Russkis, ChiCom Plot the Death of the U.S. Dollar

The U.K. Telegraph reports that "the Kremlin's chief economic advisor" recommends that the dollar be replaced as the world's reserve currency with an International Monetary Fund-issued set of "drawing rights," backed by a basket of commodities and currencies, to include….gold, Mr. Bernanke. Gold. According to the Telegraph, "Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week."

Celestine Bohlen at Bloomberg.com says that the dollar may be staggering, but our ancient foes the Russians and Chinese are not about to take it out anytime soon.

Comments

[hmm]

The idea of Russia and China cooperating on anything is a grand one. It would be an exploitation fest wrapped in paranoia.

[shrike]

Where is the debate?

Let them demand any currency they wish for their goods. Who should care?

(yes, I fully realize that they wish to persuade OTHERS to replace THEIR reserve currency. Thus their pleas exhibit the relative strength of the dollar.)

[Gabe]

All the people of the world who wish to end the money monopoly of the US governemnt and their important friends at a few money center banks can do so. We don't need the chinese or russian governments help...although they could help. All we need is a million or two people on this planet to start buying 10-50 oz of silver per month. Just as normal as participating in a 401k....accept the property is yours...the growth is tax free and you can withdraw it anytime without anyones permission. Participating in this plan helps bankrupt JP Morgan, Goldman Sachs and the US Federal government. Buy physical and hide it.

[shrike]

Wow, I am short gold.

India, historically the largest end market for gold, has become a net exporter since January.

Gold will do a face plant within three months.

[FTG]

All we need is a million or two people on this planet to start buying 10-50 oz of silver per month.

I believe there are already more people than that doing what you describe.

[Frederick Barber Campbell]

"Just as normal as participating in a 401k....accept the property is yours...the growth is tax free and you can withdraw it anytime without anyones permission."

Oh sure that _sounds_ like it would work, but...

[EJM]

No picture of Shirley Eaton? 😉

(reference explained here)

[Suki]

I may not have been around H&R for long, but I do know H&R+Gold=crazy wild thread antics.

[Logfile]

All we need is a million or two people on this planet to start buying 10-50 oz of silver per month. Just as normal as participating in a 401k....

That's a terrible idea. Letting the availability of silver effect the value of your wealth is no more intelligent than letting the Federal Reserve effect the value of your wealth. What you *should* do is have your wealth spread around between various currencies, various stocks and bonds, gold, silver, etc, etc. Depending heavily on one thing is a good path to disaster.

[Suki]

What you *should* do is have your wealth spread around between various currencies, various stocks and bonds, gold, silver, etc, etc. Depending heavily on one thing is a good path to disaster.

Diversification? Portfolio balancing? Some of that business major talk?

[Malto Dextrin]

The Russians and the Chinese don't need to plot the death of the dollar.

All they need to do is sit back and watch the Fed and our government kill it for them.

[Suki]

All we need is a million or two people on this planet to start buying 10-50 oz of silver per month.

I know this one! Gabe has silver futures and is trying to get others to buy silver.

[Hooked-Nosed Jew]

Wow! I thought ChiCom was a reference to Chicago!

[Hooked-Nosed Jew]

@Frederick Barber Campbell

No mention of silver in that link. Just gold.

[oldtimer]

I am diversified. I was able to lose money in real estate and all of my diversified mutual funds. I lost dollars due to inflation and taxes that I had to pay 'cause my mutual funds had to sell to pay the folks smart enough to bail out ahead of me. The good news is that I'll be in a lower tax bracket next year. Not bad for an old guy that hasn't had a job for 17 years.

[Brandybuck]

A couple of weeks ago I got dragged into a conversation with a conspiracist. She was arguing that everything (everything) was being run by the Rothchilds and the Illuminati. The Federal Reserve was just a tool of theirs. Then later on she started going on how China was going to come out with a new currency, that would be a global fiat money.

When I inquired as to how China fit in with France and Bavaria, she said, "This goes really deep! It's very intricate! It doesn't make sense unless you've spent years studying it!"

[Harry Dean]

@ Brandybuck,

Maybe she wants to recruit you into the ELF or LDD.

[Logfile]

Diversification? Portfolio balancing? Some of that business major talk?

Eh, not a business major. The specific examples I mentioned are not even all that important. The underlying point is, the value of one specific item is not something that you should be dependent on. Hence me pointing out that Gabe's silver idea is not a good one. It might work out well for him. Its also possible that at some point in the future still relevant to Gabe we will mine the Moon for silver, causing the value of silver to plummet. Personally, I'd rather not risk that.

[Hazel Meade]

I actually think this is an okay idea.
Having multiple competing currencies ironically brings us a lot closer to the libertarian ideal than reliance on the Centralized Fed-backed US dollar - which is subject to the whims of the executive branch any time it wants to print money to "stimulate" our way to a better tomorrow.

Think of it - if you could actually go around the US using Euros or Gold-backed IMF-bucks, or whatever. Pick your currency according to the one that is the most stable. Let them compete for users.

The reason the Chinese and the Russians want a new reserve currency is because the Obama administration's spending policies are undermining the US dollar's value. Obviously.

So let a million currencies bloom. The one most stable in value is likely to win in the marketplace.
Which will produce an impetus for governments to stop manipulating their own money.

[Kolohe]

This exact report (and a parallel one by a Chinese counterpart) is what prompted Rep. Bachman (and other Republicans) to go off like she did here for example. And caused elements of the right wing screech machine to yack about how Geitner & Obama were conspiring to sacrifice US sovereignty.

And I dare say, iirc, Congressman Paul was part of that chorus.

So I'm glad to see some sanity on this thread.

[Suki]

When I inquired as to how China fit in with France and Bavaria, she said, "This goes really deep! It's very intricate! It doesn't make sense unless you've spent years studying it!"

Was she an exotic dancer in the DC -> Deleware general area? If yes, I think I dated her.

[Marc]

Pick your currency according to the one that is the most stable. Let them compete for users.

Off topic: this made me go check Wikipedia to refresh my memory about Gresham's Law. There I found that Gresham's law was anticipated by Copernicus.

That's just f---ed up.

[John]

Oh, the dollar crash is coming. Once the world starts selling, the dollar's value is going to drop off a cliff as everybody races to get as much as they can in the firesale.

You can already see how the world REALLY feels about the dollar if you know what to look at....

[Mr. Chartreuse]

I actually think this is an okay idea.
Having multiple competing currencies ironically brings us a lot closer to the libertarian ideal than reliance on the Centralized Fed-backed US dollar - which is subject to the whims of the executive branch any time it wants to print money to "stimulate" our way to a better tomorrow.

Think of it - if you could actually go around the US using Euros or Gold-backed IMF-bucks, or whatever. Pick your currency according to the one that is the most stable. Let them compete for users.

Agreed. When that pizza chain in Texas decided they were going to accept Mexican pesos, I really didn't understand the outcry. Their customers can pay with Showbiz Chuck E Cheese tokens for all I care.

[Suki]

Oh, the dollar crash is coming. Once the world starts selling, the dollar's value is going to drop off a cliff as everybody races to get as much as they can in the firesale.

I heard that one before in school! Axed beloved, much older, boyfriend (with a money degree) about it and he heard about it several times in His long life, pluse He got to study other instances in college.

Cool man, get rid of your money. Invest in tin.

[Suki]

MC,

Agreed. When that pizza chain in Texas decided they were going to accept Mexican pesos, I really didn't understand the outcry. Their customers can pay with Showbiz Chuck E Cheese tokens for all I care.

Never herd of that but agree with you. Why should it be an issue what money a merchant will accept? I have an old engagement ring (that I tried to give back) that I always carry with me in case I need my car fixed or a room for the night. Why should I go to the pawn shop first?

[Gabe]

so isn't it interesting that the conspiracy nuts with the illogical sounding thinking told you the news weeks ahead of time?

of course she can't know all the inner workings of france and bavaria's political elite, but she got the big part right...the fed is there to fuck us and China and Russia were not content to leave the monetary system in it's current state.

[Mr. Chartreuse]

Never herd of that but agree with you. Why should it be an issue what money a merchant will accept

It really shouldn't be, and the sad thing is they got death threats for doing that. Here's a link for ya if you'd like to check it out:
Pesos for Pizzas

[Gabe]

"I believe there are already more people than that doing what you describe."

your right...people already buy silver. It would take a lot of additional people buying silver.

Ted Butler has a following of about 50,000 ...he is the one who has written more about this than any others. If he is wrong and JP Morgan and GS don't have huge short positions on silver futures contracts then this whol line of thinking is bad.

[Suki]

MC,

It really shouldn't be, and the sad thing is they got death threats for doing that.

I will NEVER understand people doing that. I still do not understand fellow students having a fit over other languages besides English being on an ATM. Doesn't the bank manager have some say over that? It was not the government teling them that Spanish and Farsi must be on the ATM, they have customers who speak both and are catering to them, I thought.

I am a woman without a society.

[Mr. Chartreuse]

I am a woman without a society.

Feel the same way some days, though not the woman part 🙂

[Gabe]

Ok no conspiracies here I promise. Just facts from the CFTC.

2 banks have huge short positions amounting to over 150 million ounces of silver.

3 banks have a huge short position in gold.

http://www.cftc.gov/dea/bank/deamar09f.htm

my opinion
These two banks do not hold the silver to deliver on these contracts. If they tried to purchase the silver on the market it would cause a huge stampede in the metals. There is a $2 plus retail premium on physical silver compared to the futures variety...over the past 20 years this never ever happened because people would arbitrage. People are trying to arbitrage now but it isn't satiating demand...if the physical demand keeps going we will have

a)physical default of futures contracts(a cataclysmic event)

or

b)the two banks will be forced to try and cover but will drive prices way way up

b is unlikely because this has been going on a long time and the governments always "stand ready to lend metals" in increasing amounts.

However, the annual demand can only be met by stockpile silver for so long...eventually the stockpilers will either run out or stop unloading....and that time is getting near.

[gabe]

Read about the hunt brothers, they were making big money...their only error was in trusting the paper market...they were leveraged 9 : 1....when the big banks and the government upped the margin the Hunts were fucked...with 200,000- 1,000,000 freedom lovers accumulating...plus lots of good folks looking to make money on the ride...we can railroad the federal reserve and JP Morgan...it is much smarter than protesting in the streets and getting tazed.

[Gabe]

when you vote for the libertarian dogcatcher or pull the lever for Bob Barr you cna be sure that your vote is thrown out in the trash...when you corner JP Morgan and Goldman Sachs your sticking to the fuckers who want ot put a chip in your head.

[Gabe]

I understand there are many holes in the conspiracy nuts ideas about how the world works, but doesn't it seem pretty pompous to believe that the people who rule over us...the same people who take our money, tax us for air (carbon dioxide), tell us what size toilet we can use while prodding us with tasers into free speach zones...isn't it incredibly egotistical to say those people who are our masters are actually idiots and we are the geniuses with incredible powers of common sensory? They must get a huge laugh out of that.

[Suki]

Feel the same way some days, though not the woman part 🙂

Aw, thank you. 🙂

[Brandybuck]

Gabe, it's not a conspiracy, it's called "government". And the sad fact that many libertarians will not admit, is that most people want a big, powerful and intrusive government. There's no need to resort to grand multi-generational conspiracies of French bankers to explain the dearth of liberty in history.

[Hazel Meade]

I'm not sure Gresham's law would work in a credit-card/debit-card era, if you had multiple currencies.

The credit card companies aren't going to want to denominate your account in a currency that is losing value, and you aren't going to want your bank account demoninated in one either.

Gresham's law strikes me as only applicable to a cash economy. These days, with credit accounts, you can convert between currencies instantaneously, so there's really no need to "unload" anything.

Incidentally, the wiki article on Gresham's law, led me to this useful little article ...
http://en.wikipedia.org/wiki/Lemon_socialism

[j]

Gabe, you were much less crazy during your time @ MIT.

[greshgremlin]

Read "Good Money"
Gresham's law only works when legal tender laws force people to accept good money and worse money at the same value.

When discounting is allowed, good money drives out bad...

[R C Dean]

The U.K. Telegraph reports that "the Kremlin's chief economic advisor" recommends that the dollar be replaced as the world's reserve currency with an International Monetary Fund-issued set of "drawing rights," backed by a basket of commodities and currencies, to include....gold, Mr. Bernanke.

IOW, the response to a global economic crisis caused by financial derivatives is to create a new monetary derivative? Because that's what this "basket" is - a derivative of the currencies (and gold) that it includes.

This will fail. It was tried once already (early '70s?) and it failed then.

Wow, I am short gold.

India, historically the largest end market for gold, has become a net exporter since January.

I'm long gold. Its been trading in a range for the last few months. It could break out either way, of course, but I think the fundamentals point to an upside breakout. What fundamentals, you ask? All the inflation being packed into our money supply, for one, the persistent shortage of physical gold v. gold futures and drawing rights.

A 10% increase in the number of futures contracts being held for delivery would crush the upside price resistance on gold. The price resistance to gold breaking the $1000/oz barrier is almost entirely the work of central banks defending their currencies. Their capacity to do so is not unlimited, and is in fact declining.

I could well be wrong, of course, which is why my position in gold is smaller than my position in equities, which is smaller than my position in cash.

[Gabe]

J, I have changed very little. I live a very conventional life.

The CFTC clearly shows the very large short positions by three major banks in gold and silver future. Do you think they have the physical metal to cover those shorts...or are they naked?

There are plenty of areas of conjecture and unprovable theories that many people widely accept out of peer pressure or hivethink. I know many of my models for the world are wrong. However, I can state with certainty that most conventional people have EVEN worse "world models".

I believe that taxing americans to give Goldman Sachs & JP Morgan a few hundred billion dollars was not good for the future of the country. I'm open to theories on why it happened. The nuttiest fringe people said it would happen like this for the last ten years...the serious thinkers said the "economic fundamnetals are strong". When I see thought models that have predictive value I pay more attention to them.

[Gabe]

J, why not show your name? are you a little paranoid? "oh no somebody will see me and steal my identity" or "people shouldn't be talking about politics and religion, I don't want to appear to have thought about these topics"

[John]

"I heard that one before in school! Axed beloved, much older, boyfriend (with a money degree) about it and he heard about it several times in His long life, pluse He got to study other instances in college.

Cool man, get rid of your money. Invest in tin."

You know, I always thought that it was more convincing to come up with bad sarcastic attempts at jokes than to back up a thought with, say, actual numbers. Looks like you agree.