Thursday, March 26, 2009

The buck stops here - or does it?

Business Times - 27 Mar 2009

NEWS ANALYSIS
The buck stops here - or does it?

By LEON HADAR
IN WASHINGTON

AGAINST the backdrop of next week's G-20 summit in London, several emerging economies led by China and Russia have been promoting the idea of halting the use of the US dollar as the main global reserve currency and replacing it with a new one.

This could pose huge economic problems for the Obama administration which is planing to continue paying for the financial bailout and the economic stimulus by printing more dollars and by selling more Treasury bills to foreign private investors and central banks.

In China which is the largest holder of US dollar assets, with American greenbacks making up more than half of its US$2 trillion in foreign reserves, including US Treasury bonds worth about US$750 billion, there is concern over US deficits that could erode the greenback and the value of China's foreign reserves.

China's central bank governor, Zhou Xiaochuan raised the possibility that the International Monetary Fund's Special Drawing Rights (SDR), a reserve asset whose value is currently based on a basket of the dollar, euro, pound sterling and yen, be expanded to include other global currencies and be used as a super-sovereign reserve currency.

Officials and analysts in Russia as well as in other emerging economies, including India, Brazil, South Korea, Iran and Venezuela have also expressed support for the idea. The Russian government has made it clear that it was planning to raise the issue during the G-20 meeting.

At the same time, both Iran and Venezuela have called on members of the Organization of Petroleum Exporting Countries to price oil against a currency, or a basket of currencies, other than the dollar.

But leading US officials, including President Barack Obama, have dismissed the idea. Similarly, both US Federal Reserve chairman Ben Bernanke and Treasury Secretary Timothy Geithner, testifying in congressional hearing on Tuesday rejected the proposal to bring an end to the global primacy of the US dollar, as they were grilled by Republican Congresswoman Michele Bachmann from Minnesota.

So it came somewhat as a surprise when on Wednesday, during a discussion in the Council on Foreign Relations (CFR), Mr Geithner seemed to be suggesting that he was 'open' to discuss the SDR proposal of China's central bank governor.

Later during the CFR discussion, Mr Geithner did stress that he did not foresee a change in the dollar's centrality as a global reserve currency. 'We will do what's necessary to say we're sustaining confidence in our financial markets,' he said. But the notion that Mr Geithner was seriously considering the Chinese SDR plan seemed to have come as a shock to investors - with the dollar plunging instantly against the euro and yen after he made his remarks.

In any case, most experts seem to agree that while the Chinese may be trying to flex their economic muscle, their SDR proposal is not practical, especially since the US has the power to veto policy decisions at the IMF.

If anything, while challenging the US dollar's global supremacy, the Chinese have actually increased their Treasury holdings by close to 40 per cent, reflecting the continuing confidence other foreign investors and central bankers have in the US currency.

Indeed, as Paul Volcker, the former Federal Reserve chairman, pointed out during a conference in New York on Wednesday, the Chinese 'ignore the fact that they didn't have to buy those dollars in the first place, so they contributed to the problem.'

But there is no doubt that a failure on the part of Washington to fix its ailing financial system could prompt more calls around the world to consider alternatives to a dollar-based system.


Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.

2 comments:

Anonymous said...

America will need a new currency before Geithner and the politicians are finished expanding the debt and destroying the dollar but the solution is a gold backed currency free of government manipulation. The Campaign to Cancel the Washington National Debt by 12/21/2012 through constitutional amendment begins. See our facebook page at http://www.facebook.com/group.php?gid=67594690498&ref=ts

We are also planning to have a booth at FreedomFest 2009, the world’s largest gathering of free minds! July 9–11 http://www.freedomfest.com in Las Vegas. Ron

酒店上班請找艾葳 said...

艾葳酒店經紀公司提供專業的酒店經紀, 酒店上班小姐,八大行業,酒店兼職,傳播妹,或者想要打工兼差打工,兼差,八大行業,酒店兼職,想去酒店上班, 日式酒店,便服店,制服酒店,ktv酒店,禮服店,整天穿得水水漂漂的,還是想去制服店日領上班小姐,水水們如果想要擁有打工工作、晚上兼差工作兼差打工假日兼職兼職工作酒店兼差兼差打工兼差日領工作晚上兼差工作酒店工作酒店上班酒店打工兼職兼差兼差工作酒店上班等,想了解酒店相關工作特種行業內容,想兼職工作日領假日兼職兼差打工、或晚班兼職想擁有鋼琴酒吧又有保障的工作嗎???又可以現領請找專業又有保障的艾葳酒店經紀公司!

艾葳酒店經紀是合法的公司工作環境高雅時尚,無業績壓力,無脫秀無喝酒壓力,高層次會員制客源,工作輕鬆,可日領現領
一般的酒店經紀只會在水水們第一次上班和領薪水時出現而已,對水水們的上班安全一點保障都沒有!艾葳酒店經紀公司的水水們上班時全程媽咪作陪,不需擔心!只提供最優質的酒店上班,酒店上班,酒店打工環境、上班條件給水水們。心動嗎!? 趕快來填寫你的酒店上班履歷表

水水們妳有缺現領、想要兼職、有缺錢的煩腦嗎?想到日本留學缺錢嗎?妳是傳播妹??想要擁有高時薪又輕鬆的賺錢,酒店和,假日打工,假日兼職賺錢的機會嗎??想實現夢想卻又缺錢沒錢嗎!??
艾葳酒店台北酒店經紀招兵買馬!!徵專業的酒店打工,想要去酒店的水水,想要短期日領,酒店日領,禮服酒店,制服店,酒店經紀,ktv酒店,便服店,酒店工作,禮服店,酒店小姐,酒店經紀人,
等相關服務 幫您快速的實現您的夢想~!!