BREAKING NEWS: Dollar loses reserve status to yen & euro

Quote from endsongs:

I hope people realize the math behind why the Fed can't raise rates with unemployment high ( low tax revenues). These numbers might not be exact, but they are in the ballpark: The US is currently paying ~ 300billion per year interest on ~ 12trillion of debt with the Fed rate near 0%. The average interest rate on this debt is ~ 3.35% right now. If you add the ~ 11trillion additional debt projected to be run up by 2019 to this and assume the rate on gov't debt only rises to ~ 5.0% from 3.35% when the Fed raises rate, then you have 23trillion of debt with interest payments of ~ 1.2 trillion per year. Keep in mind this assumes a conservative ~1.5% increase in interest rates and not the ~ 5% or more I hear analysts speak of.

So, the added interest on this new debt will just about match the total of the debt itself. This seems to be approaching a parabolic point where there won't be enough money to pay interest on the debt much less have money left to borrow as
principle.
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That's key. I've said it for a long time.

The FED can't raise past 6% or debt interest payments eat 50% of the federal budget. People don't get it.

Long term picture is clear. The Dollar gets murdered. End of reserve status. End of US hegemony. Massive inflation. Once America repudiates it debt, wicked interest rates, and the Greatest Depression.

Demand for long end yields is falling. Most foreign debt purchases are for the T-bill and 2 year. Means the preponderance of debt is financed on short-term rates. Plus the extra 9 Trillion Obama will tack on to the debt.

The Government is destroying the Country, with full premeditation. Its obvious.
 
Quote from ByLoSellHi:

This article is extremely poorly written and smacks of yellow journalism.

No other currency in the world has the liquidity that the USD provides, regardless of current valuation trends, and the USD makes up 63% of all central bank reserves across the globe.

We saw the USD go lower in the late 70s and early 80s, and if anyone thinks we're remotely close to have any currency supplant the USD as the reserve currency, they're delusional and/or buying into the goldbug BS.

Once any significant pullback occurs, as Wall Street and Main Street intersect once again, the USD will rally furiously.

p.s. - Most exporting nations are in a race to devalue their currencies.
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The assumption here is Dollar policy will get tighter. It won't.

Bernacke and crew have signaled every intent to inflate the hell out of the Dollar. Long-term SS unfunded liabilities and a banking sector desperate for reinflation, corroborate.

Its not that other currencies get more attractive. Its that the USD becomes increasingly less attractive as the FED insists on trashing it.

Until we see a repudiation of US debt (or total destruction of the greenback = same thing), rates won't go up. We raise now, and America is stuck with a strong dollar, 15+ Trillion in national debt, churning at a high rate of interest. Like the other poster said, rates north of 5% equates to ~40% of the Federal Budget consumed by interest payments.

The alternative is to run up the debt, spend the world out of recession, trash the dollar, screw the savers, and walk away from 15+ trillion having only paid 40% of it, in real terms. THEN, we raise. Of course, America will look like a shithole by then. But, you gotta ask yourself, who has the Political Will to raise rates to 15%, crash the market (with Boomers waiting to cash out), crash the economy (with voters desperate for reprieve) just to save the Dollar? It's not gonna happen.

Government is reactive. Not proactive. They'll wait until there's a run on the dollar first, AND Then, defend it...

Anyway, my 2 cents.
 
Quote from ByLoSellHi:

It will take someone like Volcker to come along, but political pressure will force it, ultimately.
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Given recent behavior, there is no indication at all that politicians will allow this to happen.
 
Quote from achilles28:

That's key. I've said it for a long time.

The FED can't raise past 6% or debt interest payments eat 50% of the federal budget. People don't get it.

Long term picture is clear. The Dollar gets murdered. End of reserve status. End of US hegemony. Massive inflation. Once America repudiates it debt, wicked interest rates, and the Greatest Depression.

Demand for long end yields is falling. Most foreign debt purchases are for the T-bill and 2 year. Means the preponderance of debt is financed on short-term rates. Plus the extra 9 Trillion Obama will tack on to the debt.

The Government is destroying the Country, with full premeditation. Its obvious.
More...

Theres a touch of analysis from somebody who's been around the block a few times and knows what they are talking about.

Although the question remains, is the government trying to destroy the country, or merely the currency of the country? Is there is difference? What solution could be offered if the Dollar became "to much of a burden upon the federal budget"?

A new currency? A north American currency?

The Amero?

The Worldo?
 
i cant believe the amount of non sense this thread has.

inflation will never happen in the US because in that case the rest of world would have to devalue their currencies accordingly, to keep their finances stable. this is the result of US being the single most important economic partner of the rest of the world.

hence, the US will always be able to repay its debt, no matter how high it is, as the US pays it in USD which is created by central bank of the US and has no physical backing whatsoever. in other words, as long as the US is the main economic zone in the world, it can do whatever it wants with its economic policy, as the rest of world will always play along.
 
Just to play contrarian, is it possible that Bernake could be right? That devaluing the dollar is going to help all US companies get more of a competitive edge with global sales in a time when many businesses are now selling things online. Possibly even help businesses with a high amount of international clientele. I've heard Canadians say they love coming to the US and buying things for less. In turn, stimulating a segment of companies to hire more and expand into global markets as well.

Just a thought, I've heard financial managers say this before. That a devalued dollar is great for many businesses. Some would even argue that we've been secretly hit with inflation for years now. For example a bag of chip that is $1, or a burger that is $1 still but is half the size. Remember when you could get a whopper for 99 cents, now you can only get a whopper junior. Or a big mac was a dollar, now you can get a smaller burger with no veggies for a dollar.

Then again, we could end up like Germany, using our currency to stay warm.
 
Quote from crash n burn:

i cant believe the amount of non sense this thread has.

inflation will never happen in the US because in that case the rest of world would have to devalue their currencies accordingly, to keep their finances stable. this is the result of US being the single most important economic partner of the rest of the world.

hence, the US will always be able to repay its debt, no matter how high it is, as the US pays it in USD which is created by central bank of the US and has no physical backing whatsoever. in other words, as long as the US is the main economic zone in the world, it can do whatever it wants with its economic policy, as the rest of world will always play along.
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It's definitely true that China and some oil producers have their currencies pegged to ours, which is why gold (the real measure of inflation) is up so much since 2000 while prices have been growing at a slower rate. The question is at what point is it not worth it for these countries to continue to give their goods and services away to America at a steep discount? We might be approaching a new equilibrium where the rest of the world can survive with a much less ravenous American consumer. At that point, other countries will not need to tightly peg to the USD, causing prices to rise in America rather rapidly.
 
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