HSBC bids farewell to dollar supremacy

Discussion in 'Economics' started by wildfirepow, Sep 21, 2009.

  1. The sun is setting on the US dollar as the ultra-loose monetary policy of the US Federal Reserve forces China and the vibrant economies of the emerging world to forge a new global currency order, according to a new report by HSBC.

    "The dollar looks awfully like sterling after the First World War," said David Bloom, the bank's currency chief.

    "The whole picture of risk-reward for emerging market currencies has changed. It is not so much that they have risen to our standards, it is that we have fallen to theirs. It used to be that sovereign risk was mainly an emerging market issue but the events of the last year have shown that this is no longer the case. Look at the UK – debt is racing up to 100pc of GDP," he said

    Crucially, China and rising Asia have reached the point where they can no longer keep holding down their currencies to boost exports because this is causing mayhem to their own economies, stoking asset bubbles. Asia's "mercantilist mindset" of recent decades is about to be broken by the spectre of an inflation spiral.

    The policy headache was already becoming clear in the final phase of the global credit boom but the financial crisis temporarily masked the effect. The pressures will return with a vengeance as these countries roar back to life, leaving the US and other laggards of the old world far behind.

    A monetary policy of near zero rates – further juiced by quantitative easing – is completely incompatible with circumstances in most of Asia, the Middle East, Latin America, and Africa. Divorce is inevitable. The US is expected to hold rates near zero through 2010 to tackle its own crisis.

    What is occurring is an epochal loss in the relative wealth and economic power of the old G10 bloc of rich countries compared to rising regions of the world. The euro, yen, sterling, Swiss franc and other mature currencies will be relegated along with the dollar in this great process of rebalancing, but the Greenback will bear the brunt.

    The Fed's super-loose policy is turning the dollar into the key funding currency for the next phase of the global "carry trade", taking over the role of Japan during its period of emergency stimulus.

    Mr Bloom said regional currencies would emerge as the anchor for their smaller trading partners, with China, Brazil, or South Africa substituting the role of the US. Australia is already linking its fortunes to China through commodity ties
  2. I remember Bloom saying the exact same thing in January 2009 in a meeting... I don't disagree with him, but it's all a bit one-sided, if you ask me.
  3. Rothschild owns HSBC. and IMF is advocating abolishing dollar supremacy. I wonder if international bankers and U.S. competitors are conspiring to unseat dollar supremacy. :confused:
  4. Haha, if only things were that simple...
  5. Think about it. This way works very well to them. International bankers and their representatives in U.S., by controlling unlimited cash, owning almost all public media, can pretty much control what U.S. public what to know, can pretty much control white house, congress. They devalue dollar inside U.S. while raking up trillions for themselves. Outside U.S. they scream dollar is worthless, and need to switch to alternatives. This can also set up equal competitors to U.S., such conflict, such more borrowing from them.

    Bankers do not have homeland, treason is the lest inconvenience to them. German bankers did not hesitate to withhold money from Germany in order to let the UK win world war I. U.S. bankers attempted to charge U.S. government 30% interest during the Civil War.

    U.S. is screwed.:mad:
  6. When volatility returns to equity markets, and China pares back stimulus spending, the USD will be KING once again.

    Count on it.
  7. Whatever, man...

    I think I might agree with you there. Looks that way, for the moment, anyways.
  8. lrm21


    Reminds of the 1970's talk with the carter malaise inflation running rampant, dollar decline that started under Nixon.

    Never count the big dog out.

    Its all hyperbole when you attempt to claim that America is on par with likes of Brazil, China, et al.

    Australia is a stable currency, so is the swiss franc. But easy to do when you are a highly educated homogeneous population that outsources your defense spending to other nations.

    But the resources needed to be top dog are beyond the reach.

    China is the biggest smoke and mirror job since the Soviet Union, and the Red Scare.

    Remember Japan march in the 80's they were going to overtake the western world, everyone was teaching their kids Japanese.

    I give the China Bubble another 5 years.
  9. It looks like it's time to get on the long dollar train for now. Every analyst seems to think that the dollar is doomed.
  10. The market seems to think the dollar is doomed...
    #10     Sep 22, 2009