Last Lap for Bretton Woods

[akrowne]

Re: Last Lap for Bretton Woods

Both Japan and Canada are in a similar situation in terms of threats to the export complex as the US currency plummets (of course, Canada has raw materials to export even if finished goods cannot be. Japan and Europe, not so lucky).

If these export-driven countries think that throwing their own currencies under a bus is the best solution, things will certainly get interesting. Will that allow bubbling to shift into these other currency zones, or will it just magnify the near-term global crack-up boom (will the US-centered "no bid" continue to haunt the Eurozone and the loonie, etc?)

Who knows, but either way it is good for gold... hint hint.

[Chris Coles]

Re: Last Lap for Bretton Woods

if the u.s. enters recession, i don't see how europe can avoid following. if the ecb stays with its mandate, europe's recession may well be worse than the u.s.'s. i think the ecb will eventually pay attention to europe's gdp more than europe's cpi. and when the ecb finally caves to political pressure, i would think that gold will take off like a scalded [yellow] dog.

My view is the ball game is radically different this time to any other period of such instability. In the past when the United States went to war, financially, with the rest of the planet, as it is doing now; there was insufficient dynamic to the rest of the worlds economy to allow them to fight back. But this time is very different indeed.

I believe that the US has crucially misjudged the overall mood and is certainly more vulnerable to a shift change from the dollar to the Euro as the base trading currency. It only needs relatively few BIG players to change currencies for the whole thing to backfire and the trend to become unstoppable. In that case, the ECB is much better off sticking to its own policy and sitting this out, rather than trying to quickly square the circle as you suggest they will, from political pressure. The ECB is not in the firing line this time, the dollar is. Just at this particular moment in the history of finance, the United States does not hold the strong cards it needs to pull off another route of the rest of the planet.

No one, can beat the market trend all of the time. No one! I believe we are about to see a great sea change, a crossover from the dollar to the Euro as the base currency of trade. The ECB, seeing that potential, will stick it out for they have nothing to lose and everything to gain.

[jk]

Re: Last Lap for Bretton Woods

My view is the ball game is radically different this time to any other period of such instability. In the past when the United States went to war, financially, with the rest of the planet, as it is doing now; there was insufficient dynamic to the rest of the worlds economy to allow them to fight back. But this time is very different indeed.

I believe that the US has crucially misjudged the overall mood and is certainly more vulnerable to a shift change from the dollar to the Euro as the base trading currency. It only needs relatively few BIG players to change currencies for the whole thing to backfire and the trend to become unstoppable. In that case, the ECB is much better off sticking to its own policy and sitting this out, rather than trying to quickly square the circle as you suggest they will, from political pressure. The ECB is not in the firing line this time, the dollar is. Just at this particular moment in the history of finance, the United States does not hold the strong cards it needs to pull off another route of the rest of the planet.

No one, can beat the market trend all of the time. No one! I believe we are about to see a great sea change, a crossover from the dollar to the Euro as the base currency of trade. The ECB, seeing that potential, will stick it out for they have nothing to lose and everything to gain.

there aren't enough euros around for the euro to replace the dollar as reserve and means for trade. let's imagine the chinese decide to trade their trillion dollars in for euros.... what do you think the exchange rate would go to?

the eurozone will have to run enormous trade deficits for many years to get enough euros in global circulation to allow trade to be priced in euros. say, isn't there a country that's already done that?

the dollar is the only thing in big enough supply to be the currency of [reluctant] choice for global trade.

[Chris Coles]

Re: Last Lap for Bretton Woods

there aren't enough euros around for the euro to replace the dollar as reserve and means for trade. let's imagine the chinese decide to trade their trillion dollars in for euros.... what do you think the exchange rate would go to?

the eurozone will have to run enormous trade deficits for many years to get enough euros in global circulation to allow trade to be priced in euros. say, isn't there a country that's already done that?

the dollar is the only thing in big enough supply to be the currency of [reluctant] choice for global trade.

With the greatest of respects, you have missed the point. The way around that problem has been a road travelled before, but the last time by the United States. You simply go back to pre Bretton Woods and get together and decide to use Gold as the interface between the currencies and you use the interface between Gold and every other currency to overcome the problem. So, yes, in a very real sense, you are correct, but it is the dollar under pressure and those that use it; not the rest of the planet. I like an old French expression Force Majeure; an unexpected or uncontrollable event that upset's ones plans...... Woops!

[jk]

Re: Last Lap for Bretton Woods

With the greatest of respects, you have missed the point. The way around that problem has been a road travelled before, but the last time by the United States. You simply go back to pre Bretton Woods and get together and decide to use Gold as the interface between the currencies and you use the interface between Gold and every other currency to overcome the problem. So, yes, in a very real sense, you are correct, but it is the dollar under pressure and those that use it; not the rest of the planet. I like an old French expression Force Majeure; an unexpected or uncontrollable event that upset's ones plans...... Woops!

there is no doubt in my mind that the dollar cannot remain THE reserve currency long term. but "long term" is a long time. there is no interim alternative. certainly not gold - the politicians and central bankers will not quickly give up the ability to manipulate their budgets and their currencies. only if we go through financial catastrophe will they THEN consider such a radical alternative. thus i believe that for at least the next several years there will be diversification into ad hoc baskets of dollar alternatives, but the dollar will retain a central, albeit ever weakening, role. these changes don't come easily. the transition from the pound to the dollar, after all, took a depression and 2 world wars.

[Chris Coles]

Re: Last Lap for Bretton Woods

If you chose to go to war, financially and to cover the same ground and the same strategy again and again you have to accept that somewhere down that time line, someone will figure a way around your forces. That is as plain as a pikestaff. All it would need is for a beleaguered British Exchequer, (now certain that it cannot gain the high ground and return good old Sterling to its pride of place), to decide to throw its towel in with the Euro and all bets would be off.

Turning Sterling into Euro's might be all that would be needed and remember, there are a lot of Arabs and Asians holding a lot of Sterling.

War is a chancy business and victory goes to the brave and the bold.

[jk]

Re: Last Lap for Bretton Woods

If you chose to go to war, financially and to cover the same ground and the same strategy again and again you have to accept that somewhere down that time line, someone will figure a way around your forces. That is as plain as a pikestaff. All it would need is for a beleaguered British Exchequer, (now certain that it cannot gain the high ground and return good old Sterling to its pride of place), to decide to throw its towel in with the Euro and all bets would be off.

Turning Sterling into Euro's might be all that would be needed and remember, there are a lot of Arabs and Asians holding a lot of Sterling.

War is a chancy business and victory goes to the brave and the bold.

do you think the uk is going to adopt the euro? it appears ever less likely to me, but i'm curious how it looks to someone living there.

[Chris Coles]

Re: Last Lap for Bretton Woods

do you think the uk is going to adopt the euro? it appears ever less likely to me, but i'm curious how it looks to someone living there.

The Euro represents many nations, not one. While it has indeed got problems, hardly to be unexpected, it is a stable currency in an unstable world. On the one hand, why should the Euro zone always roll over? Why should the European business environment always be under the heel of the dollar? I suspect that exactly the same thoughts were in the minds of many in the United States at exactly the point where, weakened by war, the UK Pound £ seemed vulnerable enough to make it worth while to take a stand and tell its holders to "take a hike".

the £ was, not that long ago, in exactly the same place as the dollar is today; a thought that must be running through many well oiled minds world wide. Add to that the fact that there are a lot of £'s in circulation and in long term holdings.... precisely the reason why there was so much angst against throwing our hands in with the Euro.... and you start to see the potential for a different strategy.

Pride comes before a fall. Over confidence is the crack in your armour.