FT's Martin Wolf on US Dollar

[DRumsfeld2000]

Wolf seems to be be changing his mind on the US and the Dollar. A few months ago he was saying that it was too early to write off the US, now he is implying that the debts are so huge that the Dollar is weakened and this undermines its reserve status. This has the potential to have massive consequences for the funding of US debt.

http://gata.org/node/8183

I also include a video from the Cato Institute on US debt which is interesting:-

http://www.financialarmageddon.com/

[skidder]

Re: FT's Martin Wolf on US Dollar

Any currency that doesn't have a strict limitation on issuance (like the gold standard) will just end up being used as a vehicle to enrich the elites through debasement practices. We all know that. Mix that fact with a new "Global" currency and we would lose the ability to track that debasement through other currency moves, assuming everyone was using this new global currency. I'd say this is exactly what the elites are shooting for.

I have a question. Probably so basic no one will answer but here it is.

Why is the China pegging of their currency to the dollar considered "manipulation"? Why isn't the U.S. blamed for it's part in this problem?

[rjwjr]

Re: FT's Martin Wolf on US Dollar

As I read the article, it made me wonder if losing reserve currency status may actually help the US to re-establish itself as a producer of goods in the real economy. I'm not sure that we'd have any other choice. We either get competitive and compete in a global economy or our standard of living declines.

Maybe the result is a return to protectionism and focusing inward. Brazil seems to be weathering this global economic storm quite well from what I understand and I believe Brazil to be one of the most protectionist countries in the world.

However it shakes out, it's sad to think that our best days may be behind us, especially if you have children that are about to enter adulthood.

[cmalbatros]

Re: FT's Martin Wolf on US Dollar

Being competitive to the the rest of the world would mean a substantial drop in the standard of living for most people. I.E. US labour rates of $7.25+ per hour verses $2 per day for Chindia etc. it's a basic math problem when its cheaper to use very flexible people instead of machines to gain the production advantage.

[pianodoctor]

Re: FT's Martin Wolf on US Dollar

I have a question. Probably so basic no one will answer but here it is.

Why is the China pegging of their currency to the dollar considered "manipulation"? Why isn't the U.S. blamed for it's part in this problem?

Some claim it's purposely misleading rhetoric (think "strong dollar policy" as another example of misleading rhetoric) because the last thing the U.S. wants is an unpegged Yuan because it would cause U.S. inflation to get quickly out of control (since we buy so much from China) in such a way that it exceeds the Fed's mandate on inflation.

Strong Dollar Policy and China Must Unpeg are contradictory ideas if you think about it. However Weak Dollar Policy and China Stays Pegged (which is what we actually have) are complimentary ideas. But the last thing they can say is what the U.S. is actually pursuing- Dollar devaluation.

[GRG55]

Re: FT's Martin Wolf on US Dollar

...I have a question. Probably so basic no one will answer but here it is.

Why is the China pegging of their currency to the dollar considered "manipulation"? Why isn't the U.S. blamed for it's part in this problem?

Seems to me the USA financial and political system have been getting lots of international criticism about its role in creating the present circumstances...and particularly its stewardship of the world reserve currency. Where are living that you've not noticed this?

[iyamwutiam]

Re: FT's Martin Wolf on US Dollar

Being competitive to the the rest of the world would mean a substantial drop in the standard of living for most people. I.E. US labour rates of $7.25+ per hour verses $2 per day for Chindia etc. it's a basic math problem when its cheaper to use very flexible people instead of machines to gain the production advantage.

I am not sure this premise is correct. i think many of us forget how far technology has come in the past few decades. A fully automated plant -as we see in many industries (food) easily out performs the lowest labor cost -especially when we are talking economy of scale in the millions (say Coke). Labor becomes increasingly irrelevant in these sorts of manufacturing venues. Rather it becomes about chasing tax advantages, incentives (SEZ-where electricity/water/land-are basically given for free along with lax environmental regulations). So a plant can go full tilt -with out expensive additions to ensure compliance and operating costs reduced as far as possible when the drivers (utilities/acquisition costs and taxes) are driven down to increase profits exponentially.

Cellphone, chip manufacturing, etc -do not require as much labor -instead it requires setting up good automation that is enhanced by government subsidies that decrease capital costs and operating costs -driving more profit which in a few years will have paid of the plant. Next-do it all over again and move to another country. The past of Malaysia and Indonesia -now moving to India and China is something people are missing. The incentives are in the billions sometimes and for that a multi-national will simply build a new plant -as rarely are you going to have (for small businesses) such subsidies further reducing your cost structure.

[cmalbatros]

Re: FT's Martin Wolf on US Dollar

My premise was mainly about how flexible people are and how quickly they can be used in changing production items, of which Chindia has a huge surplus of, compared to machines. Take Nissan motors, I read they have the shortest production turn around in the world of about 2yrs compared to GM & Ford (4or5 i think). And having worked in the food production industry I can vouch that machines are far faster than people at producing the same things again and again and making it cheaper, assuming there is a long enough "run" and there will be a demand for those said items. Being able to adapt quickly is one way to stay competitive.