RSS

Tag Archives: world reserve currency

Foreign Currency Inflation Causes U.S. Dollar Deflation


Dangerous Deflation is Death to Debtors [courtesy Google Images]

Dangerous Deflation is Death to Debtors
[courtesy Google Images]

Forbes magazine recently published “Egypt Is About To Slash The Value Of Its Currency To Revive Its Flagging Economy”. According to Forbes,

.

Egypt’s Finance Minister Amr El Garhy has said his country needs to move faster in dealing with its currency woes, opening up the possibility of a large and rapid devaluation of the Egyptian pound.”

.

Big deal. Egypt is devaluing (inflating) the Egyptian pound. Who cares, right?

Q:  What’s the value of the Egyptian pound have to do with the U.S. dollar and U.S. economy?

A:  Actually, more than you might suspect.

. Read the rest of this entry »

Advertisements
 

Tags: , , ,

Are (Draconian) Capital Controls Coming?


Currency Controls:  "I'll give you one green one for three purple ones." [courtesy Google Images]

Currency Controls: “I’ll give you one green one for three purple ones.”
[courtesy Google Images]

Casey Research recently published an article entitled, “Capital Controls Are Coming”—but are they really?

In fact, some capital controls already exist as restrictions on how much cash you can take out of the country.  These capital controls exist at our physical and financial borders and concern international movement of dollars.

Other capital controls exist domestically.  I.e., you can’t deposit more than $10,000 into bank accounts in the U.S. without causing your bank to send notice to the national government.

Until A.D. 1934, we had $500, $1,000, $5,000, and $10,000 bills in circulation.  Now, the biggest bill we can use is $100.  That’s evidence that currency controls have been with us since A.D. 1934.

Article 1.10.1 of the Constitution of the United States (A.D. 1788) declares that “No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts”. That’s a form of “money control” that amounts to “currency control/prohibition”.  Currencies other than gold or silver are prohibited or at least restricted within the States of the Union.

My point is that some form of “currency controls” have been with us for over 200 years.  I doubt that you can find a nation anywhere on earth that hasn’t engaged in some form of “currency controls” over the past century.

Read the rest of this entry »

 

Tags: , ,

Allies Revolt?


[courtesy Google Images]

[courtesy Google Images]

The New York Times recently reported in “Hostility From U.S. as China Lures Allies to New Bank” that,

 

“ When Xi Jinping, then the newly minted Chinese leader, first broached the idea of a new Asian development bank in a public speech in 2013, few in Washington paid it much heed.

“But as Beijing systematically recruited longtime American allies to help fund and oversee the new bank, it became clear that the push was more than a public relations gesture to China’s Asian neighbors.  It was also a direct threat to the post-World War II financial institutions led primarily by the United States, and to President Obama’s pledges to make a “pivot” to Asia in American foreign policy.

“Now with Britain, France, Germany and Italy signing up to join the new bank, despite direct pleas from Washington to steer clear, the question is whether the Obama administration mishandled a significant challenge from China, and what it might have done differently.”

 

No, that’s not “the question”.

“The questions” are:

Read the rest of this entry »

 

Tags: , , ,

Currency War’s Prize: Privilege to Print “World Reserve Currency”?


Dali: a surrealist artist for a surreal currency [courtesy Google Images]

Salvador Dali: a surrealist artist for a surreal currency
[courtesy Google Images]

Salvador Dali (1904-1989) was one of the world’s premier surrealist artists.  During his peak popularity he enjoyed a peculiar privilege: Whenever he wrote a check, he embellished the check with so many distinctive flourishes and artwork, that many people refused to cash his checks. 

Why?  Because they believed his check (an intrinsically worthless piece of paper) was—as a work of art signed by the Dali—worth more than the face value of the check. 

Result?  Dali frequently didn’t have to actually pay for many of the goods and services he purchased by check with a deduction from his bank account.  Dali could buy dinner or a new pair of tools and discharge his debt with nothing more than a few doodles.

Dali was essentially printing his own fiat currency (an intrinsically worthless piece of paper just like a US fiat dollar).  His celebrity allowed him to use that “currency” to discharge his debts without redeeming that currency at Dali’s bank.

In that regard, Dali was able to emulate the US government’s ability to issue fiat dollars (the World Reserve Currency) and never have to actually redeem the fiat dollar. 

I.e, whoever prints the world reserve currency doesn’t have to actually pay his bills.  At least not for a couple of generations.

Read the rest of this entry »

 

Tags: , , , ,

Current Currency Wars


World Reserve Currency Teeter-Totter-- if they go up, we go down

World Reserve Currency Teeter-Totter–
if they go up (inflate), we go down (deflate)

In “Currency Battle Is Tethered to Obama Trade Agenda,” The New York Times recently offered some bases for insight and conjecture concerning currency:

 

 

“A number of countries — China most prominent among them — have long acted to hold down the value of their currencies against the dollar, helping their industries by keeping exports to American consumers cheaper and making goods from the United States more expensive.”

 

Since the fiat dollar is still the World Reserve Currency, there’s a teeter-totter relationship between US dollars and the rest of the world’s major fiat currencies.  When foreign countries hold their currencies down in relation to the dollar, they hold the dollar up. That is, by inflating foreign currencies they make the dollar more valuable and thereby contribute to dollar deflation.

Read the rest of this entry »

 

Tags: , ,

Coming Global Economic Reset?


I could quibble about a few of the remarks in this video, but I agree with most it.  More, it’s a brief, but well-done video.

video   00:07:04

 

Tags: , ,

Currency Wars: China’s Yuan vs. the US Dollar


US Dollar vs. Chinese Yuan [courtesy Google Images]

US Dollar vs. Chinese Yuan
[courtesy Google Images]

CNBC posted “Yuan overtakes euro as 2nd most used currency in trade finance”. In that article, CNBC reported that,

“The yuan has overtaken the euro as the second most used currency in international trade finance, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

“The share of the Chinese currency’s usage in trade finance, such as Letters of Credit and Collections, grew to 8.7 percent in October, from 1.9 percent in January 2012, data from the transaction services organization showed.”

Note that the yuan’s share of the global trade rose from 1.9% to 8.7% in less than 2 years. That’s an average increase of over 3% per year.

Read the rest of this entry »

 
22 Comments

Posted by on December 10, 2013 in Currency Wars, Money, US Dollar

 

Tags: , , , ,