Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The U.S. Dollar Will Not Crash

Politics / US Dollar Oct 20, 2009 - 03:38 PM GMT

By: Mike_Whitney

Politics

The dollar is not going to crash. There may be grumblings in foreign capitals and "secret meetings" between finance ministers but, for now, the dollar appears to be safe.


Foreign countries don't trade in dollars because they like America. They do it because they have no choice. If they want oil, they need dollars; it's as simple as that.

It's great to talk about a "basket of currencies" replacing the dollar, but that's still a work-in-progress. It might happen, or it might not; no one really knows. What's clear, is that we still live in dollar-centric world where paper claims on wealth are arbitrarily increased at will by a handful of unelected officials at the Federal Reserve. It's a process which relies more on Gutenberg than moral authority.

There's no sign that the dollar is about to lose its position as the world's reserve currency. For that to happen, central banks would have to start unloading US Treasuries, which they are not. Despite record government spending and mushrooming deficits, there is still a strong appetite for US debt. Treasury data show that foreigners purchased $28.6 billion more in US assets in August than they did in June. The flows are not enough to offset downward pressure on the dollar, but that could change in the months ahead. As capital flows increase, dangerous imbalances will reemerge, and the prospect of another financial calamity will become more likely. The Fed is rebuilding the system that just blew up using the same blueprint as before. It's madness.

World leaders and central bankers mutter about Fed policies, but do nothing. There's been no resistance to the secrecy, the bailouts or the money printing. The bottom line is that the people in power really don't want change. They just want to make speeches and blame America. It's all just empty posturing.

What difference does it make if China and Russia are unhappy? Who gives a hoot? Toppling the dollar is going to take a concerted effort by people who truly despise the system, not the blather of malcontents who are simply envious of US power. Putin doesn't want to change the "reserve currency" system, he just wants a spot on the Executive Board so he can extract tribute from emerging nations like the US has for more than a century.

The financial crisis hasn't hurt the dollar a bit. The dollar isn't getting weaker because people are dumping it, but because Fed chief Bernanke is managing its value downward to increase exports and reduce the true cost of household and financial sector debt. What doomsayers are calling a "crash" is really just part of the Fed's plan.

The rest of the world should have chucked the present system and kicked the dollar to the curb more than a year ago when Lehman Bros. collapsed. But they didn't, because they were afraid to face their own future without holding onto Uncle Sam's hand. If they really wanted to stand on their own two feet, they'd pile their Treasuries and greenbacks in a heap and set them ablaze. That's what freedom looks like.

The reserve currency system sucks. It creates a de facto international currency which elevates one country above all others giving it special access to credit and implicit control over the global economic system. It inevitably leads to exploitation, abuse of power and systemic instability.

The dollar should have been crushed when the opportunity presented itself. Now, the the window has closed and it's back to business as usual.

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

Mike Whitney Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in