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The future of the U.S. dollar

of futureofdollar.com ©

INTRODUCTION

The world is worried that the dollar does not can no longer play the role after the financial crisis of the major reserve currency triggered by the collapse of the U.S. mortgage market to the worst recession since the 1930s led. The government stimulus package, financial bailouts, the need to support the liquidity of government bonds hold interest rates at the lowest making level in the circumstances of low economic growth, high unemployment and low tax revenues it print more dollars. This leads to a high risk for serious Inflation or hyper inflation in a long-term.

With a $ 12300000000000 55000000000000 $ in debt and unfunded commitments for programs such as Social Security, Medicare and Medicaid, with total Federal Reserve and the Treasury bailout commitments now placed at $ 11800000000000, of which $ 3600000000000 already the U.S. must immediately to take steps to protect against the potential loss of purchasing power of their U.S. dollar warning inflation.us.

Although there is no significant inflation Data in the United States, international equity and commodity markets were growing abnormally in the last eleven months. Analysts called it the "flight from the dollar" or "diversification of risk."

There are many factors evidencing the future against the dollar as global reserve currency. In this article futureofdollar.com pays attention to the crucial points of the analysis after an extensive research on the subject.

Part I

WEAK FOUNDATIONS of the U.S. economy

Nobel Prize winner Paul Krugman explains that "a country whose fundamentals are persistent and predictable deterioration is necessarily a [Currency] crisis at some point. "(1)

1st National Debt

signed in the middle of February 2010, President Obama in the Act Act to increase the national debt ceiling of $ $ to 12394000000000 14294000000000. This is a second increase in the ceiling on national debt in less than two months.

Last time, in December, House Majority Leader Steny Hoyer commented that Congress simply had no choice because otherwise the United States would have on their debt obligations, which would be a disaster for the financial standard. (2)

"The Financial Management Services The U.S. Treasury estimates that the total obligations of the U.S. government exceeded $ 90000000000000, "David Ross provided by Radiant Asset Management in its Research. (3) This includes hospital insurance, supplementary Health Insurance and social security. "[T] he collected money (the Treasury has borrowed and Congress) spent by far not what is necessary to fulfill the long-term commitment of these programs, even if it has not already been spent. Almost all of the 90000000000000 $ Commitments are no established method of the promised payment. "(4)

"Including unfunded obligations, the United States first moved to well over Taiwan and Zimbabwe, for the highest debt ratio ... U.S. total debt plus unfunded commitments total 625% of GDP. "(5)

The Peterson-Pew Commission found on budget reform, that "the United States would almost certainly experience a debt driven crisis" that "gradually could develop or it could happen tomorrow, but at great expense either way. "The excessive debt levels. . . affect the Citizens in their daily life through damage to the American standard of living by slower economic growth and the dampening wages, and shrinking the government's ability, to cut taxes, invest, or a safety net. "(6)

2nd Unemployment

This past February, lost 36,000 jobs, the economy after the loss of 26,000 jobs in January and 109,000 jobs in December and the unemployment rate held at 9.7 percent. (7)

In January, the unemployment decreased from 10.0 to 9.7 percent. According to Reuters to give up "a large increase in the number of people looking for work helped to push the unemployment rate. The number the "discouraged job seekers" rose to 1.1 million in January from 734,000 a year ago. "(8) The number of discouraged workers rose to 1.2 million in February (9).

Gallup reported in late February 2010 that "was 19.9% of the U.S. workforce during the month of January under-translating to 30 million Americans who work less than near its desired capacity. "(10)

In its March Summary of Commentary on current economic Conditions by Federal Reserve districts, the Beige Book is the government that the labor markets remained soft in general throughout the nation. "Although" [d] he pace of layoffs slowed in most districts ... Rental plans remained soft in the rule. "(11)

3rd Budget deficit

IMF chief Dominique Strauss-Kahn presented at the 10th Annual Meeting Herzliya Conference in Tel Aviv that the global crisis had created a problem of fiscal sustainability for many countries could take, the decades, built because of the huge debts during the crisis to resolve, particularly in the developed countries. (12)

The United States reached a record high budget deficit of 1415000000000 $ in fiscal 2009, which ended in September. (13) The deficit is expected to return more than one trillion Dollars in the current fiscal year, as it is already about 651 billion U.S. dollars.

The surplus of revenue over expenditure in the USA was $ 220,900,000,000 In February 2010, as compared to a deficit of 193.900.000.000 $ in February 2009 the Treasury announced in its monthly budget statement. It was the 17th Consecutive month, which the government deficit, CNNMoney.com said. (14)

In the beginning of February 2010 sent Obama $ 3,800,000,000,000 Budget for the year 2011 to Congress with a $ 1600000000000 record deficit. (15)

During the debate on the public debt of the Senate "a proposal rejected bipartisan commission for ways to recommend reducing the U.S. budget deficit, "reported Bloomberg." The legislation would require that the panel's recommendations will be voted debated by Congress, without change. "(16) Instead of the original idea of the Commission by Congress, President Obama is trying to form a government to deficit-based Commission that would be the lack of any requirement to act on his advice for the Congress. Experts consider it one more symbolic than a practical step.

4th Economic impact of U.S. international military operations

The cost of implementing wars in Iraq and Afghanistan pushed the budget into the red during the presidency of George W. Bush. The situation after the start of the financial crisis with the government adopted measures such as stimulus deteriorated packages that financial rescue packages, the need to support liquidity in Treasuries, etc. In addition, in early December 2009, the unproductive Expenditure increased by 30,000 troops permission to be sent to fight in Afghanistan.

All economists agree that one of the fundamental causes of inflation Kind, the existence of significant non-productive government expenditures such as military expenses.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said Obama is too much on his plate. "You can not a war, a financial crisis, recession, and add health coverage of uninsured at the same time, "he said." It is simply a recipe for disaster. "(17)

However, could be important targets of the war, military Operations are no doubt very expensive for U.S. citizens in particular to the time of financial crisis and growing deficits. In addition, the situation is not better considering that around 40 percent of the war was on loan financing from abroad, Joseph Stiglitz, the Nobel prize winner, shows in his study "The Three Trillion Dollar War: the actual cost of the Iraq conflict. "

Explain why it expensive wars points indicate that military expenditures are not only the direct operating costs limited, but also (the greater part of) the loss of life, future costs of disability, loss of income to offset increases in oil prices, opportunity costs, Veterans' social welfare, unproductive expenditure, loss of confidence in the future economic situation, increasing the national debt, and so on.

"The Obama administration has just reported to Congress asked for a defense budget of more than 700 billion dollars for ... - almost 5% of GDP - for the next Year, "Guardian.co.uk in late February 2010. This is exactly one third of total budget revenues for the fiscal year 2009.

"If We try to stay the course, we will be more and more money to spend, "Stiglitz says." The fact that the war we financed entirely by deficits means that, if 10 years from now we decide to pay back, that what I do not know if we, the amount we must raise our taxes, is the much larger, because the debts that are much larger. "

5th China's commitment to the dollar

So far, China enjoys low yuan rate of the levy of their exports Competitive advantage compared to countries with appreciating currencies against the U.S. dollar.

As a result China is actually "stealing" jobs from many countries with rising currencies since their companies are not in a position to compete with Chinese producers.

In relation to the United States, this means that the country should not count on early recovery. China's commitment to the dollar makes imports cheaper in the U.S.. This supports high unemployment in America. Unemployment prevents the growth of GDP and reduce turnover.

Part II

Lack of confidence

Defining the important Reasons of currency crises Paul Krugman explains that the most important, a lack of confidence. The "lack of investor confidence - is an essential characteristic of a currency crisis "He argues (18).

Below are opinions of a number of people from different parts of the world, many of us know quite well. Their opinions affect the U.S. dollar and the U.S. economy.

Nouriel Roubini, the New York University professor who predicted the financial crisis, said that the greenback may be for the next three years to weaken. (19)

Warren Buffett, a successful international investor: "There is a likelihood of significant inflation on the way. "(20)

Robert B. Zoellick, President of the World Bank: "There is little the United States can about the sinking value of the dollar, to do except restore growth in the economy. "(21)

George Soros, a successful international investor: "Regardless of the Situation on the stock markets or the state of the economy, we will see another shift out of dollars into real assets in the long term. "(22)

to help Jim Rogers, a successful international investor: "Printing money, the U.S. economy will weaken the dollar and Treasuries in a long term." (23)

Joseph Stiglitz, Nobel Laureate in Economics: The greenback will continue to head down for the moment, given the huge U.S. trade deficit and the global trade imbalance. (24) "[M] a factors go into the decline of the U.S. dollar. But clearly one of the factors is a total loss of confidence, loss confidence in the future, particularly economic situation. "(25)

Fan Gang, a renowned economist and advisor to the Chinese Central Bank: "This Crisis is a U.S. dollar crisis, which has a relatively long time, takes to clear. The problem relates to the U.S. currency and U.S. debt, after all it has to the U.S. dollar devaluation be solved. "(26)

Yuri Luzhkov, mayor of Moscow, Russia: The world is on the verge of a radical devaluation of the U.S. Currency. Therefore, Russia has to give up its dependence on the dollar as soon as possible. American currency reserves are supported by nothing, and industrial production in this country is very low. (27)

The list of known people with similar ideas is endless. In his research futureofdollar.com faced a difficulty Successful investors, economists and foreign politicians to think with the opponent. There are only few of them. Most of them are the U.S. government, whose task is to confidence in the U.S. economy with a part of this work is spoken in the "positive" conditions recover.

The people in this group either believe that:

* The recession is over and the U.S. economy is a sharp rebound, or

* The fact that the dollar remain the reserve currency primary for a long time to find because during this recent financial crisis in U.S. dollars investors a safe haven or

* The fact that there is no threat to inflation, based on data from the U.S. government, or

* Only that "we will sink or swim with the dollar."

For example, Barack Obama is confident that the dollar is "exceptionally strong" because investors are confident in the ability of the United States lead to a global recovery. (28)

The Chairman of the U.S. Federal Reserve Ben Bernanke believes that the U.S. asset prices are no longer in line with fundamental values and monetary policy will ensure that the "dollar strong. "(29)

The U.S. Treasury Secretary Timothy Geithner forecasts that the dollar will remain the world's "leading reserve currency." (30)

So we came to a conclusion that, unfortunately, the U.S. economy and the dollar lose confidence. The U.S. government must work even harder now, to restore them.

Part III

DIVERSIFICATION from the dollar

Maurice Obstfeld and Kenneth Rogoff observe that "there is a long-term Trend of diversification of official foreign reserves away from dollars, especially among the fast-growing, emerging Reserve hunger and developing economies, and this trend continues in recent data. "(31)

It is hard to argue that the future of the dollar today depends largely on the development such countries as China, India, Brazil, Russia, and others. These countries accumulate large dollar reserves and U.S. debt.

Let her recent Positions on the U.S. dollar with an attempt to predict the future.

1st China

Already over a longer period of time, China was quite aggressive in diversifying its currency reserves and the protection of the weak U.S. dollar, recommending its private sector to do the same.

The Chinese Ministry of Finance started selling bonds worth six billion yuan in Hong Kong in late September 2009, an important step in its currency at a time of concern for the dollar to . Internationalize (32)

China bought the same months the equivalent of $ 50000000000 of the first bond sale by the International Monetary Fund, the purchase, that Beijing could enhance the reputation of the fund and help the government quiet campaign to expand the reach of its currency. China has the unusual step of pays for the IMF loans with 341.2 billion yuan - which is not traded on global markets - rather than dollars. (33)

The country signed agreements with Argentina agreed currency and credit, South Korea, Malaysia, Indonesia and Belarus with their own currency. (34)

were in the middle of September 2009 the International Monetary Fund that it would sell to 403 tonnes of gold. Chinese central bank showed its willingness to buy the entire site. (35)

The People's Bank of China showed its intention to reduce its dollar reserves. Chinese authorities will increase their euro and yen reserves. (36)

China and Brazil established international payments in the local currency of the Republic of China. Zhuhai Geli Corporation received a transfer of several million yuan from San Paolo in the fall of 2009. (37)

The country was ready to expand its African oil reserves by bidding for up to one sixth of Nigeria's crude oil reserves are about 6 billion barrels. Appreciation in close to $ 30-50 billion Chinese offer is higher than that of the current owners. China has been buying oil reserves around the world for the second year already. (38)

Chinese companies to invest about $ 4.4 billion in Peru's mining industry over the next three years after the declaration of the Prime Minister Peru Javier Velasquez made. (39)

Nearly 44% ($ 14.3 billion) of the total volume of China's investment in the first nine months of 2009 were in mining and Production sector are. Representatives of the Asian Development Bank pointed out that investment in the mining sector through the purchase of shares equivalent to a long-term strategy of the country to achieve the resource security. (40)

China Investment Corporation (CIC), State Fund Management Fund, part of China's foreign exchange reserves, "was quietly accumulate holdings in companies including Canada's Kinross Gold Resources Corp. and Potash Corp. of Saskatchewan to a filing with securities regulators. "(41)

CIC chairman Lou Jiwei said "recently that CIC would focus on investment in emerging markets in 2010. In October, the chairman the fund CIC was allocated $ 110 billion in foreign investment and had already more than half used. "(42)

"In In addition to the $ 3.5 billion in interest Teck CIC has a $ 652-million stake in Brazilian iron ore giant Vale and Nickel SA, a $ 4.7-million interest in copper Miner Freeport-McMoRan, and a $ 9.1-million stake in steel producer ArcelorMittal. "CIC also has stakes in a number of top-class brands in North America acquired as Research In Motion Ltd., Apple Inc., News Corp., and AIG Inc. (43)

China cut its holdings of U.S. government bonds through 34200000000 $ in December 2009, but still remaining the largest foreign holder of U.S. debt. (44)

2nd India

Suresh Tendulkar, an economic adviser to the Indian Prime Minister urged the government in summer 2009 to diversify its currency reserves and 264.6 billion U.S. dollars to hold less dollars. (45)

The IMF sold 200 tonnes of gold to India in early November 2009. The $ 6700000000 Sales is the largest single investment bank money purchase, that we know of at least 30 Years in such a short period, "said Timothy Green, author of" The Ages of Gold. "" The only comparable event the U.S. has been steadily buying in the 1930s and 1940s. "(46)

3rd Brazil

Brazilian Central Bank President Henrique Meirelles said the country is considering the gradual Abolition of the USA. Dollars in trade with China, Russia and India. (47)

In October 2009, the Brazilian Central Bank announced that an agreement with the Uruguayan Economic authorities has been reached, apply the so-called SML system in bilateral commercial transactions. (48)

Brazilian Finance Minister Guido Mantega said, that Brazil spending increase 10000000000 $ for the purchase of the International Monetary Fund commitments to the Fund. This "radical change" will help Brazil to diversify their resources, he added. (49)

4th Russia

The Central Bank of Russia increased the proportion of Japanese Yen and Swiss franc in reserves in the middle of 2008. Japanese Yen currently account for about 2 percent of Russia's reserves. The Swiss franc share is smaller because of the limited Liquidity.

Russian President Dmitry Medvedev said at the St. Petersburg International Economic Forum in June 2009: "We should not be the possibility of a Scenarios in which the dollar will be subject to a serious inflationary pressures. "(50)

Russian reserves now consist mainly of the U.S. dollar and the euro. Though it is quite possible that Russia will add Chinese Yuan is said Alexei Kudrin, Russian Finance Minister. The lack of convertibility of Chinese currency and the free movement of capital was the main current obstacle. (51)

Brazil and India are interested in the resolution of bilateral trade with Russia in the national currency, said Alexander Potemkin, an adviser to the Russian Central Bank chairman, Echo Moscow's drive for greater use of national currencies and less of the U.S. dollar. "It was a Initiative within the BRIC. These countries intend to create the conditions for the direct payment for trade in local currency, "he said. He said also, that Russia had a range of experience of mutual payments in local currency with China. He estimated that settlements in yuan and rubles already by about one percentage 2 percent of Russian trade with China. (52)

Moscow should also address the trade in local currency with other countries, including Turkey and Vietnam. (53)

Russian Central Bank first deputy chairman Alexei Ulyukayev said in November 2009 that Russia wanted the Canadian dollar add Gold and currency reserves in the coming months, but his share would be insignificant. (54)

Russia, Belarus and Kazakhstan, members of the customs Union of the Commonwealth of Independent States, can a single currency as early as in 2012, adopted by the Russian Vice Premier Igor Shuvalov. (55) specialists estimate Russia, Belarus and Kazakhstan will be at least 1 percent of the total amount of transactions (to save tens of millions of dollars) no payment in dollars and euros. (56)

Russian President Dmitry Medvedev criticized for delaying the creation of a new international financial system, and announced that the President himself, and French wanted the initiative as long as the "Bretton Woods Agreement do not necessarily not the current economic situation." (57) "Both President Sarkozy and I'm worried about the new international financial architecture, it is not just far away from perfection, we have no serious steps taken in this matter "Said Medvedev (58).

5th Other countries

In April 2009, the Latin American Heads of State and Government in power, a new South American Currency signed the so-called "be Sucre. ALBA leaders (representing Venezuela, Cuba, Bolivia, Honduras, Nicaragua and Dominica) say that Sucre is necessary to help cover the regional impact of the Great Depression by substitution of their trade in U.S. dollars with a new, alternative currency. The ALBA countries and its allies are planning to use the virtual Sucre until early 2010. (59)

In the second quarter ending in June 2009, invested central banks around the world 63 percent of their new cash reserves into euros and yen, and put only 37 percent in dollars. (60)

Kuwait, Saudi Arabia, Qatar and Bahrain signed an agreement in June 2009 to create a common currency Union Council, a prelude to the creation of a central bank and the introduction of a Gulf monetary union and single currency. The other two members of the Gulf Cooperation Council (GCC), the UAE and Oman, not signed, after the decision to withdraw from the project. The GCC states have the 2010 set the goal to start the monetary union and a single currency set, but many experts believe that goal is too ambitious and unrealistic. (61)

Turkey announced in late October 2009 was that switching to the national currencies in trade with Iran and China, ending dependence on the dollar and the euro about 20% of its turnover products. (62)

The International Monetary Fund sold two tons of gold to the Bank of Mauritius on the basis of market prices on 11 November 2009. (63)

Shortly thereafter, the IMF 10 tonnes of gold sold to the Central Bank of Sri Lanka for about $ 375,000,000. The purchase is part of Sri Lanka's plan, its to diversify reserves, and it has been gradually accumulating the metal in the past nine months. "Gold is a good anchorage and protection in these volatile conditions have, "said Nivard Cabraal, the governor of the central bank." We think it is a good time to buy. "(64)

In the beginning of January 2010 Canada announced that they might sell more than 1000000000 € the 10-year bonds, the first issue of debt instruments in the European currency in more than one Decade. This strategy will help attract new investors, while debt is in U.S. dollars given less and less popular among the creditors are the declining Value of U.S. currency. (65)

It is obvious that the trend of diversification from the dollar by the year 2009 on and will continue in 2010.

Part IV

WAY OUT

Peterson-Pew Commission on budgetary reform suggests that "the United States must show their creditors, it seriously is to stabilize the federal debt over a reasonable period of time. Both spending cuts and tax increases will be necessary. "

Most economists would suggest that the U.S. anti-inflation strategy should include:

* Suppression of inflation expectations and the stimulation of savings;

* Achieving balance between budget revenue and expenditure;

* Increasing the mass of raw materials and

* Strengthening the national currency through the creation of an unconditional priority of inflation on other government programs (such as military spending, the unemployment Regulation, impact on the national currency market, etc.).

Will the U.S. expect such a pain by cutting spending and fighting the gaps? Probably not, considering the words of Sir John Templeton, the John Templeton Foundation, which said in 2005: "The psychology of the whole world is that people will not re-elect leaders they want to be thrifty. The voters elect the government that spends more money. "(66)

Many analysts are fairly certain that the weak dollar policy to benefit the United States, therefore, is what the authorities say there will be no resistance to devaluation on be their role.

Most experts have doubts that the solution of the problem, much hinges on the U.S. and call for global action. "We must reform of the international monetary system, "Yu Yongding, a former Chinese central bank adviser, stated in mid-November 2009." A good monetary system should us confident. But we do not trust the U.S. dollar now, "he added. (67)

George Soros is convinced that we need "a new monetary system and actually do the Special Drawing Rights, type the makings of a system, "he told the Financial Times.

THE FUTURE OF THE DOLLAR

The future of the dollar is in danger, as is evident from the article.

This topic is the primary focus of futureofdollar.com. We follow the latest developments in this area and offer our readers information from reliable sources.

This analysis was prepared by http://www.futureofdollar.com ©

11th March 2010

Notes:

(1) Paul Krugman, Currency Crises, 1997;

(2) Reuters, 17 December 2009;

(3) David Justin Ross, The future of the dollar and China: The threat of collapse and the transition to a new reserve currency, 27 October 2009, Radiant Asset Management, LLC;

(4) Ibid.

(5) Ibid.

(6) budgetreform.org 14 December 2009;

(7) U.S. Department of Labor, 5 March 2010;

(8) Reuters, 8 February 2010;

(9) U.S. Department of Labor, 5 March 2010;

(10) Gallup, 23 February 2010;

(11) The Beige Book, 3rd March 2010;

(12) IMF, 31 January 2010;

(13) The Department of the Treasury;

(14) CNNMoney.com, 10th March 2010;

(15) Bloomberg, 1 February 2010;

(16) Bloomberg, 26 January 2010;

(17) Bloomberg, 8 January 2010;

(18) Paul Krugman, Currency Crises, 1997;

(19) Bloomberg, 4 February 2010;

(20) FOX Business Network, 24 June 2009;

(21) The Economic Times, 13 November 2009;

(22) Reuters, 26 October 2009;

(23) Bloomberg, 28 October 2009;

(24) The Korea Times, 28 October 2009;

(25) The Three Trillion Dollar War: the actual cost of the Iraq conflict, book discussion, 8 April 2008;

(26) Reuters, December, 2009;

(27) RB.ru Russian Business, 1 September 2009;

(28) Bloomberg, 24 March 2009;

(29) Bloomberg, 17 November 2009;

(30) USA Today, 25 March 2009;

(31) Maurice Obstfeld and Kenneth Rogoff, global imbalances and the financial crisis: Products of the most common causes, November 2009;

(32) People's Daily Online, 28 September 2009;

(33) The Associated Press, 3 September 2009;

(34) The New York Times, 4 September 2009;

(35) CommodityOnline.com 21 September 2009;

(36) RosBusinessConsulting, 6th November 2009;

(37) NEWSru.com 28 October 2009;

(38) Vedomosti, September 28, 2009;

(39) Bloomberg, 25 November, 2009;

(40) ChinaPro.ru / Vedomosti, 25 November 2009;

(41) The Globe and Mail, 8 February 2010;

(42) Ibid.;

(43) Ibid.;

(44) Xinhua, 1 March 2010;

(45) Bloomberg, July 4, 2009;

(46) Bloomberg, 3 November 2009;

(47) Merco Press, 29 October 2009;

(48) Ibid.;

(49) Bloomberg, 4 October 2009;

(50) RIA Novosti, 5 June 2009;

(51) Bloomberg, 24 October 2009;

(52) Reuters, 25 November 2009;

(53) Ibid.;

(54) Reuters, November 2009;

(55) Rossiyskaya Gazeta, 9 March 2010;

(56) RBC-TV, 10 March 2010;

(57) RIA Novosti, 1 March 2010;

(58) Ibid.

(59) Venezuelanalysis.com, 17 April 2009;

(60) CNBC, 14 October 2009;

(61) ArabianBusiness.com, 11 October 2009;

(62) RIA Novosti, 28 October 2009;

(63) IMF press release, 16 November 2009;

(64) Bloomberg, 25 November 2009;

(65) Bloomberg, 5 January 2010;

(66) NewsMas;

(67) Bloomberg, 17 November 2009.

About the Author

Futureofdollar.com is a group of people who, just like billions of other people around the World, will have to live with the future consequences of the current global crisis provoked by short-sighted politicians. We wish as many people as possible were aware of such consequences.