Re: nettimethe dollar's demise (and the rise of Asia)
Hi Anyway, read on, nettimers, and contemplate the end of the world as we know it. Or at least get out while you can. Keith Hart Below, a very strong analysis by Loren Goldner of the newly discovered - but clearly rather well established - dollar crisis. if he's right, it doesnt sound like those who will be most affected will have the option of getting out. Ben Seymour http://home.earthlink.net/%7Elrgoldner/dollarcrisis.html The Dollar Crisis, and Us By Loren Goldner Incredible as it may sound, ever since the late 1950's, the world economy has been tossing around a hot potato of an ever-increasing mass of nomad dollars (dollars held outside the U.S.) whose actual conversion into tangible wealth would plunge the world into a deflationary crash. Even now, few people are aware of the extent to which this technical question of economics (and in reality a profoundly social question) has in fact cadenced 45 years of world history, erupting into view in key years such as 1968 (dollar convertibility crisis), 1973 (end of the Bretton Woods System), 1979 (runaway global inflation, gold at $850 an ounce) 1990 (Japanese deflation) or 1997-98 (Asia crisis, Russian default, hedge fund crisis). We are clearly today at another key turning point, and perhaps (over the next few years) at the long-delayed culmination of the whole story, when that mass of dollars, now grown to gargantuan proportions (the $30 billion of 1958 have become at least $11 trillion today) will be deflated, one way or another. With the election safely behind it, the Bush administration in the U.S. can now get on with the world economic crisis that has been stalking it ever since it came to power, in the wake of the stock market crash of spring 2000. Bush and his people must move as quickly as possible to get the worst over with, in their own terms (terms distorted by their own illusions of being in control of events).before they have to face new elections or other political challenges. (Had Kerry won, his incoming government might well be facing a worse crisis, compounded by international uncertainty over various policies.) In recent weeks, the dollar crisis, which is merely the immediate visible face of a profound social and economic crisis in progress for decades, has moved (once again) from technical discussions of a marginal coterie of specialists to center stage in the media. Prominent pro-capitalist economists such as Steve Roach and Paul Krugman are now saying that a major crisis is almost inevitable, more a question of when than if. This is particularly revealing in light of the fact that in eight or nine months of almost constant media huffing and puffing about the election, this reality and the issues it raises were precisely nowhere in the discussion. Ever since the 1960's, when the problematic international status of the dollar became an ongoing policy question (with its ebbs and flows) no mainstream American politician has ever gone anywhere near it. It is more of a political third rail than Social Security or Medicare (1) Unfortunately, the same thing can be said, with some honorable exceptions, about the radical left.in the U.S. A capitalist crisis like the current one resembles a poker game where the table is swept clean and all cards and chips must be redistributed for the game to continue at all. This could happen as an orderly bankruptcy proceeding but it will most likely happen (as it has always happened in the past) chaotically, through economic blowout, class confrontation, and war. (Only the latter options create the momentum and the constituency for the necessary changes.) This crisis will in all likelihood not come in a pure, 1929-style form of abrupt deflation, stock market crash, and sudden mass unemployment (though some combination of these is a distinct possibility). What somehow has to happen, from a capitalist point of view, is a serious devaluation of the approximately $11 trillion dollars currently held by foreigners, and a simultaneous adjustment of major currencies to reflect new world economic realities. The dollar must be dethroned from its global reserve currency status (about 63% of all central bank reserves are currently denominated in dollars, down from 69% a year ago), or reduced to one among many alongside the euro, the yen, or possibly some basket of major currencies. The U.S. must stop running $600 billion in annual balance-of-payments deficits, drawing in 80% of the world's savings to finance them. It must deflate the approximately (outstanding) $33 trillion of Federal, state, municipal, corporate and personal debt (3 times the dubious GDP figure) that has kept the economy going for decades. This will entail, among other things, a collapse of the huge mortgage bubble and the subsequent bankruptcy of untold millions of families and individuals. The U.S. must figure out a way to balance imports and exports, which, given the vast hollowing out of U.S. industry over the past 35 years,
nettimethe dollar's demise (and the rise of Asia)
A pool of fools to buy it all the way down. The ASEAN-India-China summit is taking place in Laos this week, where a=20 major free trade pact to create the world's largest trading bloc between=20 Southeast Asia and China was signed yesterday. India will be signatory=20 to a similar but more gradually phased set of trade liberalisation=20 measures soon. In the meantime, the follopwing article appeared in The=20 Economist. My comments first. Thanks to Shekhar Krishnan for bringing it=20 my attention. Bush's economic policy should be seen as Keynesianism for the rich,=20 spending public money to line their pockets. Pat Buchanan has written a=20 fine book, Why the right went wrong, that forecasts the doom entailed in=20 Bush's rejection of the two cornerstones of republicanism -- balance the=20 budget and stay at home. Bush's bet is that the rest of the world can't=20 afford to call his bluff. First of all because the US economy is the=20 only one that is steaming ahead (on borrowed money) enough to buy their=20 exports. (The Chinese are booming but mainly importing raw materials=20 from the poor countries). This is linked to the American global policy=20 of threatening to exclude countries from the US market unless they sign=20 up bilaterally for a strict intellectual property treaty and another=20 exempting the US military from prosecution for war crimes. Second, as=20 this article makes clear, its main trading partners will keep up the=20 price of the dollar in order to protect their own assets, both in dollar=20 paper and US property. The EU is really caught, since home demand is=20 sluggish and an overpriced euro means they are priced out of the US marke= t. So the neocons have taken two huge gambles, based on impeccable logic,=20 that they are going to lose -- Iraq and the dollar. They really think=20 that being the only military superpower trumps all other factors and=20 they are wrong. God, I hope they are wrong, but I beleive they are. This=20 is my delayed reaction to the election result, that these bastards are=20 really going to reap the whirlwind they sowed. The other main feature of the article is the role that Asia now plays in=20 financing the US trade and budget deficits. (Have you seen the latest on=20 the projected social security bill that will involve incredible=20 government borrowing in order to give each citizen a personal account?=20 It really is a Keynesian recipe -- spend money you don't have and tell=20 the markets to get lost, except that globalisation and the money=20 slushing around the world today makes it a very different scene from the=20 1930s). So it is China and Japan that are holding the tab for America's=20 profligacy, plus some lesser Asian countries like Singapore. I like the=20 idea of calling it a cartel and waiting for the first member to break=20 ranks (a liberal economist's dream, but not always true to life). On=20 ideological grounds alone, India will probably go with the euro. But=20 this article doesn't mention the Saudis and all that Arab oil money.=20 Does Iraq make them more or less dependent on the USA? The neocons think=20 they can just take the Saudis over if they get obstreperous. But the=20 Pentagon is strapped for resources and Saudi Arabia is a very=20 complicated country to invade right now. Anyway, read on, nettimers, and contemplate the end of the world as we=20 know it. Or at least get out while you can. Keith Hart The dollar=92s demise Nov 23rd 2004 From The Economist Global Agenda http://www.economist.com/agenda Is the dollar=92s role as the world=92s reserve currency drawing to a clo= se? WHO believes in a strong dollar? Robert Rubin, Bill Clinton=92s treasury=20 secretary, most certainly did. John Snow, his successor but two, says he=20 does but nobody believes him=97if only because he wants other countries=92= =20 currencies, in particular the Chinese yuan, to go up. Mr Snow=92s boss,=20 President George Bush, in one of his mercifully rare forays into=20 economics last week, also said he wants a muscular currency: =93My nation= =20 is committed to a strong dollar.=94 Again, it would be fair to say that=20 this was not taken as a ringing endorsement. =93Bush=92s strong-dollar=20 policy is, in practical terms, to maintain a pool of fools to buy it all=20 the way down,=94 a fund manager was quoted by Bloomberg news agency as=20 saying. It does not help when the chairman of your central bank, Alan=20 Greenspan, whose utterances on the economy are taken rather more=20 seriously than Mr Bush=92s, has said the day before that the dollar seems= =20 likely to fall: =93Given the size of the current-account deficit, a=20 diminished appetite for adding to dollar balances must occur at some=20 point,=94 were his exact words. The foreign-exchange market immediately=20 decided that it was sated, and the dollar fell to another record low=20 against the euro. America's Federal Reserve posts Alan Greenspan's comments. The US=20 Treasury
Re: nettimethe dollar's demise (and the rise of Asia)
here's that article link exactly: http://www.economist.com/agenda/displaystory.cfm?story_id=3421877 there were a number of articles written about a hidden motivation for the (2nd) iraq war - that saddam (and iran already) started accepting the euro as official currency for iraq's oil instead of only the american dollar. venezuela was also moving in this direction, and some authors wrote that the US was trying to nip all that in the bud. here is one such article archived from the guardian uk from july: The Real Reasons Bush Went to War By John Chapman http://www.truthout.org/docs_04/072904C.shtml mark # distributed via nettime: no commercial use without permission # nettime is a moderated mailing list for net criticism, # collaborative text filtering and cultural politics of the nets # more info: [EMAIL PROTECTED] and info nettime-l in the msg body # archive: http://www.nettime.org contact: [EMAIL PROTECTED]
