In an embarrassing blunder at the meeting in Riyadh, ministers' microphones were not cut off during a key closed meeting, and Prince Al-Faisal was heard saying: "My feeling is that the mere mention that the Opec countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries. "There will be journalists who will seize on this point and we don't want the dollar to collapse instead of doing something good for Opec."I wonder if this "accident" was like the one we all saw on that episode of The West Wing.
After around 40 minutes press officials cut off the feed, which had been accidentally broadcast to the press room.
Nigerian finance minister Shamsuddeen Usman said that Opec could declare in the communique that: "While underlining our concern for the continued depreciation of the dollar and its adverse impact on our revenues, we instruct our finance ministers to study the issue exhaustively and advise us on ways to safeguard the purchasing power of our revenues, of our members' revenues."Can you believe it? Nigeria is looking down on us.
From U.K.'s Independent:
"An American businessman over here who is given the choice would take anything but the dollar," David Buik of Cantor Index said yesterday. "I would want to be paid in yen, and if not yen then the euro or sterling."
The warning was reinforced by a Chinese central bank vice-director, Xu Jian, who said the dollar was "losing its status as the world currency".How did we reach this point? Part of the problem is the Bush Administration per se; foreign governments and businessmen simply have no confidence in this government, and they'll breathe a sigh of relief when someone, anyone else takes over. But the main problem is the sub-prime mortgage crisis.
China has stockpiled £700bn worth of foreign currency, and has only to decide to slow its accumulation of dollars to weaken the currency further. Last month, in a humiliating turn of events, the central bank in Iraq, four years after the United States invaded, stated that it wished to diversify reserves from a reliance on dollars.
Korea's central bank has urged shipbuilders to issue invoices in the local currency and take precautions against the weakened dollar, and three of the world's big oil exporters, Iran, Venezuela, and Russia, are demanding payment in euros rather than dollars. Iran insisted that Japan should make all its payments for oil in yen, rather than dollars
Bush staved off recession by allowing lenders to toss money at people who were not good risks. Even at the height of the resultant real estate frenzy, most people understood that the process was a sham. A country that doesn't make anything can't fake prosperity by making its easily-gulled citizenry pay ridiculous prices for the dirt beneath their feet.
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In other words, what? We can't afford to stop belching CO2 and farting methane? Coal is cheap again? Sure, the news is dire, but is the situation it refers to just as dire? The UK Independent wrote: "As well as reaching its lowest level against the euro, which has been trading at more than $1.47, the dollar has also fallen to its lowest level against the Canadian dollar since 1950, sterling since 1981, and the Swiss franc since 1995". In fact, the Canadian dollar spiked for 2-3 days last week to its highest level against the US dollar, but it's fallen back. In fact, the Canadian dollar had reached its highest value against the US dollar way back in 1974 -- when it was higher than it is today (Nov. 16). "Since 1950" is meaningless language for this discussion, but it sure stands out like it's really really significant. A few weeks ago Pat Buchanan misspoke or outright lied when he said the US dollar has fallen below the Canadian dollar for the first time "in 50 years". More of the same assholespeak.
Why is everyone targeting only the "subprime" mortgage crisis, when the actual mortgage culprit has been the housing price bubble of the way-overvalued properties? The truth is, there aren't enough home buyers anymore who can afford to pay those insanely inflated prices. Real estate stagflation in this market leads to a real estate crash and more dire news.
If you bought a home in 1950 for $20,000 with a 25-year mortgage, you wound up paying something like $40,000 including P+I. Maybe you were entitled to sell it for $40K or $50K in 1975, so you did. The next buyer would also pay double at mortgage's end and expect $100K. A very significant effect of this post-1970 real estate 'inflation' was that it prevented persons of certain pigment from being able to buy a home in most working- and middle-class neighborhoods. Yes, the banks, the homeowners, and the real estate companies conspired to keep white neighborhoods white when 'redlining' became criminal after 1965. That was around the time when 'slums' were re-named as 'ghettoes', at first a meaningful economic metaphor, but now it's just another euphemism for slum.
Interest rates will stay 'low' until the housing crisis turns into the lost cause everyone feared. Then interest rates will rise to attract foreign currency investment again, and slow the dangerous home-equity borrowing, and hopefully strengthen the dollar a little bit. That's how money works. US banks will take in valuable euros and yen for a year, or 5 or 10, making debt again, which isn't always a bad thing, and pay out US dollars in abundance.
When universal health care kicks in, and the government subsidizes much of it, domestic costs of most things will level off to a manageable rate because employers won't be paying for health insurance.
I'll blame Bush for a lot of things, but creating the housing bubble, no, that was above his pay grade. He'd have no idea how that works.
Most observers lay that at the feet of Greenspan's Fed, in a purported move to blunt the collapse of the prior bubble, the dot-com one, from tanking the economy.
Presidents generally don't dictate monetary policy (Carter and Miller and Nixon and Burns being exceptions)-- more typically, monetary policy dictates to presidents (as in Volcker to Reagan, Greenspan to Clinton, Greenspan to Bush the wiser, etc.).
...sofla
I disagree that the international move away from the US dollar is (mainly) the result of this sub-prime lending crisis.
It's rather the result of a long term inability of the US to make enough goods attractive to the world to balance our trade account. The import surplus over exports is roughly 6% of gdp, a very large number indeed, and something everybody has always said could not go on forever. 'Not forever' is coming right now, although it took a long time coming.
...sofla
http://www.realitysandwich.com/node/732
fact: capitalism is doomed to fail.
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