Next week a UN panel will make a recommendation that the world switch to a new reserve currency because the US Dollar may be scaled down in the holdings of the major central banks as concerns about its stability persists. The United States has pursued one of the greatest spending sprees; perhaps the biggest spending spree in the known history of this planet, and the combination of debt and monetized debt has nations holding the dollar concerned that its value may sharply drop. It’s a basic law of supply and demand, when the world is flooded with trillions of dollars it’s not very scarce and the demand for it as a currency falls. The United States continues to borrow and print more money and in recent days it’s become clear that the Chinese hate us for our monetary policy, Russia plans to ask for a new world currency in the upcoming G20 meeting, Europe is looking for a new world currency and now the UN is jumping on the bandwagon.
The once mighty dollar was led to its demise not by Wall Street, but by Washington, as a combination of Congressional Corruption and the machinations of the nefarious Federal Reserve System forced mortgages to be written based on political correctness while the interest rates were maintained too low for too long. You can’t force banks to make loans based on what Barney Frank and Nancy Pelosi think is fair instead of basing your decisions on the person’s ability to pay back the loan. You can’t create massive Quasi-Governmental Golems like Fannie Mae and Freddie Mac, who are neither government agencies nor profit making corporations, to fund a bizarre social ideal in which financial sanity is replaced by Democrat Ideology. It didn’t work: and the result tanked the mortgage industry that then tanked the banks and the credit froze up and now it’s out of control and spreading to every sector of the economy.
While it’s true that our constitution says we were all created equally it has been construed by half the population, thru an insidious campaign of political correctness, to mean that we must have an equality of outcome to be a just society. It’s a theory that believes the government should redistribute wealth from those who have earned it to those who have not. It’s what Eugene McCarthy warned us about in the fifty’s, and was subsequently vilified for, and yet his concerns about leftist colonization of key industries like higher education, entertainment, media and journalism seem downright prescient in early 2009. All the attempts to point out over the years the fundamental unsoundness of our mortgage lending was shouted down by cries of racism and angry accusations that one lacked compassion if he would not be browbeaten into supporting mortgages to the poor that they could not possibly repay.
While the Congress of the United States continues its witch hunt inquisition of Wall Street CEO’s, like Mr. Stewart of AIG, it makes clear that Congress couldn’t run a pay toilet. All the AIG upper management should be out the door as fast as they can: as laws are unconstitutionally crafted by a lynch mob congress to personally attack them for Congresses’ own folly. Now the world wants a new currency and when it happens the United States of America will be finished as a superpower as we go the way of the USSR. The world doesn’t care about democrats trying to extort mortgages for client groups who can’t afford them: they just want a stable unit of value that can’t be looted by a bunch of American Professional Politicians who screwed up bad and are continuing to make it worse in an effort to cover their tracks. I can’t say that I blame them.
The word will go forward that Capitalism failed and is an inherently evil and an unfair economic theory. That’s a shame because it wasn’t capitalism that failed: It was the Incumbent System of Congress that failed us. Professional Politicians with entrenched interests no longer represents liberals and conservatives in the American Electorate they simply represent themselves. The American People want good and wise laws reflecting the majority; and the Professional Politicians’ want perpetual reelection and power., For all intents and purposes the interests of the people and our own government are now diametrically opposed. We need term limits on Congress, and we need them now. This UN panel that wants to drop the dollar is representative of where the world is going, it’s just a matter of time, and it’s going to hurt our kids and grandkids a lot. Consider this Article from Reuters:
Wed Mar 18, 2009 11:16am EDT
By Jeremy Gaunt, European Investment Correspondent
LUXEMBOURG (Reuters) – A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.
Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.
Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.
“It is a good moment to move to a shared reserve currency,” he said.
Central banks hold their reserves in a variety of currencies and gold, but the dollar has dominated as the most convincing store of value — though its rate has wavered in recent years as the United States ran up huge twin budget and external deficits.
Some analysts said news of the U.N. panel’s recommendation extended dollar losses because it fed into concerns about the future of the greenback as the main global reserve currency, raising the chances of central bank sales of dollar holdings.
“Speculation that major central banks would begin rebalancing their FX reserves has risen since the intensification of the dollar’s slide between 2002 and mid-2008,” CMC Markets said in a note.
Russia is also planning to propose the creation of a new reserve currency, to be issued by international financial institutions, at the April G20 meeting, according to the text of its proposals published on Monday.
It has significantly reduced the dollar’s share in its own reserves in recent years.
Persaud said that the United States was concerned that holding the reserve currency made it impossible to run policy, while the rest of world was also unhappy with the generally declining dollar.
“There is a moment that can be grasped for change,” he said.
“Today the Americans complain that when the world wants to save, it means a deficit. A shared (reserve) would reduce the possibility of global imbalances.”
Persaud said the panel had been looking at using something like an expanded Special Drawing Right, originally created by the International Monetary Fund in 1969 but now used mainly as an accounting unit within similar organizations.
The SDR and the old Ecu are essentially combinations of currencies, weighted to a constituent’s economic clout, which can be valued against other currencies and indeed against those inside the basket.
Persaud said there were two main reasons why policymakers might consider such a move, one being the current desire for a change from the dollar.