Dollar's Antemortem

[deflateIT]

Very good analysis of the current state of things.
It looks like "something" is about to happen...

Enjoy:
U.S. Dollar Now Ripe For Catastrophic Devaluation

[don]

Re: Dollar's Antemortem

The US holds more than one card in its hand. Amazingly the US military is omitted in 90% of these discussions on the dollar's collapse in both Treasuries and Reserve Currency status.

[deflateIT]

Re: Dollar's Antemortem

The US holds more than one card in its hand. Amazingly the US military is omitted in 90% of these discussions on the dollar's collapse in both Treasuries and Reserve Currency status.

Well, he did touch the military card, the article says:

As our government expands, and our wars expand, so do our costs, and our interest payments. Eventually, every undisciplined debtor hits a state of critical mass; a point at which he runs out of options in extending his ability to outrun bankruptcy.

Military? Any country with an access to WMD has the military strength of the US because of the damage nuclear weapons can do. Having so much military heads spread around the world is very expensive and needs to be curtailed soon because money run out.

[Diarmuid]

Re: Dollar's Antemortem

I think Don may be be refering to what Michael Hudson summizes as

The balance-of-payments deficit is mainly military in nature. Half of America’s discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don’t have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America’s military aggression against them.

Correct me if I am wrong don

[gnk]

Re: Dollar's Antemortem

The US holds more than one card in its hand. Amazingly the US military is omitted in 90% of these discussions on the dollar's collapse in both Treasuries and Reserve Currency status.

Does the dollar support the military, or does the military support the dollar?

I say that if/when the US Dollar loses its global reserve currency status - the US will be forced to drastically cut military expenditures. The free ride will be over - the exorbitant privilege of exporting inflation over. Military bases/installations around the world would be left idled.

[oddlots]

Re: Dollar's Antemortem

Here's an interesting counter argument care of Yves Smith:

http://www.nakedcapitalism.com/2010/...to-an-end.html

Auerback: News Flash– China Reduces US Treasury Holdings, World Does Not Come To an End

By Marshall Auerback, a portfolio strategist and fund manager who writes at New Deal 2.0
In a post titled “China Cuts US Treasury Holdings By Record Amount,” Mike Norman makes the excellent observation that while China is moving its money out of Treasuries, interest rates are hitting record lows. In other words, the sky still isn’t falling. So, Mike wonders, “Where is the Debt/Doomsday crowd?” He rightly concludes: “They’re nowhere to be found because they can’t explain this. This is a ‘gut punch’ to them. Their whole theory is out the window. They just don’t understand or don’t want to understand, that interest rates are set by the Fed…PERIOD!!!”

[doom&gloom]

Re: Dollar's Antemortem

Very good analysis of the current state of things.
It looks like "something" is about to happen...

Enjoy:
U.S. Dollar Now Ripe For Catastrophic Devaluation

http://noliesradio.org/archives/3481 Guns & Butter
America’s Fiscal Collapse — Michel Chossudovsky
“America’s Fiscal Collapse – Obama’s Budget Will Impoverish America” with economist and author, Michel Chossudovsky. The administration’s 2010 budget will entail the most drastic curtailment in public spending in American history, leading to social havoc and the potential impoverishment of millions of people. Defense spending and bank bailouts will consume all government revenue resulting in fiscal collapse that will lead to the privatization of the state.

[gnk]

Re: Dollar's Antemortem

Here's an interesting counter argument care of Yves Smith:

http://www.nakedcapitalism.com/2010/...to-an-end.html

Auerback: News Flash– China Reduces US Treasury Holdings, World Does Not Come To an End

By Marshall Auerback, a portfolio strategist and fund manager who writes at New Deal 2.0
In a post titled “China Cuts US Treasury Holdings By Record Amount,” Mike Norman makes the excellent observation that while China is moving its money out of Treasuries, interest rates are hitting record lows. In other words, the sky still isn’t falling. So, Mike wonders, “Where is the Debt/Doomsday crowd?” He rightly concludes: “They’re nowhere to be found because they can’t explain this. This is a ‘gut punch’ to them. Their whole theory is out the window. They just don’t understand or don’t want to understand, that interest rates are set by the Fed…PERIOD!!!”

I'll repost a couple comments I made at the Pragmatic Capitalist blog:

TPC – I agree that a sovereign with a free floating currency and the independent power to create it at will can never technically default. However, at the end of the day, even this attempt of thwarting the laws of thermodynamics (no free lunch) has its limits.

At the end of the day, such a system still needs to have a semblance of sustainability. It still needs to “look” mathematically rational. That is, the debt levels, interest payments, and corresponding gdp percentage need to make sense. A fiat currency relies on well grounded and rational faith, and when that is breached – that faith is lost along with the currency.

and:

Hyperinflation or a currency crisis need not be purely a domestically originated issue.

Keep in mind that money is also a unit of account and we live in a world of finite resources. How much longer will resource exporting nations allow others to consume their nonrenewable resources in return for easily created units of account, i.e., IOUs paid off by irredeemable currency?

This current global financial system is barely 40 years old. As resource depletion and energy constraints intensify, the free luch crowd will be increasingly scrutinized by those that export real “stuff.”

A “game over” moment is well within our lifetime.

Another argument is the propensity for malinvestment by sovereign deficit spending which distorts economies by making them less robust and more prone to crises, or as I would describe them, natural corrections. Bigger spending, bigger bubbles = bigger corrections down the road.

As to Auerback's premature victory lap: I will borrow a Yogi Berra quote:

"It aint over 'til it's over!"