Category Archives: Federal Reserve Bank

Future Of The Dollar Teeters

Barack Obama, Bush, Economy, Federal Reserve Bank, Inflation

Trashed By “W,” and his “worthy,” wastrel successor, the once-solid dollar may soon be dumped as the world’s reserve in favor of a basket of fiat currencies.

Reuters:

“The U.S. deficit is so huge. This is why all countries, particularly East Asia, are concerned because we hold a lot of these assets. What happens if the U.S. dollar falls 40 percent? Many central bankers will be losing huge amounts of money.”

Yahoo Finance:

“Central banks hold their reserves in a variety of currencies and gold, but the dollar has dominated as the most convincing store of value — though its rate has wavered in recent years as the United States ran up huge twin budget and external deficits.”

Tough love indeed.

Big-Time Beggars

America, Barack Obama, Bush, China, Federal Reserve Bank, Inflation

The political class yaks about the fiction of our dependency on foreign oil markets, exploded in “The Goods On Gas.”

We are to believe that, while gas trading is oh-so dangerous to America’s national security, accruing debt and selling it to China—that’s just dandy.
China, reports Bloomberg.com, is worried that its “Treasury holdings [will] be eroded by “reckless policies.”

I wonder whose?

BAB readers will know that “China, the U.S. government’s largest creditor, is ‘worried’ about its holdings of Treasuries and wants assurances that the investment is safe.”

“We have lent a huge amount of money to the United States,” Premier Wen Jiabao said at a press briefing in Beijing today. “I request the U.S. maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

Honor? Come again!

“White House National Economic Council Director Lawrence Summers, asked about Wen’s remarks, said overseas ‘confidence’ in Treasuries would be hurt without the administration’s steps to end the economy’s decline. President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of debt sales to fund a $787 billion stimulus package.”

China is enabling Barack as it did Bush. The only reason it doesn’t put an end to the US’s spending addiction is that it stands to lose a lot if it does:

“‘China won’t sell the U.S. debt now as that will only drive down Treasury prices, hurting not only the U.S. but also the value of its own investments,’ said Shen Jianguang, a Hong Kong- based economist at China International Capital Corp., an investment bank partly owned by Morgan Stanley”

“‘China’s purchases of American debt have been one of the few bolts keeping the wheels on the global economy,’ said Phil Deans, a professor of international affairs at Temple University in Tokyo. ‘If China stops buying, where does Obama’s borrowing to fund his stimulus come from?’”

This reminds me how brain dead are the Sinophobes. Beggars can’t be choosy, and they most certainly can’t afford to be as arrogant as the US is.

Updated: Buck Obama; Don’t Borrow

Barack Obama, Economy, Federal Reserve Bank, Individualism Vs. Collectivism, Inflation

Writes economist Peter Schiff:

“After more than a decade of unsustainable borrowing and spending, the private sector is currently attempting to restore balance through reduced consumer and mortgage credit, greater savings, and lower asset prices. With its trillions of dollars of credit injections and stimulus programs, the government hopes to allay this process by force-feeding Americans a diet of more borrowing. They feel that a restored securitization market will help. It won’t. It will just grease the skids for a quicker collapse.

Credit, whether securitized or not, cannot be created out of thin air. It only comes into existence though savings, which must be preceded by under-consumption. Since savings are scarce, any government guarantees toward consumer credit merely crowd out credit that might otherwise have been available to business. During the previous decade too much credit was extended to consumers and not enough to producers (securitization focused almost exclusively on consumer debt).

The market is trying to correct this misallocation, but government policy is standing in the way. When consumers borrow and spend, society gains nothing. When producers borrow and invest, our capital stock is improved, and we all benefit from the increased productivity.”

Updated (Feb 19): “All credit is debt,” explained the brilliant Henry Hazlitt. “All loans, in the eyes of honest borrowers, must eventually be repaid. Proposals for an increased volume of credit, therefore, are merely another name for proposals for an increased burden of debt. They would seem considerably less inviting if they were habitually referred to by the second name instead of by the first.”

Updated: Buck Obama; Don't Borrow

Barack Obama, Federal Reserve Bank, Individualism Vs. Collectivism, Inflation

Writes economist Peter Schiff:

“After more than a decade of unsustainable borrowing and spending, the private sector is currently attempting to restore balance through reduced consumer and mortgage credit, greater savings, and lower asset prices. With its trillions of dollars of credit injections and stimulus programs, the government hopes to allay this process by force-feeding Americans a diet of more borrowing. They feel that a restored securitization market will help. It won’t. It will just grease the skids for a quicker collapse.

Credit, whether securitized or not, cannot be created out of thin air. It only comes into existence though savings, which must be preceded by under-consumption. Since savings are scarce, any government guarantees toward consumer credit merely crowd out credit that might otherwise have been available to business. During the previous decade too much credit was extended to consumers and not enough to producers (securitization focused almost exclusively on consumer debt).

The market is trying to correct this misallocation, but government policy is standing in the way. When consumers borrow and spend, society gains nothing. When producers borrow and invest, our capital stock is improved, and we all benefit from the increased productivity.”

Updated (Feb 19): “All credit is debt,” explained the brilliant Henry Hazlitt. “All loans, in the eyes of honest borrowers, must eventually be repaid. Proposals for an increased volume of credit, therefore, are merely another name for proposals for an increased burden of debt. They would seem considerably less inviting if they were habitually referred to by the second name instead of by the first.”