HSBC bids farewell to dollar supremacy

[Christa]

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.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6211858/HSBC-bids-farewell-to-dollar-supremacy.html






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[ixion]

1. Mission Accomplished!

Thanks, Neocons! :grr: :argh:

[Xenotime]

2. It's a smart move, actually. The US economy has failed. Why invest in it?

[truedelphi]

4. And this just in - the G 20 is reforming the IMF law

so that emerging countries will have More clout.

So the tide has truly turned. The dollar is not to be trusted, and as we owe everyone and his brother across the globe, maybe the IMF will end up bailing us out.

Then since we cannnot pay oyur debts, China and/or others can buy up our water (Or buy up our water utilities) and as we pay through the nose to have drinking water, laundry water and the occasional water for the car wash, they can use the exorbitant funds generated to have state of the art de-salinazation plants.

Oh and by the way, Obama "The Change You Can Believe in" President is presiding, on our behalf, at the G 20. Somewhere in an alternate universe, where the people in their Republic get true choices at election time, the alternate Obama is telling the G 20 where they can stuff it!

[earth mom]

3. I find this disturbing and I'm glad to see that I'm not the only one. nt

[roamer65]

5. The Brits had to leave the gold standand well before the USA.

WW1 drove them out of it due to increased war spending/money creation. The Vietnam war drove us off the gold exchange standard. Iraq/Afghanistan will be the final nail in the coffin of the dollar.

The attempted reintroduction of the British gold standard post-WW1 definitely helped foster the Great Depression. The same attempt with the dollar would bring us the Second Great Depression.

Either way we go, we are is screwed.

[amandabeech]

6. I am not aware that the currencies of China, India, Brazil or Russia

are freely convertible, unlike ours and those of the west.

How a world monetary system can go on using both convertible and fixed rate currencies I simply don't understand. Is E-P suggesting that we go back to a fixed rate? Or is he suggesting that we all fix our currencies at present rates? Really, I don't think that the global economy can go on half donkey, half camel.

I agree with those who say that we are at a disadvantage against mercantilist countries generally, and even more so on those who not only manipulate or fix their currencies.

Our trade agreements and the corporations do not allow us to use standard tactics to even the playing field.

[Art_from_Ark]

7. Really. While the dollar might be down, relying on any of those currencies

is taking a big risk.

Remember the fixed exchange rate for the ruble during the USSR days? It was approximately $1.29 for one ruble. Now one ruble is approximately 3 cents. Yeah, that's a currency I would really like to invest in.

The Brazilian currency has had several identity crises during its relatively short history, going from rei to real to cruzeiro to cruzado to new cruzado to the current real and who knows what else in-between, and all of the preceding currencies have been demonetized, that is, made totally worthless.

The Indian rupee is barely worth 2 cents and is worth slightly less than it was against the dollar at this time 5 years ago.

And it was only recently that China even allowed foreigners to use the same money as Chinese citizens. What's more, if you think corruption is bad in the US, you should try doing business in or with China. And this is a country where it considered acceptable to produce counterfeit money-- as long as it's another country's currency.

Yeah, those are all countries that I would like to trust the fate of my currency to.
Not.