Negative interest rates and what it means

Quote: AZDuffman

Would their banking systems affect ours since it was all in dollars? While monetary policy is tricky enough that perhaps 10 countries in the world can really manage it well, is it better to quarantine the problem children?

Colombia has 49.4486 trillion Colombian Pesos in circulation = $16.8804 billion USD

In comparison $16.23 billion is the production of pennies, nickels and dimes since 1963 .
Another way to look at it is the $1 bills in circulation are about $11.40 billion, and $5 bills are $13.70
Vermont has a Gross State Product of $29.75 billion

I just don't think it's enough money to make much difference.

Quote: AZDuffman

Yes, one more in a list of things they blame the USA for.

I think that is the biggest issue. It's like blaming all of Greece's problems on the Euro.

10,000 Greek Drachmas was worth 29.35€ , which was their biggest banknote. Now they are in a world where a 50€ banknote is the norm for an ATM machine, and there are 100€, 200€, and 500€ banknotes.

Quote: AZDuffman

For that case I would say make an "international" version and a domestic one. Maybe several international, say put "PANAMA" over part of it. This way bills could be voided if a coup or other hostile action.

That would defeat the object of using US dollars in non-US economies... the fact it's backed by the US government is what makes it usable... the US doesn't get much control over it in the end... people buy the dollars and use them cos they are trusted. Even if that's a questionable trust.

(questionable that they should have it... the US dollar seems to be pretty rock solid as a currency)

Quote: TheCesspit

That would defeat the object of using US dollars in non-US economies... the fact it's backed by the US government is what makes it usable... the US doesn't get much control over it in the end... people buy the dollars and use them cos they are trusted. Even if that's a questionable trust.

(questionable that they should have it... the US dollar seems to be pretty rock solid as a currency)

Somebody has replaced your "rock" with a movie styrofoam rock Cesspit. China announced in the fall they are going to quit buying US debt. This will likely be looked back on by history as the beginning of a new economic order in the world. The shape of this new order I don't think is clear yet but it could be as bad as AZD believes or it could be a more controlled shift that will not be a catastrophic change.

Be ready for your life to change more than you want to Cesspit no one will be immune.

Quote: kenarman

Somebody has replaced your "rock" with a movie styrofoam rock Cesspit. China announced in the fall they are going to quit buying US debt. This will likely be looked back on by history as the beginning of a new economic order in the world. The shape of this new order I don't think is clear yet but it could be as bad as AZD believes or it could be a more controlled shift that will not be a catastrophic change.

Be ready for your life to change more than you want to Cesspit no one will be immune.

Sure if it is a bad currency, labelling some of the notes with 'Ecudaor' is still not going to make those notes used.

I'll just wait and see....

Quote: TheCesspit

That would defeat the object of using US dollars in non-US economies... the fact it's backed by the US government is what makes it usable... the US doesn't get much control over it in the end... people buy the dollars and use them cos they are trusted. Even if that's a questionable trust.

(questionable that they should have it... the US dollar seems to be pretty rock solid as a currency)

In 1290, King Philip IV of France did not have enough money to pay for his wars, so he began to debase the currency by using more base metal in new coins.
This policy produced a devaluation of the French currency, inflation and the disappearance of gold and silver from the kingdom. To secure cash the King had to arrest the Lombards (1292), then the Jews (1306) and finally the Templar Knights (1307), and confiscated their assets to issue new coins.

The amount of the base metals used was the historical definition of Seigniorage . Sometimes you purchased 1 ounce of the mix (British coins were only 92.5% silver, so the seignorage was 7.5%). Sometimes gold was kept at one ounce, and base metals were added in addition, but the coins are sold at far above melt price of precious material. An American Eagle 2016 One Ounce Gold Proof Coin sells for $1,560 even though Gold is $1230/ounce.

The Bahamas issues its own independent currency, the Bahamian dollar, which is set at parity with the U.S. dollar. The Central Bank maintains parity by a combination of external reserves in the form of U.S. dollars and a system of exchange control. External reserves average at last two months worth of imports. One benefit of an independent currency is that The Bahamas earns seigniorage on its note issue because it receives interest on its foreign currency holdings.

Quote: kenarman

China announced in the fall they are going to quit buying US debt. This will likely be looked back on by history as the beginning of a new economic order in the world. The shape of this new order I don't think is clear yet but it could be as bad as AZD believes or it could be a more controlled shift that will not be a catastrophic change.

How on earth did I miss that one? That is indeed big. China is it's own house of cards, but have to wonder where all those dollars spent at Target and Harbor Freight will start ending up.

Quote: AZDuffman

How on earth did I miss that one? That is indeed big.

Relax. We'll Survive China's Sales of U.S. Debt.

Some people aren't nervous.

Quote: Pacomartin

Relax. We'll Survive China's Sales of U.S. Debt.

Some people aren't nervous.

In other words, we're screwed if we do,
and screwed if we don't.

Quote: Pacomartin

Relax. We'll Survive China's Sales of U.S. Debt.

China has purchased treasury's for years in order to keep the value of the Renmimbi down, to keep their export machine chugging along. If they hadn't kept the value of the Yuan down, so much hot money would have already flowed into China that it would have caused massive inflation at home. They are not really sure what to do with 300 million starving peasants either.

When China found out we would apply several iterations of QE, they panicked because, they expected to receive the same value for US treasury's as when they bought them. China now has been dumping treasury's and buying anything of intrinsic value, [Africa] that they could, without driving up the value of the Yuan. They also buy covertly as possible, thousands of tons of gold, and now are buying up silver. China purchased the LBME, which has been the worlds pricing mechanism for PM's for 300 years.

From, the hedge: http://www.zerohedge.com/news/2015-07-21/chinas-record-dumping-us-treasuries-leaves-goldman-speechless

http://www.zerohedge.com/news/2015-08-25/devaluation-stunner-china-has-dumped-100-billion-treasurys-past-two-weeks

From your link; "OCT 12, 2015 8:56 AM EST
By
Noah Smith
A lot of people I talk to are very worried about Chinese holdings of U.S. sovereign debt. The general idea is that if China decided to dump Treasuries, the U.S. economy would go into a tailspin."

and, " In August, China allowed its currency, the yuan, to depreciate to some degree. But since then it has been intervening in the foreign exchange markets to keep the yuan from weakening too fast. " China has been in a currency war since QE, they want to keep the Yuan cheap.

He continues: " But China's sales of U.S. debt haven't sent the price of Treasuries plummeting (or thought of another way, it hasn't caused interest rates to soar). Instead, as China has stepped out of the market, other investors have stepped in. It turns out that the demand for U.S. government bonds is much wider and deeper than many had expected. "

Hasn't sent treasury's plummeting? They are going negative. I disagree with him. The only buyer in size of treasury's is the fed or, US Vassal states .

Russia and China have both been dumping treasury's. Where are all these buyers, he speaks of? The federal reserve has 3 trillion worth of unaudited assets on their books. Low quality CDO's and treasury's.

One more, China, Russia and Japan are selling, and tiny Belgium is able somehow to buy tens of billions worth of treasury's? http://www.zerohedge.com/news/2014-02-18/china-sells-second-largest-amount-us-treasurys-december-and-guess-who-comes-rescue

Quote: Pacomartin

Relax. We'll Survive China's Sales of U.S. Debt.

Some people aren't nervous.

It is the same story of Japan in the 1980s. After their market crash they sent more money home, and their market has still never recovered that high or in fact even come close to it. On the China side one must ask if they stagnate for decades when their boom stops. Asian "miracle economies" tend to have that pattern. Slow growth in basic industries. 20 year boom. Financial crash. China is nearing the end of the boom phase.

Back to USA debt and the USD. If they keep taking USD in payment, and they will, all those dollars still have to go somewhere. Will be interesting to see both that and who the next customer for our paper is. Saudi Arabia may soon start some strategic dumping for both political and fiscal reasons. Who is the next sucker?