Monday, March 23, 2009

Wow. China, Backing Russia in Advance of G20 Summit, Calls for Replacement of Dollar as Global Reserve Currency

Doubtless in anticipation of the April 2 G20 meeting in London, China today joined Russia in calling for the dollar to be replaced as the world's global reserve currency by a basket of currencies managed by the I.M.F. Here's the story in the Financial Times, the International Herald Tribune, Agence France Presse and the Prudent Investor. (Question: did Nouriel Roubini see this coming? He's been saying that even though "the American Empire" is on the decline, the dollar, despite rough spots, looks secure as the global reserve currency over the next twenty years.)

The news from China strikes me as a game-changer. (My buddy Big Bill says it's just sabre-rattling.) But I don't see it mentioned on the New York Times or Wall Street Journal. Or CNBC. U.S. markets seem unperturbed. In fact, the Dow is up 300 points at the moment on the strength of a surprisingly strong housing report and positive response (including from global markets) to the Obama administration's release this morning of its $1 trillion private-public plan to save America's financial system without nationalizing the big banks. On CNBC, guest host lefty Democrat Howard Dean supported the Treasury plan in several clips and righty Republican Dick Armey opposed it one clip. While Dean is an able advocate, and although I've felt the Armey is a blowhard, I find myself feeling sympathy towards Armey's assertion that he has never thought any bank as "too big to fail". Interesting to compare his take on the Fed with those of lefty Fed critics like Matt Taibbi and Mike Whitney. Interesting similarities. Also worth reading is Mike Hudson's critique of the "house burning down" metaphor used by Ben Bernanke in his "60 Minutes" interview March 15 (at Mike's site, scroll down to "Articles").
  • Jim Willie, an avowed friend of gold and foe of the dollar, reading Asia News, says the Chinese are planning to replace the dollar with the yuan as global reserve currency (3/27)
  • Asia Times - good source for news and commentary on the yuan/dollar story
  • Celestine Bohlen at Bloomberg says the time has not yet come for the dollar's replacement as global currency (3/31)
  • This three part video interview of economist Anantha Nageswaran in the Financial Times argues that the dollar's days are numbered (3/31) Here's Nageswaran's Blog
  • "New York Stock Exchange Runs out of Gold Bars: What Happens Next? (Market Sceptic, 3/31/09)
  • Paul Krugman says that China’s call for a new “super-sovereign reserve currency” is a sign of troubles ahead for a global economic recovery (4/3)
  • John Tamny of RealClearMarkets argues for the universal benefit (including to the U.S.) of a new global reserve currency that he says will brings a stability the dollar can no longer provide (4/7)
  • "China Slows Purchases of U.S. and Other Bonds" (NYT 4/12)
  • Economist Andy Xie argues "If China loses faith the dollar will collapse" (FT 5/5)
  • Gwen Robinson of FT gives the views of investor Jim Rogers, Black Swan auther Nassim Taleb, and three other analysts on the possibility of a dollar collapse ( 5/12)
  • America’s triple A rating is at risk U.S. financial media ignored story that was front-aged in FT. The gist: "Prices have risen on credit default insurance on US government bonds, meaning it costs investors more to protect their investment in Treasury bonds against default than before the crisis hit." (FT 5/13)
  • Nouriel Roubini discusses the possibility of an "Almighty Reminbi" and says the US must invest "in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation [in order to] "slow down the decline of the dollar, and sustain our influence in global affairs (NYT 5/14)
  • The Economist concedes that the world's new economic order "is more likely to be made in Beijing" than in the West, given the sway of creditor nations (5/14)
  • Investor Sahm Adrangi, in a thoughtful review of Richard Duncan's "The Dollar Crisis," predicts "that the dollar will collapse, and its ramifications could be as violent as when the credit markets cracked in July 2007." (Clusterstock via John Carney and Hunter at Distressed Debt Investing" 5/18)
If this happens, how about the chinese word for harmony - tao or tiao - as the name for the world's new global currency?

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