Russia's anti-dollar crusade

[boneyard bill]

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.

The "stupid economic theory" is neither stupid nor a theory. It is a simple matter of fact. The Fed's balance sheet has risen from $800 billion in 2008 to nearly $4 trillion today. That's nearly a five-fold increase in six years! It is certain to have negative consequences down the road (beyond the negative consequences it has already produced). The Russians are really trying to collapse the dollar, they are merely trying to speed the process along. We are already well on the way to collapsing the dollar due to our own indecisiveness.

 

[boneyard bill]

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.

That is really Glazyev's point. He is telling the Europeans that the US is trying to sucker them into agreeing to more sanctions which will hurt the European economy and therefore make the dollar more of a safe haven than the euro or the pound.

 

[boneyard bill]

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.

The dollar is safe because we will always print enough of them to pay our debts, but that only works as long as we can get the rest of the world to print money as fast as we are. So far we've been pretty successful at that, but the BRICS nations are catching on to this even if Europe is not. So it is the emerging markets, the G-20, not the G-8, that we have to worry about.

 

[laughing dog]

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.

The "stupid economic theory" is neither stupid nor a theory. It is a simple matter of fact. The Fed's balance sheet has risen from $800 billion in 2008 to nearly $4 trillion today. That's nearly a five-fold increase in six years! It isn to have negative consequences down the road (beyond the negative consequences it has already produced). The Russians are really trying to collapse the dollar, they are merely trying to speed the process along. We are already well on the way to collapsing the dollar due to our own indecisiveness.

You've been promoting that outcome (high US inflation/collapsing US dollar) for some time now. Yet, despite your critical analysis, none of your predictions on this issue have come to pass. Do you ever wonder why that is?

 

[Togo]

That is really Glazyev's point. He is telling the Europeans that the US is trying to sucker them into agreeing to more sanctions which will hurt the European economy and therefore make the dollar more of a safe haven than the euro or the pound.

But it's not a serious arguement, intended to convince people who actually understand how the markets work. It's just fear-mongering for public consumption. Which is why I suggest it originates in a propaganda department, rather than a politician or analyst. You could make all sorts of arguements for why sanctions would be a bad idea, but this isn't a good arguement, and isn't attempting to be a good arguement. It's just trying to press as many hot buttons as possible.

 

[boneyard bill]

That is really Glazyev's point. He is telling the Europeans that the US is trying to sucker them into agreeing to more sanctions which will hurt the European economy and therefore make the dollar more of a safe haven than the euro or the pound.

But it's not a serious arguement, intended to convince people who actually understand how the markets work. It's just fear-mongering for public consumption. Which is why I suggest it originates in a propaganda department, rather than a politician or analyst. You could make all sorts of arguements for why sanctions would be a bad idea, but this isn't a good arguement, and isn't attempting to be a good arguement. It's just trying to press as many hot buttons as possible.

I disagree. Even though not every point is nailed down as it would be in a serious economic argument, it still serves as a warning to the Europeans to be careful about sanctions. Remember that the Obama administration is expected to come up with a third round of sanctions. I don't think this argument is aimed at economists, but it is aimed a European businesses, and it is intended to elicit fear, but I wouldn't call it fear-mongering. He's painting an exaggerated picture, but it certainly is likely that any new sanctions against Russia will hurt Europe more than it will hurt the US. Keep in mind that many European businesses are not at all happy with the events in Ukraine even though the bankers are.

 

[tupac chopra]

That is really Glazyev's point. He is telling the Europeans that the US is trying to sucker them into agreeing to more sanctions which will hurt the European economy and therefore make the dollar more of a safe haven than the euro or the pound.

But it's not a serious argument, intended to convince people who actually understand how the markets work. It's just fear-mongering for public consumption. Which is why I suggest it originates in a propaganda department, rather than a politician or analyst. You could make all sorts of arguments for why sanctions would be a bad idea, but this isn't a good argument, and isn't attempting to be a good argument. It's just trying to press as many hot buttons as possible.

It seems to be part threat and part argument (the whole of what is reported anyway), and from that point it is serious, I's think. Russia has made good on it's promises on these sorts of issues. For example it warned it could or would sell it's US treasuries after US interference in Ukraine not long ago. In March it sold 20% of it's US treasuries. It has warned about making efforts to abandon the US dollar in trade. Recently it signed an important gas deal with China to be settled in Rubles.
I think that Europeans are probably aware now that they need Russia, and that Russia is likely to do what is says, regardless of whether it makes short term "market" sense.

 

[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.

The "stupid economic theory" is neither stupid nor a theory. It is a simple matter of fact.

You will have hard time finding (actual) economists who agree with you.

 

[boneyard bill]

That is really Glazyev's point. He is telling the Europeans that the US is trying to sucker them into agreeing to more sanctions which will hurt the European economy and therefore make the dollar more of a safe haven than the euro or the pound.

But it's not a serious argument, intended to convince people who actually understand how the markets work. It's just fear-mongering for public consumption. Which is why I suggest it originates in a propaganda department, rather than a politician or analyst. You could make all sorts of arguments for why sanctions would be a bad idea, but this isn't a good argument, and isn't attempting to be a good argument. It's just trying to press as many hot buttons as possible.

It seems to be part threat and part argument (the whole of what is reported anyway), and from that point it is serious, I's think. Russia has made good on it's promises on these sorts of issues. For example it warned it could or would sell it's US treasuries after US interference in Ukraine not long ago. In March it sold 20% of it's US treasuries. It has warned about making efforts to abandon the US dollar in trade. Recently it signed an important gas deal with China to be settled in Rubles.
I think that Europeans are probably aware now that they need Russia, and that Russia is likely to do what is says, regardless of whether it makes short term "market" sense.

The move away from the dollar is on-going. China began making "currency swap agreements" with other countries at least a couple of years ago, and the movement has mushroomed. The now even have an agreement with Britain. And it's not just China now either. Japan and India have a CSA and so does Russia and Japan. They're settling their trade in each other's currencies without using the dollar as the intermediary. All you have to do is set up a facility to do this and that can easily be done through a few large banks. Meanwhile, China and Japan have quit buying new US debt and Russia is selling its treasuries.

Russia is also selling oil for rubles or gold or, if you've got yuan, you can buy Russian oil through China. So you don't need dollars to purchase oil anymore. All of this is putting pressure on a dollar that is already weak. Moreover, it is destined to get weaker. Now the Federal Reserve is the overwhelming buyer of the US deficit. That means an ever weakening dollar as the Fed purchases nearly a trillion dollars of treasuries each year. So the US does have a big incentive to see Europe's economy weakened so that its fund managers will look to US treasuries as a safer investment than European bonds.

The whole problem here is that the US is trying to defend the dollar with gunboat diplomacy. It won't work. The only way you can defend the dollar is with monetary policy. But if we tighten monetary policy, the Wall Street Banks go under so that should tell you who's really calling the shots in America today.

 

[boneyard bill]

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.

The "stupid economic theory" is neither stupid nor a theory. It is a simple matter of fact.

You will have hard time finding (actual) economists who agree with you.

Hardly. Facts are facts. The Fed's balance sheet in 2008 was $800 billion. It took them from 1914 until 2008 to get there. The Fed's current balance sheet is about $4 trillion. So we've had a five-fold increase in just 6 years. That's a fact, not a theory. There's really nothing to argue about.

Most Americans are unaware of this but that isn't necessarily the case overseas and especially in the emerging markets where the US budget deficit along with our huge foreign exchange deficit is creating real problems for these countries. The US response has been, "You have your central banks, deal with it." The problem is that the solution for their central banks is to create recessions in their own countries to cure the inflation that the US is exporting.

 

[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.

The "stupid economic theory" is neither stupid nor a theory. It is a simple matter of fact.

You will have hard time finding (actual) economists who agree with you.

Hardly. Facts are facts. The Fed's balance sheet in 2008 was $800 billion. It took them from 1914 until 2008 to get there. The Fed's current balance sheet is about $4 trillion. So we've had a five-fold increase in just 6 years. That's a fact, not a theory. There's really nothing to argue about.

Most Americans are unaware of this but that isn't necessarily the case overseas and especially in the emerging markets where the US budget deficit along with our huge foreign exchange deficit is creating real problems for these countries. The US response has been, "You have your central banks, deal with it." The problem is that the solution for their central banks is to create recessions in their own countries to cure the inflation that the US is exporting.

Despite popular in Russia theory US is not printing money, that's a fact.

 

[laughing dog]

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.

The "stupid economic theory" is neither stupid nor a theory. It is a simple matter of fact.

You will have hard time finding (actual) economists who agree with you.

Hardly. Facts are facts. The Fed's balance sheet in 2008 was $800 billion. It took them from 1914 until 2008 to get there. The Fed's current balance sheet is about $4 trillion. So we've had a five-fold increase in just 6 years. That's a fact, not a theory. There's really nothing to argue about.

Most Americans are unaware of this but that isn't necessarily the case overseas and especially in the emerging markets where the US budget deficit along with our huge foreign exchange deficit is creating real problems for these countries. The US response has been, "You have your central banks, deal with it." The problem is that the solution for their central banks is to create recessions in their own countries to cure the inflation that the US is exporting.

Facts are facts and there is no evidence that the US is exporting "inflation". Certainly not in the developed world. And much of the less developed world as well.

 

[tupac chopra]

Despite popular in Russia theory US is not printing money, that's a fact.

They aren't physically printing masses of money. They have been and still are creating huge amounts of money out of thin air, in order to buy toxic mortgages from banks, and to buy US treasuries. This is why Warren Buffet called the Fed the "largest hedge fund in history".
But, as he also noted, they will find that it is a lot easier to buy this crap than to sell it.

 

[tupac chopra]

Facts are facts and there is no evidence that the US is exporting "inflation". Certainly not in the developed world. And much of the less developed world as well.

Of course there is. Many of them have been madly making money to stop their own currencies becoming too strong

 

[laughing dog]

Facts are facts and there is no evidence that the US is exporting "inflation". Certainly not in the developed world. And much of the less developed world as well.

Of course there is. Many of them have been madly making money to stop their own currencies becoming too strong

Perhaps you could provide some evidence to that effect.

 

[funinspace]

Not that I want to fan the flames of the “collapsing dollar” mantra…but I found this article interesting (it might take an free account to access, but I'm not sure). Wow, the renminbi going from 2% of world trade to 8.66% in 2 years is a big jump. The US dollar has 80% per the article. With projections that Chinese GDP will surpass US GDP in 3-5 years, I’d imagine that this trend will continue, even if it slows down somewhat. In another decade the US won’t be able to bully financial organizations like SWIFT so easily…
http://www.thebanker.com/Editor-s-Blog/The-US-s-dollar-domination-is-coming-to-an-end

Expect the renminbi and the rouble to be increasingly used as trade currencies. Less than 2% of world trade was denominated in the Chinese currency back in January 2012, according to Swift. By October 2013, this had grown to 8.66%, making it the second most used currency after the dollar, and placing it ahead of the euro. Russia is the latest country to fear sanctions, and VTB’s chief executive Andrei Kostin told the newspaper the Financial Times that expanding the use of non-dollar currencies was one of the state-owned bank’s main tasks.

The era of American hegemony is drawing to a close to be replaced by a several competing power blocs. US exceptionalism – in imposing US laws beyond its borders and on non-US institutions – is hastening this process. From a pragmatic point of view, this should be an improvement – falling out with the US becomes less fatal. On the other hand, do not expect China or Russia to be any less severe with transgressors of their world view.

 

[boneyard bill]

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.

The "stupid economic theory" is neither stupid nor a theory. It is a simple matter of fact.

You will have hard time finding (actual) economists who agree with you.

Hardly. Facts are facts. The Fed's balance sheet in 2008 was $800 billion. It took them from 1914 until 2008 to get there. The Fed's current balance sheet is about $4 trillion. So we've had a five-fold increase in just 6 years. That's a fact, not a theory. There's really nothing to argue about.

Most Americans are unaware of this but that isn't necessarily the case overseas and especially in the emerging markets where the US budget deficit along with our huge foreign exchange deficit is creating real problems for these countries. The US response has been, "You have your central banks, deal with it." The problem is that the solution for their central banks is to create recessions in their own countries to cure the inflation that the US is exporting.

Facts are facts and there is no evidence that the US is exporting "inflation". Certainly not in the developed world. And much of the less developed world as well.

The US is running a FOREX deficit of about $800 billion a year. Where is that money going? Primarily into foreign central banks where it gets added their reserves which in turn boosts their money supply and causes inflation. Yes, they can sequester the money, but then it does them no good. Their best bet is to spend the money which is what a highly-centralized economy like China can do and they are which is why the dollar has fallen by one-third on the dollar index during this century. But to argue that there is "no evidence" that the US is causing inflation overseas in nonsense. The falling dollar alone is quite clear evidence for this as is the inflation in emerging countries like Brazil, Turkey, India, and China. Obama gets an earful about this at every G-20 meeting.

 

[boneyard bill]

Facts are facts and there is no evidence that the US is exporting "inflation". Certainly not in the developed world. And much of the less developed world as well.

Of course there is. Many of them have been madly making money to stop their own currencies becoming too strong

Good point which I neglected to address in my previous response. Many of these countries refuse to tighten their money supply because they do not want to lose a competitive advantage against the declining dollar. The dollar has only declined by one third this century because it is measured against other currencies which are also declining. It is a race to the bottom. The Chinese yuan has risen by about 30% against the dollar, but only because they manipulate their currency. In a free float it would have risen much more.

In my opinion this is bad policy. They should allow their currencies to rise, but modern economic theoretical nonsense insists that a "beggar they neighbor" policy is the way to go. In any case, it is just another way in which US money creation is creating a global monetary inflation.

 

[boneyard bill]

Not that I want to fan the flames of the “collapsing dollar” mantra…but I found this article interesting (it might take an free account to access, but I'm not sure). Wow, the renminbi going from 2% of world trade to 8.66% in 2 years is a big jump. The US dollar has 80% per the article. With projections that Chinese GDP will surpass US GDP in 3-5 years, I’d imagine that this trend will continue, even if it slows down somewhat. In another decade the US won’t be able to bully financial organizations like SWIFT so easily…
http://www.thebanker.com/Editor-s-Blog/The-US-s-dollar-domination-is-coming-to-an-end

Expect the renminbi and the rouble to be increasingly used as trade currencies. Less than 2% of world trade was denominated in the Chinese currency back in January 2012, according to Swift. By October 2013, this had grown to 8.66%, making it the second most used currency after the dollar, and placing it ahead of the euro. Russia is the latest country to fear sanctions, and VTB’s chief executive Andrei Kostin told the newspaper the Financial Times that expanding the use of non-dollar currencies was one of the state-owned bank’s main tasks.

The era of American hegemony is drawing to a close to be replaced by a several competing power blocs. US exceptionalism – in imposing US laws beyond its borders and on non-US institutions – is hastening this process. From a pragmatic point of view, this should be an improvement – falling out with the US becomes less fatal. On the other hand, do not expect China or Russia to be any less severe with transgressors of their world view.

I would note that the renmimbi isn't even fully convertible. Look for an even bigger increase when they make it convertible which should happen soon. This increase in trade is no accident. China has been making "currency swap agreements" with its trading partners all around the world. It began with Brazil but now include India, Russia, Japan, Australia, and even Britain, among others. This means that they balance their foreign exchange accounts with each other's currencies rather than dollars and ultimately, they settle in gold. India and Japan also have such an agreement and so does Russia and Japan. This "gold trade settlement" is not a return to the gold standard, but it does look like a viable alternative to the dollar as the reserve currency.

Will these other countries actually be a severe as the US has been with its dollar leverage? I doubt it. For one thing, it is this very use of our leverage which is helping to bring the dollar down, and Russia and China are exploiting that so they know the downside of such a policy which we haven't yet but soon will. For another, several leading currencies simply aren't going to have the leverage that you get from a global reserve fiat currency.

 

[barbos]

Despite popular in Russia theory US is not printing money, that's a fact.

They aren't physically printing masses of money. They have been and still are creating huge amounts of money out of thin air, in order to buy toxic mortgages from banks, and to buy US treasuries. This is why Warren Buffet called the Fed the "largest hedge fund in history".
But, as he also noted, they will find that it is a lot easier to buy this crap than to sell it.

Nope, they are not creating money out of thin air. They are creating loans out of thin air.
It does not cause inflation or anything associated with uncontrolled cash printing