China and Russia Quit the Dollar

Discussion in 'Politics, Religion, Social Issues' started by fivepoint, Nov 24, 2010.

  1. fivepoint, Nov 24, 2010
    Last edited: Nov 24, 2010

    fivepoint macrumors 65816

    fivepoint

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    #1
    A sign of things to come? What are the ramifications for the dollar if it loses it's status as the world's business exchange currency?

     
  2. itcheroni, Nov 24, 2010
    Last edited by a moderator: Nov 27, 2010

    itcheroni macrumors 6502a

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    #2
    And so many people have no idea why gold is so important at this point in time. There can't be a top in gold until the US reverses their terrible economic policies and allow the free market to work.

    No surprise there's absolutely no press here in the US.
     
  3. Lord Blackadder macrumors G5

    Lord Blackadder

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    #3
    Read the comments to the linked article if you want a laugh. Apparently, for some people, ignorance is not bliss since they seem pretty angry.
     
  4. Eraserhead macrumors G4

    Eraserhead

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    #4
    The Chinese and Russians not using the dollar for trade hardly seems exciting...
     
  5. werther macrumors regular

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    #5
    They quit using the dollar for bilateral trade which is around 60bn.
    Not as much 'sky is falling' news as it appears. -Also the Yuan is pegged to the dollar.
     
  6. itcheroni macrumors 6502a

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    #6
    This is a very significant thing. You're just going to have to trust us. ;)
     
  7. Ugg macrumors 68000

    Ugg

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    #7
    Gold worshippers are to be avoided at all costs.
     
  8. CaoCao macrumors 6502a

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  9. Desertrat macrumors newbie

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    #9
    China has been busy with setting up direct exchanges of currency. Russia is one; Brazil is another. China is already using a "basket of currencies" in setting renmimbi values. Can't blame China for that. The US money-printing policy is a case of heaping Pelion upon Ossa, playing Dumb And Dumber without end.

    I dunno. Lots of second-guessing going on. Japan's headed for the toilet, given that their debt is even higher than ours. Any increase in the interest they have to pay to sell debt means the interest component will eat up their budget. The Eurozone is in deep doo-doo for the same reasons as the U.S.

    Allegedly, there are very-secret discussions going on in Germany about returning to the Deutschmark. Ironic, if true; Germany was a prime mover in the creation of the Euro.

    I know the oil-exporters are fed up with the U.S. Price inflation means that unless the price of oil rises, they buy less and less with every dollar. All that's holding the price down now is the depression--although China's road-building program and the sale of ten million cars in 2010 mean rising demand there. I wouldn't be surprised if direct exchange with oil-exporters becomes a topic of discussion.

    "Gold worshippers are to be avoided at all costs."

    Hey, Ugg, what does that mean? Makes about as little sense as "Gold haters are to be avoided at all costs." :D:D:D If you're going to offer an opinion, at least support it with some amount of rational thought, okay?
     
  10. bruinsrme macrumors 603

    bruinsrme

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    #10
    Are you saying we are headed for inflation like never seen before?
     
  11. Ugg macrumors 68000

    Ugg

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    #11
    It's no big surprise that China and Russia are working together, but their bilateral trade is a drop in the bucket. And, most importantly, the rem nimbi is irrevocably tied to the dollar and Russia's largest export is.... Yep, that's right oil, which is priced in dollars. To say that they are "quitting the dollar" is like saying salmon quit swimming in water when they leave the salty ocean to spawn in non-salty rivers.

    Japan's debt is problematic but they also have a lot of valuable assets. I don't think anyone's worried about Japan repaying at this point in the game. They are definitely someone to keep an eye on though.

    The Eurozone's difficulties are well-known, but so far, Greece and Ireland are small potatoes. Portugal is also pretty small and Spain seems to have a handle on things. All the talk of the dissolution of the Euro is just that. Germany's exports really took off after the introduction of the Euro. Remember, their biggest export market is not China, but the EU. If Germany was to exit the Eurozone, the Deutsch Mark would skyrocket in value while many of the Eurozone's currencies would plummet, therefore making German products unaffordable. German exporters and politicians aren't stupid. Any talk of exiting the Euro is just that, talk.

    The best thing OPEC could do is base the price of oil on a basket of currencies. It makes no sense to continue pricing it only in dollars. But OPEC has been making noises about that for years.

    As I have stated before, those who bought gold at $400 like you did, have made a killing and that's great but those who are jumping onto the bandwagon right now sound awfully like the people in 2005-6 who were saying leverage whatever you have and buy a house in Las Vegas or Florida or etc, etc. In other words, gold right now looks as though it's heading to bubbledom just like the real estate bust of '07 or the dotcom bust of '99.

    If it looks like an evangelical and sounds like an evangelical, then it's time to think about joining another church.
     
  12. Eraserhead macrumors G4

    Eraserhead

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    #12
    And both of them are big economies. So why wouldn't they settle their trades in their own currencies?
     
  13. Peterkro macrumors 68020

    Peterkro

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    #13
    This of course is the point, Russia is the largest energy exporter and whilst they are at loggerheads with China over the price of gas they will sort it. Iran and Venezuela are also part of the group buying each others currency with a view to sidelining the dollar.
     
  14. Evangelion macrumors 68040

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    #14
    Um, why exactly should Russia and China use US dollars for their bilateral trade in the first place?
     
  15. Desertrat macrumors newbie

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    #15
    Evangelion, it goes back to the Bretton Woods agreement of 1945. The US $, at that time the strongest currency extant, was set up as the world's reserve currency against which all others would be measured. Thus, instead of trying to deal with possible fluctuations among various weak or unstable currencies, all were much easily measured against the dollar and trade settlements were thus made in dollars.

    The $ has continued as world's the reserve currency, but now with our high debt and oncoming high inflation, other countries are worried about our ability to continue as the major player in world markets. This is particularly true of the emerging markets countries such as Brazil, Russia, India and China, known as the BRIC nations.

    "Stimulus Package" and "Quantitative Easing" are just nicey-nice phrases to hide the actuality of money printing, the increase in the money supply. This is also what is called the inflation of the money supply. Historically, such inflation has inevitably led to higher prices--aka consumer price inflation. If you follow the graphs of $$$ vs. time, the amount and the rate of increase are historically unprecedented. That's true for Japan as well, although they've now been at it for right at twenty years. Their real estate is down to around 40% of peak property-price averages, and their stock market is down to about a third of its peak. Their savings are near exhaustion, and the governmental debt situation is worse than our own.

    We're parallelling Japan, and began the activity in worse economic shape than Japan was when they headed down their own wrong path. We started with high debt and no savings.

    Japan holds somewhere around or over $800 billion in US treasury paper. If there is a need to sell in order to cover debt, who's to buy, and at what discount?

    China holds somewhere around $864 billion in US treasury paper, last time I saw a number. (Varies monthly.) But, China has jingle in her jeans, so there is no pressure to sell--other than to get rid of ever-degrading value.

    The US needs to sell right at $110 billion to $120 billion per month, just to stay afloat. That's actually borrowing. The interest rate is the inducement to buy. As we get riskier, the rate must go up--which means an ever-higher amount of the budget goes to pay interest. For 2010 that was $400 billion. At the historical average of 5%, that would near a trillion dollars per year in interest alone. The take from income tax is about $1.2 trillion.

    IOW, the US is in deep, deep doo-doo.

    These are just some of the forces presently pushing the price of gold and silver upwards. So long as these forces act, gold and silver will rise--no matter what Ugg's opinion is.

    I've never said that these forces would be forever, but there is certainly no sign whatsoever of their cessation. So, "The trend is your friend," recognizing that no trend lasts forever. For now, however, the trend is up, up, up. End of trend? When the world financial structure stabilizes. Two years? Five years? More? Yo no se.
     
  16. CaoCao macrumors 6502a

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    #16
    Sounds like we are heading towards Ike income tax levels :cool:
     
  17. Desertrat macrumors newbie

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    #17
    Ike was still in the Army when those income tax levels were set. A 1940s thing, with FDR.

    The tax problem faced by the US is that taxing "the rich" takes investment capital away from owners of small businesses, which leads to more unemployment. Other rich-income people merely seek to use the same sorts of shelters as do members of Congress, the Administration and the Wall Streeters--so those shelters will remain.

    And, unfortunately, there is not enough available taxable income from the over-$250K crowd to do much good with respect to the deficit--not even at 100%. Again, it's an arithmetic thing, not a political viewpoint thing.

    By the way, if it looks like I've been too hard on Ugg, rest assured that at some point he will be correct about gold. IMO, however, that's just not any time soon. I just hope my own "nervous twitch" works as well at that unknown time down the line as it did in January of 1980 when I cleared out of all bullion on the Saturday preceding the Monday collapse.
     
  18. CaoCao macrumors 6502a

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    #18
    entirely incorrect, investments are classified as Capital gains which are taxed at 15%. If there wasn't much money than how would extending the Bush tax cuts cost hundred of billions of dollars?
     
  19. Evangelion macrumors 68040

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    #19
    Were/are countries mandated to use Dollars? I doubt it. When Finland trades with Sweden (for example), I'm quite certain that they do not use dollars.

    And if use os US Dollars is somehow mandated by some agreement.... It's about time that agreement is nullified. Mandating countries to use certain currency is artificial. They should be able to use whatever currency they prefer.
     
  20. fivepoint thread starter macrumors 65816

    fivepoint

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    #20
    Just increasing taxes won't quite cut it.

     
  21. Desertrat macrumors newbie

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    #21
    CaoCao, "Investment" is much more than just buying capital items such as stocks, buildings or land. It includes increases of manufacturing equipment and the hiring of more employees. IOW, investment in one's business, not just buying items for (hoped for) future profits.

    Evanglion, the US $ as the reserve currency has greatly simplified international trade. As example, when the price of oil is posted in dollars, the whole world has a uniform number to use. If each oil exporter posted the price in its own currency, traders in the oil markets would have a very difficult time in setting up buys and sells. Currencies fluctuate daily. I suggest getting the free email subscription to the "Daily Pfennig" from http://www.everbank.com

    As far as why I tend to be a Gloomer at this time? The articles below the initial discussion in today's Ed Steer column are illustrative:

    http://www.caseyresearch.com/gsd/edition/peoples-bank-china-researcher-calls-us-sell-gold

    Numerous links to articles about the world's financial turmoil, from various international sources. This is a daily read, for me. And I like the cartoons. :)

    I don't pretend to any perfect knowledge for all this. But at least I'm a helluva lot smarter than Gordon Brown. When he was Chancellor of the Exchequer in England, he sold half of England's gold. 400 tonnes, at 32,000 troy ounces per ton. Sold at $264 per ounce. Unfortunately, "Stupid" is not a criminal act. However, I merely smiled and bought--and am smiling even more, now.

    Y'all be good. I'm off to finish reading at the links in Steer's column. See y'all this evening.
     
  22. Eraserhead macrumors G4

    Eraserhead

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    #22
    Raising the pension age to something sensible and cutting the military would help too. There was a recent thread about it. It didn't really look that painful.
     
  23. ohaithar macrumors 6502a

    ohaithar

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    #23
    Off topic question: Does Vladimir Putin have moar power President Dmitry Medvedev? It seems like it....
     
  24. Desertrat macrumors newbie

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    #24
    Putin comes across as tougher and smarter, seems like. Seems to be more aware of "big picture" stuff, and an expanding role for Russia vis-a-vis Eurozone trade. Expanding trade with China beats squabbling, for sure. He seems to be a pragmatist and have an understanding of marketplace forces--far more so than previous leaders.

    Doesn't make him a Nice Guy, of course. :)
     
  25. iJohnHenry macrumors P6

    iJohnHenry

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    #25
    No, just makes him effective, and a realist. ;)
     

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