Posts Tagged ‘Reserve Currency’

Must A Reserve Currency Explode The Trade Balance? No! Just Look! Also: Avoiding Slavery Is No Socialism!

July 3, 2018

Established economists say that Trump doesn’t understand the nature of the dollar: its status as world reserve currency causes a trade deficit for the USA. Really? It takes one look at one graph, while knowing the USA conspired to make the dollar official world currency in 1944. (And when the French Dominique Strauss Kahn tried otherwise, as head of IMF, he soon fell to a huge sex prosecution, out of which nothing came, except the destruction of his career. That would teach all those who, like DSK, pretend to follow the exact same idea Lord Keynes had in 1944… when Keynes chaired the Bretton Woods conference!) WTF? 

I have a Facebook friend who is a fanatical anti-Trump, she retweets anti-Trump material frequently. 2 days ago she put out 2 posts (retweeting from overseas oversea junk) which were deeply offensive. One extolled a woman cop killer; the young mom he had killed was unarmed; the other compared Trump to Hitler, and emanated from Germany, supporting whom I call Merkler (for her economic war against the Greeks and others… which has killed many).

My friend didn’t know her (French) jailbreaker hero was an unarmed-woman-officer killer (because my friend doesn’t know much about Europe). Neither did my friend, who has socialist pretentions, know Merkel was a fascist exploiter hiding under a “left” immigration policy (importing slaves to better exploit the working class). My friend took down both posts (and my smart comments, unfortunately!). We are still friends. Some of the political hysteria is just misunderstanding. For example, do conventional economists misunderstand what causes the deficit? If we can’t learn to live with (some) intolerance, we aren’t tolerant.

Another friend, an economist objected to my playing dumb in economic matters. I had asserted there was no connection between reserve status and deficit (contrarily to what self-declared “liberal” economists say). To the price of starting a squirmish with dropping a thermonuclear warhead on the opposition, here is the proof:

Those Who Brought You Reagan, Brought You the Trade Deficit. Economists of the Clinton-Obama persuasion say the dollar as reserve caused the deficit. This is obviously false: the dollar has been a reserve currency for about a century, and officially since 1944. However, there was no sizable deficit before Reagan. Reagan was a tool of global plutocrats, so the deficit exploded under him, right away. He was succeeded by G. Bush, who knew all too well where real power was an re-established the balance. But then came the stooges of plutocracy, and they let the deficit fly, as their masters told them to. The idea was to weaken American US unions, workers, and citizenry.

Eugen Roden wrote:

“Even if it is hard to believe, that you Patrice don’t understand how reserve currency will necessarily create deficit, I will do my best to explain to you and to your followers in a very easy way, why [the status of the dollar as] reserve currency necessarily creates deficit in US.

Reserve currency means,  that the currency is saved in other countries, than [the] country of its origin. It can be done by private corporations or public entities,  or even private individuals, who prefer to hold the reserve currency, as media of savings, because of the trust [they have] in it, compared to the local currency.  By doing so, they create demand for the money itself, as if it would be commodity or item of value by itself. And the truth is the reserve currency is an item of value, because of the trust people all over the world put in it. This trust is result of long history of reserve currency origin country’s military dominance,  democratic political system, free competitive market economy and unchallenged right for private property and wealth. China, even with its size of economy, (a bigger economy than that of US, not in nominal but real terms) doesn’t have a reserve currency, because it couldn’t create the trust in its sincerity in most of the above mentioned issues.  Europe succeeded only partly in making the Euro a reserve currency, because of its history of because of the world wars it initiated, and their economic consequences on Europe. Even 70 years of peace was not enough to create enough trust in Europe, to make from its currency a reserve currency comparable to US dollar, which has a history of continuous respect for the values mentioned above, since its declaration of independence.

The need for reserve currency exists,  to create trust in local currencies, based on these reserves. Just as in the past precious metal reserves, like gold or silver, made the currencies trustworthy, today holding of US dollars makes local currencies trustworthy.

But then if there is demand for reserve currency,  not as media of exchange, but as value holding item, its price, or exchange value will be influenced by this demand, without the question if exists enough additional production capacity to satisfy the value of potential demand that reserve currency promises. But then the relative prices in the country of origin of reserve currency,  have to be higher than in countries who accumulate the reserve currency, that has to create surplus in trade with reserve currency origin country, to be capable to accumulate these reserves. Such a surplus can be created only if the local currency value is undervalued compared to the reserve currency. Then the other side of this surplus has to be the deficit of the reserve currency origin country.”

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Too Much Reserve Makes You Deficient?

The argument seems partially to be that, to create a store of dollars overseas, one needs to send said dollars there, to start with: a deficit. The graph of the deficit from the Federal Reserve which I put on top shows this is not correct: a continual flow of dollars is not needed to entertain a stash. A stash is a stash, it’s not a current.

OK, so we need X amount of dollars to create an overseas dollars stash. Say that stash is $10 trillion (a large overestimate). That’s 25 years at the present rate of deficit with China alone. And the stash existed before, it started before 1945. And also 4 trillion dollars of the stash is unpaid taxes by US corporations…

Moreover, consider, say, Argentina. It has a dollar stash. However the US has long exported cars to Argentina, so how did the stash develop? Through plutocratic mechanisms involving either tax cheating (laundered Argentine currency) or US plutocrats buying vast tracts of the country (also done in Chili).

In any case, the fact that the US dollar is considered reserve doesn’t mean one needs to have a deficit! And the fact is the US has been reserve since 1944 (after cheating Lord Keynes who didn’t want the $ as reserve, and headed Bretton Woods, but documents were switched!) There was no deficit for decades! And the fact is the massive deficit with China and Germany, or Ireland are recent. And the fact is, Germany has used its bankrupt small banks to self-finance its massive export machine, even within Europe…

And the fact is, the industrial core of the USA in the Middle West, got gutted, although it had a large educated population, and lots of fossil fuel energy. I say it got gutted precisely because it was educated (and thus a risk). Unions used to be hyper powerful in the USA, now they are near nothing…

Trade is good, exporting work, exporting ALL work, is bad… Yes, Merkler, 44% unemployment in Greece thanks to YOUR policies, was a terrible thing. Yes, the Greek government was an accomplice, an accomplice of you and your ilk. But We The People of Greece was innocent.

There are legal incentives to exporting job overseas, because corporate plutocrats told politicians to pass such friendly laws: watch how wealthy the Clintons are. And now the Bamas. Bahamas Bamas: a jungle rhythm. Main offenders in trade should be punished, until they cease and desist:

  • China/Hong Kong exported to the US 3 times as much as it imported from the US.
  • Japan exported to the US 2.2 times as much as it imported.
  • Germany exported to the US 2.2 times as much as it imported.
  • Ireland “exported” to the US 32 times as much as France, per capita, all of it being tax evasion by US corporations.

Notice that the French Republic should not save Merkler’s skin: whereas Europe didn’t have the muster to correct the exporting and exploiting ways of Merkler’s Germany, Trump does, and Southern Europe (that includes France, which is both northern and southern…) should enjoy the shooting down of the Merkler vulture by Trump, hopefully ending the austerity which has, and is destroying Europe (see Brexit).

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Krugman, Smelling Blood In Global Plutocratic Waters, Turning “Socialist”?

Krugman blocked and banned my comments for years, presumably because they were “socialist” (what else? I supported Sanders, Krugman dined with the devils, including Obama and Clinton, and took systematically anti-“socialist” position). But now he is changing. Suddenly, “Radical Democrats Are Pretty Reasonable“, opines Paul.

A “Socialist” newcomer young woman defeated the fourth ranking democrat in Congress in New York.

Alexandria Ocasio-Cortez’s upset primary victory has produced a huge amount of punditry about the supposed radicalization of the Democratic party, how it’s going to hurt the party because her positions won’t sell in the Midwest… But I haven’t seen much about the substance of the policies she advocates, which on economics are mainly Medicare for All and a federal job guarantee.

So here’s what you should know: the policy ideas are definitely bold, and you can make some substantive arguments against them. But they aren’t crazy. By contrast, the ideas of Tea Party Republicans are crazy…

Ocasio-Cortez’s positions: Medicare for all is a deliberately ambiguous phrase, but in practice probably wouldn’t mean pushing everyone into a single-payer system. Instead, it would mean allowing individuals and employers to buy into Medicare – basically a big public option. That’s really not radical at all.”

***

A hefty minimum wage is not a question of having it more social, it’s a question of avoiding a slave society:

Medicare for all was proposed by yours truly, more than a decade ago: the idea is to open Medicare to all… As long as they pay the cost of insuring themselves. As Medicare is not for profit and is huge (economies of scale), it would be cheaper than ANY private health plan. So Medicare for All would quickly devour for profit healthcare gouging. My friend Obama meekly proposed it to his cabinet, which unanimously rejected it in favor of giving subsidies to healthcare billionaires, their sponsors (“Romneycare aka, Obamacare”).

Employment for all, as presently done in the USA is a good thing… Except if people work for free, in which case that’s called slavery. Thus, to avoid slavery, a hefty minimum wage insuring minimum living standards, in particular the capability of affording a home. In places like Oakland, California, or cities around, with all those jobs, a minimum one bedroom is $3,000 a month. That’s 36K a year. Cities around Oakland are instituting a minimum wage of $15. That boils down to 30K a year, working full-time, 2,000 hours a year: not enough to afford a roof! Thus college professors in San Jose have been observed, sleeping in cars….

$15 an hour is not socialism, it’s not even, a realistic minimum wage in the most booming part of the US. It is just an effort to avoid a slave society.

We are all socialist, just as we are all progressive. Just as we have to be somewhat conservative (to save the planet). The only question is how much. Not whether. 
Patrice Ayme

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France Versus Dollar Justice

June 4, 2014

WALL STREET JUSTICE: USA BANKS RULE, LET’S KILL OTHERS

In Brief: The attack of Manhattan “Justice” against French bank BNP is reminiscent of the sanctions of the USA against France in 1939… because France had declared war to Hitler. With “Justice” like that, no wonder Putin does “Justice” himself. Morality: If there is no Justice, but Wall Street Justice, it’s time to strike back at the empire.

***

The world is complex, so is human society, history, and explanations thereof. The Wall Street Journal condemned, once again, stridently, the sale of French Mistral ships to Russia. It forgot to mention that the USA has several times greater business with the Russian military-industrial complex. That’s propaganda, for you.

I sent a comment tying the sale of the Mistral up with the extravagant attack of Manhattan “justice” against the French bank BNP. It was censored immediately. As the sheep say, there are no conspiracies, just, stuff happens.

If Around The USA Beware About Who Is Lurking In Your Hotel Room

If Around The USA Beware About Who Is Lurking In Your Hotel Room

Thomas Piketty, a young French economy professor, made a devastating attack against the Wall Street plutocratic system in his book, “Capital in the 21 C”. The goons in Manhattan reply with calling for an 11 billion dollar fine to bankrupt BNP, just because they can (BNP violated no European or French laws, just the hatred the government of  the USA has for Iran and Cuba).

It’s time to arrest the respect those goons get. They are not any better than the clowns around Putin. I will actually that they are worse, since, as Putin himself would point out, they are more subtle. (Meanwhile Piketty ought to be careful when visiting the USA)

The presidency of Barack Obama has been characterized by a lack of punishment of the bankers that had organized the heist of 2008. How could Obama do anything? Supposed liberals such as Krugman have just been clamoring for more money for the banks: that’s how the left is defined in the USA. The rest of the USA, or at least, the USA’s Main Stream Media, is on the right of that. Giving money, ever more money, trillions of dollars in monetary base or bond buying (= Quantitative Easing, Twist), in the USA, defines the “left”.

Obama has been cracking on bankers, but only Swiss bankers. Switzerland’s banks destruction became a golden opportunity for the banks of the USA, which can now manage thousands, not to say hundreds of thousands, of new clients.

The USA is against tax havens: that’s the law. Overseas tax havens, that is. Slight problem: the USA is, by far, the world’s largest tax haven.  Delaware is, by itself, the world’s largest tax haven state, as USA Den Of Thieves pointed out. The USA legislative system is an enormous tax haven for the hyper rich.

So why so upset that BNP conducted some transaction overseas between overseas clients, using the world’s reserve currency? That’s just a pretext. BNP is one of the two largest European banks. It’s also one of the two largest banks in Europe, and one of the top five dollar clearing banks, worldwide. As the dollar is the world’s reserve currency, gigantic reserves of dollars are overseas, never to transact through regions directly controlled by the USA.

BNP had business in Iran for generations. But that’s the point. When the USA applied sanctions on Iran, it forced the rest of NATO to do the same. That devastated French industry. In particular the car maker Peugeot, the second car maker in Europe at the time. It devastated no American industry.

However, what is the difference between Iran and Saudi Arabia? Women cannot drive in Saudi Arabia. Yet, they can in Iran. Clearly a crime, in Washington’s eyes, if it’s done in a Peugeot. So Washington struck Iran, and thus Peugeot, with sanctions.

American economists such as Paul Krugman, hopefully lying through their teeth (the alternative, that they are really believing what they are saying, being worse), have claimed that the fact that the dollar is the world’s reserve currency presented no economic advantage to the USA.

Why this will to destroy France? Because, if France is on her knees, so is Europe: the European Union, re-instatement of the Imperium Francorum, is mostly a French multiplier, and is built around the principle of 1789, the FRENCH Republican Constitution of 1789 (Liberté, Égalité, Fraternité), not the Constitution of the USA of 1789 (We The People of the USA, whatever that is, friendly to all sorts of discrimination, extermination, exploitation and slavery).

OK, I am exaggerating a bit. The master does not want to destroy the slave. The Master just want the slave to abide by His law. The law of the strongest. Cyrus Vance, a francophobe in Manahattan, is the strongest. His Law is the best. Vance knows well that, this French spirit of 1789 is counter-attacking. He needs to fight back.

So he caged DSK, head of the IMF, who had the impertinence of raising hundreds of BILLIONs dollars of SDR. A word on this here, as it goes to the ugly heart of the USA centered global plutocracy.

Under Strauss-Kahn, a senior, famous economy professor, the IMF’s pursuit of financial stability called for a new world currency to replace the dollar as the world’s reserve currency. An IMF report from January 2011 called for a stronger role for special drawing rights (SDR), to stabilize the international monetary system. For most countries, there would be many serious advantages in switching the pricing of certain assets, such as oil and gold, from dollars to SDRs. The BNP affair is a case in point.

For Manhattan “Justice” gangsters, the call for SDRs was a call for the end of Manhattan, New York, Wall Street.

DSK had followed Keynes’ idea (Krugman is anti-Keynes about this, unsurprisingly). To foil Keynes, the head of the financial commission at Bretton Woods, the American goons substituted false documents at the last minute. This forgery is how the dollar became the world’s reserve currency.

And how Wall Street has now a weapon to destroy European banking.

Symbolically, only one man was criminally prosecuted for the 2008 financial heist. A lower employee of Goldman Sachs. A French citizen, of course. Tragedy is emphasized by comedy, to make it more blatant, that, whatever it is, it’s the fault of the French.

My advice? It was important to go all-out to blunt Putin’s Pluto grab. But one should remember one ought to crush infamy (“Écrasez l’Infâme”; Voltaire signed it: Ecr. L’Inf.)

This, this BNP affair, is even worse than Putin. In a way, it is the sort of mood and chronic conspiracy, that caused Putin to act the way he did.

The old Putin, say of 20 years ago, just as the old Yeltsin, was naïve: he really believed the free market propaganda oozing from Harvard, and other austere American institutions. Then Vlad found out how the sausage was made. He decided to make his own. (Hitler went down that road too, sort of.)

The Russian plutocracy, around Putin, is just a subset of the global plutocracy that individuals gravitating around Wall Street feel, and think that they direct and control.

Thus, it is even more important to smash the power grab of the USA’s plutocracy. Putin made an error, a grave error. He has to reverse it. However the system of exponentiating greed around Wall Street has been messing with the world, big time, for EXACTLY a century. (As I have explained, the White House excited the Kaiser to go to war against France in 1914, and then proceeded to make a fortune, feeding and arming the Kaiser.)

When I wrote “Mistral Blows Hard”, I argued that it was smarter to give Putin his amphibious, French made, aircraft carriers. Now, I would argue, it’s a necessity.

Be it only so that Putin can land his “little green men” in Manhattan, and go arrest the criminals there who call themselves proponents of “Justice”. When extirpating cancer, one has to exterminate its stem cells. This important, recent discovery in oncology has a morality of its own, that carries far, and wide.

Truth ought to look better than any of us. And that’s:

Ecr. L’Inf.

Patrice Aymé