Monday, April 6, 2009

Soros Says the U.S. Dollar May Eventually be Replaced as a World Reserve Currency

Curt Here...

According to the latest article posted below, liberal economist George Soros says that the future of the dollar as the worlds reserve currency may be in doubt. He said he believes the new IMF special drawing rights, which is now basically a synthetic currency basket comprised of dollars, euros, yen and sterling, will eventually replace the dollar as the worlds reserve currency. The world leaders, fresh from the G20 summit may have just done what UK Prime Minister Gordon Brown claimed and that is to create a new global world order.

Soros also claims that the US could use this new currency so that "In the long run, having an international accounting unit rather than the dollar may, in fact, be to our advantage so we can't splurge—you know, it felt very good for 25 years but now we are paying a very heavy price."

The world currency is coming, or at least a system where the currency is controlled globally, instead of nationally. It is just a matter of time, but I think it could be much sooner than later. The question I have is how many recognize what is going on? How many Christians see what it is coming?

Stay Tuned



US Recovery Is Far Off, Banks Are 'Basically Insolvent': Soros

The U.S. economy is in for a "lasting slowdown" and could face a Japan-style period of relatively low growth coupled with high inflation, billionaire investor George Soros said on Monday.

Soros, speaking to Reuters Financial Television, also warned that rescuing U.S. banks could turn them into "zombies" that draw the lifeblood of the economy, prolonging the economic slowdown

"I don't expect the U.S. economy to recover in the third or fourth quarter so I think we are in for a pretty lasting slowdown," Soros said, adding that in 2010 there might be "something" in terms of U.S. growth.

Soros' view contrasts with the majority of economists, who expect the U.S. economy to stop contracting in the third quarter and resume growing in the fourth quarter, according to the latest monthly poll of forecasts conducted by Reuters.

The recovery will look like "an inverted square root sign," Soros said. "You hit bottom and you automatically rebound some, but then you don't come out of it in a V-shape recovery or anything like that. You settle down—step down."

The healing of the banking system and housing markets is crucial to recovery. "The banking system, as a whole, is basically insolvent," Soros said.

What's more, the Treasury's Public-Private Investment Fund is going to work but it won't be enough to recapitalize the banks in a way that they are able to or willing to provide credit.

"What we have created now is a situation where the banks who will be able to earn their way out of a hole, but by doing that, they are going to weigh on the economy," he said. "Instead of stimulating the economy, they will draw the lifeblood, so to speak, of profits away from the real economy in order to keep themselves alive. This is the zombie bank situation."

The stress tests being conducted by Treasury could be a precursor to a more successful recapitalization of the banks, he added.

Dollar is Vulnerable

Soros, whose latest book, "The Crash of 2008 and What it Means," has made prescient calls during the current credit crisis.

Exactly one year ago, he told Reuters that global losses are likely to top $1 trillion from the credit crisis. To date, U.S. and European banks have recorded more than $700 billion in losses and write-downs, as of Feb. 5. 2009, according to Reuters data.

Soros also said the U.S. dollar is under selling pressure and may eventually be replaced as a world reserve currency, possibly by the IMF's Special Drawing Rights, a synthetic currency basket comprised of dollars, euros, yen and sterling.

"I think the dollar is now under question and I think the system will need to be reformed, so that the United States will be subject to the same discipline as is imposed on other countries," said Soros, whose famous bet against the British pound earned his Quantum Fund $1 billion in 1992. "Being the main issuer of international currency, we have been exempt and we have abused that because we have effectively consumed 6.5 percent more than we have produced. That is now coming to an end."

China recently proposed greater use of Special Drawing Rights, possibly as an eventual global reserve currency. "In the long run, having an international accounting unit rather than the dollar may, in fact, be to our advantage so we can't splurge—you know, it felt very good for 25 years but now we are paying a very heavy price," Soros said.

China will be the first country to emerge from recession, probably this year, and will spearhead global growth in 2010, Soros said. He said world policymakers are "actually beginning to catch up" with the crisis and efforts to fix structural problems in the financial system.

The system was "fundamentally flawed, and there is no returning to where we came from," he said.

Euro Zone Not in Danger

In Europe, he said the crisis provides an incentive for countries that use the euro to remain inside the monetary union, though countries on the periphery still face serious problems.

The euro has been "a tremendous advantage" to countries that use it, adding there's "no question of a weaker country dropping out," Soros said.

While additional resources for the International Monetary Fund will help it stabilize struggling Eastern Europe, he said the Baltic states still face "serious problems" and Ukraine is not far from default.

Widespread use of credit default swaps has worsened the risks for Europe, he said, though he added that Germany, the euro zone's biggest economy, is becoming more open to offering help. "Germany, which has been the most reserved about being the deep pocket of the rest of Europe, has recognized that it too has a responsibility toward the new member states."

Germany has been one of the most reluctant major economies to meet U.S. calls for more fiscal stimulus spending to boost the global economy and fight the financial crisis.


Darrell's End Times said...

The US government has, since the beginning of the cold war, dominated all their foreign debt in dollars; meaning that, if push comes to shove, and the debt holder demands payment of their debt, all the Federal Reserve has to do is issue dollars to pay off the dollar dominated debt. Thus, instead of holding a bag of dollar dominated debt the holder will be holding a bag of dollars.

The Federal Reserve policy people call this quantitative easing.

At the beginning of the cold war the free world focus was on protecting the world from the Communist’s cold-blooded ideology and not on the mundane policy issue of currency control.

In large part, America’s prosperity is based on the fact that the dollar is accepted as legal tender by most countries, allowing the dollar holder to buy goods, services, and/or assets with their dollars rather than the currency of that country.

Central banks are the black hole for storing excess dollars; they reinvest their dollar holdings in US debt or other debt securities. Some countries have set up wealth funds to invest their excess dollars in wealth producing activities within their own country and other countries.

And Mr. Soros is correct in saying that, because of our ability to purchase stuff with dollars rather than from earnings through normal trade practices, Americans have lost their frugal instinct of preserving and building wealth.

The cold war is over, capitalism will be a major driving agent in the new world, and the dollar will be replaced by a global currency regulated by professional staff of policy makers and governed by an appointed board selected by whoever. For sure the Federal Reserve role will change.

We have now entered into the transition stage where most people recognize that the world has changed and the currency system must change with it.

Invest accordingly.

Craig said...

Q: The question I have is how many recognize what is going on? How many Christians see what it is coming?

A: Not enough!

the70thweek said...

I agree Craig, not enough recognize what is going on. It is very sad and frustrating.