I was in the Vietnam border town with China.

[GRG55]

Re: I was in the Vietnam border town with China.

It's already being displaced by non US dollar denominated bilateral agreements...

I have a different view of this trend. Although it may be a factor, I don't think it has nearly as much to do with Dollar debasement by the Fed as many profess. I see currency debasement as an international pastime of Central Bankers and most are worse than the USA in that regard.

I think the bilateral trade agreements have much more to do with the rampant levels of corruption spreading around the world, and the desire to avoid US-led efforts (such as the FCPA) to curb it. Certainly the USA political and economic system has become more corrupt over recent decades, but what I have seen and experienced first hand over many years of working abroad is breathtaking by comparison. Bilateral trade agreements between regimes like Russia-China, or China and Saudi that bypass the US Dollar clearing system are to further enrich that tiny cohort of kelptocrats that strip most of their national economies for their personal gain...even the leadership of that great "People's Republic" has recently been publicly revealed for what it really is. I see more and more national economies in Africa, Central Asia, the FSU, the Middle East, SE Asia and even bits of eastern Europe that after "independence" have become the private playthings of a single family or a tiny group that hold absolute political and economic power over their citizens...and they are enriching themselves to a degree that makes Bill Gates look like a pauper. It's one of the reasons I continue to believe the USA is going to outperform well beyond the current doomsayers forecasts.

Does Turkey ship gold to Iran in exchange for much needed oil because it wants to bypass the US Dollar...or because it has to? One thing about that specific example: They may not be using the US Dollar, but you can be certain they are pricing the transaction using a US Dollar based crude oil reference price and adjusting for quality and transport differential...just like the overwhelming majority of international oil transactions. I haven't noticed any great desire on the part of the Iranians to accept Turkish lira, or the Turks to trade in Iranian rials. Tell me again that the US Dollar isn't the most important currency in the world...

Historically, yes, the emerging power or existing power dictated the terms to the rest of the world.

US gdp through out most of the 1900s was a large, dominating share of the world economy, especially its manufacturing and agricultural sector (what I call "real life gdp", as opposed to paper being pushed across desks.) Today, as a percentage of the world economy, it is shrinking. Add Triffin's Dilemma to the mix, and what we have is something we have never seen before.

Global Trade using the US dollar as we know it peaked. I see a long process of global balkanization occurring due to peak oil and the process of the de-dollarization of global trade.

What does this mean to the average American? The exorbitant privilege de Gaulle once complained of may be over.

Emphasis on "long". As in decades; perhaps even a major portion of this century. Or longer?

[touchring]

Re: I was in the Vietnam border town with China.

Show me any other nation whose currency, or even 2 or 3 nation's currencies, that is piling up $1trillion plus every year in debt.

The other nations are printing primarily in response to the US - the printing isn't some abstract physical law.

Many nations don't even publish true figures. Just like Madoff's scheme, we'll never know the real picture until the very end.

Singapore has tens of billions of corrupt money from China, is this a published figure?

[gnk]

Re: I was in the Vietnam border town with China.

You bring up great points. I'll address a few of them:

1) FCPA: an admirable act that should be part of any global trade organization - with teeth (enforcement). Too many US companies have lost business while others prospered. And here in Greece, I would have liked to see many Greek politicians and German (and others) corporate executives pay the price for engaging in such practices. Both countries lose when there is bribery. And I'm talking about the EU here, not some eastern Eastern Europe or Caspian Sea republic. By the way, I think we have overused the expression "banana republic." Maybe we should start saying "Caspian Sea republic"? But I digress...

2) Corruption in BRICS and other developing countries: Most of these countries have recently adapted a, let's call it "form of capitalism" After all, is there any country in the world that practices the theoretical form of capitalism? Nonetheless, these countries, in my opinion, are going through the same chapter the US went through from the 1870s to the era of Teddy Roosevelt. It was the Guilded age followed by TR's progressive era. An age of unimaginable wealth and kleptocracy (Robber Barons) followed by a rise in labor power and quality standards. It's a fast paced Industrial development thing countries go through. Labor is a reactionary type movement. They'll be reacting soon.

Just as these countries went from Communism to a form of freer markets, labor will follow. The pendulum of power always swings, albeit slowly, from the many to the few for all societies. It's a dynamic, not static process. The most cynical of us may say "meet the old boss, same as the new boss" - but I think there are significant societal changes happening in these countries nonetheless.

3) Non dollar denominated trade - I think it's a real trend, irrespective of motivation. Bottom line - all these countries are complaining in unison about the exorbitant privilege. That's huge. We haven't heard that kind of international public talk since de Gaulle in the 1960s. And now everyone is singing that tune. Now, whether they reap the rewards of eschewing the dollar in a kleptocratic manner or not is a secondary effect. They see the exorbitant privilege as a gain for the US and a loss for them. And they're right. How they spend the money afterwards, who gets it... another matter. I think that eventually their "little people" will want a piece of the action.

But I do believe that they also see the US Dollar status as inherently dangerous to the system.

So, it's not just the leaders of these countries that are thinking about this topic, but central bankers everywhere - from Europe to Asia to Latin America. That's a lot of central bankers on the same page - things do happen when many actually agree on something. Just a couple here:

From the BIS: Dr. Zhou Xiaochuan and Philipp Hildebrand

One more thing, I believe one of the main drivers for the creation of the Euro itself was to challenge the dollar - the exorbitant privilege specifically. Now the developing world is following suit after experiencing the Wall Street meltdown of 2008.

I think we're further into this global process than most believe. It will not be decades. Probably within 10 years. Why do I say 10 years? I'm being generous. When the US experiences the ramifications (within 10 years - easy) of the end to QEx - that's when the process really goes into full swing.

I was a Euro skeptic. Now I believe that the European elite will go through Hell and High Water to keep it together. Geopolitically, they have no choice, and they know it. It won't be a smooth process, but they will fight the good fight nonetheless. Like the Americans, they will try all the wrong solutions before doing the right thing.

By the way, I have dual citizenship - EU (via Greece) and US (born and lived most my life there). Despite all the crap that is going on, I think these are exciting times, and I feel fortunate to be a citizen of both the US and EU.

[c1ue]

Re: I was in the Vietnam border town with China.

I see more and more national economies in Africa, Central Asia, the FSU, the Middle East, SE Asia and even bits of eastern Europe that after "independence" have become the private playthings of a single family or a tiny group that hold absolute political and economic power over their citizens...and they are enriching themselves to a degree that makes Bill Gates look like a pauper.

I cannot say I agree with your assertion that corruption in the US is in any way better than elsewhere; the corruption is simply indirect. It seems worse elsewhere only because the sources of wealth are concentrated in those poorer nations - thus the grab for it must be so much more overt.

But be that as it may, the small nations you refer to are not going to be the ones driving a change in reserve currency. It is going to be the EU and BRICS.

Many nations don't even publish true figures. Just like Madoff's scheme, we'll never know the real picture until the very end.

Singapore has tens of billions of corrupt money from China, is this a published figure?

Who needs to publish when money flows overall can be tracked? Or are you now going to argue that all this corrupt money gets created but isn't actually spent?

As for tens of billions, it would take 100 piles of 10 billion dollars to equal the deficit spending in one US federal budget year. You also fail to distinguish how much of that Singaporean money is American, or Japanese, or Saudi, or Bruneian.

Hint: It isn't insignificant.

[touchring]

Re: I was in the Vietnam border town with China.

As for tens of billions, it would take 100 piles of 10 billion dollars to equal the deficit spending in one US federal budget year. You also fail to distinguish how much of that Singaporean money is American, or Japanese, or Saudi, or Bruneian.

Hint: It isn't insignificant.

Tens of billions is just Chinese money. If you want to talk about other countries, it will be in the region of hundreds of billlions.

Of course, Singapore isn't the only place the corrupt put their money nor is it one of the most desirable places. Much of it also goes to Hong Kong, London and many other cities. The total corrupt money sent out of China could be trillions of dollars.

[Slimprofits]

Re: I was in the Vietnam border town with China.

http://www.cnbc.com/id/100324664

The Wall Street Journal recently estimated that more than $225 billion flowed out of China in the 12 months ended in September.

[touchring]

Re: I was in the Vietnam border town with China.

http://www.cnbc.com/id/100324664

The Wall Street Journal recently estimated that more than $225 billion flowed out of China in the 12 months ended in September.

This is the great irony. MSM asking people to invest in Chinese stocks while the Chinese themselves are busy moving money out.

China Hedge funds in cahorts with MSM?

[raja]

Re: I was in the Vietnam border town with China.

Never forget EJ's admonition that the US gold reserves exist to prevent a total destruction of the dollar.

Total value of US gold reserves -- $418.39 billion

The U.S. government's budget deficit for 2011 was $1.3 trillion.

Somehow EJ's admonition is not reassuring . . . .

[jpatter666]

Re: I was in the Vietnam border town with China.

Total value of US gold reserves -- $418.39 billion

The U.S. government's budget deficit for 2011 was $1.3 trillion.

Somehow EJ's admonition is not reassuring . . . .

Gives you some pause to think what the "real" price of gold in dollars should be......