediate reward :(

[MadHound]

16. Reduce the military budget and not only could we have tax cuts

But we could also fund such social programs like UHC with ease.

It has been estimated that all told, black budgets and stated ones, the US spends a little over half of its revenues on the military. Our military is so large, in terms of size and firepower, that it is bigger than the next 28 military units combined. I think that we could afford to cut a little of that away, don't you. In fact, quite frankly we apparently haven't learned anything from the fall of the USSR. They grew their military so large that they went deep into debt, and starting cutting back on social programs along with everything else. And within ten years of doing this, they toppled and fell. You would think people would learn:eyes:

Meanwhile, those big evil social programs like welfare get pennies. Last I hear the federal expenditure for welfare was 0.8% of the federal budget. Listening to politicians talk, sometimes one would think that its taking up at least three quarters, if not more.

Cut the military budget now. I think that the US military can be pared down to be only bigger than the other top five military units combined, don't you?

[htuttle]

17. That sort of depends on how many countries they plan to invade

If our main concern was protecting the territorial United States, we could cut our military down to 1/4 or less of it's current size (since we'd still have the state National Guards, of course).

But if they plan to conquer the planet for the sake of their gangster capitalism, they're going to need a MUCH bigger armed forces than we have now to accomplish that. You can't run an effective protection racket without a lot of button men...

[TayTay]

8. I keep thinking of what Sy Hersh said a while back

on one of the talk shows that the rest of the world has had it with Bush and can employ other means to let him know that they are not happy with what he has done in IRaq. One way would be an 'oil shock' when other countries cut us off. Another would be in sabre rattling by threatening the US economy with the clout that China and India have in dollars and such.

I heard Bush is thinking about a military incurion into Iran. I don't think this move by China is cooincidental. They might be firing a warning shot that the US cannot bomb Iran.

Just guessing.

[Inland]

9. At some point, they lose interest in things bought with dollars.

Most importantly, US debt and US productive assets. "We already have lent two trillion dollars to the US. We already have US real estate. We already built the factory. We don't WANT things that can be bought with dollars."

Demand for dollars goes down. Has to happen.

[htuttle]

10. They all expect us to start printing a lot more money soon

The difference between the dollar and the euro is that the US dollar is used for prodigious deficit spending (running the virtual printing presses), whereas the euro doesn't do that (as far as I know). The more 'dollars' (virtual or otherwise) in circulation, the less the currency is worth -- you know: inflation.

Has less to do with the strength of our underlying economy, and more to do with creating too many dollars out of thin air.

[arenar]

12. One big reason IMHO...

is the issue with Iran not trading oil in dollars anymore (in a few months) or at least that's their plan... don't think that the US will let them go through with it though ...

http://www.energybulletin.net/8379.html

http://www.teamliberty.net/id209.html

[ThomWV]

14. Have You Seen The Price Of Gold In The Last Week?

Forget Euros for oil, look at gold.

It has just about doubled in pirce in the last week.

War!

[C_U_L8R]

15. No brand demand

Bush has ruined brand "America" and subsequently every American brand.
People around the world just don't want our products anymore because
they hate what we stand for. It's simple economics.
I'd be dumping dollars too.,, if I had any (but Bush already took care of that)

[On the Road]

18. It's Not Just the Debt --

lots of countries have more debt than the US -- it's more expectations for the future. Financiers put money into currencies which the believe are likely to do maintain their value. Some of that perception is in keeping the money supply under control, managing debt, having a trade surplus, and minimizing inflation.

In the case of the US, there is an additional factor -- namely that the US dollar is the most used international currency. It has been the lingua franca of trade. Historically, the dollar has been strong for other reasons -- less debt than most developed countries, low inflation, small government deficits, favorable balance of trade.

Even though the situation has changed, the dollar has still remained relatively high. But that may be starting to change.

Decreased confidence might lead to a run on the dollar, as happened in Indonesia, South Korea, Mexico, and Argentina in the 90s. Longer term, what's in the back of every financier's mind is that an increased debt burden will eventually create such political pressure that the only way out will be a round of double-digit inflation that will devalue the currency and make the debt manageable again.

[roguevalley]

19. because China doesn't want its cash to be attached to a currency

that has no value. Euros and yen still do. Dollars, not so much.

[TheBaldyMan]

20. There is an article about sino-american fiscal relations in GU today

It maybe that the Chinese and Saudis might have been fibbing about the level of US debt they hold.

The Guardian's senior economics correspondant Michael Keegan's article: Smiling into the Abyss

Exchange markets remain ebullient despite rumbling that the US economy might slide into recession thanks to a sluggish housing market and a weak dollar.
<snip>

Nor did the exchange markets in particular pay much attention to the announcement from China's foreign currency regulator that it intended to "optimise the currency and asset structure" of foreign currency reserves that are estimated at some $800bn (£450bn) and rising fast).

</snip>

It could be argued that there is a tacit approval of a laissez-faire approach to the currency dealings between the US and China.

<snip>

Now, in one sense, there is nothing surprising about an announcement that a country wishes to optimise the structure of its financial assets and "actively boost investment returns".

This is what all treasuries or central banks should be doing all the time. But the announcement does draw attention to the vulnerability of the US dollar ...

</snip>

<snip>

... the markets have been misreading the degree to which the sensational US current payments deficit (6.4% of gross domestic product) is being financed by private investors - indeed, grossly overestimating the extent.

Purchases of US bonds by, say, the Chinese government through JP Morgan are recorded as private transactions. Purchases by Opec governments via British banks are also categorised thus. This means that China's stash of dollars is even greater than we think.

</snip>

This could be the result of China's desire not to devalue its own holdings as most estimates point to a much larger devaluation than the level now proposed to bring parity to the Chinese currency.

<snip>

For the path of the US currency is surely downwards. The only question is whether the decline is orderly, or some panic - unpredictable at present - turns a decline into a rout.

</snip>