mfioretti: money* + dollar*

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  1. After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply be forwarded to the U.S. Treasury.

    The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the Reichsbank printed marks to throw onto the foreign exchange market. The currency declined, import prices soared, raising domestic prices as well. The debt deflation was much like that of Third World debtors a generation ago, and today’s southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).

    In a pretense that the reparations and Inter-Ally debt tangle could be made solvent, a triangular flow of payments was facilitated by a convoluted U.S. easy-money policy. American investors sought high returns by buying German local bonds; German municipalities turned over the dollars they received to the Reichsbank for domestic currency; and the Reichsbank used this foreign exchange to pay reparations to Britain and other Allies, enabling these countries to pay the United States what it demanded.

    But solutions based on attempts to keep debts of such magnitude in place by lending debtors the money to pay can only be temporary. The U.S. Federal Reserve sustained this triangular flow by holding down U.S. interest rates. This made it attractive for American investors to buy German municipal bonds and other high-yielding debts. It also deterred Wall Street from drawing funds away from Britain, which would have driven its economy deeper into austerity after the General Strike of 1926. But domestically, low U.S. interest rates and easy credit spurred a real estate bubble, followed by a stock market bubble that burst in 1929. The triangular flow of payments broke down in 1931, leaving a legacy of debt deflation burdening the U.S. and European economies. The Great Depression lasted until outbreak of World War II in 1939.

    Planning for the postwar period took shape as the war neared its end. U.S. diplomats had learned an important lesson. This time there would be no arms debts or reparations. The global financial system would be stabilized – on the basis of gold, and on creditor-oriented rules. By the end of the 1940s the Untied States held some 75 percent of the world’s monetary gold stock. That established the U.S. dollar as the world’s reserve currency, freely convertible into gold at the 1933 parity of $35 an ounce.
    It also implied that once again, as in the 1920s, European balance-of-payments deficits would have to be financed mainly by the United States. Recycling of official government credit was to be filtered via the IMF and World Bank, in which U.S. diplomats alone had veto power to reject policies they found not to be in their national interest. International financial “stability” thus became a global control mechanism – to maintain creditor-oriented rules centered in the United States.

    To obtain gold or dollars as backing for their own domestic monetary systems, other countries had to follow the trade and investment rules laid down by the United States. These rules called for relinquishing control over capital movements or restrictions on foreign takeovers of natural resources and the public domain as well as local industry and banking systems.

    By 1950 the dollar-based global economic system had become increasingly untenable. Gold continued flowing to the United States, strengthening the dollar – until the Korean War reversed matters. From 1951 through 1971 the United States ran a deepening balance-of-payments deficit, which stemmed entirely from overseas military spending. (Private-sector trade and investment was steadily in balance.)
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  2. US-Saudi relationship has shown strains in recent years. Saudi anger over Obama-era rapprochement with Iran and unwillingness to go full-Gaddafi on Assad has been met with US threats about exposing "Saudi" terror, including the 9/11 lawsuits and the 28 pages. The recent American shale oil boom has meant that Saudi has seen selling less oil to the US, and China is only too happy to step in and take America's place as Saudi Arabia's most-favored trading nation. And now China is setting up a yuan-denominated oil exchange that could potentially mean that the Saudis and others may be trading oil for yuan in the future.

    This is why the CIA and other outside forces are extremely interested in what is happening in Saudi Arabia right now, and why, by extension, the rest of the world should be as well. After all, by now we know all too well what happens to countries that try to back away from the petrodollar, don't we? Only this time, it's not some "minor" players on the grand chessboard who can be taken out of the game with a simple NATO lovebomb campaign. This time we're looking at the potential of Russia and China backing this shift away from the petrodollar en masse. And we all know what that spells.
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  3. single currencies are never the product of debates about optimal economic solutions. Instead, currencies like the U.S. dollar itself are the result of political battles, where motivated actors try to centralize power. This has most often occurred “through iron and blood,” as Otto van Bismarck, the unifier of Germany put it, as a result of catastrophic wars. Smaller geographic units were brought together to build the modern nation state, with a unified fiscal system, a common national language that was often imposed by force, a unified legal system, and, a single currency. Put differently (with apologies to sociologist Charles Tilly), war makes the state, and the state makes the currency.
    Tags: , , , , by M. Fioretti (2015-07-28)
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  4. Nel frattempo il gigante asiatico è diventato il primo produttore di oro a livello globale con una quota di oltre il 14% del totale, vale a dire circa 400 tonnellate sulle 3mila estratte ogni anno. Gli addetti ai lavori segnalano però come neppure un’oncia di questo oro lasci il Paese. Anzi, attraverso la porta di Hong Kong continuano ad affluire grossi quantitativi di metallo giallo. La produzione nazionale e l’import non finiscono solo in riserve, ma è molto probabile che la reale entità delle disponibilità cinesi si sia comunque molto accresciuta rispetto al dato del 2009.

    La voracità di oro cinese è paragonabile solo a quella della Russia. La banca francese Société Générale ha segnalato come nelle ultime settimane Mosca sia stata costretta a vendere parte dei suoi lingotti sul mercato per far fronte al drammatico deterioramento delle condizioni finanziarie del Paese e al crollo del rublo. Ma negli ultimi anni i forzieri della banca centrale russa non hanno fatto altro che riempirsi. Nel 2010 lo Stato presieduto da Vladimir Putin ha razziato sul mercato qualcosa come 140 tonnellate, l’anno seguente altre 94.

    Maurizio Mazziero, economista e fondatore del centro studi Mazziero resarch, ritiene che questi acquisti avvengano con uno scopo preciso. “La mia idea”, spiega, “è che prima o poi Cina e Russia possano far valere questa situazione sui mercati internazionali. Magari proponendo che gli scambi commerciali avvengano utilizzando un paniere di valute in una certa misura collateralizzato con l’oro”. “Non è infatti da escludere”, continua Mazziero, “che in un futuro non troppo lontano si arrivi a un momento in cui non ci sarà più fiducia nelle monete completamente smaterializzate e affidate unicamente alla gestione delle banche centrali”.

    Al momento Berlino può contare, si stima, su riserve per quasi 3.400 tonnellate. Di questi lingotti soltanto il 31% si trova però attualmente all’interno dei confini nazionali e l’intenzione tedesca e di portare questa quota al 50% entro i prossimi cinque anni. Nella stessa direzione si sta muovendo la Banca centrale olandese, che ha annunciato l’intenzione di rimpatriare oro di sua proprietà depositato negli Stati Uniti.

    E l’Italia? Per ora tutto tace. La Penisola dispone di riserve significative, stabili da circa un decennio: 2.451 tonnellate per un controvalore di circa 95 miliardi di dollari. Stando ai dati ufficiali si tratta della terza riserva dopo Usa e Germania, di poco superiore a quella francese. Anche in questo caso però solo una parte delle riserve si trovano sul suolo italiano.
    Tags: , , , , , , by M. Fioretti (2014-12-31)
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  5. Beijing's move to bail out Russia, on top of its recent aid for Venezuela and Argentina, signals the death of the post-war Bretton Woods world. It’s also marks the beginning of the end for America's linchpin role in the global economy and Japan's influence in Asia.

    What is China's new Asian Infrastructure Investment Bank if not an ADB killer? If Japan, ADB's main benefactor, won't share the presidency with Asian peers, Beijing will just use its deep pockets to overpower it. Lagarde's and Kim’s shops also are looking at a future in which crisis-wracked governments call Beijing before Washington.

    China stepping up its role as lender of last resort upends an economic development game that's been decades in the making. The IMF, World Bank and ADB are bloated, change-adverse institutions. When Ukraine received a $17 billion IMF-led bailout this year it was about shoring up a geopolitically important economy, not geopolitical blackmail.
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  6. Nuovo strappo al ribasso per il rublo. La divisa russa non beneficia del tentativo di rimbalzo del petrolio e perde ulteriore terreno nei confronti delle principali valute internazionali: il cross tra dollaro Usa e rublo oggi è salito per la prima volta nella storia sopra quota 60 rubli, con una variazione di oltre il 10% rispetto ai livelli di chiusura di venerdì scorso.
    Tags: , , , , by M. Fioretti (2014-12-16)
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  7. With the dollar as the world’s reserve currency, globalization leads to huge US balance of trade deficits and other imbalances.
    Figure 10. US Balance on Current Account, based on data of US Bureau of Economic Analysis. Amounts in 2012$ calculated based on US CPI-Urban of the Bureau of Labor Statistics.

    Figure 10. US Balance on Current Account, based on data of US Bureau of Economic Analysis. Amounts in 2012$ calculated based on US CPI-Urban of the Bureau of Labor Statistics.

    With increased globalization and the rising price of oil since 2002, the US trade deficit has soared (Figure 10). Adding together amounts from Figure 10, the cumulative US deficit for the period 1980 through 2011 is $8.6 trillion. By the end of 2012, the cumulative deficit since 1980 is probably a little over 9 trillion.

    A major reason for the large US trade deficit is the fact that the US dollar is the world’s “reserve currency.” While the mechanism is too complicated to explain here, the result is that the US can run deficits year after year, and the rest of the world will take their surpluses, and use it to buy US debt. With this arrangement, the rest of the world funds the United States’ continued overspending. It is fairly clear the system was not put together with the thought that it would work in a fully globalized world–it simply leads to too great an advantage for the United States relative to other countries. Erik Townsend recently wrote an article called Why Peak Oil Threatens the International Monetary System, in which he talks about the possibility of high oil prices bringing an end to the current arrangement.

    9. Globalization tends to move taxation away from corporations, and onto individual citizens. Corporations have the ability to move to locations where the tax rate is lowest. Individual citizens have much less ability to make such a change. Also, with today’s lack of jobs, each community competes with other communities with respect to how many tax breaks it can give to prospective employers. When we look at the breakdown of US tax receipts (federal, state, and local combined) this is what we find:
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  8. Gli Usa sono nervosi: stanno per perdere la loro secolare leadership economica mondiale in favore della Cina, e stanno col dito sul grilletto. In caso di guerra, una sola certezza: non ci saranno vincitori.

    Secondo l’ultimo studio della Banca Mondiale, citato dal “Financial Times”, gli Stati Uniti stanno per consegnare alla Cina lo scettro di prima economia al mondo: «Il sorpasso avverrà molto prima del previsto 2019, forse già quest’anno», scrive Conti su “Contropiano”. Gli Usa detengono il primo posto dal 1872, quando avevano superato la Gran Bretagna. E saranno presto incalzati anche dall’India, che sta per prendersi il terzo posto. «È la temuta crisi dell’egemonia statunitense, affermatasi pienamente con la Seconda Guerra Mondiale ma lungamente preparata nei decenni precedenti».

    Storia: «Non si è mai vista una potenza imperiale dominare sul mondo senza essere anche la prima economia del pianeta». Ma il “lungo addio” della Gran Bretagna all’egemonia globale è potuto maturare «solo grazie a un mondo assai più lento di oggi e allo “speciale rapporto” con l’ex colonia che stava diventando una superpotenza».

    Oggi, continua Conti, l’economia finanziaria viaggia in tempo reale: la competizione, a questo livello, si gioca sui centesimi di secondo. «E anche le forze militari sono mobilitabili in tempi infinitamente più rapidi». Peccato però che gli approvvigionamenti energetici stiano diventando sempre più problematici, tra risorse storiche in via di esaurimento e “risorse non convenzionali” appena sufficienti, per ora, a mantenere allo stesso livello i consumi planetari. «Gli Stati Uniti sanno meglio di tutti che il loro dominio sul mondo è a rischio, e hanno deciso di lottare per non farsi scalzare, nemmeno a favore di un “multipolarismo” in cui non potrebbero restare dei “primus inter pares”», perché non possono più sperare all’infinito di «affrontare i propri problemi stampando dollari e imponendo agli altri di accettarli in cambio di prodotti fisici».
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  9. La moneta unica è praticamente la sola al mondo di fronte alla quale tutte le altre divise, grandi, medie e piccole, hanno perso valore. Sull'euro si sono svalutati il dollaro americano (del 4,2%), quello canadese (dell'11%), lo yuan cinese (del 2%), per non parlare dello yen giapponese (meno 22%), del real brasiliano (meno 19,7%), del dollaro australiano (meno 20%), del rublo russo (meno 13%) o della lira turca (meno 24%).

    La lista continua per decine di monete, inclusi il franco svizzero (meno 1,5%), la corona norvegese (meno 15%) e la rupia indiana (meno 14,5%). La maggior parte di queste svalutazioni sono a doppia cifra e gran parte delle divise estere, incluso il biglietto verde, hanno toccato i minimi dell'anno sull'euro ieri sera. È un segno che lo smottamento è ancora in corso. Dai Paesi avanzati alle economie emergenti, tutte le aree del pianeta stanno conquistando competitività di prezzo sui mercati globali rispetto ai prodotti venduti a partire da Eurolandia.
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  10. Here, we necessarily enter the world of symbols intrinsically tied to political consciousness. When people enter a political union, they are raised to pay homage to a particular set of symbols (i.e. a flag, a set of stock images, national heroes). The value of the currency is then tied to these symbols, and a threat to the currency is seen to be a threat not only to the symbols, but also to the people who have been raised with them.

    This problem has been aggravated by the transition to paper and, later, digital currency. The wisdom of central issuing agencies of paper notes for centuries was that it had to be backed by specie (i.e. gold) of a certain amount, or the value of the paper object would be destroyed. Moreover, it is an often cited maxim that a government in a time of perceived crisis can never find the necessary willpower to avoid printing money.

    This problem, widely noted for centuries, was offset by a different sort of innovation — the introduction of government debt on the open market, a way by which the government could gain money in a crisis without massively inflating its currency. This process, helped by the innovation of British banks, made the world wide bond markets become the basis for governments in need of immediate capital infusion.

    when the true gold is lacking, the ability to convince people you have the ability to create it from nothing is extremely important. Here, simply showing something shiny to the masses is often sufficient — at many points in history, these alchemists have been able to convince both masses and monarchs to partake in their fool’s gold. Although in these cases a collapse is inevitable, very often these charlatans have escaped with a large amount of coins taken from the public purse.

    The present system is especially prone to this problem. For most of the innovations outlined above, America played second fiddle. While the increased rule of finance involved Europe in a number of small wars and revolutions, Americans were busy spreading across an untamed continent. Their assumption of the royal mantle at the head of finance was not quite deliberate, it was more the product of their massive economy fueled by the incredible industry of their citizens. Americans worked hard and built a lot.

    The simple truth at this moment is that there is a great sloshing about of capital derived from the ability of people to repackage debt and sell it as assets, but a great loss as governments lose the ability to ensure the value of their own currencies, parading naked due to corrupt advisors who make both the governments and their citizens a laughingstock.
    Tags: , , , , , by M. Fioretti (2013-06-03)
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