"Wholesale flight out of the dollar"

11 posts / 0 new
Last post
TFGC's picture
TFGC
Status: Member (Offline)
Joined: Dec 13 2009
Posts: 19
"Wholesale flight out of the dollar"

Hi, after reading "How the Federal Reserve is Monetizing Debt", I had a question about one of the last statements in the paper saying that "One possible result of the abandonment of these efforst is a wholesale flight out of thedollar and into other assets."

I was curious as to how any of you thought the government would react to this situation, either as it was unfolding, or once it was over?

Thanks!

goes211's picture
goes211
Status: Diamond Member (Offline)
Joined: Aug 18 2008
Posts: 1114
Re: "Wholesale flight out of the dollar"

Maybe you should explain your agenda with reguard to a global currency before people start responding to your question?

TFGC's picture
TFGC
Status: Member (Offline)
Joined: Dec 13 2009
Posts: 19
Re: "Wholesale flight out of the dollar"

Sure, there's a question mark at the end of that phrase. :) As in 'Time for a Global Currency?', its a university research project on evaluating the pros and cons of a global currency.

Capital movements is one of the areas that I am researching in the project, and you can see my project outline on the website.

Thanks!

docmims's picture
docmims
Status: Platinum Member (Offline)
Joined: Jun 17 2009
Posts: 644
Re: "Wholesale flight out of the dollar"

crazy as it may seem.  The flight is to the dollar, because trust in other currencies including the Yuan is worse.  Look at what is happening to the Euro today as the PIIGS currencies collapse. PIIGS = Portugal, Ireland, Italy, Greece and Spain.

agitating prop's picture
agitating prop
Status: Platinum Member (Offline)
Joined: May 28 2009
Posts: 864
Re: "Wholesale flight out of the dollar"

Your question implies that we don't presently have a global currency. We do, and it's the American dollar. A global alternative to the Yankee buck, though perhaps the least desired alternative, would likely be more egalitarian.

On Our Own's picture
On Our Own
Status: Bronze Member (Offline)
Joined: Dec 28 2009
Posts: 72
Re: "Wholesale flight out of the dollar"

I think this question merits more attention.

There are strong indicators that oil producing countries are exploring an alternate form of monetary issue.  Additionally, as China becomes more wary they are likely to either keep their money in Yuan or put it in commodities.  But, I am sure others among us can give us a clearer idea of where this could go.  If you were trying to find somewhere else to put your cash, and you were a country, where would you put it?

Aaron M's picture
Aaron M
Status: Diamond Member (Offline)
Joined: Oct 22 2008
Posts: 2373
Re: "Wholesale flight out of the dollar"

Am I right in my assumption that you're for a Global Currency?
If not, the language on your project flyer is misleading.
Your Flier stipulates that the idea is to establish whether or not a Global Currency would have a "Beneficial Effect" - is this to say you're not interrogating the probability that a Global Currency manipulated on a Global level would have an extremely detrimental effect?

Currency in and of itself is immaterial. Especially when the topic is not finite or precious; as are the Pound, Euro, En and Dollar.
As it stands now, the "material" worth of these currencies is evaluated against the perceived wealth (see: Ability to oblige debts) of the issuing nation.
This very simple fact has profound implications when you consider a "global" fiat currency.
The supposition which presently is: Our dollar represents debt we are willing to pay.
This is easy to establish because our nation has no "surplus" of funds, no tangible assets backing it and no intrensic value. Without those things, it's impossible for a currency to represent anything other than a nations willingness to both go into debt and provide labor or resources at a later date to service that debt.
A concept that's utterly inconsistent with a stable economy without severe cognitive dissonance.

If we were to impliment a Global Fiat currency, what would this money represent?
A Global debt which we are all collectively on the hook to pay off? A note of debt being traded for citizens labor of other nations who may or may not have any control over their own ability to generate wealth, be it material or service based? How would this encourage "developing" nations?
Do you feel that there would be an increased or decreased probability for banking interests to interfere with soverign nations' development if they controlled their finances? I think it's quite clear that this probability would increase, as would the probability of war with nations who resisted this effort on behalf of the Global Banking Cartels.

How could this possible be a good idea?

That might be a good starting point for this discussion.

Here is a concise list of the negative impacts I feel are imminent with this concept:
1. Undermining of National Soverignty
2. Political disputes and War from rejection of said currency
3. Monopoly of Monetary Generation
4. All the terrible side effects that stem from issue #3.
5. Loss of standard of living for those with a stable currency in trade for a raise of standard of living for those with mismanaged currency (Unfair, Unethical and Inflammatory)
6. Disposition of currency dictated by a central authority, rather than supply and demand.
7. Reduction in overall global monetary Stability based on fewer layers of currency to act as "fail safes". Imagine a Failure of the Argentine Dollar versus the failure of a Global Currency, should this highly improbable (rolling eyes) situation occur.
8. Destruction of premiums through disparity of quality versus distribution of currency; for example if a nation produces better quality coffe than another, and this nation invests heavily in it's own coffee trade but cannot control it's own currency, it's wealth is devalued through no fault of its own. Again, unfair and unethical.

Cheers,

Aaron

On Our Own's picture
On Our Own
Status: Bronze Member (Offline)
Joined: Dec 28 2009
Posts: 72
Re: "Wholesale flight out of the dollar"

Aaron,

I find number three to be compelling reason enough to be alarmed at the concept of a global currency.  

Two questions:  what alternative existing currency should/could take the role of the dollar?

                              How likely are we to stop it?

 

I don't think a truly global currency is likely,  but the US dollar is as close as we can get since too many are pegged to it.   But, there do seem to be rumbles of a leave taking from the dollar.

Aaron M's picture
Aaron M
Status: Diamond Member (Offline)
Joined: Oct 22 2008
Posts: 2373
Re: "Wholesale flight out of the dollar"

O3,

As to your questions:

Quote:

1. what alternative existing currency should/could take the role of the dollar?
2. How likely are we to stop it?

I have to defer.
Honestly, I don't have the knowledge of the intriciacies to really say "this is my plan".
Personally, I'd like to see a return to tangible metals being the standard global medium of exchange, and have nations weigh their own currencies against them. This sets a bar that is both finite and precious, which will maintain some semblence of a balance. However, I don't think humans have the sort of foresight or discipline to not just return to another Fiat system as soon as they run low of Gold.

Further (and I'm not an "equal distribution" guy) but the disparity of wealth globally precludes any meaningful return to a Gold standard.

In short, it's my belief (because an opinion implies I'm educated ;)) that we cannot escape the ultimate demise of the Fiat system we're currently entrenched in, and that after this collapse we'll not see a return to sound monetary practice on a global scale.

So, quite frankly, I'd rather see people act locally to discard Federal Reserve Notes and establish their own system of trade using denominations of metals to balance exchanges of goods, livestock and services. Ultimately, that's what'll happen anyway, so no matter how improbable it might seem, it's just be a buffer against the inevitable.

Maybe I'm rambling. I'd be glad to see someone pick this post apart, since I'm sorta just "thinking out loud".

Cheers,

Aaron

On Our Own's picture
On Our Own
Status: Bronze Member (Offline)
Joined: Dec 28 2009
Posts: 72
Re: "Wholesale flight out of the dollar"

Did you eve really stop to contemplate why the constitution works so well here (all arguments to the contrary asunder,  it has been stable for a long time)  and it has failed miserably in Liberia?

 

The dollar is similar to me:  Americans keep it afloat thru incredibly stubborn refusal to accept that it is worthless.  So it does not gyrate here as other currencies do because and I say this with all due caution we believe in it.     

Problem for us, is that the rest of the world is not so enamored in it as they once were.  It just puzzles me as to what they could choose to replace it.

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2259
Re: "Wholesale flight out of the dollar"

Aaron, well-said re your response about a global currency!  I admire your understanding/perception of the ramifications of a global currency, and your ability to communicate that to boot! 

-pinecarr

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments