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Global Currency Crisis

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rvr,

even though i think, that sometimes markets behave like sheep, there is a feeling, that overall western economies are shaky.

the u.s. is finding out rather belatedly, having lost most of its manufacturing base, that a rise in chinese yuan, would actually make it worse for the usa.

a more expensive yuan, means that americans used to necessities of life at the cheap, will have to shell out more money. which means they buy less. which means there is less economic activity. which means that there is another entry to a downward economic spiral.

i think us politicians and general public, mouthing the old economic theory, that an re-evaluation of the currency means more export, does not hold good any more if you do not have the wherewithal to produce those goods and services competitively.

i have always viewed china's ascent with trepidition. not because the chinese are evil or bad. it is just the sheer scale of their development. just imagine there is one town in china, which produces socks only. only socks. annual output is enough for 3 pairs for every human on earth. with such economies to scale, how can anyone compete?

right now india & china have an issue with indian banning import of chinese made cell phones. very rightly so too. i think every country cannot afford to go the way or u.s. or europe, and destroy their manufacturing base, on the principles of free trade. the only people who profit from these in the long run are the traders.

another interesting fact is now that certain industries like commercial aircraft, in which europe and the usa still have a lead - are dependent on china mostly for their survival as other markets have gone done south.

china has effectively manoevered this dependency to forcing airbus to built a320s in a chinese factory. to understand how siginificant this is - over 100 years of historical development of technology has been transferred to chinese hands overnight.

now it will be only a matter of 20 years or less before you have chinese made commercial planes, just as good, but half the price.

the chinese leadership has not made any mistakes in the past 30 years since deng xao ping opened up the economy. for that matter, we have not made any mistake either, except that our decision making process has been at snail's pace compared to the chinese.

the west, on the other hand, has succumbed to its weakest links - its soft underbelly of poor and unemployed. the local whites do not have this problem, thanks to generous government subsidies. so the ensuing absence of labour to perform menial tasks has been left to 3rd world immigrants. what next?

it was interesting to note, that greece received the $18 billion yesterday from the imf/erb, only to see it shipped back to the german and french banks. the way i understood this flow - germany, france and other governments gave money to imf/erb, which lend it to greece, which paid the money as interest payments to german/french banks. nobody has touched the repayment of capital - these are just debt servicing. it boggles my mind as to how ethics of money management has been so corrupted.
 
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RvR sir
thanks for the detailed description of globel economy and gold bonds. and information about possible fall of gold price once the traders dump metel back to market,

mckinsy link is also useful one.

thanks
ananth
 
I have followed with interest the discussions here. I do not think people here understand the financial stranglehold that the US has on the world markets. It is foolhardy to think that the US has lost her competetive edge. The phenomenon of 'globalization' and the instruments that America employs to control (through WTO, IMF etc.) make sure that the wealth created by the toil of other counries reflect in the ownership of American Corporations.

It is wrong to compare Euro to dollar. Currencies reflect the basic productivity of respective countries. Euro is based on the assumption that all the countries that the currency represents are competetive in the world (which now we know is not true, thanks to Greece, Spain, Portugal and even Italy). The situation in US is different. The socialism as precticed by a lot of the countries participating in Euro has not yet taken full shapein USA, and I suspect that the forthcoming elections in November have the results that overturn the policies that have the deficit spending in the future.

Don't write off America so easily!

Regards,
KRS
 
US $ may continue as a global currency since alternatives are not emerging.

Euro which emerged as an alternative currency in the last few years has started facing problems.

But the problems facing the western world are likely to last for longer period.

Krugman: Lost Decade Looming? - DealBook Blog - NYTimes.com

As a person involved in business, I am in touch with lot of exporters and they all don't know what to do with the crisis facing the western nations. Traditionally they were quoting their export products in US $ which was partially changed to Euro. Now they don't have faith in both the currencies.

Some time back China suggested `SDR" Special Drawing Rights of IMF as a global currency.

Special Drawing Rights - Wikipedia, the free encyclopedia

If China, India, Brasil and Russia decide to go for SDR then SDR may be the global currency standard in the future.

All the best
 
The 'BRIC' countries are in no position to float a world currency. Look at each of there GDP by their population, and one can understand why. It is not enough tohave the 'biggest' GDP in the world, what is more important is to look at the GDP by each erson in the country. India contributes about $2500, China about $5000, Brazil and Russia a little more each. Combined they donot approximate even closely with what this figure isfor the US, which isabout $60,000. A currency always reflects this reality and unfortunately, it does not matter what the 'Bric' countries think. A world standard currency, by default is a currency backed up by productivity, innovation and the entreprenureship of it's nation. Sorry to say, there isno other country other than the USA that comes close.

Regards,
KRS
 
There is marked shift from US $ to Euro in the last eight years or so.

Reserve currency - Wikipedia, the free encyclopedia

Dominance of US $ which was 70% plus has come down to 61% plus in 2009.

In the same period, Euro has gained to the extent of 28% plus in the Global currency reserves.

China is the largest holder of foreign currency reserves and every move of it will affect the global currencies in the future. China is not happy with US $

Asia Times Online :: China News, China Business News, Taiwan and Hong Kong News and Business.

We have to watch moves of China more closely in the future.

All the best
 
Yes, Euro was flying high, because the debt crisis did not hit them and the US policy was not to strengthen th $, because of attracting investment from China.

As the saying goes, 'if you owe a bank $1000, the bank owns you, but if you owe the bank $1000000, then you own the bank can be applied to the situation between the USA and China. China's economy today is almost 100% dependent on exports. This is why, when China makes noices, they know they have no alternatives. They are even allowed to keep Rimimbi at an advantageous position vis-a-vis $, because the US wants them to finanance their deficits.

Unless China becomes politically free and align their economy to be truly competetive in the global market with trasparency, where they can not hide their true costs as they do today, they will have to depend on a benefactor like the US. Today, they are just paper tigers, I am afraid.

Regards,
KRS
 
China holds foreign exchange reserves of US $ 2,45 Trillion. Roughly one third is in US treasury bonds.

During last six months, China offloaded 45 billion US $ in the market but last week due to Euro problems bought back 17 Billion US $

China seems to move towards Gold as reserves. Last year India bought Gold from IMF.

China is No 1 holder of US Treasury debt again, buys $17.7 bn-International Business-News-The Economic Times

Everything depends on China as it is holding largest forex reserves.

All the best
 
Exploring avenues to boost its stagnant exports, the US is apparently mulling a complete overhaul of its export control policies this year, which might pave the way for sale of more high-technology goods to India and China, especially in the field of green energy.

"We are reviewing the entire list of our export control system as some of the protections and restrictions make very little sense," US Secretary of Commerce Gary Locke said here, raising hopes among Chinese officials for acquisition of some of the latest US technology, blocked by Washington over fears of intellectual property rights.

He said US hopes to increase its exports to emerging markets, including China, India, Brazil and Russia. China especially will be a key part of the US strategy to boost exports.
- (Central Intelligence Agencies)
 
good time for exporters

If an exported has quoted in Euro, say 1000 Euros for his goods, and expects to ship goods after one month. He can sell the Euros today on forward trading at Say 58 Rs. per Euro for delivery after one month.

Suppose Euro falls to 55 Rs after one month, without this forward trading he will only 55 Rs instead of 58 Rs as above.

Suppose if the Euro climes to 61 Rs after one month, he stands to lose.

Forex trading business is a high risk, high return business much larger than stock markets.

If Euro collapses then US $ will appreciate.

All the best


good time for exporters. to get more forex to come inside the country.
 
rvr,

the imf chief dominique strauss-khan (dsk) is playing a double game.

at heart he is basically a french politician, edged out local french politics by the wily sarkozy. but dsk wants to become president of france, and whatever sarkozy says, dsk opposes him.

almost everywhere i read,it looks like the euro is doomed. i personally also do not like the euro, not that it matters much.

but what it has done, is to make (close to)third world countries like greece, portugal, spain, lithuania, cyprus, malta, slovakia, slovenia into thinking that they can be considered first world, by simply changing the currency.

it is like india overnight adopting the u.s. dollar, and claiming that we too are of the developed world. the wily merchants ofcourse, will immediately redenominate their wares, ie what was one ruppee will become one dollar and the ensuing disaster everyone will face.

in euro, german and french banks, gave money freely as these countries converted to euro, and with these money, these countries bought more and more of german goods, thus destroying what little they had of their own home industry. countries like greece, portugal or spain, where people from other rich countries went for vacation because it was cheap, overnight faced the high euro cost, and reduced going.

all this was thought through by german scholars & economists, prior to the creation of the euro, and prior to spreading it into the (almost)third world countries of europe.

the sooner the drachma, cruzeiro etc comes back into life, the sooner these countries will recover. ofcourse, the german and french banks will take a haircut. so let us see what happens.

or as you used to say rvr under a different circumstance, 'sit back in the sidelines and watch the fun'.
 
kunjuppu

north americans are super smart,don't you think?hope it stays like this.i dread to see in future,when one dollar is equal to one rupee,definitely not my life time at least.
 
kunjuppu

north americans are super smart,don't you think?hope it stays like this.i dread to see in future,when one dollar is equal to one rupee,definitely not my life time at least.
hi nachi...
USD has great power...bcoz WE TRUST IN GOD....only currency in
world use the name GOD especially so called secular democray
counties...i think...if we use in indian rupeee about GOD...then
so called psuedo secularist willl arguen on it....even in USA ...many
aethiest/othere non beleivers are there....still USD says...IN GOD
WE TRUST....the great american...proud american....

regards
tbs
 
tbs
hi nachi...
USD has great power...bcoz WE TRUST IN GOD....only currency in
world use the name GOD especially so called secular democray
counties...i think...if we use in indian rupeee about GOD...then
so called psuedo secularist willl arguen on it....even in USA ...many
aethiest/othere non beleivers are there....still USD says...IN GOD
WE TRUST....the great american...proud american....

regards
tbs

in usa people are very religious.that is why at the drop of the hat,the closing oratory of any politician will be god bless america,which is natural as an american to do.by printing" in god we trust" in currencies,is a tribute to lord kubera and mahalakshmi,i think.:wof:
 
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