Does the Dollar Have a Future?

[Crewleader]

Weekend Edition November 1-3, 2013


by Mike Whitney


“If the dollar does indeed lose its role as leading international currency, the cost to the United States would probably extend beyond the simple loss of seigniorage, narrowly defined. We would lose the privilege of playing banker to the world, accepting short-term deposits at low interest rates in return for long-term investments at high average rates of return. When combined with other political developments, it might even spell the end of economic and political hegemony.”

– Economist Menzie Chinn, “Will the Dollar Remain the World’s Reserve Currency in Five Years?”, CounterPunch 2009

Barack Obama’s economic recovery has been a complete bust. Unemployment is high, the economy is barely growing, and inequality is greater than anytime on record. On top of that, inflation has dropped to 1.2 percent, private sector hiring continues to disappoint and, according to Gallup’s “Economic Confidence” survey, households and consumers remain “deeply negative”. More tellingly, the Federal Reserve’s emergency program dubbed QE– which was designed to mitigate the fallout from the 2008 stock market crash and subsequent recession–is still operating at full-throttle five years after Lehman Brothers defaulted. This is inexcusable. It’s an admission that US policymakers have no idea what they’re doing.

Why is it so hard to get the economy up and running? Everyone knows that spending generates growth, so if the private sector (consumers and businesses) can’t spend the public sector (the government) must spend. That’s how sluggish economies shake off recession, through growth.

Spend, spend, spend and spend some more. That’s how you grow your way out of a slump. There’s nothing new or original about this. This isn’t some cutting-edge, state-of-the-art theory. It’s settled science. Economics 101.

http://www.counterpunch.org/2013/11/01/does-the-dollar-have-a-future/

[Laelth]

1. I agree. The public sector needs to spend more.

That said, there's this pesky little thing called the Republican Party that's forcing us to spend even less than we did a few years ago. The fact that this recession lingers is almost entirely their doing.

-Laelth

[Crewleader]

3. I definitely agree with you Laelth

it is the Republican Party.

[Benton D Struckcheon]

2. Crazy as it sounds,

out of the developed economies, our recovery was one of the best, because of the stimulus Obama managed to get through in '09. It was too small, and no repeat was done because of the 2010 elections, but it still did something.
As for the dollar, I have news for the author of that piece: it's not like the UN sits around and decides what the world's reserve currency will be. There is no official decision; it's simply the currency of the country everyone thinks is the most stable and is the most important to the global economy. China is catching up fast on number two and may already be past us, as I think they now attract more investment than we do, but on number one, it'll be a while before anyone thinks China's governance is more stable than ours. It's not just can you get your money in, it's also can you get it out without a hassle. That's taken for granted with the US, not so much with China. They need to build up a history of reliability before their currency is treated as the dollar is now.
Ditto for the euro, where the mere existence of the currency in 10 or 20 years is in question.

[Crewleader]

5. Interesting Benton D. Struckcheon

I think the government shutdown open up everyone's eyes how foolishly dollars was spent and the lack of leadership we do have in Washington, particularly the Republican Congress who is for their own interests and those that fund them.

It specially open eyes to those we owe the dollars to and how the Federal Reserve is handling the low interest rate, if rates go up, trouble will be knocking on the door.

[Benton D Struckcheon]

8. Yeah, the Republican shenanigans have international investors concerned,

and is one of the reasons China's inward investment may already be larger than ours. But the Chinese still don't allow invoicing in yuan for import/export transactions, so between that and the fact everyone figures dictatorships are inherently less stable than democracies, the dollar will be the reserve for the foreseeable future. But the Republicans are doing real damage to US economic interests.

[johnd83]

4. This article is wrong on several fronts

China and Japan stopped buying US debt for their own internal reasons. China stopped buying US debt because their trade surplus has evaporated, not for any US political reason. The fed also just decided to continue QE. It is correct though that the public sector does need to "tax and spend" to rebuild the country and the economy.

[Crewleader]

7. johnd83

China stopped buying US Debt because their trade surplus has evaporated.

I think you are correct john83 not many shoppers these days at Walmart, I'm told they are not stocking shelvess like they use to and they no longer have meet to greet employees at the front door, they stopped that policy a year ago.

It all has to do with how poorly the economy is doing, people are broke, no jobs or those lucky to have part time ones with no benefits. And those that are working are holding on and not spending because they don't know if the government going to shut down again effecting their businesses or employment. It's no way to run a business, a country or lift morale for people to spend for the economy to be good.

They need get the special interest out of Washington, term limits and put the people first policy in so we can all have the American Dream like it was years before not like now so rigged against us.

[RobertEarl]

6. Social Security is keeping it afloat

SS is buying US bonds.

SS income is close to 10% of all employment paychecks. A massive amount removed, automatically from paychecks and put into bonds. SS has $2 trillion invested in bonds.

On the other side, money in the SS bank is going out to millions of recipients. These people spend that money, keeping the general economy afloat.

Without SS, it is a whole different economy.

[Crewleader]

9. Hi RobertEarl

You said it friend and look how the republicans call SS a entitlement and you know what they would like to do.

[RobertEarl]

10. Yep. They want to have it all

If Bush could have made SS money go into the NYSE like he wanted, SS would be done for.

The new meme of the pukelicans is to keep Obama from a 3rd term. Ha!

[lastlib]

11. It's not that policymakers have no idea what they're doing--

It's that what needs to be done is being obstructed by bull-headed know-nothings who have a chip on their shoulder and anger-management issues.

[Crewleader]

12. I hear you lastlib

One way kind of thinking, only their way.