The death knell of the dollar

I have previously blogged on the emerging power of the BRIC countries here: When China awakes, it will shake the world. - Napoleon Bonaparte The article below is just more evidence that the dollar is losing reserve currency status. American leaders must know this. Exactly what this means for common people though, I do not know.

Brazil joins Russia, China in eyeing IMF bonds

By ALAN CLENDENNING
06.10.09
Source

SAO PAULO -- Brazil is looking to buy $10 billion in IMF bonds, Finance Minister Guido Mantega said on Wednesday, joining China and Russia in seeking to use the new instruments to diversify dollar-heavy currency reserves.

"This support is important to help end the international financial crisis," Mantega said, adding that a trade surplus and $204 billion in reserves has positioned Brazil to help the International Monetary Fund boost lending to other emerging economies.

Chinese officials have also expressed interest in buying as much as $50 billion in IMF bonds, while a Russian central bank official on Wednesday said his bank would reduce U.S. Treasury holdings to invest in the IMF notes instead. Russia now holds about $120 billion, or 30 percent, of its hard currency reserves in U.S. Treasuries and said it would redirect up to $10 billion to the IMF.

India also plans to buy some of the notes, although it has not yet said how much it will spend, Mantega said, according to the state-run Agencia Brasil news agency.

The announcements come just a week before the BRIC nations - Brazil, Russia, India and China - gather for talks in Russia, where they are widely expected to discuss alternatives to the U.S. dollar as the global reserve currency.

Russian officials have expressed concern about the dollar for several years and China has advocated a shift away from the greenback, warning that large U.S. budget deficits and monetary expansion could weaken the world's chief currency.

Commodity exporters like Brazil and Russia are particularly vulnerable because most raw materials including oil, soy and minerals are priced in U.S. dollars, making it even more likely that a weak greenback would slash their export income.

Russia is looking to diversify that risk with a move to IMF bonds, analysts said.

"They need to spread the risk out," said Ron Smith, chief strategist at Alfa Bank, one of Russia's biggest private lenders. "They've been doing some diversification for the past several years measuring everything against the dollar-euro basket."

In a statement from the Washington-based lender on Tuesday, IMF managing director Dominique Strauss-Kahn welcomed news of China's interest, saying its investment would "boost the Fund's capacity to help" emerging economies weather the world crisis and "benefit all members by facilitating an early recovery of the global economy."

He said the bonds will offer "a safe investment instrument with reasonable return," but gave no other details, noting only that IMF staff will present plans to the board to allow the bond issue "as early as possible."

The bonds, which have yet to be issued, will be denominated in special drawing rights, an artificial currency used by the IMF.

Leaders of the so-called Group of 20 nations, which include the four BRIC powerhouses, agreed at a London summit in April to boost contributions to the IMF by as much as $500 billion to help it increase lending to nations battered by the global downturn.

The bond issue is part of the effort to meet that goal, said a spokesman for the fund in Washington. He was unable to give any other details and declined to be named.

In Brazil, Mantega echoed Strauss-Kahn on Wednesday, saying that his country's $10 billion loan would help troubled economies recover, reviving global trade and ultimately benefiting net exporters including Brazil.

"Brazil is facing solid conditions to loan to the IMF. In the past, the opposite was true: the fund loaned to Brazil," said Mantega, who has lobbied for reforms that would boost developing countries' voting rights within the IMF. It was not clear if a bond purchase would change that.

The IMF has lent Brazil billions of dollars in the past, but the country became one of the fund's creditor countries for the first time this year.

The majority of Brazil's foreign reserves are held in dollars.

Associated Press writer Nataliya Vasilyeva in Moscow contributed to this report.

Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Americans and their ostrich culture.

Ho-hum – The Collapse of the Dollar

By Joseph Farah
April 03, 2009
"WorldNetDaily"
Source

One of the interesting things about the Internet news business is how you get to see which stories attract interest, attention and readership.

Sometimes, you just never know what people will go for until you see the reports with your own eyes.

Recently, the news has been rife with reports of the imminent collapse of the dollar.

Now, I would have guessed that this story would be of inordinate interest – especially to Americans.

What it means, fundamentally, is that their dollars are going to be worth less – or maybe even worthless.

Yet, according to the readership reports I see on WND, these stories have been met with a collective yawn.

I don't know if that means Americans just aren't taking these warnings seriously or whether they just don't want to read bad news. Maybe Americans believe if they don't read the reports, they won't come true.

But this is serious business.

Since World War II, the U.S. dollar has been the standard for currency throughout the world. That is changing because of the weakness of the dollar – because of how much debt the U.S. has accumulated and because of how many dollars have been flooded into the system to keep the economy from collapsing.

The response by the U.S. government to the imminent collapse of the dollar internationally has been to do more of the same – to vastly increase debt and currency. Very seldom in life is the cure for an affliction higher and faster doses of the poison that caused the affliction. But that is what the Barack Obama administration, the U.S. Congress and the Federal Reserve are trying as a last resort to jumpstart the economy.

Arm yourself with information, like a great new book by Jerry Robinson called "The Bankruptcy of Our Nation." It's a great primer on the subject – and very current.

Unfortunately, even if it works in the short-term, which I sincerely doubt, it will mean even more long-lasting pain later.

The current debt-spend economy of the United States is simply not sustainable. And the cure is not more debt and more spending.

This formula has been tried many times by empires of the past. It has failed every single time – no exceptions.

Do Americans really believe they live such a charmed life that the laws of economics and the laws of the universe do not apply to them?

Do Americans really believe their leaders are so much smarter and gifted than the leaders of the past that they can somehow outwit the laws of economics and the laws of the universe?

Do Americans really have such blind faith in their government that they are willing to keep their heads in the sand even when they see their economy failing all around them?

I hope not.

I pray not.

In fact, I am very encouraged by the grass-roots "tea-party" rebellion springing up all across America. But will it be enough? Is it too little too late?

I believe unless this activity is greatly stepped up in the coming months, government will continue to believe it has license to continue the failed policies of the past – ending all hopes of a reversal and real, long-lasting recovery.

Government and the central bank are pushing all the wrong buttons. The death of the dollar is near. If you want to avoid a total catastrophe in this country – one that will affect not only you but your children and grandchildren – it's time to get out in the streets and stop the madness.

Yes, participate in those tea parties. Help organize more. And let your elected officials know you are on to them. Tell them, "No more bailouts. No more economic stimulus bills. No more printing money. No more tax increases."

Let the free-enterprise system work. Stop the counterproductive and destructive government meddling.

We can do this. The time is now!

Joseph Farah, is a veteran newspaper reporter and editor who directed the editorial operations of the Sacramento Union and other major metropolitan dailies before pioneering Internet journalism.

Read and weep.
U.S. Debtor Meets G20 Creditors at the Dollar’s Funeral

Bye Bye Dollar

Ditch the dollar?

By Jeremy Gaunt
European Investment Correspondent
Source
Play Video
LUXEMBOURG (Reuters) - A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.

"It is a good moment to move to a shared reserve currency," he said.

Central banks hold their reserves in a variety of currencies and gold, but the dollar has dominated as the most convincing store of value -- though its rate has wavered in recent years as the United States ran up huge twin budget and external deficits.

Some analysts said news of the U.N. panel's recommendation extended dollar losses because it fed into concerns about the future of the greenback as the main global reserve currency, raising the chances of central bank sales of dollar holdings.

"Speculation that major central banks would begin rebalancing their FX reserves has risen since the intensification of the dollar's slide between 2002 and mid-2008," CMC Markets said in a note.

Russia is also planning to propose the creation of a new reserve currency, to be issued by international financial institutions, at the April G20 meeting, according to the text of its proposals published on Monday.

It has significantly reduced the dollar's share in its own reserves in recent years.

GOOD TIME

Persaud said that the United States was concerned that holding the reserve currency made it impossible to run policy, while the rest of world was also unhappy with the generally declining dollar.

"There is a moment that can be grasped for change," he said.

"Today the Americans complain that when the world wants to save, it means a deficit. A shared (reserve) would reduce the possibility of global imbalances."

Persaud said the panel had been looking at using something like an expanded Special Drawing Right, originally created by the International Monetary Fund in 1969 but now used mainly as an accounting unit within similar organizations.

The SDR and the old Ecu are essentially combinations of currencies, weighted to a constituent's economic clout, which can be valued against other currencies and indeed against those inside the basket.

Persaud said there were two main reasons why policymakers might consider such a move, one being the current desire for a change from the dollar.

The other reason, he said, was the success of the euro, which incorporated a number of currencies but roughly speaking held on to the stability of the old German deutschemark compared with, say, the Greek drachma