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teedubya
02-11-2011, 01:50 PM
http://money.cnn.com/2011/02/10/markets/dollar/index.htm?hpt=T2

Prices on shit are about to SOAR. Brace yourselves.

http://i2.cdn.turner.com/money/2011/02/10/markets/dollar/chart_ws_currency_usd_eur.top.png

NEW YORK (CNNMoney) -- The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency.

The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system.

SDRs represent potential claims on the currencies of IMF members. They were created by the IMF in 1969 and can be converted into whatever currency a borrower requires at exchange rates based on a weighted basket of international currencies. The IMF typically lends countries funds denominated in SDRs

While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.

Dominique Strauss-Kahn, managing director of the IMF, acknowledged there are some "technical hurdles" involved with SDRs, but he believes they could help correct global imbalances and shore up the global financial system.

"Over time, there may also be a role for the SDR to contribute to a more stable international monetary system," he said.

The goal is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy.

In addition to serving as a reserve currency, the IMF also proposed creating SDR-denominated bonds, which could reduce central banks' dependence on U.S. Treasuries. The Fund also suggested that certain assets, such as oil and gold, which are traded in U.S. dollars, could be priced using SDRs.

Oil prices usually go up when the dollar depreciates. Supporters say using SDRs to price oil on the global market could help prevent spikes in energy prices that often occur when the dollar weakens significantly.

The dollar alternatives
Fred Bergsten, director of the Peterson Institute for International Economics, said at a conference in Washington that IMF member nations should agree to create $2 trillion worth of SDRs over the next few years.

SDRs, he said, "will further diversify the system."

Dollar firms after starting 2011 weak

The dollar has been drifting lower so far this year as the global economy improves and investors regain their appetite for more risky assets such as stocks and commodities.

After rising above 81 in early January, the dollar index, which measures the U.S. currency against a basket of other international currencies, eased below 77 earlier this week.

However, the dollar was higher Thursday against the euro, pound and yen as disappointing corporate results weighed on stock prices following several days of gains on Wall Street. The rally in the commodities market also cooled, with the price of oil and metals backing off recent highs.


In addition, renewed concerns about the debt problems facing troubled European economies put pressure on the euro and supported the dollar. The yield on Portugal's benchmark bond rose to a record high Wednesday, and borrowing costs for Ireland, Spain and Greece remain elevated.

"The market is shedding risk, with equities and commodities weakening and the U.S. dollar broadly stronger" said Camilla Sutton, currency strategist at Scotia Capital.

Traders were also digesting comments from Federal Reserve chairman Ben Bernanke, who told Congress Wednesday that despite a strengthening economic recovery, the unemployment rate remains high while inflation is "still quite low."

Those remarks reaffirmed the view that "the Fed would be very slow to tighten policy given its dual mandate of price stability and employment," analysts at Sucden Financial wrote in a research report.

Bernanke also urged lawmakers to come up with a "credible plan" to bring down "unsustainable" federal budget deficits.

"We expect that the outlook for the U.S. fiscal position will weigh heavily on the U.S. dollar in the quarters ahead," said Sutton. In the near-term, however, she said "a strengthening growth profile" could help provide "a temporary period of dollar strength."

Donger
02-11-2011, 01:52 PM
LMAO

teedubya
02-11-2011, 01:58 PM
:bang: http://chiefsplanet.com/BB/customavatars/avatar3166_27.gif

BucEyedPea
02-11-2011, 01:59 PM
:bang: http://chiefsplanet.com/BB/customavatars/avatar3166_27.gif

LMAO LMAO LMAO


Puurfect!

FD
02-11-2011, 02:27 PM
Prices on shit are about to SOAR. Brace yourselves.


Can you explain this a bit more carefully, I don't understand how the dollar's reserve currency status relates to domestic inflation.

Are you suggesting the value of the dollar will fall drastically on foreign exchange markets if it is used less frequently as reserves? This defies my knowledge of foreign exchange, so can you please explain it to me.

Donger
02-11-2011, 02:31 PM
:bang: http://chiefsplanet.com/BB/customavatars/avatar3166_27.gif

LMAO

I'm sure that this time, your predictions will come to fruition, Ari.

teedubya
02-11-2011, 02:41 PM
Can you explain this a bit more carefully, I don't understand how the dollar's reserve currency status relates to domestic inflation.

Are you suggesting the value of the dollar will fall drastically on foreign exchange markets if it is used less frequently as reserves? This defies my knowledge of foreign exchange, so can you please explain it to me.

Im suggesting that once other countries no longer NEED dollars to buy oil or imports... then the demand for them will be drastically decreased.

No demand for dollars... supply increases... dollar value plummets.

I'm no economist, but that's not a good scenario for America.

FD
02-11-2011, 03:03 PM
Im suggesting that once other countries no longer NEED dollars to buy oil or imports... then the demand for them will be drastically decreased.

No demand for dollars... supply increases... dollar value plummets.

I'm no economist, but that's not a good scenario for America.

The demand for dollars used in these types of exchange are trivial though, when compared to the demand coming from countries like China that are fixing their currencies to the dollar, a policy that not changing any time soon. The idea that because of a fleeting shift in transactions the demand for dollars will fall drastically is simply preposterous, it has no basis in reality.

If indeed "prices are going to SOAR" as you say, wouldn't this news make some dent in today's currency markets or on the price of T-bills?

Can you show me some data suggesting that denominating some transactions in SDRs instead of US$ will cause dollar demand to drastically fall? I'm just having a hard time understanding your theory.

teedubya
02-11-2011, 04:24 PM
The demand for dollars used in these types of exchange are trivial though, when compared to the demand coming from countries like China that are fixing their currencies to the dollar, a policy that not changing any time soon. The idea that because of a fleeting shift in transactions the demand for dollars will fall drastically is simply preposterous, it has no basis in reality.

If indeed "prices are going to SOAR" as you say, wouldn't this news make some dent in today's currency markets or on the price of T-bills?

Can you show me some data suggesting that denominating some transactions in SDRs instead of US$ will cause dollar demand to drastically fall? I'm just having a hard time understanding your theory.

Just have Donger tell you where I'm wrong and how things are actually going to be ok with the dollar, and how I'm full of shit on all fronts...

Or do some research on Quantitative Easing and/or look to see what happened to England when the Sterling stopped being the reserve currency.

When the dollar is no longer needed, these countries will get out of dollars as fast as they can... including China who holds trillions.

Or as Mr. Flopnuts stated, "Read up on the great panic of 1857 I believe it was. Obviously the products were different, and some circumstances have obviously changed with technology making our community much more globally centralized, but what happened then is happening again right now"

Prices of shit are already starting to soar with commodities at all time highs... when the dollar is devalued, they will rocket, IMO. But, then again, I'm a bit of a Chicken little in regards to the US dollar.

Mr. Kotter
02-11-2011, 08:18 PM
Travis...I hear you; your panicked opinion and hysteria are....somewhat credible.

One question, though: what replaces the dollar as the world reserve currency??? :hmmm:

A sincere, and honest, question? WHAT? :shrug:

Mr. Kotter
02-11-2011, 08:21 PM
...

I'm no economist....

Obviously. Heh.

Just sayin'.... ;)

KILLER_CLOWN
02-11-2011, 08:40 PM
Travis...I hear you; your panicked opinion and hysteria are....somewhat credible.

One question, though: what replaces the dollar as the world reserve currency??? :hmmm:

A sincere, and honest, question? WHAT? :shrug:

Ask China, to whom we are indebted forever.

teedubya
02-11-2011, 09:33 PM
Travis...I hear you; your panicked opinion and hysteria are....somewhat credible.

One question, though: what replaces the dollar as the world reserve currency??? :hmmm:

A sincere, and honest, question? WHAT? :shrug:

Obviously, this is a move towards a one world currency, in my estimation.

Stay asleep Rob. :thumb:

KILLER_CLOWN
02-11-2011, 09:34 PM
Obviously, this is a move towards a one world currency, in my estimation.

Stay asleep Rob. :thumb:

All of these true believers will love the IMF shock therapy once it hits the US, crying to mommy is not an option.

FD
02-12-2011, 11:34 AM
Just have Donger tell you where I'm wrong and how things are actually going to be ok with the dollar, and how I'm full of shit on all fronts...

Or do some research on Quantitative Easing and/or look to see what happened to England when the Sterling stopped being the reserve currency.

When the dollar is no longer needed, these countries will get out of dollars as fast as they can... including China who holds trillions.

Or as Mr. Flopnuts stated, "Read up on the great panic of 1857 I believe it was. Obviously the products were different, and some circumstances have obviously changed with technology making our community much more globally centralized, but what happened then is happening again right now"

Prices of shit are already starting to soar with commodities at all time highs... when the dollar is devalued, they will rocket, IMO. But, then again, I'm a bit of a Chicken little in regards to the US dollar.

When the dollar is no longer needed? The US is the largest economy in the world, the largest exporter and the largest importer.

Economists generally agree there are three benefits derived from possessing the world's reserve currency:

1) Seigniorage gained from foreigners with unstable currencies adopting the dollar as their local currency. This is not nothing but its probably not worth more than a few billion in extra revenue.

2) The ability to avoid the transaction costs of exchanging currency for large international purchases of commodities. This is fleeting and an almost trivial portion of the actual transaction cost. If overnight no country was willing to sell oil, for instance, denominated in dollars, the price of gas would not even go up a penny. Thats what a small portion of the transaction would be affected by the currency market.

3) The ability to sell our debt more cheaply. There are estimates that we get a premium on our debt of as much as half a percentage point. This is the main benefit. But still, half a percent isn't exactly going to cause the sky to fall.

The main drawback from having the reserve currency is that the dollar is consistently overvalued. This has hurt our ability to export goods.

In any event, only point 2 would change if a large amount of foreign exchange became denominated in SDR's. The US will never stop issuing debt denominated in dollars, a slight revaluation of the dollar right now would actually be a boost to our economy, not the opposite. More importantly than any of that, though, is that even if it would be some tragedy to lose reserve currency status, it wont happen because there is no alternative and wont be for at least 20 years.

BucEyedPea
02-12-2011, 12:48 PM
Travis...I hear you; your panicked opinion and hysteria are....somewhat credible.

One question, though: what replaces the dollar as the world reserve currency??? :hmmm:

A sincere, and honest, question? WHAT? :shrug:

Ask the international bankers. Only they would know.