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Meet the World’s New Reserve Currency: The Chinese Yuan
- Text size
Mike Whitney
Information Clearing House
October 25, 2008
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| "The harsh reality of the economic fallout isn’t that Joe the plumber can’t buy his business or that people’s retirement funds are being lost or that unemployment is rising; the harsh reality is that people will die." | |
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Things are getting worse. On Friday morning, futures trading was halted for the first time ever after futures plunged more than 5 percent. The sell-off came after another 500-plus down day on the Dow followed by steep declines in equities markets across Europe and Asia. Japan’s benchmark index, the Nikkei, slipped more than 9.5 percent after Toyota and Samsung reported disappointing earnings. The news was equally bad in Europe where shares were battered across the continent on fears of a global recession. Since September, $16 trillion has been erased from global stock market value. Losses in the US–where the financial turmoil originated–have been much smaller than other, more vulnerable markets. The Dow is down less than 40 percent from its peak of 14,000, whereas Hong Kong, Poland and China have all tumbled more than 60 percent. Its a bloodbath.
The Chicago Board Options Exchange Volatility Index, “the Fear Index”, surged to 79.13 on Friday, the highest in its 18-year history, while the Dow clawed its way back from 500 points down to a 312 point loss on the day. The massive blow-off in stocks is mainly the result of ongoing deleveraging among the hedge funds which are dumping shares in at a record pace to cover the dwindling value of their asset base. According to the New York Times: “Hedge funds lost an estimated $180 billion during the last three months and some are near collapse. Investors are demanding their money back, and Wall Street is bracing for a shake-out in the $1.7 trillion industry.” If a large fund, like Citadel, goes down, it will create a black hole in the financial system, similar to the loss of Lehman Bros. and, once again, the US Treasury will have to come to the rescue by providing a multi-billion dollar taxpayer bailout.
The dislocations caused by the unwinding of the hedge funds creates the possibility that US markets will have to be closed while assets are dumped on the market. New York University Professor Nouriel Roubini summed it up like this:
“Policy makers may soon be forced to close financial markets as the panic selling accelerates.
Indeed, we have now reached a point where fundamentals and long term valuation considerations do not matter any more for financial markets. There is a free fall as most investors are rapidly deleveraging and we are on the verge of a a capitulation collapse. What matters now is only flows – rather than stocks and fundamentals – and flows are unidirectional as everyone is selling and no one is buying as trying to buy equities is like catching a falling knife. There are no buyers in these dysfunctional markets, only sellers and panic is the ugly state of this destabilizing game.
We have reached the scary point where the dysfunctional behavior of financial markets has destructive effects on the financial system and – much worse – on the real economies. So it is time to think about more radical policy actions and government interventions.” (Nouriel Roubini’s Global EconoMonitor)
The stock market rout has triggered gigantic swings in the currency markets, too. The dollar has surged 16 percent against the euro in a matter of weeks while every other currency in the world has steadily lost ground, excluding the yen. The sudden fall in commodities and the unwinding of dollar-based bets in foreign capitals has bolstered the dollar and made US Treasurys the preferred “flight to safety” investment.
The volatility is causing problems everywhere, particularly where foreign companies must pay back loans in dollars which have risen steeply in relation to their own currencies. Emerging “commodities based” markets are getting clobbered. The stronger dollar also threatens to make it harder on US exports which have been the one economic bright spot in recent months. If present trends continue, then foreign governments will have to allocate more of their reserves to prop up their own currencies which will make it even more difficult for the US to fund its current account deficit as well as the Treasury’s expanding balance sheet. In other words, these violent and unprecedented currency swings foreshadow a funding crisis looming just ahead as credit is drained from the financial system and capital becomes even scarcer. For now the dollar is flying high, but the future is looking grimmer by the day.
The financial crisis is wringing credit from the system and pushing prices downward across the board. No asset class has been spared, including gold which posted its biggest one week loss in 28 years and has plummeted from $1,040 in March to $734 at Friday’s market close.
Oil has also been hammered by speculative bets made by the hedge funds which are now forced to sell their positions to cover downgrades on their mortgage-backed assets. The erratic movement in oil prices makes it possible to see the real destructive power of the unregulated market, particularly the opaque buying and selling by the hedge funds. In just 14 months oil went from $70 to $145 and back to $67 again on Friday. Wall Street speculators drove up prices with money they borrowed from the investment banks and delivered a knockout blow to the US consumer. The Fed played a critical role in this “gaming the system” by providing the low interest credit that created burgeoning profits for the investment class and falling living standards for everyone else.
Now that the currency bubble has popped, its effects are being felt worldwide. Countries that benefited from the high commodities prices are now getting slammed everywhere from Russia to the Persian Gulf. Ethanol producers are facing bankruptcy if things do not turnaround in the next 12 months. As the Wall Street Journal notes:
“The tragedy of the second bubble is that it has left the economy in a weaker position to ride out the housing slump and credit panic. The American consumer has been whipsawed with $4 dollar gas and food inflation, while entire industries have been put on the edge of bankruptcy. Detroit’s auto makers have spent the last year taking down their truck and SUV assembly lines while gearing up to make hybrids and electric cars, even as their cash flow has been ravaged. Their new investments are based on the expectation that oil will stay high permanently, but will the market for hybrids exist if oil is $50 a barrel?
- A d v e r t i s e m e n t
As Congress plumbs the causes of our current mess, the main one is hiding in plain sight: Reckless monetary policy that did so much to create the credit mania and then compounded the felony with a commodity bubble and run on the dollar whose damage is now becoming apparent.” (Wall Street Journal)
The effects of low interest rates and credit contagion are not limited to “bottom line” considerations. As Marketwatch’s Thomas Kostigen points out, monetary policy can be a death sentence for poor people across the planet who are invariably it biggest victims:
“The harsh reality of the economic fallout isn’t that Joe the plumber can’t buy his business or that people’s retirement funds are being lost or that unemployment is rising; the harsh reality is that people will die.
Already, since food prices began to rise 100 million more people have been pushed into poverty, according to the World Bank, with as many as two billion on the verge of disaster. Almost half the world’s population, let’s remember, live on less than $2.50 per day. Millions die annually of hunger and starvation, and more than a billion do not have access to fresh water.
These numbers are poised to rise dramatically with population growth, dwindling natural resources and higher consumer prices across all goods and services. So as the stock market tumbles and the world economy falters, it’s important to remember that it’s more than financial losses we are talking about, it’s the loss of life.
And increasingly it isn’t just people in far-off places around the world who are succumbing to such extreme hardships. Note this: Job losses in the state of Indiana have caused the child poverty rate there to spike 29% since 2000. The wealth gap in the United States and around the world is at record levels — and it has serious consequences.
The Organization for Economic Cooperation and Development reported this week that the gap between the rich and the poor is getting bigger around the world, and that the U.S. is experiencing the biggest dichotomy.
We are experiencing the largest wealth gap in history. Further erosion of the economic floor will only send more people plunging into destitution.
This is why it’s so important to fix the economic crisis — now.
We’re all linked.” (MarketWatch)
The Bush administration has called for an economic summit to be held by the 20 largest economies sometime after the presidential elections. US and EU officials are hoping to stitch together another Bretton Woods wherein control of the global economic system was delivered to those same nations. It’s likely, however, that the outcome will turn out considerably different than anticipated. Already, under China’s leadership, 12 Asian nations have agreed to set up an 80-billion-dollar fund to protect their economies from currency-runs, capital flight or other financial disruptions. China has the world’s largest reserves at $1.9 trillion followed by Japan at more than $1 trillion. Clearly the two richest nations will set the agenda and play a central role in deciding how best to deal with the global recession.
The November summit in Washington could produce some unwelcome surprises which were hinted at by Thailand’s Deputy Prime Minister, Olarn Chaipravat, who told Bloomberg News: ,
“The message of this initiative is for China to consider whether or not China would open up its banking system and allow the strongest currency in the world, which is the Chinese yuan, to be the rightful and anointed convertible currency of the world.”
Surely, the present financial malaise which has its roots in Wall Street and at the Federal Reserve, has demonstrated that the dollar must be replaced as the world’s “reserve currency” and that America must be deposed as the de facto steward of the global economic system. Leadership implies responsibility and the US must be held to account for its failings. It’s time for a change.
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October 25th, 2008 at 8:57 pm
here here, american financiers have lied for years to all of us. they should f---ing hang the bastards no more no less
October 25th, 2008 at 9:01 pm
14And deceiveth them that dwell on the earth by the means of those miracles which he had power to do in the sight of the beast; saying to them that dwell on the earth, that they should make an image to the beast, which had the wound by a sword, and did live.
15And he had power to give life unto the image of the beast, that the image of the beast should both speak, and cause that as many as would not worship the image of the beast should be killed.
16And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:
17And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name
18Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.
its just a matter of short time! kevin coleman scienceofficer at justintv.
October 25th, 2008 at 9:16 pm
Mankind cannot govern themselves. Next step: Armagedeon
October 25th, 2008 at 9:22 pm
667 the neighbour of the beast WOW lol
October 25th, 2008 at 9:34 pm
this is what the government doesn’t think will happen because they think the Chinese are SOOOOOOOO dependent on the US for survival. well, hello, the Chinese growth is now down due to the global crisis and when the US tanks next year anyway, then what will the Chinese need the US for? Probably just STORAGE.
October 25th, 2008 at 9:34 pm
i agree with #1, the sooner the better
October 25th, 2008 at 9:36 pm
would you like some rice with those wontons m’am?
October 25th, 2008 at 9:40 pm
Information clearing house,from which this article is taken from, is just as much a propaganda tool as any other NWO horse-hooey.For example “millions of people will die” <—-don’t tell me that peole are so stupid they don’t even know how to grow a garden or raise livestock.
October 25th, 2008 at 9:48 pm
#8 most Americans live in cities and suburbs and not the country, hence why this crisis will be worse the the Great Depression of the 1930’s (people back then for the most part lived in the country).
October 25th, 2008 at 10:02 pm
#8, I don’t know anything about the information clearing house. However I do know that there are a lot of people out there who have been conditioned to think that the world owes them a living. And when that world they live in collapses they will not be able to think for themselves, because they haven’t ever done that. The bottom line is if the food supply stops there are a large number of people who will be so used to eating at Mcs--- and Taco Smell that they will turn to violent fatal murderous rioting or starvation. I have heard, from several people that I know “I DONT NEED FOOD STORAGE I JUST NEED A GUN AND THE ADDRESS OF A MORMON”. So it’s starve, or murder the choice is up to the unprepared. But there will be rioting, killing, and starving. There will be a few who will have to use guns to protect the food supply they have. Yes they are really that stupid or lazy. It’s easier to load and shoot than work for food.
October 25th, 2008 at 10:12 pm
2bwise:
Tell me, where are all the people in downtown Detroit or Chicago going to plant that garden, or keep that livestock? LOL! Most people barely know how to cook for themselves, let alone maintain a garden and slaughter animals! Half this Country is composed of hideously useless human beings who have rarely struggled for anything in their lives. When the Government DOESN’T give them a free ride like they expect, you’re going to see millions starving in the streets. The time for naivety is over, this is all VERY REAL and its happening RIGHT NOW.
October 25th, 2008 at 10:23 pm
667, the “beast across the street”. Sorry. We know about the Antichrist, the mark and
“Arma-ged-eon”. But until we’re drowned by tsunamis, burnt up by a flaming comet
or stung to death by horse-headed scorpions we must keep on keeping on.
Over 2 billion will survive all the tribulation stuff and it will be great to see the devil
chained and thrown into the bottomless pit. Meantime we go about the business of
living; to keep our loved ones, friends and neighbors.
There will be cities of refuge where decent people will band together for strength.
The NeoNazis will NOT succeed in turning the earth into a sterile anthill with them
as the Queens and the rest of us as workers.
They will NOT succeed in stealing all the resources and eliminating production of food.
“For as long as the earth remains there shall be seedtime and harvest”.
So mankind will survive, the smoke will clear, storm clouds will dissolve into sunlight.
There is a Mighty Hand that ultimately rules over the affairs of men, and all their
make-believe gods must bow the knee to His final authority. Evil has NEVER won
completely over good and this time will be no different.
But we must do our part. At a critical time in history the Bible declares that God
“sought for a man to make up the hedge, to stand in the gap for this people; yet
He found none, so the nation is turned over for destruction.”
We HAVE men like Alex Jones, Lindsey Williams, Jim Tucker and many others
who are “standing in the gap” against the New World Order, and it will fail. This
mess is the devil taking his last, best shot against mankind. But he’s always
been a loser and so is everyone who has ever followed him.
So stock up, stand up and pray up, Patriots. It’s about to be our finest hour!
October 25th, 2008 at 10:54 pm
“I have heard, from several people that I know “I DONT NEED FOOD STORAGE I JUST NEED A GUN AND THE ADDRESS OF A MORMON”.”
To think Mormons don’t have guns and/or lack the will to use them in defense of their families and property is a big mistake. Not to mention, Mormons can organize themselves faster in an emergency than any other group I know. Tell your buddies that they are I’ll advised to think Mormons will be easy targets in adverse times such as these.
October 25th, 2008 at 10:57 pm
Well put, Huck. Inspirational.
October 25th, 2008 at 11:18 pm
The bastards just don’t get it! There is no investment to invest in, to make money, if people are too scared to buy the products that back the investments. Example: Oil, Food, Property, Etc. ,
All the greedy fools are going to lose everything, and the newly printed money the Treasury is going to give them will be worthless. In the end they will get what they deserve. But the rest of us suffer as a result. It’s time for hunting season. Let the games begin.
October 25th, 2008 at 11:18 pm
wont the world reserve currency be the euro?
October 25th, 2008 at 11:53 pm
The bailout was just another way for NWO masters to prove to themselves that average citizens will sit idly by and let themselves get raped.
October 26th, 2008 at 12:01 am
I happen to be a Mormon. I will share anything that I have to help another within reason and according to his/her circumstance. But pity the poor bastard that believes that he can take anything from me without paying a price.
October 26th, 2008 at 12:09 am
Something more to it than meets the eye. The dollar has just increased in value. We are the country with the largest trade deficit. Does this make any sense? To look at it in another way nearly all currencies have devalued against the Yuan except the Dollar. What will this do to American manufacturing?
Is there any value of being the world’s reserve currency? As far as I can see it allows us to import more than we produce and drives our factories overseas. It is another form of the Dutch Disease and if the Chinese want it let them have it.
October 26th, 2008 at 12:43 am
@ Giordano – When things are left to go to pot. The Big Cities will fall into chaos, crime, and looting, etc.
Some(cities) will be completelly eliminated.
believe it or not. Actually they(NWO) want as many peoplein the Bigger cities as they can get. Before they implement their agendas.
” When we get crowded into big cities like Europe. America will become as corrupt as Europe.”
Thomas Jefferson
October 26th, 2008 at 1:12 am
Newsflash for America:
People around the world are ALREADY dying from the global economic crisis. And I’m not talking about just Africa.
The U.S. won’t be shielded for much longer. Get prepared for gas and food rationing due to hyper-inflation.
October 26th, 2008 at 1:21 am
Wal-Mart is about to build more factories overseas. Somewhere in Asia i think. Probably China
October 26th, 2008 at 1:45 am
Over here in Australia we are being subtley primed by Kevin Rudd our Prime Minister that we are to join the ASIA PACIFIC UNION, China has a very corrupt government, so don’t think this is a good change, infact it’s more like one step closer to destruction.
read more at this subject at
http://www.illuminatiinvestigator.com.au
October 26th, 2008 at 1:49 am
Why dont you yanks overthrow the opperssion that is put upon you? every1 else is feeling it 2, but it started with you, you are the ones that have your taxes spent on wars you reep no benifit from. US Govts have said the health system is private because of effeciency and less stress on taxes… ow which means you can purchase that fantastic material possesion you have been craving, go on give them more ealth and power.
The reason your founding fathers gave you the rights to bear arms, was so that you could over throw tyrannical govts, this is economic tyranny. Your constitution allows freedom, in some cases to much freedom, this allows great power to be wielded and concentrated. DO SOMETHING ABOUT IT! you have automatic weapons for f--- sake!!!
October 26th, 2008 at 1:50 am
Mike Conder “To think Mormons don’t have guns and/or lack the will to use them in defense of their families and property is a big mistake. Not to mention, Mormons can organize themselves faster in an emergency than any other group I know. Tell your buddies that they are I’ll advised to think Mormons will be easy targets in adverse times such as these.”
I am mormon I have lots of food and GUNS dont mistake my words.
October 26th, 2008 at 1:50 am
I love you HUCK. Marry me!
October 26th, 2008 at 2:24 am
.
” Strike another match, start a new; it’s all over now – baby blue. ”
~ Bob Dylan
October 26th, 2008 at 3:03 am
SAM: We DO NOT have automatic weapons for the public!!!! I agree with you though…We NEED to STAND more vehemtly(if that’s spelled right)!!! But Many Americans…and I personally don’t like to realize this…are as dumb as dirt!!! Sorry Americans…served in boots 7 years…all over the place…so I can understand your point of view!!! As for the Yuan…”f--- That!!!” “Fairies wear Boots!!!” DIG?????????? “All ‘HAIL’ Thermal Expansion!!!”
October 26th, 2008 at 4:28 am
@ #24 Sam….We do not have AUTOMATIC weapons amongst the population…well not legal. BUT!
We do have access to Semi-Automatic weaponry!
October 26th, 2008 at 5:21 am
The fundamental problem is overpopulation.
Accept it.
October 26th, 2008 at 5:35 am
This is pure scaremongering. Americans who can easily afford drugs, liquor, smokes and a myriad of other non-essentials can easily afford food. And irrespective of what the price of oil settles at, it is always in the self-interest of Americans to seek out alternatives and consider the cost, in the round, and in the long run. Neither Americans, nor anyone else has a RIGHT to the least expensive oil, unless it is the least expensive because of free market forces as opposed to government intervention designed to keep the price low. Propping up the House of Saud, etc., which is not reflected in the price of a gallon of gas at the pumps.
October 26th, 2008 at 5:40 am
The machine continues to be perfected.
October 26th, 2008 at 5:51 am
Best learn the 3 Bs ,Bread,Beans,Bullets or your going to be hungry real soon !!!!! Also we don,t need auto weapons to stop them,remember Vietnam 65 to 75 and most didn,t have auto s / aim small /miss small !!!A 22 can still kill as good as a m16 put in the right place///3Bs
October 26th, 2008 at 6:13 am
Here’s a German perspective on Bread, beans and bullets:
Getting by in Germany during the global meltdown
http://www.thelocal.de/15101/20081023/
October 26th, 2008 at 6:21 am
hey Rat your wrong! Greed is the problem and the thirst for power.
October 26th, 2008 at 6:42 am
joe the plumber is a f---ing douchebag, he was asking if he starts to earn more money, will he get taxed more for it. well, of course you will, and of course you should!
October 26th, 2008 at 8:35 am
Why should people get taxed for being more productive? Why is it that when I create more goods and services that help all people I should be fined and punished for doing so? If there is a consequence for being more productive, then I will be less productive as a result. The result of less productivity is less supply of goods and services for everyone, which results in higher prices. Higher prices result in less purchasing power so that people cannot purchase as many things as they could before. Poor people are affected the most by this.
We shouldn’t be paying taxes at all to a corrupt system that steals from us at the point of a gun.
I think that the only rule that governments should enforce is that every person should read two books: Atlas Shrugged by Ayn Rand + Economics in One Lesson by Henry Hazlitt
October 26th, 2008 at 10:19 am
The new world order globalist have an affection for the Chinese because they love the way that they can execute their citizens on demand and make them pay for the bullet that they used to kill them!! But they will all be in the lake of fire and brimstone together in the very near future!! About 10 to 15 years from now!!
October 26th, 2008 at 10:37 am
Here’s what’s in store for us… when we are homeless!
http://www.youtube.com/watch?v=LrPdZmPB36U
See St. Pete’s finest and how they treat the homeless!
October 26th, 2008 at 12:36 pm
blah blah blah…
Just like the goverment i too have my list.
And when i cash in their dysfunctional destrutive asses. I will liberate them of what i need
When the time comes if you have anything that i want or need . ITS MINE .
October 26th, 2008 at 12:42 pm
Stop censoring the important blogs….traitors!
October 26th, 2008 at 1:06 pm
Buy at Walmart———————
October 26th, 2008 at 1:09 pm
Americans do have access to automatice weapons. You just have to pay a $1000 fee(Each year) to have them, and then get approved.
Unless you are LOVED by the Government in your area? You won’t be able to get APPROVED, to own fully automatic weaponry.
October 26th, 2008 at 1:36 pm
Screw getting approved buy them on your local black market.
October 26th, 2008 at 4:57 pm
what a jumbled article. fears of strengthening dollar? I’ve read similiar articles in respect to the devalued dollar. Poor hedge funds. People act like hedge funds are something important. NO! not important ! but a cause of the inflated market that is now in a down turn, the capital of hedge funds isn’t anything tangilble. All they create is wealth nothing substantial, paper farmers.
Yes things are dire for the poor of course their subcides will dry up, B.S. We’re being lead to believe the interets of the poor are determined by the riches increasing wealth. I believe it’s a bit diiferent. The rich need the poor to gain their wealth and the rich needs the poor to keep their riches.
October 26th, 2008 at 8:56 pm
North shore kid, get off your ass and get your own crap it’s much easier than trying to kill someone for it. You never know who is more prepared for just such an attack. Someone can cash you in just as easily.
October 26th, 2008 at 9:10 pm
Tim who do you think the army will visit first when martial law is declared. Go ahead and pay a thousand dollars a year to be put on that list.
October 27th, 2008 at 1:49 am
TOUCHE..
October 27th, 2008 at 11:52 am
Join a militia. America is a battleground.
October 27th, 2008 at 6:24 pm
You guys need to stop talking s--- On the Internet and get your message across the US Nation.
We need to stop paying the lenders there ‘bonus’ money, Start paying off existing MORTGAGES and become more reliant on US Economy………
An stop depending on foreign oils, etc OPEN YOUR HANDS, EARS AN EYES START PROTESTING AND FIGHTING TO PROTECT USA1!!#!#$!@$@!