Wednesday, November 30, 2011

The whole world is short dollars!

Today, like so many times in the past three years, we see the Fed stepping in and providing dollar liquidity to the world's central banks.

How many times do we have to see this?

The whole world is short dollars.

Let's face it...without the Fed’s intervention the dollar would soar to levels that no one would believe. It would restore American purchasing power, lower inflationary pressures, improve our real terms of trade and by so doing, raise our standard of living.

But what does the Fed do instead?

It “sells” the dollar on the cheap, to central banks that have every capability to sell their own currencies to provide dollar funding for their own, domestic needs.



Matt Franko said...


I think if they wouldnt have intervened in 2008 I'd be retired right now (ok maybe)

Unbelievable. And Warren has something up today that INDIA is now short USDs. I thought they were staying out of this global "dollar mania" but I guess they have been caught up in it too.

And as you point out this Fed intervention is in many ways not in the best interest of our citizens.


mike norman said...

Yeah, me too. Maybe that's why I'm so angry. ;)

Clonal said...

Norm, Matt

Currency stability is in everyone's best interest.

The only problem with US policy makers, is their deficit phobia, and their unwillingness to engage in fiscal policy. Bernanke has said as much to the Congress -- he cannot engage in fiscal policy. Only the President and the US Congress can do that.

On the "Bank Bailout," the problem would have been taken care of if Banks had not been allowed to profit from the bailout. De facto medium term "Nationalization" would have done the trick, combined with strict limitations on Banker Compensation.

googleheim said...

Remember in 1998 gasoline prices were down to $0.79 per gallon and we could import anything from Asia just the same.

Isn't there a way to show how they are ignoring USA small biz in the process ?

Isn't this just like when Korean mfgs so corruptly steal all the money, then we bail them out so they can make memory devices cheaper than us and take away our jobs and any reason to build factories here in USA, esp high tech semiconductor.

Mike has a point - we should soar the dollar just enough to bring manufacturing back here because the dollar purchasing power could suck in via imports whatever we need to make the factories.

However, the FED is doing the opposite with false puritanical deficit terrorist " we need to export & have cheap dollar " mentality by making dollar cheap.

This exporter pipe dream is all about building up the rest of the world and not the USA while wealth is concentrated here in the 1% since they are multinational anyway via Bermuda and Bahamas.

This will take more jobs overseas.

The Europeans have successfully blackmailed us, especially the Germans - they threaten us with an Italian fiasco or Greek fire, but really it is their way of keeping the Euro higher than the dollar.

The only counter argument is that these people may erroneously think that interest rates would have to rise since the dollar would rise in value.

What's going on here ?

The same discussion over the past 3 years somehow.

If the dollar rose in value, that would be the only way we would have inflation since it would attract a crowd ( mostly late comers ) who want to seek safety.


googleheim said...

Clonal :

"The only problem with US policy makers, is their deficit phobia, and their unwillingness to engage in fiscal policy."

what are you talking about ?

we are guaranteeing the world with open swap lines at the cost of creating a deficit.

if you take a look with MMT Goggles especially with Mike Norman Toolkit of invariants ( unchangeables ) then you will notice that open swap lines are a form of QE that NOBODY IS LOOKING AT.

Mike's radar is wide so don't fall out.

googleheim said...

Ok today is the unofficial Mike Norman day and here is a little ditty to run past the chitty :

A modern-day warrior
Mean mean stride,
Today's Tom Sawyer
Mean mean pride.

Though his mind is not for rent,
Don't put him down as arrogant.
His reserve, a quiet defense,
Riding out the day's events.
The river

And what you say about his company
Is what you say about society.
Catch the mist, catch the myth
Catch the mystery, catch the drift.

The world is, the world is,
Love and life are deep,
Maybe as his eyes are wide.

Today's Tom Sawyer,
He gets high on you,
And the space he invades
He gets by on you.

No, his mind is not for rent
To any god or government.
Always hopeful, yet discontent,
He knows changes aren't permanent,
But change is.

And what you say about his company
Is what you say about society.
Catch the witness, catch the wit,
Catch the spirit, catch the spit.

The world is, the world is,
Love and life are deep,
Maybe as his skies are wide.

Exit the warrior,
Today's Tom Sawyer,
He gets high on you,
And the energy you trade,
He gets right on to the friction of the day.

Matt Franko said...


Best video ever of the boys opening up with that
in Rio from several years ago.

Tom Hickey said...

This is part of the dilemma of being the issuer of the global reserve currency, the world's largest economy, and leader of the global monetary system. The issuer has to ensure that there is sufficient supply in spite of national considerations. "Noblesse oblige."

It can also be argued that it is in the US national interest to step in as lender of last resort to prevent a global liquidity crisis that could bring down the global economy, thereby inflicting "collateral damage" on the US economy.

So I am not upset about this and indeed expected it. But I would be more sanguine if Bernanke is completely transparent about it.

googleheim said...

I agree with Tom too

John Daliani said...

I thought that the problem was an insufficient supply of Euros, NOT an insufficient supply of U.S. dollars ...