US dollar

[Abdel]

How long before it loses it reserve status?

http://www.youtube.com/watch?v=h5GBll9X250

The less countries uses the US dollar = the inflation created by the FED won't be exported and will stay in the US.

What is your take on that Anthony?

 

[Abdel]

... what could you possibly know about Russians?

What does this have to do with my previous post?

What could that video have anything to do with the US dollar?

Since China won't have to go via the US dollar to buy the Ruble = inflation will remain in the US...how? Simple:

Before, when helicopter Ben printed out of thin air $1 trillion, if China wanted to buy Rubles they needed to buy some US dollars = imported inflation since that money was printed.

Now, when Ben prints $1 T, if China wants to buy Rubles, it can do it directly (no need to buy US dollars anymore) = Zero imported inflation = inflation stays in the US.

 

[Abdel]

You posted a video about Chinese putting machines to make it easier to exchange Rubles for their currency for Russian tourists...

No, they just have to pay one bid ask spread now instead of two as before. But nice try.

Aw man, you got me! You must be a genius!

Forward the vid to 1:10 : ''Chinese businsses use to have to exchange RMB to US dollars first, before converting it to Ruble''.

And what are the implications of this new deal? They won't have to exchange RMB to US dollars anymore.

 

[Abdel]

As I already said, this merely decreases the number of bid-ask spreads these businesses have to pay from two to one.

You're missing the point. When Chinese businesses baught the printed US dollar and exchanged it to the russians, those US dollars were in circulation worldwide.

In that scenario, the ones holding the printed USD (lets say russian businesses) could go out and buy up products (inflationary demand) = why do you think every product on earth that is being traded in USD is an all time high?

With this new russian-chinese deal, there won't be no USD flying over to china then to russia, he'll stay in the US. Banks will probably use it and lend it to people = more paper money chasing the same limited amount of goods IN THE US = more inflation in the US.

Now sure, the USD still has the reserve status, but as you can see, more and more countries are moving away from it.

That is the answer to your question: ''What could that video have anything to do with the US dollar?''

 

[Abdel]

There is no USD flying to Russia?

Ok so let me get this straight.

1) Chinese businesses buys up USD
2) They sell the USD to the Russians in return of some Ruble.
3) Now the russians holds USD.

No USD flying to Russia?

And remember, these are businesses = money actually move in and out of their bank accounts.
If that Russian business wants to use the USD he received from the chinese counter-part, he surely can.

 

[Abdel]

But I guess only time will tell.

If inflation goes up in the US = I'm probably right.

If inflation remains the same or goes down in the US = You're probably right.

 

[bigbadwolf]

1) Chinese businesses buys up USD
2) They sell the USD to the Russians in return of some Ruble.
3) Now the russians holds USD.

No USD flying to Russia?

Why would Russians want to buy dollars? If anything, they want to shrink their dollar holdings. The USD is a hot potato which everyone who has a choice wants to divest himself of.

 

[Abdel]

Inflation will go up in USA whether you are right or wrong, simply because the low inflation we have right now can't last forever with our current monetary policy.

Sure, if you go by the governement bogus CPI numbers that doesn't include food & energy, that use substitution, hedonics, and ponderation, then yes the inflation is low.

But the free market way to measure inflation (that governement used to use before - way back-) is saying that the inflation is around 8%/year. Most regular folks who do their shopping would agree with that.

So, inflation is already high when measured correctly and it will go higher (in the US) as the world move out of the US dollar.

Option 1 and Option 2 will see zero change in the exposure to USD inflation, merely a decrease in the number of bid/ask spreads to pay since transactions happen instantaneously.

Option 3 is not impacted by new RUB/RMB market since one of the two parties does not intend to hold RUB or RMB for whatever reasons in their economic outlook, and therefore the new market will not be made use of (since there is no point...).

For the record, this new deal/policy will extend to russian exports of oil and natural gas to China.

You're missing the big picture here.

The reserve status of the US dollar is sliding away = less & less USD flotting around the world = USD will come back to the US = major inflation

Remember, as the international demand for the USD goes down, there will still be the same amount of USD out there. Since no one will want to hold it, guess where it'll go? Back home.

EDIT: What about the chinese tourists that used to buy the USD to get the RUB? Exactly, lol...there is a billion of them out there, that's alot of people who won't use the USD.

 

[Abdel]

Why would Russians want to buy dollars? If anything, they want to shrink their dollar holdings.

That's the whole point of this deal with the chinese, i.e. to get away from the USD.

 

[anujjain]

http://www.businessinsider.com/iran-china-oil-barter-2011-07. I guess what Abdel is saying is that if transactions like this increase in number or if you no longer have to hold USD to get some other currency, then this would decrease the demand of USD in international market.

 

[Abdel]

... you say CPI is a bad way to measure inflation... but then say that inflation is 8% flat? Inflation is not 8% flat... it's just not...

I said : AROUND 8%

It's neither a deal nor a policy. It's an exchange.

Whether or not it will be used for Russian exports of Nat Gas depends on if the contracts will be written in USD or RUB. Historically Russian Nat Gas contracts have been written in USD, and I have seen nothing in the news (and I just searched) ever about migrating away from this. So you're going to have to provide sources.

http://www.ibtimes.com/articles/85424/20101124/china-russia-drop-dollar.htm

You're taking a news item about essentially fancier ATMs that dispense chinese currency for rubles for the sake of convenience of Russian tourists and blowing it out of proportion because at one point some businessman complained about having to pay the USDRBP spread on top of the RUBUSD spread....

I'm not blowing nothing out of proportion.

I started a thread about the US dollar and I asked a question : ''when will it lose it's reserve status?''

And I attached a video that showed how the world is starting to move away from it. I didn't put this vid up and said because of this chinese/russian currency deal, the USD is out.

I have better things to do with my time.

Keep it moving son. Done told you not to quote me anymore.

 

[Abdel]

http://www.businessinsider.com/iran-china-oil-barter-2011-07. I guess what Abdel is saying is that if transactions like this increase in number or if you no longer have to hold USD to get some other currency, then this would decrease the demand of USD in international market.

Exactly.

And what will the USD that is outside the US do? Fly back to the US = big inflation.

 

[Lyosha]

I didn't put this vid up and said because of this chinese/russian currency deal, the USD is out.

If inflation goes up in the US = I'm probably right.

If inflation remains the same or goes down in the US = You're probably right.

I smell a contradiction.

Re-read your article. Translate it into your native language if it is difficult to read English articles for you. It doesn't say that Russia is going to sell oil/nat gas for Rubles, it just says that the two countries are charting a course that could potentially be hazardous to the USA. As a matter of fact, despite all the talk, recent negotiations for prices with Belarus have been in USD. And Belarus is Russia's closest trade ally, with a common economic zone amongst the two countries. Beyond the occasional economic summit speech I haven't seen any indication of anything ever coming to fruition. And I read news in two languages from multiple news sources religiously ... and trade oil...

However, some context goes a long way here - all this talk about Russia selling Russian oil for RUB has never been about an assault on the dollar. It is rather a desperate attempt by the country to make its currency worthwhile. It wants the RUB to be reserve-currency worthy. Internally, few keep significant quantities of their capital in RUB, which has historically caused considerable volatility in the value of the currency, which politicians are trying to avert.

Anuj - Iran only goes around sanctions because we put sanctions there. If we don't put up more sanctions, less oil will be traded via non-dollars. Nor is the value of the dollar pegged to any particular product anymore. Currency swaps are cheap enough to make it so. Sad as it is, but we live in a modern world nonetheless.

The single greatest threat to the USD as a reserve currency is the Euro, which has been making gains against the USD for a while now despite Europe being in hot water. I haven't heard anyone mention it yet...

The USD that is outside the US will do the exact same thing as a USD inside the US.

 

[anujjain]

I understand that the example I cited happened because of the sanctions. I am not saying that USD is going to lose the reserve currency status anytime soon, if ever. But if that happens then there will be less demand of USD in international markets and in that case there will be more USD inside US leading to a greater inflation.

 

[anujjain]

That is without mentioning that there is effectively no way to get the USD back into the USA - this country doesn't exactly export anything or have liquidatable non-internal assets lol.

What if you want to print more.

 

[Lyosha]

That is actually a complicated question. Are we printing faster than the country's value appreciates and the value of various commodities depreciates? What are the other countries doing?