Gold Replacing Dollar as World’s Reserve Currency?

[JBeukema]

er barrel oil. Cotton prices at record levels. Food prices at 2008 highs. Typically, such commodity price increases would send central banks running to the U.S. Dollar to secure the value of their savings. After all, the dollar has been the reserve currency since World War I. But not this time.

Central banks are shedding dollars, reducing their holdings by about $9 billion in previous quarter, according to Nomura Securities’ Jens Nordvig, global head of G10 FX Strategy.
What are they buying instead? Gold

News Headlines

 

[william the wie]

This is news?

 

[waltky]

Granny got her money in Halliburton an' BP stocks...

Expert: U.S. should 'give up on the dollar'
April 15, 2011: The push to replace the U.S. dollar as the world's reserve currency has been gaining steam, with one expert arguing that America "must give up on the dollar."

In a Financial Times op-ed, Michael Pettis, a finance professor at Peking University, said U.S. policymakers should lead the charge to create a more diverse reserve system, "in which the dollar is simply first among equals." The dollar has been the dominant reserve currency for decades, with central banks and other institutions around the world amassing vast reserves. Pettis argues that this has resulted in dangerous trade imbalances that threaten to destabilize the global economy. He contends that countries such as China have been able to "game the system" by stockpiling dollars, which has allowed them to grab a larger share of global demand for goods and services.

At the same time, the U.S. economy has suffered as money rushes out of the country and into red-hot emerging markets. Pettis said this leaves the United States with a stark choice between further pain in the job market, as demand continues to shift overseas, or adding to already massive deficits to finance domestic growth. "Americans, in other words, must choose between higher unemployment and higher debt," Pettis wrote. As such, the United States may eventually need to force the rest of the world to gradually "disengage" from the dollar as a reserve currency if it continues to decline.

The dollar index, which measures the greenback against a basket of currencies, has fallen 5% so far this year to around 74.80. That's down from a high near 87 in June of 2009, as jittery investors flocked to the dollar for safety. However, there is not an obvious alternative to the dollar. Pettis suggested that the euro could emerge over the next decade, since no other world currency has "the necessary characteristics to allow it plausibly to serve the needs of the global economy." But he suggested that European officials would resist taking on the responsibility, since it would saddle the European Union with the same burdens currently facing the United States.

MORE

 

[Mr Liberty]

Granny got her money in Halliburton an' BP stocks...

Expert: U.S. should 'give up on the dollar'
April 15, 2011: The push to replace the U.S. dollar as the world's reserve currency has been gaining steam, with one expert arguing that America "must give up on the dollar."

In a Financial Times op-ed, Michael Pettis, a finance professor at Peking University, said U.S. policymakers should lead the charge to create a more diverse reserve system, "in which the dollar is simply first among equals." The dollar has been the dominant reserve currency for decades, with central banks and other institutions around the world amassing vast reserves. Pettis argues that this has resulted in dangerous trade imbalances that threaten to destabilize the global economy. He contends that countries such as China have been able to "game the system" by stockpiling dollars, which has allowed them to grab a larger share of global demand for goods and services.

At the same time, the U.S. economy has suffered as money rushes out of the country and into red-hot emerging markets. Pettis said this leaves the United States with a stark choice between further pain in the job market, as demand continues to shift overseas, or adding to already massive deficits to finance domestic growth. "Americans, in other words, must choose between higher unemployment and higher debt," Pettis wrote. As such, the United States may eventually need to force the rest of the world to gradually "disengage" from the dollar as a reserve currency if it continues to decline.

The dollar index, which measures the greenback against a basket of currencies, has fallen 5% so far this year to around 74.80. That's down from a high near 87 in June of 2009, as jittery investors flocked to the dollar for safety. However, there is not an obvious alternative to the dollar. Pettis suggested that the euro could emerge over the next decade, since no other world currency has "the necessary characteristics to allow it plausibly to serve the needs of the global economy." But he suggested that European officials would resist taking on the responsibility, since it would saddle the European Union with the same burdens currently facing the United States.

MORE

China and Russia are talking about creating a new currency backed by gold, replacing the U.S. dollar as the reserve currency.

Russia backs return to Gold Standard to solve financial crisis - Telegraph

If the dollar loses its status as the reserve currency, we will no longer be able to use devalued dollars to pay our foreign debt. This will cause hyperinflation quite quickly. Washington has been silent on the issue.
We need to stop the printing presses, now. We need cut deeply and balance our budget. None of this is going to happen. I am buying silver and storing food. I have never feared total economic collapse before, but I think it is a very real possibility.

Having said all of this, I could be wrong.

 

[Toro]

There's not enough gold in the world for it to replace the dollar.

There sure is a lot of bearishness on the dollar.

 

[waltky]

Granny says dem politicians don't know what dey doin' - dey just monkeyin' around...

Treasury’s Geithner: Solving Fiscal Crisis Key to Maintaining Confidence in Dollar
Thursday, May 05, 2011 – Treasury Secretary Timothy Geithner said the key to maintaining global confidence in the dollar rests with whether the U.S. government can solve its fiscal problems. The federal budget deficit projected for fiscal year 2011 is $1.6 trillion and the national debt is now $14.33 trillion.

Geithner, speaking to a gathering of mutual fund advisors in Washington, D.C., on Wednesday, explained that if America wants to remain the world’s most attractive market, government must solve its fiscal problems. “Ultimately, what matters most is our capacity to earn the confidence of the world – that this is a good place to invest your resources, that the balance of safety, liquidity, and return will be higher here than in many of the alternative places you can put your money,” said Geithner. “And that requires, again, and particularly because of the damage to confidence caused by this crisis, that we work very hard to do a better job of earning that confidence – rebuilding where we need to,” he said. “And that is about growth fundamentals, it’s about the basic integrity and strength of your financial system, and it’s about fundamentally getting out of these fiscal problems.”

Government, Geithner said, would have to resolve its fiscal issues as well if global markets were to maintain their confidence in the dollar. “If we do, as we have always done in the past, if we’re able to get this political system in Washington to do a better job of delivering policies in those areas, then we’ll be able to continue to earn that confidence that you see reflected in U.S. financial markets today,” he said. Geithner also threw cold water on the idea that other large world economies, such as China and Russia, might be able to move away from the dollar as the world’s reserve currency. Both countries have expressed skepticism that the dollar can continue to serve that role, suggesting that maybe other countries ought to consider an alternative. Geithner said that would not be happening anytime soon because none of the countries suggesting alternatives have the type of free and open markets found in America.

“I don’t think there’s any realistic prospect of really dramatic or substantial change in the global monetary system in the next decade or two,” Geithner said. “I think that over the longer term as these economies get stronger, if they really open up their financial systems, if their currencies are really flexible, if they dismantle controls on capital movement, if they integrate more fully, then it’s possible over a longer period of time you’d see a more significant shift,” he said. “But not until you see those changes happen and they’re at the very early stages – let’s just take China for example – the very early stage of letting their currency reflect market forces of letting people use their currency,” said Geithner. “So I don’t think that’s going to come very rapidly.”

Source

 

[sparky]

If the dollar loses its status as the reserve currency, we will no longer be able to use devalued dollars to pay our foreign debt. This will cause hyperinflation quite quickly. Washington has been silent on the issue.
We need to stop the printing presses, now. We need cut deeply and balance our budget. None of this is going to happen. I am buying silver and storing food. I have never feared total economic collapse before, but I think it is a very real possibility.

Having said all of this, I could be wrong.

yup

and you're far from alone Liberty

the asian monetary consortium has been moving towards a fiat all their own, pushing the IMF for SDR's in liue of the USD

the implications could, overnight, be of an economic magnitude not seen before, the only saving grace is the debt we owe, and who holds it

but like any gambling addict, the bookie will come down on a bad risk, even if it means his own loss


Cotton prices at record levels.

I'm pickin' as fast as i can.....

 

[expat_panama]

...Expert: U.S. should 'give up on the dollar'
April 15, 2011: The push to replace the U.S. dollar as the world's reserve currency has been gaining steam, with one expert arguing that America "must give up on the dollar."

...The dollar index, which measures the greenback against a basket of currencies, has fallen 5% so far this year to around 74.80. That's down from a high near 87 in June of 2009, as jittery investors flocked to the dollar for safety...

The dollar index is proof that we're in a dollar-crisis now, even though it was worse three years ago when we weren't. CNBC also tries to push the EURO becuase it's strong now, even though they didn't push it three years ago when it was stronger.

How about instead we give up on this 'give up on the dollar' hype.

 

[Baruch Menachem]

Reserve currency is not something that can be assigned. It is a status that is earned (or lost) by the actions of the governments involved.

Russia leading a currency reform is a rich joke. they have hyper inflated so many times that they have had to take three zeros off the currency 7 times.

 

[percysunshine]

If I can easily trade toilet paper for food, I do not need a small piece of paper.

 

[sparky]

Government, Geithner said, would have to resolve its fiscal issues as well if global markets were to maintain their confidence in the dollar. “If we do, as we have always done in the past, if we’re able to get this political system in Washington to do a better job of delivering policies in those areas, then we’ll be able to continue to earn that confidence that you see reflected in U.S. financial markets today,” he said. Geithner also threw cold water on the idea that other large world economies, such as China and Russia, might be able to move away from the dollar as the world’s reserve currency


Phenomenal doublespeak from a former (NY fed) insider , almost on par with Greenspan

he's basically advocating kenyesianism, while having led the lobbyists astray from anything resembling it

Wall Street chiefs do not often lobby top regulators directly, but this issue is unusually important to Goldman.

"They're totally freaked out about Volcker," said a Goldman lobbyist who declined to speak on the record for fear of losing the contract. "People are working on that a lot, with agency staff, with lawmakers, you name it."

http://www.huffingtonpost.com/2011/05/04/goldman-sachs-volcker-rule-lobbying_n_857491.html


- The U.S. Treasury Department wants to give regulators discretion to define proprietary trading as the White House tries to revive its plan to bar banks from making hazardous bets that could cause another financial crisis

'Volcker Rule' Stalls In Senate: Geithner May Give Regulators Leeway In Applying Plan

 

[editec]

There's not enough gold in the world for it to replace the dollar.

There sure is a lot of bearishness on the dollar.

There will be, sooner or later, when the world bankster cabal has converted enough of their wealth into some other specie.

 

[expat_panama]

There's not enough gold in the world for it to replace the dollar.

There sure is a lot of bearishness on the dollar.

There will be, sooner or later, when the world bankster cabal has converted enough of their wealth into some other specie.

At today's prices there's about $6 trillion worth of gold that's been mined, and the amount of dollars in currency is only about a third of a trillion. OK, currency is just 2 or 3 % of the world's dollars, but we still have a half trillion tons of gold on the earth's surface, so at $1,500/oz that's about $8,500,000T.

 

[william the wie]

I'm generally with Toro and ex-pat on this but I do think the attempt to get back to a gold standard will help my gold investments.

 

[sparky]

R Paul opines on the fiat system, no doubt to plug his new bill>

Single and Dual-Tier Fiat Monetary Systems [Republicae] | Ron Paul 2012 | Sound Money, Peace and Liberty

 

[william the wie]

R Paul opines on the fiat system, no doubt to plug his new bill>

Single and Dual-Tier Fiat Monetary Systems [Republicae] | Ron Paul 2012 | Sound Money, Peace and Liberty

This will probably change when asteroid mining comes online 50-100 years from now, Gold, silver and other precious metals will be byproducts of such mining, but it is certainly true now.