Thread: US backing for world currency stuns markets

US Treasury Secretary Tim Geithner shocked global markets by revealing that Washington is "quite open" to Chinese proposals for the gradual development of a global reserve currency run by the International Monetary Fund.
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By Ambrose Evans-Pritchard 6:05PM GMT 25 Mar 2009

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The dollar plunged instantly against the euro, yen, and sterling as the comments flashed across trading screens. David Bloom, currency chief at HSBC, said the apparent policy shift amounts to an earthquake in geo-finance.

"The mere fact that the US Treasury Secretary is even entertaining thoughts that the dollar may cease being the anchor of the global monetary system has caused consternation," he said.

Mr Geithner later qualified his remarks, insisting that the dollar would remain the "world's dominant reserve currency ... for a long period of time" but the seeds of doubt have been sown.

The markets appear baffled by the confused statements emanating from Washington. President Barack Obama told a new conference hours earlier that there was no threat to the reserve status of the dollar.

"I don't believe that there is a need for a global currency. The reason the dollar is strong right now is because investors consider the United States the strongest economy in the world with the most stable political system in the world," he said.
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The Chinese proposal, outlined this week by central bank governor Zhou Xiaochuan, calls for a "super-sovereign reserve currency" under IMF management, turning the Fund into a sort of world central bank.

The idea is that the IMF should activate its dormant powers to issue Special Drawing Rights. These SDRs would expand their role over time, becoming a "widely-accepted means of payments".

Mr Bloom said that any switch towards use of SDRs has direct implications for the currency markets. At the moment, 65pc of the world's $6.8 trillion stash of foreign reserves is held in dollars. But the dollar makes up just 42pc of the basket weighting of SDRs. So any SDR purchase under current rules must favour the euro, yen and sterling.

Beijing has the backing of Russia and a clutch of emerging powers in Asia and Latin America. Economists have toyed with such schemes before but the issue has vaulted to the top of the political agenda as creditor states around the world takes fright at the extreme measures now being adopted by the Federal Reserve, especially the decision to buy US government debt directly with printed money.

Mr Bloom said the US is discovering that the sensitivities of creditors cannot be ignored. "China holds almost 30pc of the world's entire reserves. What they say matters," he said.

Mr Geithner's friendly comments about the SDR plan seem intended to soothe Chinese feelings after a spat in January over alleged currency manipulation by Beijing, but he will now have to explain his own categorical assurance to Congress on Tuesday that he would not countenance any moves towards a world currency.

http://www.telegraph.co.uk/finance/econ ... rkets.html

you better be absolutely terrified of what this criminal cabal has been doing America ... Treason is just to kind of a word for this new Mafia

This same paper had a very similar article back in 2009.

A world currency moves nearer after Tim Geithner's slip

US Treasury Secretary Tim Geithner confessed on Wednesday that he had not read the plans by China's central bank governor for a "super-sovereign reserve currency" run by the International Monetary Fund, but nevertheless let slip that Washington was "open" to the idea. Whoops.

5:15AM GMT 26 Mar 2009

This is how matters quickly escalate in geo-finance. China's suggestion – backed by Russia, Brazil, and India, and clearly aimed at breaking US dollar hegemony – is making its way onto the agenda of the G20 Summit next week. 'Dollar-dämmerung' no longer looks so far-fetched.

China's paper, by Governor Zhou Xiaochuan, is couched in understated language – more a 'thought experiment' than a declaration of monetary war. His ideas could be mistaken for the musings of an academic theorist. Nobody should be fooled by decorum.

It comes days after premier Wen Jiabow demanded US action to safeguard the value of China's holdings of US bonds - $740bn of US Treasuries and a further $600bn or so of other debt. "We have lent huge amounts of money to the US. Of course we are concerned about the safety of our assets," he said.

China's Communist Party seems to fear that the Federal Reserve is orchestrating a beggar-thy-neighbour devaluation - and a disguised default on America's foreign debt - by resorting to the nuclear option of printing money to buy US Treasury bonds.

China's proposal is to activate the IMF's power to issue Special Drawing Rights (SDRs). The IMF would be groomed as de facto central bank for the planet. The SDRs would gradually become an "accepted means of payment". Call it the 'globo'.

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It would be an error dismiss this idea as a pipe-dream. Cynics once ridiculed Maastricht plans to launch the euro. John Major famously said chatter about a European currency had "all the quaintness of a rain-dance and about the same potency". Yet once officialdom began assembling the machinery for monetary union, EMU acquired a life of its own.

The pitfalls of a world central bank are obvious. It is hard enough for the European Central Bank to run policy for 16 states in a region with a shared history, and shared EU institutions (Commission, Court of Justice, competition police, etc). The politics of global monetary management would be poisonous.

The heads of the Fed, the ECB, and the Bank of England, must all testify before parliaments and answer to democracy. There is no world parliament, no world government. Who would control a super-IMF?

In theory, this world reserve bank would be above politics. China's plan suggests a resource currency along the lines of the "Bancor" floated by Keynes at Bretton Woods. This was anchored on 30 commodities, giving it a broader base than the Gold Standard. Such a currency would prevent the "credit-based" debauchery of today's fiat system, says Mr Zhou.

True, but this would be jumping from frying pan to fire. If the world is running out of oil, metals, freshwater, and arable land – as many believe – then the price of commodities must rise over time. The 'globo' would become a deflation machine, like the late 19th Century gold as it asphyxiated endebted US farmers.

The China-Russia plans may never come to much. As President Barack Obama put it, the US is going through a "rough patch" but still commands the world's biggest economy, under a stable democracy and the rule of law. He might have added that it will largely avoid the aging crisis already dulling Japan's dynamism, and soon to ensnare Germany, Italy, above all China.

For all its bluster, Beijing must move with care. After years of export-driven mercantilism China is even more dependent on US markets than America is dependent on Chinese capital. The risks of currency and trade conflict are not symmetric. The hegemon must prevail.

But 10 years hence the picture may look different. If the G20 opens the door wide enough next week, a world currency may yet come into being.

http://www.telegraph.co.uk/finance/econ ... -slip.html

Oooops. I just noticed that the original article above is from 2009.

Is Obama's Team Ready to Dump the Dollar?
By Bobby Eberle March 18, 2011 7:13 am


Back in October, Treasury Secretary Tim Geithner gave a speech in which he answered a question about the U.S. dollar. Geithner said that America needed to "work hard to preserve confidence in the strong dollar." My, oh my, how quickly things change. This week, Geithner said he was "quite open" to the establishment of a new global reserve currency. The dollar plunged upon news of the statement, and one has to wonder, does the Obama administration really support America?

In a column written in October, Lawrence Kudlow focused on Geithner's comments (or lack thereof) regarding the dollar.

In fact, Geithner has said little to nothing about the dollar during his tenure.

But then on Monday, in a Silicon Valley speech to businessmen, he said the following: "It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to be competitive. . . . It is not a viable, feasible strategy, and we will not engage in it."

Answering a question at this meeting, Geithner said the U.S. needed to "work hard to preserve confidence in the strong dollar." And when asked if the dollar would lose its status as the world's reserve currency, he said, "Not in our lifetime."

So... is Geithner measuring a "lifetime" in dog years? The Telegraph reports that Geithner "shocked global markets by revealing that Washington is 'quite open' to Chinese proposals for the gradual development of a global reserve currency run by the International Monetary Fund."

The dollar plunged instantly against the euro, yen, and sterling as the comments flashed across trading screens. David Bloom, currency chief at HSBC, said the apparent policy shift amounts to an earthquake in geo-finance.

"The mere fact that the US Treasury Secretary is even entertaining thoughts that the dollar may cease being the anchor of the global monetary system has caused consternation," he said.

According to the Chinese plan, there would be a "'super-sovereign reserve currency' under IMF management, turning the Fund into a sort of world central bank. The idea is that the IMF should activate its dormant powers to issue Special Drawing Rights. These SDRs would expand their role over time, becoming a 'widely-accepted means of payments.'"

Despite its weakness, the dollar is still the world's currency. The dollar grows weaker because of the dire financial situation America is in. But Geithner's comments only added fuel to the fire. Do Geithner and Obama really seek to promote America or tear her down? If the former, they have a very strange way of showing it. If that latter, then their actions are move beyond criminal. Why would American officials work against the common good of Americans?


http://www.gopusa.com/theloft/2011/03/1 ... he-dollar/

Why would American officials work against the common good of Americans?

Because they don't work for America? The move to a new currency just indicates that the U.S. has already been milked. Time soon to siphon off the wealth in Asia.

No shock here. Notice that Geithner is a member of the Bilderberg Group

Timothy F. Geithner

Timothy F. GeithnerAKA Timothy Franz Geithner

Born: 18-Aug-1961
Birthplace: New York City

Gender: Male
Race or Ethnicity: White
Sexual orientation: Straight
Occupation: Government, Business

Nationality: United States
Executive summary: US Secretary of the Treasury

Wife: Carole Sonnenfeld Geithner (two children)

University: BA Government & Asian Studies, Dartmouth College (1983)
University: MA Intl. Economics & East Asian Studies, School of Advanced International Studies (1985)
US Secretary of the Treasury (26-Jan-2009 to present)
Federal Reserve Bank of New York President & CEO (2003-09)
International Monetary Fund Director, Policy Development & Review Department (2001-03)
US Treasury Department Under Secretary for International Affairs (1999-2001)
US Treasury Department Assistant Secretary (1997-9
US Treasury Department Deputy Assistant Secretary (1994-97)
US Treasury Department Special Asst. to Under Secretary for International Affairs (1988-94)
Kissinger Associates (1985-8
Bilderberg Group
Center for Global Development
Center for Strategic & International Studies
Council on Foreign Relations Senior Fellow, Economics (2001)
Economic Club of New York Trustee
Group of Thirty
Partnership for New York City Board of Directors (ex officio)
RAND Corporation Trustee