CDZ Is US heading for a financial cliff?

[CultureCitizen]

2017 when the dollar stops being the default reserve currency.

Why is that going to happen?

Fiat overprinted currency.

The Fed stopped printing and the ECB and BOJ have begun.
Doesn't sound like a reason for everyone to dump dollars.

Whatever their reasons , chinese are dumping it fast.

I don't think the Chinese are 'dumping' the dollar.

At one point, China's reserve holdings were somewhere up near 90% in US dollars. Even in this graph, it's 75% in US dollars in 2003, right?

That's a heck of a lot of capital all locked up in one single currency.

I think... I could be wrong.... have been before, will be again... just my opinion. I think China is diversifying. I think they are getting more Euros, and Yen, and Sterling. I think they are just being wise, and investing in multiple currencies.

If they are dumping it.... then why are bond interest rates so low? Because if they were actually selling off their bonds, then interest rates would go up... and fast too.

Take a look at this.

The estimated amount of US treasuries owned by China, has gone up. Not down.

But notice in 2004 to 2005, they started buying corporate bonds, and equities.

I would suggest to you that this indicates what I was saying. Diversification. It's not that the amount of US dollar reserves have been dumped by China, but rather that they have purchased more reserves in other things. Thus as a percentage of their total reserves, the dollar has fallen, as they have increased other reserves.

But I don't think they are dumping the dollar. We would have known it by now, if they had. The interest rates on bonds would have tripled by now, if they were selling them off.

I think we are talking about different topics.
True , china holds an enormous amount of instruments which they can't dump too quickly, but the fact remains that they are doing a real effort to avoid using the USD as an exchange currency and cutting the USD share of foreign exchange reserves.
As China outgrows the US economy in absolute terms ( and not just PPP) it will become the most common reserve currency, and the US will have to live with higher interest rates.

Ditching US dollar China Russia launch financial tools in local currencies RT Business

China Reduces its US Dollar Holdings. The Geopolitics of Forex Reserves Diversification Global Research

 

[CultureCitizen]

There is only one way the dollar can be displaced. That's if we screw up our own economy, so that the dollar has no value. Could that happen? Of course. Anything can happen. But we'd really have to screw it to bits, to do that. We're no where close to that right now (although we're working on it).

I'll tell you what : the combination of the shale oil hoax, the trillions of derivatives held by the banks and the apparently never ending QE give me the creeps. On top of that the velocity of money keeps droping , It all spells recession to me.
But I would really, really like to be wrong.

 

[ralfy]

About global reserve currencies:

Triffin dilemma - Wikipedia the free encyclopedia

On oil price and QE:

The Oil Price Fall An Explanation in Two Charts

 

[Andylusion]

2017 when the dollar stops being the default reserve currency.

Why is that going to happen?

Fiat overprinted currency.

The Fed stopped printing and the ECB and BOJ have begun.
Doesn't sound like a reason for everyone to dump dollars.

Whatever their reasons , chinese are dumping it fast.

I don't think the Chinese are 'dumping' the dollar.

At one point, China's reserve holdings were somewhere up near 90% in US dollars. Even in this graph, it's 75% in US dollars in 2003, right?

That's a heck of a lot of capital all locked up in one single currency.

I think... I could be wrong.... have been before, will be again... just my opinion. I think China is diversifying. I think they are getting more Euros, and Yen, and Sterling. I think they are just being wise, and investing in multiple currencies.

If they are dumping it.... then why are bond interest rates so low? Because if they were actually selling off their bonds, then interest rates would go up... and fast too.

Take a look at this.

The estimated amount of US treasuries owned by China, has gone up. Not down.

But notice in 2004 to 2005, they started buying corporate bonds, and equities.

I would suggest to you that this indicates what I was saying. Diversification. It's not that the amount of US dollar reserves have been dumped by China, but rather that they have purchased more reserves in other things. Thus as a percentage of their total reserves, the dollar has fallen, as they have increased other reserves.

But I don't think they are dumping the dollar. We would have known it by now, if they had. The interest rates on bonds would have tripled by now, if they were selling them off.

I think we are talking about different topics.
True , china holds an enormous amount of instruments which they can't dump too quickly, but the fact remains that they are doing a real effort to avoid using the USD as an exchange currency and cutting the USD share of foreign exchange reserves.
As China outgrows the US economy in absolute terms ( and not just PPP) it will become the most common reserve currency, and the US will have to live with higher interest rates.

Ditching US dollar China Russia launch financial tools in local currencies RT Business

China Reduces its US Dollar Holdings. The Geopolitics of Forex Reserves Diversification Global Research

Ah ok. See when you said they were 'dumping the dollar fast', that to me implied they were selling off their dollar reserves. They are not.

As for everything else you said, yeah I agree with that. All of in fact. China will most certainly strengthen ties with Russia (given Russia is right at their door), and increase ties with other nearby economies. They said very openly they intended to diversify their reserves, and they are doing just that.

And yes, China will be the dominate economy.... assuming they continue to liberalize their economy, and nothing else happens.

One big protest in China could completely change the economic outlook. One thing about China, there are so many people, but if they decide to change stuff, it will happen. The government knows this, that's why they freak out every time anything happens.

As for interest rates... that's a given. Rates will go up. Now or later, with or without china, rates will go up.

The question is, will we be borrowing trillions of dollars to pay for health care or something, when it happens. If we are not borrowing... if we actually stop being fiscally irresponsible.... then it won't make too much of a difference. If we are borrowing.... that will cause problems.

 

[Andylusion]

There is only one way the dollar can be displaced. That's if we screw up our own economy, so that the dollar has no value. Could that happen? Of course. Anything can happen. But we'd really have to screw it to bits, to do that. We're no where close to that right now (although we're working on it).

I'll tell you what : the combination of the shale oil hoax, the trillions of derivatives held by the banks and the apparently never ending QE give me the creeps. On top of that the velocity of money keeps droping , It all spells recession to me.
But I would really, really like to be wrong.

I was under the impression that QE was over.

US Federal Reserve ends QE stimulus programme - BBC News

Of course it's government, and government lies constantly, so perhaps I'm wrong.

 

[SAYIT]

Greenspan warns: There will be a “significant market event… something big is going to happen”

US is heading for a cliff?

February 23, 2015

By Mac Slavo | SHTFPlan

With the Federal Reserve printing trillions upon trillions of dollars to keep the economic system afloat, many investors and financial pundits have surmised that the fundamental economic problems facing the United States during the crash of 2008 have been resolved. Stocks are, after all, at historic highs.
According to Lundin, the former Fed chairman made it clear that the central bank is facing a serious problem and one that will have significant ramifications in the future.
https://www.intellihub.com/federal-reserve-insider-alan-greenspan-warns-there-will-be-a-significant-market-event-something-big-is-going-to-happen/

You can expect more inflation, a stock crash near year end, and something worse by 2017 when the dollar stops being the default reserve currency.

Ah ... the sky is falling. I've been hearing the doom and gloom predictions for 5 years. I take it you missed the 150% market gains since 2009. Too bad for you.

Ah , links of course. There you go mate : foreign governments dumping dollars and the velocity of money falling, a clear sign of economic stagnation.

Jim Rickards The Coming 25-Year Great Depression
Velocity of M2 Money Stock - FRED - St. Louis Fed
The Velocity Of Money In The U.S. Falls To An All-Time Record Low Alex Jones Infowars There s a war on for your mind

Of course the exchange rate for the dollar is relatively high, mate. How do you explain that phenomenon? Why do foreign markets seem to have so much faith in the US economy and the dollar?

 

[Toddsterpatriot]

There is only one way the dollar can be displaced. That's if we screw up our own economy, so that the dollar has no value. Could that happen? Of course. Anything can happen. But we'd really have to screw it to bits, to do that. We're no where close to that right now (although we're working on it).

I'll tell you what : the combination of the shale oil hoax, the trillions of derivatives held by the banks and the apparently never ending QE give me the creeps. On top of that the velocity of money keeps droping , It all spells recession to me.
But I would really, really like to be wrong.

I was under the impression that QE was over.

US Federal Reserve ends QE stimulus programme - BBC News

Of course it's government, and government lies constantly, so perhaps I'm wrong.

QE is over, the ignorant whining about it is not.

 

[CultureCitizen]

Ah ok. See when you said they were 'dumping the dollar fast', that to me implied they were selling off their dollar reserves. They are not.

Oh , they are selling their dollar reserves, just not too fast. It doesn't show in your chart because its kind of old.
It is no secret that china and russia have agreements to trade surpasing the dollar.

And althoug I am no big fan of fracking, I would rather have a higher oil price so that all those companies can stay afloat, and thousands of Americans remain employed, than see the whole industry go to the sink hole.
If the companies survive , the risks of fracking will be know an investors and companies will be more prudent ( or so I hope).

Chinese Reduce Their Holdings of US Treasury Bonds for the Fourth Consecutive Month SilverDoctors.com
Russia and China Announce that they have been selling U.S. Treasuries SBC Gold

 

[HenryBHough]

Seems more and more likely there won't be a "crash" - rather just a continued slow erosion. Proving, once again, my instructions to my broker to sell 10% of holdings each time the DJIA achieves a new 52-week high. Not much left just now so exposure is minimal. I will not, however, share with anyone the makeup of the "basket" of alternative currencies that's proving not only sheltering but also quite profitable.

Just me and George Soros. Though I'm working in terms of slices of cupcakes and he's thinking in terms of big pies.

 

[2aguy]

No...at 18 trillion in debt we went over a long time ago........

 

[katsung47]

(Reuters) - U.S. retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, tempering expectations for a sharp acceleration in consumer spending in the fourth quarter.
U.S. retail sales drop biggest in 11 months, but seen as a blip

By Lucia Mutikani

WASHINGTON Wed Jan 14, 2015
The Commerce Department said on Wednesday retail sales fell 0.9 percent, the biggest decline since last January, after increasing 0.4 percent in November.
http://www.reuters.com/article/2015/01/14/us-usa-economy-idUSKBN0KN1HY20150114

How can people have no money to spend while more people get employed?
------------------------

US jobless rate falls to 5.6% in best year since 1999
By Paul HandleyJanuary 9, 2015
Washington (AFP) - The US unemployment rate fell to 5.6 percent in December, the lowest level in six and a half years, as the country capped its best year for job creation since 1999.
http://news.yahoo.com/us-unemployment-rate-falls-5-6-140539065.html

 

[CultureCitizen]

(Reuters) - U.S. retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, tempering expectations for a sharp acceleration in consumer spending in the fourth quarter.
U.S. retail sales drop biggest in 11 months, but seen as a blip

By Lucia Mutikani

WASHINGTON Wed Jan 14, 2015
The Commerce Department said on Wednesday retail sales fell 0.9 percent, the biggest decline since last January, after increasing 0.4 percent in November.
http://www.reuters.com/article/2015/01/14/us-usa-economy-idUSKBN0KN1HY20150114

How can people have no money to spend while more people get employed?
------------------------

US jobless rate falls to 5.6% in best year since 1999
By Paul HandleyJanuary 9, 2015
Washington (AFP) - The US unemployment rate fell to 5.6 percent in December, the lowest level in six and a half years, as the country capped its best year for job creation since 1999.
http://news.yahoo.com/us-unemployment-rate-falls-5-6-140539065.html

They usually measure unemployment rate by polling the number of persons actively seeking a job.
You are not counted into the stat if you have given up finding a job.

 

[katsung47]

CEO of Gallup admits 5.6% unemployment is a big lie.

The Big Lie: 5.6% Unemployment

by Jim Clifton
February 3, 2015

Here's something that many Americans -- including some of the smartest and most educated among us -- don't know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.

Right now, we're hearing much celebrating from the media, the White House and Wall Street about how unemployment is "down" to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.
(Jim Clifton is Chairman and CEO at Gallup.)
http://www.gallup.com/opinion/chairman/181469/big-lie-unemployment.aspx

 

[Entrepredoer]

Certainly debt makes the economy more fragile and less credible. I doubt the United States with such a huge budget would allow itself to simply crash; however, could there be penalties on the economy if debt continues to add up? Of course. Countries would be less likely to loan us money and we could be then "encouraged" to start allocating funds more wisely (or less stupidly).

 

[auditor0007]

Greenspan warns: There will be a “significant market event… something big is going to happen”

US is heading for a cliff?

February 23, 2015

By Mac Slavo | SHTFPlan

With the Federal Reserve printing trillions upon trillions of dollars to keep the economic system afloat, many investors and financial pundits have surmised that the fundamental economic problems facing the United States during the crash of 2008 have been resolved. Stocks are, after all, at historic highs.
According to Lundin, the former Fed chairman made it clear that the central bank is facing a serious problem and one that will have significant ramifications in the future.
https://www.intellihub.com/federal-reserve-insider-alan-greenspan-warns-there-will-be-a-significant-market-event-something-big-is-going-to-happen/

I'm not going to worry too much about what Greenspan has to say. He was the most important player leading to the crash of 2008. He did more than anyone to create the real estate bubble and bust. As for his analysis, he is forgetting the fact that the dollar has been steadily gaining strength against all foreign currencies as is much stronger today than it was six years ago. His concerns would carry much more weight if the the rest of the global economy was in much better shape, but the fact is that the US economy is one of the strongest and the strongest of all the top economies in the world today.

 

[auditor0007]

Certainly debt makes the economy more fragile and less credible. I doubt the United States with such a huge budget would allow itself to simply crash; however, could there be penalties on the economy if debt continues to add up? Of course. Countries would be less likely to loan us money and we could be then "encouraged" to start allocating funds more wisely (or less stupidly).

The debt is slowly decreasing as a percentage of GDP, although not by much. It is projected to decrease slightly through 2020.

 

[Politico]

(Reuters) - U.S. retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, tempering expectations for a sharp acceleration in consumer spending in the fourth quarter.
U.S. retail sales drop biggest in 11 months, but seen as a blip

By Lucia Mutikani

WASHINGTON Wed Jan 14, 2015
The Commerce Department said on Wednesday retail sales fell 0.9 percent, the biggest decline since last January, after increasing 0.4 percent in November.
http://www.reuters.com/article/2015/01/14/us-usa-economy-idUSKBN0KN1HY20150114

How can people have no money to spend while more people get employed?
------------------------

US jobless rate falls to 5.6% in best year since 1999
By Paul HandleyJanuary 9, 2015
Washington (AFP) - The US unemployment rate fell to 5.6 percent in December, the lowest level in six and a half years, as the country capped its best year for job creation since 1999.
http://news.yahoo.com/us-unemployment-rate-falls-5-6-140539065.html

It's called Obamanomics.

 

[Stephanie]

 

[Delta4Embassy]

National debt is over $18 trillion. Couldn't pay off even a $1 trillion debt. And our own money is imaginary since it isn't actually based on anything of value. It's based on happy thoughts and fairy dust.

We're not heading for a cliff, we're already on the edge of it doing a remarkable balancing act.

 

[HenryBHough]

When those who have given up on looking for work after a couple of years of wasted effort turn to mugging folks for income.....does that constitute having "found employment"?