Stiglitz predicts dollar will cease to be world's reserve currency.

[goldissima]

the yuan is the next world currency... no doubt that the chinese economy will take a hit but since chineses work for peanuts, the country will overcome the global crash much quicker...

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Death of the dollar
By Steven Irvine 16 March 2005
Stiglitz predicts dollar will cease to be world's reserve currency.

http://www.financeasia.com/articles/...8D9ECC2BCB.cfm

In his keynote address to CSFB's Asian Investment Conference yesterday (March 15), Nobel Prize winning economist, Joseph Stiglitz predicted the demise of the US dollar as the world's reserve currency.

The former World Bank Chief Economist told the audience: "Reserve currencies must serve the role of being a good store of value. The dollar is no longer serving that function and there are alternatives."

Stiglitz said from the perspective of a European, if they had held dollar assets, they would have seen those assets decline in value by 40-50% in terms of their own currency, the euro. "That's the same thing," Stiglitz pointed out, "as if they had seen their purchasing power eroded by 40-50% by inflation. This exchange rate instability is therefore as destructive to a currency's suitability to be a reserve currency as inflation is."

He pointed out that there are now alternative reserve currencies. "There is obviously the euro, and in the future possibly even the Chinese yuan."

Stiglitz said the dollar's right to reserve currency status cannot be taken for granted, and its loss of this status is likely. "We've seen it before with the gold standard and with sterling," he added.

His view on the dollar formed part of an overall pessimism he felt about the US economy. Listing figures for the trillions that would be required for Medicare, the privatization of social security, the war in Iraq and the cost of making Bush's tax cuts permanent, Stiglitz said: "We are looking at a larger and larger fiscal deficit. The hope that it will be cut in half in the next five years is just not borne out by the details. It will be very difficult to make the magnitude of cuts necessary to make that happen."

Stiglitz added that policy decisions were also proving a longer term problem for the US economy. He said investment in science and technology was dropping and thanks to the war on terror the US was no longer benefiting from the influx of talented engineers and students from abroad. He predicted the US's lead in science - "a legacy from immigration after World War Two" - would be lost to China and India.

A major problem he also identified was the fall in the US savings rate from 5.8% of GDP in 2000 to 1.1% in 2004. Responding to a question from the audience that suggested the average American did not realize they were spending beyond their means, he said: "I agree about the seriousness of the problem. Americans are currently benefiting from high housing prices and that makes them confident about spending. It has become a cultural phenomenon and has created a built-in fragility for the economy that makes me pessimistic about the US going forward."

Asked how Americans could be made to save more, he responded: "The sad answer is we don't know how to get Americans to save more - but we do know how to get them to spend more and save less. That was Greenspan's great achievement in 2001."

Currently a professor at Columbia University's economics department, and a member of the Clinton cabinet, Stiglitz said that when the financial markets recognize that political gridlock would not see the deficit reduced, the dollar would weaken. In the worst case scenario, if everyone ran for the exits at the same time, it could lead to a "financial crisis". This was a problem since three times as many dollar securities were held by the private sector as by the world's central banks; and the former would lead the charge for the exits at the same time. "The dollar was attacked in the 1970s and it could happen again."

[BarnacleBob]

Originally Posted by goldissima

The former World Bank Chief Economist told the audience: "Reserve currencies must serve the role of being a good store of value. The dollar is no longer serving that function and there are alternatives."

Stiglitz said the dollar's right to reserve currency status cannot be taken for granted, and its loss of this status is likely. "We've seen it before with the gold standard and with sterling," he added.

A major problem he also identified was the fall in the US savings rate from 5.8% of GDP in 2000 to 1.1% in 2004.

Asked how Americans could be made to save more, he responded: "The sad answer is we don't know how to get Americans to save more - but we do know how to get them to spend more and save less. That was Greenspan's great achievement in 2001."

In the worst case scenario, if everyone ran for the exits at the same time, it could lead to a "financial crisis". This was a problem since three times as many dollar securities were held by the private sector as by the world's central banks; and the former would lead the charge for the exits at the same time. "The dollar was attacked in the 1970s and it could happen again."

"The dollar was attacked in the 1970s and it could happen again."

Yep, you are a terrorist attacking the dollar when you demand payment! No wonder the dollar is falling apart .... "you are either with us or against us!"

Greenspans miracle that raised the dollar value to 121 dxu was, in part built upon creating artificial scarcity in domestic M1 supply .... without an adequate supply of domestic M1 aggregates to foster savings, Americans were forced first to use and employ their savings, then forced to borrow ..... all available aggregates are being used to service debt ..... thus there can be no future savings! Monetary authorities and policy makers are trapped by their own traps ....!

[B]"The sad answer is we don't know how to get Americans to save more (ibid)

Bottom Line: "Greenspan is a major criminal and con artist!"

PS: Caveat, the FED has never been audited, the data is data provided from an entity that cannot independently verify the provided data streams!

My thoughts on the new BK Legislation! It's a trap!

"In all fairness, a proper analysis of total household debt ($10.264 trillion) must be analysed against the total M1 measure ($1.35 trillion) ..... when calculated, there is a mere 13% dollar denominated money available to service $10.264 trillion outstanding household debts .... But the story gets even worse when considering;

"As much as 70 percent of all U.S. currency is held by foreigners, and the share of dollars held outside the United States is rising rapidly (see fig. 1). When dollars held abroad are excluded, the U.S. actually ranks fairly low in currency use." -- Edwin S. Rubenstein, The Globalization of the U.S. Dollar (emphasis added)

So how much of the M1 components are really usable for servicing household debt if 70+ % of FRN's are held in foreign ports ???? The currency component of M1 is around $701 billion .... 70% of $701 billion is $490+ billion held outside of the domestic economy and domestic banking system not available to the American general public.

$1.35 trillion minus $490 billion leaves $890 billion in M1 components to service $10+ trillion in outstanding household debt! Yikes .....

Is there any wonder why US personal savings rates are so low? There is no money stock in any remaining quantity for the common man to save! The common man is thus forced, when he has a surplus into supporting stock and bond markets ..... And all the while, Greenspan has the nerve to utter, with a straight face no less, that Americans aren't saving enuff and thats the problem!"

http://goldismoney.info/forums/showt...ght=Bankruptcy