Russia's anti-dollar crusade

[boneyard bill]

Sergey Glazev is an economic advisor to Vladimir Putin and architect of the Eurasian Economic Union. In a recent article his has accused the US of trying to provoke Russia into intervening in Ukraine as a pretext for new sanctions.

As summarized by VoR, in his article, published by Argumenty Nedeli, Putin's economic aide and the mastermind behind the Eurasian Economic Union, argues that Washington is trying to provoke a Russian military intervention in Ukraine, using the junta in Kiev as bait. If fulfilled, the plan will give Washington a number of important benefits. Firstly, it will allow the US to introduce new sanctions against Russia, writing off Moscow's portfolio of US Treasury bills. More important is that a new wave of sanctions will create a situation in which Russian companies won't be able to service their debts to European banks.

According to Glazyev, the so-called "third phase" of sanctions against Russia will be a tremendous cost for the European Union. The total estimated losses will be higher than 1 trillion euros. Such losses will severely hurt the European economy, making the US the sole "safe haven" in the world. Harsh sanctions against Russia will also displace Gazprom from the European energy market, leaving it wide open for the much more expensive LNG from the US.

Co-opting European countries in a new arms race and military operations against Russia will increase American political influence in Europe and will help the US force the European Union to accept the American version of the Transatlantic Trade and Investment Partnership, a trade agreement that will basically transform the EU into a big economic colony of the US. Glazyev believes that igniting a new war in Europe will only bring benefits for America and only problems for the European Union. Washington has repeatedly used global and regional wars for the benefit of the American economy and now the White House is trying to use the civil war in Ukraine as a pretext to repeat the old trick.

Of course, I have previously argued that the US is deliberately seeking to provoke a Russian intervention in the Ukraine and that Putin has so far refused to take the bait. But my idea was the provocation was intended to provide a pretext for NATO to send troops to Kiev thus forcing a permanent split of Ukraine with the Western sector securely within NATO.

But Glazyev is arguing that the US aim is even more ambitious and more deceptive. Our goal, he claims, is to drive a wedge between Europe and Russia and create a new cold war in which Europe is forced to bear most of the economic burden in order to damage Russia. With Europe weakened, the dollar would strengthen as investors would turn to the dollar as the safe-haven investment just as they did during the Greek financial crisis.

Glazyev's article appeared in a Russian magazine, but it is surely aimed at West European businessmen and politicians. He proposes that Russia should respond bringing down the dollar which is, in fact, what Putin said Russia would do if the West imposed sanctions on Russia.

Glazyev's set of countermeasures specifically targets the core strength of the US war machine, i.e. the Fed's printing press. Putin's advisor proposes the creation of a "broad anti-dollar alliance" of countries willing and able to drop the dollar from their international trade. Members of the alliance would also refrain from keeping the currency reserves in dollar-denominated instruments. Glazyev advocates treating positions in dollar-denominated instruments like holdings of junk securities and believes that regulators should require full collateralization of such holdings. An anti-dollar coalition would be the first step for the creation of an anti-war coalition that can help stop the US' aggression

Unsurprisingly, Sergey Glazyev believes that the main role in the creation of such a political coalition is to be played by the European business community because America's attempts to ignite a war in Europe and a cold war against Russia are threatening the interests of big European business. Judging by the recent efforts to stop the sanctions against Russia, made by the German, French, Italian and Austrian business leaders, Putin's aide is right in his assessment. Somewhat surprisingly for Washington, the war for Ukraine may soon become the war for Europe's independence from the US and a war against the dollar.

Glazyev doesn't specify who should join this anti-dollar alliance but the mention of European business leaders seems to suggest that he has the Europeans themselves in mind.

Glazyev's characterization of US intentions sounds like a crazy scheme to me, and I would be inclined to dismiss it were it not for the penchant of US policy-makers to come up with crazy schemes. Moreover, it seems to be a pattern for the US to attempt to defend the dollar through gunboat diplomacy. But I would have to doubt very seriously that Europe could roped into such a scheme that would be so seriously against their own interests, and the idea that we could replace Russian gas with US produced LNG is a pretty wild scheme in itself. However, it has been put forward quite seriously by some US politicians.

If Glazyev is right, then the US plan could back fire even without Russian involvement. There are 3,000 German businesses operating in Russia. US efforts to force Europe into sanctions could result in the break-up of the entire Western alliance if it led to Europe losing confidence in US leadership. But that is the problem with crazy schemes. Their proponents only look to the benefits (such as control of Iraqi oil) and not to the downside. (Indefinite involvement in an overseas quagmire).

http://www.zerohedge.com/news/2014-...ti-dollar-alliance-halt-us-foreign-aggression

 

[Nice Squirrel]

Russia's anti-dollar crusade...

will have no noticeable impact.

 

[tupac chopra]

The US dollar really is the Achilles heel, and the Russians are spot on because America funds it's wars with dollars that can be made out of thin air.
The USA can do all manner of things to try to hold itself together financially (and one just has to look at the FED balance sheet to see what has been going on) but the one thing they can't do is print other currencies with which to support the dollar.

 

[barbos]

In three words - "Fuck the EU"

 

[bilby]

The US dollar really is the Achilles heel, and the Russians are spot on because America funds it's wars with dollars that can be made out of thin air.
The USA can do all manner of things to try to hold itself together financially (and one just has to look at the FED balance sheet to see what has been going on) but the one thing they can't do is print other currencies with which to support the dollar.

Actually, I can't think of a single thing (other than a basic sense of self-interest) that is stopping them from doing exactly that. Forgery is only really difficult for people who are doing it in contravention of the law; If it is done lawfully (albeit clandestinely), then it is pretty easy, particularly for government actors who already print large quantities of paper currency for their own internal use.

The hard part would be secretly getting the currency into circulation in the target economy; and even that is not particularly difficult in peacetime.

During WWII, the Germans printed British five-pound notes in large quantities, with the aim of disrupting the British economy; the forgeries were excellent, but due to the war, getting the banknotes into circulation was a major issue. They tried dropping them from planes, but the British public were too patriotic, too suspicious, and/or insufficiently venal for this to succeed. At the time, five pounds was a sufficiently large sum that making change for a fiver was far from routine, and somebody other than an aristocrat trying to spend large numbers of them would arouse suspicion; most of the notes ended up being handed in to police, identified as German forgeries, and destroyed.

When the USSR collapsed, the subsequent hyperinflation of the Rouble was, in large part, the result of the ability of the newly independent states to print as many Rouble banknotes as they liked - It was like giving Russia's 14 kids free access to her credit card, with no consequences, and the republics went crazy with it. The US could quite easily undermine any currency they chose - with the possible exception of the North Korean Won - in this way.

They refrain from doing this, not because it is difficult; nor because they are nice people; but because it would harm their interests to do so.

 

[Loren Pechtel]

"Standing up to the US" is a Russian political thing, like not being soft on crime is in the US. That doesn't mean there's a rational reason for the nation to engage in the behavior.

 

[laughing dog]

Good luck to the Russians in their efforts. To help them, I will sell them the Brooklyn Bridge for rubles.

 

[tupac chopra]

The US dollar really is the Achilles heel, and the Russians are spot on because America funds it's wars with dollars that can be made out of thin air.
The USA can do all manner of things to try to hold itself together financially (and one just has to look at the FED balance sheet to see what has been going on) but the one thing they can't do is print other currencies with which to support the dollar.

Actually, I can't think of a single thing (other than a basic sense of self-interest) that is stopping them from doing exactly that. Forgery is only really difficult for people who are doing it in contravention of the law; If it is done lawfully (albeit clandestinely), then it is pretty easy, particularly for government actors who already print large quantities of paper currency for their own internal use.

The hard part would be secretly getting the currency into circulation in the target economy; and even that is not particularly difficult in peacetime.

The hard part I'd imagine would be supporting foreign exchange markets with printed notes. Are you thinking they'd print billions of dollars in a foreign currency, then deposit them into bank accounts and then use those accounts to support the USD?

Or...? You seem to be saying they would just print the notes, and "get them into circulation". However once "in circulation" how do they then support the USD?

The US could quite easily undermine any currency they chose - with the possible exception of the North Korean Won - in this way.

But undermining another currency would not automatically support the USD.
Interesting story about the war though, thanks.

 

[bilby]

The US dollar really is the Achilles heel, and the Russians are spot on because America funds it's wars with dollars that can be made out of thin air.
The USA can do all manner of things to try to hold itself together financially (and one just has to look at the FED balance sheet to see what has been going on) but the one thing they can't do is print other currencies with which to support the dollar.

Actually, I can't think of a single thing (other than a basic sense of self-interest) that is stopping them from doing exactly that. Forgery is only really difficult for people who are doing it in contravention of the law; If it is done lawfully (albeit clandestinely), then it is pretty easy, particularly for government actors who already print large quantities of paper currency for their own internal use.

The hard part would be secretly getting the currency into circulation in the target economy; and even that is not particularly difficult in peacetime.

The hard part I'd imagine would be supporting foreign exchange markets with printed notes. Are you thinking they'd print billions of dollars in a foreign currency, then deposit them into bank accounts and then use those accounts to support the USD?

Or...? You seem to be saying they would just print the notes, and "get them into circulation". However once "in circulation" how do they then support the USD?

The US could quite easily undermine any currency they chose - with the possible exception of the North Korean Won - in this way.

But undermining another currency would not automatically support the USD.
Interesting story about the war though, thanks.

Fiat currencies only have value relative to one another; there is no difference between a surge in the US dollar and a collapse of all of the world's currencies except the US dollar.

 

[tupac chopra]

Fiat currencies only have value relative to one another; there is no difference between a surge in the US dollar and a collapse of all of the world's currencies except the US dollar.

Fiat currencies, particularly the USD have value relative to commodities such as iron ore, oil, copper or gold. And the US Govt can't magically produce these either.
But are you suggesting the USA could print every currency, and clandestinely distribute them in every country ?

And don't mention bitcoin.

 

[Togo]

As summarized by VoR, in his article, published by Argumenty Nedeli, Putin's economic aide and the mastermind behind the Eurasian Economic Union, argues that Washington is trying to provoke a Russian military intervention in Ukraine, using the junta in Kiev as bait. If fulfilled, the plan will give Washington a number of important benefits. Firstly, it will allow the US to introduce new sanctions against Russia, writing off Moscow's portfolio of US Treasury bills.

Um.. that would be kinda silly, wouldn't it? Refusing to accept payments?

More important is that a new wave of sanctions will create a situation in which Russian companies won't be able to service their debts to European banks.

How? Sanctions don't usually stop people paying money to you, and it's not like the sanctions will involve threats not to buy oil or gas on the cheap.

According to Glazyev, the so-called "third phase" of sanctions against Russia will be a tremendous cost for the European Union. The total estimated losses will be higher than 1 trillion euros. Such losses will severely hurt the European economy, making the US the sole "safe haven" in the world. Harsh sanctions against Russia will also displace Gazprom from the European energy market, leaving it wide open for the much more expensive LNG from the US.

??? How, exactly? We have a pipeline from Russia to Germany. How do tankers full of LNG crossing the Atlantic compete with turning a tap?

The more logical target would be the South Stream pipeline, which is yet to be built, and would serve southern Europe.

and will help the US force the European Union to accept the American version of the Transatlantic Trade and Investment Partnership, a trade agreement that will basically transform the EU into a big economic colony of the US.

Yeah, that's not going to happen any time soon. Even if all the European leaders decide they want it, the same people who have to work out all the details are the ones who's offices and homes were illegally bugged by the US, to help US negotiators. We're going to get at least five years of 'mysterious and intractable legal problems' on any US proposals, if not ten.

Glazyev believes that igniting a new war in Europe will only bring benefits for America and only problems for the European Union. Washington has repeatedly used global and regional wars for the benefit of the American economy and now the White House is trying to use the civil war in Ukraine as a pretext to repeat the old trick. ion[/url]

The problem with this article is that it hits all the usual European anxieties - US economic dominance, US provoking conflict to help out it's trade situation, demands for a military build-up on an otherwise peaceful continent, etc. etc. At the same time it contains none of the details that would suggest it has any particular insight, it doesn't explain how these things come to pass, and it gets some odd details wrong, like suggesting the threat is to the well-known gas pipeline that's controvertial, but already built and running and the gas largely paid for, rather than the lesser-known pipeline that's actually under negotiation and would be the more logical target for disruption.

In other words, it reads like a propaganda piece, written by a PR outfit rather than actual insiders. Given that the source is the 'Voice of Russia', the Russian State-run international radio, I guess that's not particularly surprising.

 

[tupac chopra]

More important is that a new wave of sanctions will create a situation in which Russian companies won't be able to service their debts to European banks.

How? Sanctions don't usually stop people paying money to you, and it's not like the sanctions will involve threats not to buy oil or gas on the cheap.

But one can't reasonably expect the Europeans to be a party to imposing arbitrary sanctions that will hurt the Russian economy and also expect the Russians to prioritize servicing debt to European banks after the economy is hurt by the sanctions.
It's a smart tactic. Russia yet again is tending towards moving the whole fiasco towards cooperation and peaceful solutions. America and it's puppets are not.
It makes sense for Europe and Russia to cooperate and work together.

In other words, it reads like a propaganda piece, written by a PR outfit rather than actual insiders. Given that the source is the 'Voice of Russia', the Russian State-run international radio, I guess that's not particularly surprising.

Of course it is. I don't think I've seen anything on this that isn't propaganda?

 

[boneyard bill]

The US dollar really is the Achilles heel, and the Russians are spot on because America funds it's wars with dollars that can be made out of thin air.
The USA can do all manner of things to try to hold itself together financially (and one just has to look at the FED balance sheet to see what has been going on) but the one thing they can't do is print other currencies with which to support the dollar.

Actually, I can't think of a single thing (other than a basic sense of self-interest) that is stopping them from doing exactly that. Forgery is only really difficult for people who are doing it in contravention of the law; If it is done lawfully (albeit clandestinely), then it is pretty easy, particularly for government actors who already print large quantities of paper currency for their own internal use.

The hard part would be secretly getting the currency into circulation in the target economy; and even that is not particularly difficult in peacetime.

During WWII, the Germans printed British five-pound notes in large quantities, with the aim of disrupting the British economy; the forgeries were excellent, but due to the war, getting the banknotes into circulation was a major issue. They tried dropping them from planes, but the British public were too patriotic, too suspicious, and/or insufficiently venal for this to succeed. At the time, five pounds was a sufficiently large sum that making change for a fiver was far from routine, and somebody other than an aristocrat trying to spend large numbers of them would arouse suspicion; most of the notes ended up being handed in to police, identified as German forgeries, and destroyed.

When the USSR collapsed, the subsequent hyperinflation of the Rouble was, in large part, the result of the ability of the newly independent states to print as many Rouble banknotes as they liked - It was like giving Russia's 14 kids free access to her credit card, with no consequences, and the republics went crazy with it. The US could quite easily undermine any currency they chose - with the possible exception of the North Korean Won - in this way.

They refrain from doing this, not because it is difficult; nor because they are nice people; but because it would harm their interests to do so.

While I'm not prepared to dispute any of this, I don't think that is what Putin is about. He doesn't need to counterfeit dollars, the Fed is printing them fast enough as it is. He merely needs to exploit that among our trading partners who are the ones who lose because of it.

 

[barbos]

I don't buy dollar war theories.
It's nothing but a talking point for some of the russian politicians. Russia probably still has a fair amount dollar based securities.
US wants sanctions as long as it does not hurt them. Russians gently point out that is not how it works.
US wants sanctions? then US will have to buy rockets and engines for their own rockets somewhere else. I know Musk is pretty happy about that but NASA, Boeing and Lockheed are not so much. I have no doubt that Musk will make good engine but it will take time and it will be much more expensive.
Same with Europe, want sanctions but keep gas? it's not even technically possible, because you see, russian gas industry depends on Europe's equipment they (mostly US) wants to sanctions.

In the end I hope US/Europe will learn a lesson from all of this - don't mess in other countries business too much. but I doubt they will.
Ukraine crisis is solely US/Europe fault.

 

[SimpleDon]

Sergey Glazev is an economic advisor to Vladimir Putin and architect of the Eurasian Economic Union. In a recent article his has accused the US of trying to provoke Russia into intervening in Ukraine as a pretext for new sanctions.

... Our goal, he claims, is to drive a wedge between Europe and Russia and create a new cold war in which Europe is forced to bear most of the economic burden in order to damage Russia. With Europe weakened, the dollar would strengthen as investors would turn to the dollar as the safe-haven investment just as they did during the Greek financial crisis.

Glazyev's article appeared in a Russian magazine, but it is surely aimed at West European businessmen and politicians. He proposes that Russia should respond bringing down the dollar which is, in fact, what Putin said Russia would do if the West imposed sanctions on Russia.

Glazyev's set of countermeasures specifically targets the core strength of the US war machine, i.e. the Fed's printing press. Putin's adviser proposes the creation of a "broad anti-dollar alliance" of countries willing and able to drop the dollar from their international trade. Members of the alliance would also refrain from keeping the currency reserves in dollar-denominated instruments. Glazyev advocates treating positions in dollar-denominated instruments like holdings of junk securities and believes that regulators should require full collateralization of such holdings. An anti-dollar coalition would be the first step for the creation of an anti-war coalition that can help stop the US' aggression

Unsurprisingly, Sergey Glazyev believes that the main role in the creation of such a political coalition is to be played by the European business community because America's attempts to ignite a war in Europe and a cold war against Russia are threatening the interests of big European business. Judging by the recent efforts to stop the sanctions against Russia, made by the German, French, Italian and Austrian business leaders, Putin's aide is right in his assessment. Somewhat surprisingly for Washington, the war for Ukraine may soon become the war for Europe's independence from the US and a war against the dollar.

Glazyev doesn't specify who should join this anti-dollar alliance but the mention of European business leaders seems to suggest that he has the Europeans themselves in mind.

...

http://www.zerohedge.com/news/2014-...ti-dollar-alliance-halt-us-foreign-aggression

Bill, we have been through this before. It is simple.

The reason that so many countries have so much of their reserves in dollars and dollar denominated paper, largely US T-bills, has nothing to do with profligate printing of money by the Fed*. It is because so many people in so many countries sell things to the US. And so many people in the US buy things from overseas.

This sets up an easy and straight forward way for any country that doesn't want to accumulate dollar reserves to act, stop selling things in the US. Then we would be forced to start making those products in the US, having to build factories and employ people to work in them. Talk about destroying our economy!

If they want to drive us down the tubes even faster and to get rid of their dollar reserves they could buy real things from the US with their dollars. That would show us, wouldn't it? We would be forced to build even more factories at great expense and hire unemployed and dis-employed people to meet the demand. That would leave us regretting that we angered them, wouldn't it?

Or they could just burn all of that paper. That would fix us.

Or they could dump all of that paper on the financial markets, forcing us to print more dollars to buy it and leaving them with US dollars instead of T-bills. Take that US economy!

Or maybe they will find someone who wants dollar denominated T-bills and is willing to buy them with euros. That would show us, there would be an exact change of zero in the number and amount of T-bills held overseas.

Maybe they could push the value of the dollar down. Then we couldn't afford to buy some of that stuff from overseas and we would be forced to substitute shoddy American made goods for them. Once again we would be forced to build all of those expensive factories and employ all of the deadbeats that are currently living the high life on their $200 a week for 26 weeks from Uncle Sugar! Not to mention having to fill all of the orders from overseas because our products have gotten cheaper. The Germans, Chinese and Japanese would welcome us buying less from them while losing orders to us all over the world because of the lower dollar. They would jump at the chance to join Russia in destroying the US economy by making us work too hard. While their workers would enjoy many additional days of leisure!

Obviously you have considered all of the ramifications of this impending doom for the American economy. I thank you for bringing it to our attention.



* It is partially true, but not in the way that you stated. The Fed doesn't have anything to do with it. The Federal government's budget deficit must be at least as large as the trade deficit every year or the economy could tank. The trade deficit is money that leaves the US economy. If the government doesn't deficit spend at least that amount of money into the economy it will decrease private savings by the difference between the too low budget deficit and the trade deficit. For example, if the budget deficit is 200 billion dollars lower than the trade deficit private savings will drop in the US by 200 billion dollars. (Actually, private debt would go up by 200 billion dollars, bank loans and the bank money that they create will have to replace the money that leaves the US economy through trade. But debt is the opposite of savings. You say tomato ... )

 

[barbos]

China holds 3 months of US GDP, and Russia probably 1 week.
There is no reason for worry.
This stupid "economic" theory about US doing nothing but printing money is very popular in Russia.
So you can't blame local politicians for pondering it.
In other news Jen Psaki became very popular in Russia, same way Bagdad Bob was popular.
She is a subject of anecdotes. Her every interview gets translated and made fun of.

 

[tupac chopra]

Bill, we have been through this before. It is simple.
The reason that so many countries have so much of their reserves in dollars and dollar denominated paper, largely US T-bills, has nothing to do with profligate printing of money by the Fed*. It is because so many people in so many countries sell things to the US. And so many people in the US buy things from overseas.

While this is a reason it's not the only reason.
1.If you want to buy something that trades in USD then you need dollars, ie most commodities.
2.If you want to put your money somewhere "safe" you could put it into USD. Though just how "safe" the USD is is being questioned more and more. The problem is finding a "safer" currency.

 

[barbos]

Dollar is safe in the sense that if dollar is not safe then World is coming to an end and dollar is a least of your worries.

 

[Togo]

More important is that a new wave of sanctions will create a situation in which Russian companies won't be able to service their debts to European banks.

How? Sanctions don't usually stop people paying money to you, and it's not like the sanctions will involve threats not to buy oil or gas on the cheap.

But one can't reasonably expect the Europeans to be a party to imposing arbitrary sanctions that will hurt the Russian economy and also expect the Russians to prioritize servicing debt to European banks after the economy is hurt by the sanctions.

That's not how the financial markets work. If you suddenly decide to stop servicing debt based on who is holding it, then two things happen. The first is that you are in default, and your credit rating plunges, hitting your ability to borrow. And the second thing is that the people you don't want to pay just sell your debt to someone else. Or even just swap it with a different income stream.

The impact on European banks would be minimal.

And this is the problem with the article. The European banks thing is on the list because people would be scared by yet another financial crisis. It's not on the list because it's in any way a credible outcome of sanctions with Russia.

It makes sense for Europe and Russia to cooperate and work together.

Only in the short term. The point of the European project is to create an ever expanding zone that operates under the same rules. That directly threatens Russia's desire to have a periphery of countries either absorbed, aligned or at least neutral to it's own rules. Sooner or later, they're going to clash over Eastern Europe. And while it makes sense for the leaders of these blocks to peacefully cooperate, it makes very little sense for citizens of the countries between these two blocks to do so. Peaceful cooperation between the blocks is, for them, the worst outcome, because they don't gain benefits from either side.

In other words, it reads like a propaganda piece, written by a PR outfit rather than actual insiders. Given that the source is the 'Voice of Russia', the Russian State-run international radio, I guess that's not particularly surprising.

Of course it is. I don't think I've seen anything on this that isn't propaganda?

Nah, they're out there. They're the little observation pieces and eyewitness accounts that have local detail, don't draw dramatic conclusions about the whole conflict, and are generally less interesting to read. Dismissing everything is propaganda is just a way of trying to justify using sources without examining their claims.

 

[boneyard bill]

SimpleDon writes:

Maybe they could push the value of the dollar down. Then we couldn't afford to buy some of that stuff from overseas and we would be forced to substitute shoddy American made goods for them. Once again we would be forced to build all of those expensive factories and employ all of the deadbeats that are currently living the high life on their $200 a week for 26 weeks from Uncle Sugar! Not to mention having to fill all of the orders from overseas because our products have gotten cheaper. The Germans, Chinese and Japanese would welcome us buying less from them while losing orders to us all over the world because of the lower dollar. They would jump at the chance to join Russia in destroying the US economy by making us work too hard. While their workers would enjoy many additional days of leisure!

That's exactly what they're trying to do. And when they do that, we suddenly find and imports become a whole lot more expensive and the standard of living declines dramatically because of it. As for the great advantage we will get in lower-priced goods for export, you completely overlook the fact that to manufacture more, we have to import more raw materials and more energy and the new, higher prices so much of our trade advantage is lost there. But, aside from that, it also means we are exporting our products as rock bottom prices and receiving far less per item. Oh yes, export businesses love it because their sales, measured in dollars go up and that what the stockholders look at. But the amount of foreign currency that we get, and that we need to pay for those high-priced imports, goes down. Devaluation is a fools errand, and that is why they are trying to impose it upon us.

Obviously you have considered all of the ramifications of this impending doom for the American economy. I thank you for bringing it to our attention.

You are right that we have been over this before, but you still don't seem to have grasped the essential point that a decline in the dollar will mean a decline in the American standard of living as well as a decline in our ability to maintain our overseas military entanglements.

You also overlook the fact that much of the value of the dollar today is due to its reserve status. Take away the reserve status and the dollar will decline for that reason as well.

* It is partially true, but not in the way that you stated. The Fed doesn't have anything to do with it. The Federal government's budget deficit must be at least as large as the trade deficit every year or the economy could tank. The trade deficit is money that leaves the US economy. If the government doesn't deficit spend at least that amount of money into the economy it will decrease private savings by the difference between the too low budget deficit and the trade deficit. For example, if the budget deficit is 200 billion dollars lower than the trade deficit private savings will drop in the US by 200 billion dollars. (Actually, private debt would go up by 200 billion dollars, bank loans and the bank money that they create will have to replace the money that leaves the US economy through trade. But debt is the opposite of savings. You say tomato ... )

Even if what you say is true, the obvious answer would be to take measures to reduce the trade deficit, not to increase the budget deficit. But your analysis assumes the savings is not subject to the law of supply and demand. The scenario you suggest here means that a shortage of savings would force interest rates up. That's exactly what we need! The Fed's zero interest rate policy is madness. We need higher interest rates, we need more savings, and we need lower budget deficits. Savings is the only way that you can finance growth without creating inflation or bubbles.