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Wow, I never started a thread on economics but this is one of those moments where saying "I told you so" seems totally appropriate.
The US dollar currently has the status of being the world's most used reserve currency. For those of you who don't know what that means; it means the world trusts your currency enough for various reasons to accept it as a means of trade. This brings huge advantages to the state issuing the currency; the ability to borrow money cheaply and most importantly to run huge deficits without a currency collapse. However, China has sent out a message today in both Chinese and English (signalling its desire to send a message to the world) questioning the primacy of the US dollar. Taken from http://www.nytimes.com/2009/03/24/wo...ia/24china.htm:
And now to quote myself:
What it boils down to: the US has been acting fiscally irresponsible for quite some time now and the world seemed to be just fine with it. People are having second thoughts about it now though, and if the scenario of dumping the dollar for another reserve currency is to take place then strictly, when applying the rules of capitalism, it could turn the US into a third world country over night. The thing is, the chance of the US giving up its wealth just like that to repay all of its debt is so small that even a war is more likely to happen.
Today, Obama placed a request in several European newspapers asking European governments and other parts of the world to follow his lead into spending even more. Given the things said above, WHAT THE FUCK is he thinking? Seriously, now that the frenzy surrounding his election has largely gone away I think we can objectively judge for ourselves how good the (economic/fiscal) policies he's pushing through really are.
Btw, this is not an America-bashing thread, it really isn't, but as a person who studied economy/business administration and recently switched majors to public administration these developments are incredibly interesting to watch. Discuss.
The US dollar currently has the status of being the world's most used reserve currency. For those of you who don't know what that means; it means the world trusts your currency enough for various reasons to accept it as a means of trade. This brings huge advantages to the state issuing the currency; the ability to borrow money cheaply and most importantly to run huge deficits without a currency collapse. However, China has sent out a message today in both Chinese and English (signalling its desire to send a message to the world) questioning the primacy of the US dollar. Taken from http://www.nytimes.com/2009/03/24/wo...ia/24china.htm:
SHANGHAI — In another indication that China is growing increasingly concerned about holding huge dollar reserves, the head of its central bank has called for the eventual creation of a new international currency reserve to replace the dollar.
China has the world’s largest foreign exchange reserves, valued at nearly $2 trillion, with more than half of those holdings estimated to be made up of United States Treasuries and other dollar-denominated bonds.
Nicholas Lardy, an economist and China specialist at the Peterson Institute in Washington, said that through its proposal, China was indicating that the dollar’s long dominance was unfair, allowing the United States to run huge deficits by borrowing from abroad, and that the risks to holders of Treasuries were growing.
“Chinese are quite concerned that the large U.S. government deficits will eventually lead to inflation, which will erode the purchasing power of the dollar-denominated financial assets which they hold,” Mr. Lardy said. “It is a legitimate concern.”
“Chinese are quite concerned that the large U.S. government deficits will eventually lead to inflation, which will erode the purchasing power of the dollar-denominated financial assets which they hold,” Mr. Lardy said. “It is a legitimate concern.”
Originally posted by Nycle
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Today, Obama placed a request in several European newspapers asking European governments and other parts of the world to follow his lead into spending even more. Given the things said above, WHAT THE FUCK is he thinking? Seriously, now that the frenzy surrounding his election has largely gone away I think we can objectively judge for ourselves how good the (economic/fiscal) policies he's pushing through really are.
Btw, this is not an America-bashing thread, it really isn't, but as a person who studied economy/business administration and recently switched majors to public administration these developments are incredibly interesting to watch. Discuss.
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