China and Germany criticize U.S. Fed

AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.
(Joe, 5 November 2010 19:51

We know that.Great patriots waving the flag always look after number 1.

-- Well if nobody else joins the US in pressuring China to do something about its artificial weak currency; then we take matters into our own hands. China doesn't want its currency to hold the real value but keeps maintaining it at artificially low levels; the US will take steps to increase China's currency value. Something needs to be done to balance things out. It seems like they just started.
(johny, 5 November 2010 19:58

Why should China pay for Bernake's fraud? Printing new money out of thin air is just fraud.

The fraud begins when money is created from nothing then loaned out and expected to be returned with interest. Each individual loan is an unfulfillable contract as the money for the interest was never created, a great way to steal an existing money supply such as a gold and silver based economy. After stealing all the gold and silver from the American money supply, the banks proceed to steal the value of their man made currency using the same process.

BTW The dollar is crashing against virtually every form of money on the planet.And all the dollars the Fed is printing aren't doing squat for the domestic economy. Instead, they're flooding out of the country to places
more profitable.

Apologies to Joe for hurting his patriotic feelings.There is nothing wrong for a patriot investing in gold and other precious metals.

Again iam in total agreement with Lowe and SJ's comments.
It's been my opinion for sometime now the US will default on itd debt on one way or another.The trouble is they're almost certainly going to default on it through inflation,by destroying thecurrency,which is much worse than defaulting on it overtly.

Thete are two ways they can default-one by saying"we don't have the money and we're not going to pay you" and the other by continuing to print up money and giving people the number of dllars that they're owed,except the dollars are worthless.

At the moment the US is in an
economic twilight zone.There is apparent stability in the economy.The stock market is high,bonds are high.Only the real estate market is in visible trouble.But this is a temporary situation.At some point trillions of dollars created by the US goverment are going to have an effect.The timing is uncertain but i think is going to be soon.

Joe and the other American guys must've seen what is happening on the ground across the US.Towns, cities, and states across America are resorting to drastic actions to reduce their debts, such as closing fire stations, scaling back trash collection, turning off street lights, ending bus services and public transportation, cutting back on library hours or closing them altogether, school districts cutting down the school day, week or year, and it was reported in September of 2010 that “local governments will eliminate roughly half a million employees in the next fiscal year, with public safety, public works, public health, social services, and parks and recreation hardest hit by the cutbacks.

In March of 2009, an article appeared in the Washington Post written by Desmond Lachman, a fellow at the American Enterprise Institute, a previous emerging market strategist at Salomon Smith Barney and deputy director of the IMF’s Policy and Review Department, in which he referred to America as the “world’s scariest emerging market.” In other words, America resembles a third world debtor nation, from its corrupt banking elite, to the inept political class, and a massive foreign debt, America “is coming to resemble Colombia, Argentina and other so-called emerging markets, both in what led us to the crisis, and in how we're trying to fix it.

BTW There is an excellent chance Joe the trillions of dollars that Bernake and his predessesor have printed to create a bubble in gold and a big bubble in gold stocks.

"The US central bank announced on Wednesday that it would spend $600bn to buy government bonds, in the hope that the cash injection can kickstart the country's economy."

Spending money by printing ever more paper money ..... the world's next major bananan currency in the making. Avoid the greenback like the plague! http://www.federalbudget.com/

"Germany's finance minister Wolfgang Schaeuble said on German television that "with all due respect, US policy is clueless." "

Clueless and downright idiotic. If the Yankees' main target is the Chinese yuan, they may well be in for a nasty surprise. True, China currently holds lots of greenback as reserves, but it is already diversifying its portfolio away from the dollar and US treasuries. If push comes to shove, the Chinese will most likely cut their losses completely and jettision the dollar when the latter really start to turn Zimbawe and actually hasten its collapse, not forestall it.

Unlike these Yankee consumers spoilt rotten by living the high life on credit even when they don't have their own pot to pee in during the last decade, the Chinese have gone through enough hardship and foreign subjugation over the centuries to have ingrained into their cultural values the tenacity to survive and start all over again if need be.

"I can just imagine, you have a couple of bucks in shares and you’re the type that sits in front of the TV watching those stocks and breaking out in a sweat when they go down a few points."
sj

Typical Eastern European thinking, common to Serbia, Hungary, etc. The average Joe there can't imagine that somebody has more than a couple of stocks, more than a house, etc.
And the funny thing "sitting in front of TV" watching those stocks"...this tells me a lot about you. You really live in a different, let say Eastern European world. Some people speculate there too but not the big majority. Also they have mostly 3-4 main stocks to invest. In Hungary 2 stocks, MOL and OTP make up most of the volume. The fluctuations from one day to the other can be big, which is great for people who do "day trade" type trades.
I work on Wall Street and don't sit in front of the TV. Nine years ago I had my share of loses, when with my friends I went overboard with casino type stock gambling. I learned my lesson. The good thing was that already at that time I was diversified. I pushed diversification (real estate, metals) even further and also geographically into Europe at the right time when 1 euro bought only $0.86. Anyway I had no intention to write about all this (somebody I forgot his name will tell again that I am bragging)but by reading your naive comment I had to do it.

" the Chinese have gone through enough hardship and foreign subjugation over the centuries to have ingrained into their cultural values the tenacity to survive and start all over again if need be."
lowe

Yes, they would definitely need to start all over again after colossal loses if they would exchange their some 2 trillion dollars let say against euros. For a short time the euro's value would reach maybe 10-15 dollars or even more. Europe's export oriented economy would collapse. Most of the population would line up in front of soup kitchens. In many ways it would be even worse than in WWII.
In reality both China and Germany (the most exposed European country in case of serious dollar weakness) have no effective defense in case of a worse dollar scenario. That is the reason why they are so vocal about the dollar. They are afraid.
The Germans knew hardship between the 2 world wars and after WWII. Since then they became spoiled and soft. Confronted with a sudden economic hardship due to exchange rates they would have a very hard time to adjust.

"Just like I have been saying... the US is about to collapse."

Envious Europeans are hoping for that for many years.

"Inflating the money supply to pay off their creditors.."

That is what the FED is doing. You are right with that. I am not crazy about it either.

"..while this will make its own citizens poor... "

Not necessarly.

"and the US will be the next Zimbabawe."
Mladen

I know you and most Europeans would like to see it more than anything else. What you constantly forget is that trillions of dollars are kept in reserve around the world. IIf the dollar would collapse you would feel it as much as twe would or even more. Because of our weight we are able to transfer a big portion of the consequences to the whole world but mainly to Europe. This happened in tthe last 1-2 years. This will happen again and the Europeans will take "a big bite". Due to their malevolence I will not be sorry for them. AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.

(Joe, 6 November 2010 14:49)

Seeing that you’re a mover and shaker in the financial world, here is a free tip for you. If you want to secure your investment I suggest that you diversify even more and look at the Australian share market, in particular its banking and mineral industries – neither the US or Europe are safe investments.
Real estate is fine if you own quality investments, for example, an apartment opposite Central Park in NY or say St Marks square in Venice – these are the type of investments that may take a small drop, but overall keep their value. The rest is a problem just like the real estate industry in the US.
Joe, printing more money is a problem that leads to the printing of even more money. However, there is no other alternative for the US, in fact if this does not work then the US is finished and there are many that believe it will not work. The US economy was recently described as a man flat on his back and this new money was trying to raise him not on his knees or to make him stand upright, but to prop him up on his elbows.
The Corporations on the US stock market are here today gone tomorrow to say Singapore or Hong Kong or Kuala Lumpur or Sydney. They really are untrustworthy bastards. Look up a company called James Hardy in Wiki. It will give you an idea of how faithful Corporations are.

There are no guarantees, of course, but the plan has more of a chance than doing nothing does.
(Amer, 6 November 2010 21:21)
There is no other choice.
Yes, China and Germany have voiced their concerns, but for China its more “crocodile tears” because it has more than enough reserves to see it through, but Germany’s concerns are real in the sense that this crises could bring it down as well. Unfortunately the “three musketeers” attitude of “all for one and one for all” has interconnected their economies – naturally this was designed by the US to keep it on top for another century, but they never counted on the series of US numbskulls in power like George Walker Bush who would bring them down.

I can’t stop laughing at some of these postings. “We are doing this for the good of the world, ha, ha. Please stop it, I can take it anymore my stomach hurts.
If you believe the US Department of Labor unemployment figures then the CEO is Snow White and her assistance are the seven dwarfs. Even your financial sector does not believe them.
Here is an extract that tells you the real situation in the US:

….if the government raised taxes to seize 100% of all wages, salaries and corporate profits, it still would show an annual deficit. At the same time, given current revenues, if it stopped all spending such as defense and homeland security other than Social Security and Medicare obligations, the government still would show an annual deficit." The hole is so deep, it's impossible to dig out……”
Oh, if you print more money the people that invest in your bonds demand higher interest rates to compensate for the devalued dollar – so you’re no better off.
All jokes aside, the situation in the US is very serious and if it thinks it’s going to play with China and Yuan then it better think again because the Chinese have massive reserves while the US has massive debt – one minor slip and no more US.

AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.
(Joe, 5 November 2010 19:51

I can just imagine, you have a couple of bucks in shares and you’re the type that sits in front of the TV watching those stocks and breaking out in a sweat when they go down a few points.
If this storm breaks your few stocks will not help you.

"BTW, I'm an independent who believes both parties to be part of a bi-factional ruling elite who could care less for me my Country or the rest of the World. THEY JUST WANT CONTROL.
jla

Knowing that you should come up with your own strategies. Don't follow clueless millions and millions, who let themselves drift in today's economic whirlpool.

"We know that.Great patriots waving the flag always look after number 1.
Leonidas

Well, well Leonidas, from you, who sometimes have good economic ideas this is a very cheap polemic shot. Where is the contradiction of being a patriot and at the same time taking care of himself in a legal way? I think this is even something natural in Greece. Being a patriot for you does it mean in your socialist thinking that you should let yourself burned even though you can avoid it using your brain?

"It's been my opinion for sometime now the US will default on itd debt on one way or another."

It is not impossible. Being a patriot doesn't mean I am blind to realities.

"At the moment the US is in an economic twilight zone.There is apparent stability in the economy.The stock market is high,bonds are high.Only the real estate market is in visible trouble.But this is a temporary situation.At some point trillions of dollars created by the US goverment are going to have an effect.The timing is uncertain but i think is going to be soon."

I tend to agree. It is my "gut feeling" (an expression here) too that something sooner or later will happen. My exposure to stocks is pretty limited. I learned the hard way the negatives of "buy and hold" strategy. A "super" stock can become in a short time a real dog. A sold stocks yesterday to cut down my exposure. Maybe some of them will continue to go up but there is the saying "the bulls win, the bears win and the pigs lose". Normally in September, October stocks don't do well...November, December are better. This time September, October were good. The "good time" can't last too long.


"Joe and the other American guys must've seen what is happening on the ground across the US.Towns, cities, and states across America are resorting to drastic actions to reduce their debts, such as closing fire stations, scaling back trash collection, turning off street lights, ending bus services and public transportation, cutting back on library hours or closing them altogether, school districts cutting down the school day, week or year, and it was reported in September of 2010 that “local governments will eliminate roughly half a million employees in the next fiscal year, with public safety, public works, public health, social services, and parks and recreation hardest hit by the cutbacks."

Leonidas I see you are well informed. In California for example state employees work only 4 days per week because the state wants to save money.

In March of 2009, an article appeared in the Washington Post written by Desmond Lachman, a fellow at the American Enterprise Institute, a previous emerging market strategist at Salomon Smith Barney and deputy director of the IMF’s Policy and Review Department, in which he referred to America as the “world’s scariest emerging market.” In other words, America resembles a third world debtor nation, from its corrupt banking elite, to the inept political class, and a massive foreign debt, America “is coming to resemble Colombia, Argentina and other so-called emerging markets, both in what led us to the crisis, and in how we're trying to fix it. "

I am not sure if it is the scariest but it is good to keep an open mind and have a good personal strategy.

BTW There is an excellent chance Joe the trillions of dollars that Bernake and his predessesor have printed to create a bubble in gold and a big bubble in gold stocks.

Again everything is possible. Was it 2-300 years ago that there was a tulip bubble?
Also I am not in gold stocks but mainly in silver bullion. I took physical delivery over time when it was pretty cheap.
In the last 2 days alone it went up some 10% to close to 27 dollars per once. It is also called the poor man's gold. Also in percentage it goes up much faster. Based on my average purchase price even after a huge drop I would remain in plus territory.
By working on Wall Street I am not allowed to do "short sells". I used to do it a long time ago. It can be pretty nerve racking. If I would be in position I would contemplate doing it again in a limited way with sufficient safety cushion.

I know you and most Europeans would like to see it more than anything else. What you constantly forget is that trillions of dollars are kept in reserve around the world. IIf the dollar would collapse you would feel it as much as twe would or even more. Because of our weight we are able to transfer a big portion of the consequences to the whole world but mainly to Europe. This happened in tthe last 1-2 years. This will happen again and the Europeans will take "a big bite". Due to their malevolence I will not be sorry for them. AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.

I actually live in Canada.... and I really dont care what happens to us over here as long as the states collapses.

as of not making u poor... of course it will make u poorer as you have more money chasing a limited amount of goods there by raising the prices.

The US is not the engine of the world... its the wagon... you dont produce anything and exchange goods from other countries for pieces of paper IOUs.

Im an Engineer not an economist and I can see this coming.

on the plus side.... its good that your having your savings in metals. Its the only thing that will retain its value soon... I also have alot of physical Silver/Gold

Just like I have been saying... the US is about to collapse. Inflating the money supply to pay off their creditors....while this will make its own citizens poor...
and the US will be the next Zimbabawe.

I know you and most Europeans would like to see it more than anything else. What you constantly forget is that trillions of dollars are kept in reserve around the world. IIf the dollar would collapse you would feel it as much as twe would or even more. Because of our weight we are able to transfer a big portion of the consequences to the whole world but mainly to Europe. This happened in tthe last 1-2 years. This will happen again and the Europeans will take "a big bite". Due to their malevolence I will not be sorry for them. AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.
(Joe, 5 November 2010 19:51)

Well Mr Original Joe this is excatly what I tried to explain in one of MY recent comments which I addressed to Non-original Joe who was writing about america going down the drain.
http://www.b92.net/eng/news/comments.php?nav_id=70663
And indeed diversification is the keyword here .Have a good weekend and do not forget to feed those beutiful squirrels in the parks along Hudson river.

"And indeed diversification is the keyword here .Have a good weekend and do not forget to feed those beutiful squirrels in the parks along Hudson river.
Je¿ amerykanski

I am glad that you see it the same way, that diversification is not only necessary but something smart. "Isten azert adott eszet hogy hasznaljuk" (God gave us brains to use it).

As for the squirrels we have a lot. Some of them also like to run on our long deck driving our cat crazy. They need feeding when we have a lot of snow. Somehow they do not hibernate or maybe just for a short time.

“Yes, they would definitely need to start all over again after colossal loses if they would exchange their some 2 trillion dollars let say against euros. For a short time the euro's value would reach maybe 10-15 dollars or even more. Europe's export oriented economy would collapse. Most of the population would line up in front of soup kitchens. In many ways it would be even worse than in WWII.
In reality both China and Germany (the most exposed European country in case of serious dollar weakness) have no effective defense in case of a worse dollar scenario. That is the reason why they are so vocal about the dollar. They are afraid.
The Germans knew hardship between the 2 world wars and after WWII. Since then they became spoiled and soft. Confronted with a sudden economic hardship due to exchange rates they would have a very hard time to adjust.
(Joe, 6 November 2010 00:57)”

Well, methinks they should just go ahead and dump those greenback asap -- for euros, yen, Swiss francs, diamonds, gold, industrial metals, precious metals, petroleum etc etc, anything that has real value. rather than hold on to what I see to be the banana currency of the future. And they seem to have already embarked on this diversification already.

As for your remark that “…. they have become spoiled and soft”…. Actually methinks that very sentence would describe perfectly many of you Yankees today!”

Finally your “serious dollar weakness” and “worse dollar scenario” prediction seems belated to me, The greenback IS currently weak – it is actually trading slightly below the Canadian and Aussie dollars, something unheard of as far as I know in recent memory – I do recall that even during the financial crisis brought about by your banking and mortgage fiasco a couple of years back that your currency actually went up in spite of everything. I would think that a big part of that phenomena then was due to the misguided confidence that the world still had in the greenback at that time. But no more now obviously. The day of reckoning seems to have started at last. And better late than never for the world to wake up to the reality of the Yankee financial fig leaf.

"Why should China pay for Bernake's fraud? Printing new money out of thin air is just fraud. "

It's not when the other side has been doing it for decades. Leveling the plain field will be forced if the other side wants to maintain a competitive advantage by means that cheat this side. There will be a response every time the Chinese think they're smooth enough to maintain a trade imbalance based on artificial monetary value. If they want to compete on equal terms they're more than welcome to do so. If they don't listen and want to cheat their way ahead of us; then we'll take matters into our own hands.

"The fraud begins when money is created from nothing then loaned out and expected to be returned with interest. Each individual loan is an unfulfillable contract as the money for the interest was never created, a great way to steal an existing money supply such as a gold and silver based economy. After stealing all the gold and silver from the American money supply, the banks proceed to steal the value of their man made currency using the same process."

-- This doesn't have much to do with the fact that China keeps its currency undervalued for the sole purpose of unfair competition. They've been doing this since the 70's. That may sit well with you but not with many of us.

"BTW The dollar is crashing against virtually every form of money on the planet.And all the dollars the Fed is printing aren't doing squat for the domestic economy. Instead, they're flooding out of the country to places
more profitable."

-- Not so sure about that. We'll see as time passes.

Cutting taxes, since Reagan, has been proposed by Republicans as the best way to "grow the economy," by stimulating business. Supposedly, tax revenue will rise as a result of all the new economic activity inspired by the chance for business owners to keep more of what they make. They've tried this, and it doesn't work - you simply don't make up the amount of the taxes that are cut. (Tax revenues went up under Reagan - but only due to inflation.) Clinton came in, raised taxes, and the economy boomed, and we started paying down the national debt.

Amer, why is it that liberals always forget who it is that actually controls the purse strings?

Reagan had little control over spending and Dems who did reneged on their end of the bargain by not cutting spending after Reagan allowed certain taxes increases to take place.

Clinton on the other hand was forced by a Republican congress to show a little fiscal restrain while riding the tech bubble and cold war dividend until that blew up in our face.

By the way, congress has been controlled by dems since 2006 and hows that been working.

BTW, I'm an independent who believes both parties to be part of a bi-factional ruling elite who could care less for me my Country or the rest of the World. THEY JUST WANT CONTROL.

This is not the best way to get the economy going, but after the election, it is the only choice.

The party that took over in power in the House (where all spending bills originate) wants to reduce the national debt - currently treated more as a sin than a financial problem by cetain politicians - by cutting taxes (to stimulate the economy) and by cutting spending. The problem is, they've tried this approach in the past, and it hasn't worked. Especially not when taxes are relatively low, historically and relative to other countries.

Reducing the deficit and the national debt is an admirable idea, but doing it right now is like kicking a patient out of the recovery room to go back to work to start paying his hospital bill (the deficit) and his unpaid credit card bills (the national debt). He'll probably relapse under the strain, and who knows how long he'll be in the hospital the next time.

Cutting taxes, since Reagan, has been proposed by Republicans as the best way to "grow the economy," by stimulating business. Supposedly, tax revenue will rise as a result of all the new economic activity inspired by the chance for business owners to keep more of what they make. They've tried this, and it doesn't work - you simply don't make up the amount of the taxes that are cut. (Tax revenues went up under Reagan - but only due to inflation.) Clinton came in, raised taxes, and the economy boomed, and we started paying down the national debt.

And then there's cutting government spending. It sounds virtuous, especially to the people who imagine that it's other, undeserving people who will be the ones to suffer. But when individuals aren't spending, due to fear of unemployment even if they are currently working, business slows down, tax revenues fall, unemployment rises leading to even less spending and more fear, and you have a real vicious cycle going. Producing for export is a possibility, but as long as other countries are also in a slump, sales will be low here too. Especially if competitors (for example, China) are keeping their currency (= prices) artificially low. When private demand is as low as it is now, the government is left as the spender of last resort. (And the infrastructure certainly could use the work, scientific research has been underfunded, teachers need to be kept in the classroom ...)

So the political means to getting the economy moving are unusable, for political - almost theological - reasons, and we're left with the (independent) Fed's ability to print money, which may inspire businesses to expand and banks to lend, simply because there's more money cheaply available. And it should help exports, since the value of the dollar outside the country will be lower, with more dollars in circulation. Developing countries are especially worried by this - some of those extra dollars are going to flood their economies, causing their assets to appreciate, raising the values of their currencies, and making it harder for them to compete, and risking inflation of their economies.

If China decides to lower the yuan even more in response, in order to keep its factories operating, the new House will be even more inclined than the current one to impose tariffs on Chinese products, leading to even more tension between the world's two largest economies. It could get really unpleasant in the next year.

"Some countries fear that the US Federal Reserve's move could hurt their exports by making their currencies stronger. "

-- Well if nobody else joins the US in pressuring China to do something about its artificial weak currency; then we take matters into our own hands. China doesn't want its currency to hold the real value but keeps maintaining it at artificially low levels; the US will take steps to increase China's currency value. Something needs to be done to balance things out. It seems like they just started.

" Well if nobody else joins the US in pressuring China to do something about its artificial weak currency; then we take matters into our own hands. China doesn't want its currency to hold the real value but keeps maintaining it at artificially low levels; the US will take steps to increase China's currency value. Something needs to be done to balance things out. It seems like they just started.
johny

Johnny you are right. When the need calls for it we can take matters into our own hands. Nobody else is able to do it definitly not the EU, to coward to confront China.

"The most important thing is to introduce a new reserve currency".
GC

Many countries dream about it for a long time. Their big problem - and our good luck - is that they can't find an other reserve currency. Things are much more complicated. Even the Chinese acknowledge this openly.

Joe -

"Inflating the money supply to pay off their creditors.."

That is what the FED is doing. You are right with that. I am not crazy about it either. "

The Fed is pumping money into the economy to encourage growth - not to pay off creditors (holders of Treasuries) with cheap dollars. The first QE ("quantitative easing," pumping of dollars into the economy) rescued the economy from freefall, but there were those who said at the time it simply wasn't big enough to do the job of returning the economy to growth, and it looks like they were right. Now Bernanke et al. are going to give it another shot, and the whole world had better hope it works, for it's own sake, if not for ours.

Employment figures for October were the best they've been in months, so companies may not need all that much encouragement to get back to work seriously. In which case, unemployment will fall and the dollar will go back up again.

"cut their losses and jettison the dollar," lowe? Just how do you envision that happening? If you mean unpegging the yuan from the dollar and letting it float, that would make most of the world happy, especially every other exporting country. Or just stop buying US debt? They slowed down last summer, and nobody noticed because domestic demand for it went up. Anyway, if the US goes bust, just whom are they going to export to? Serbia? They are hooked on exports to keep their population employed - start shutting down the factories, and the Chinese will remember their centuries-old experience of dealing with governments that have lost the mandate of Heaven. Given time and some changes to public policy (a national pension scheme, for example) they should be able to rely on domestic demand to drive their economy, but they're not there yet.

In short the world wide economic cycle goes this way:

The US consumes the goods that the rest of the other world produces(Germany,Japan-> high tech stuff,Russia->materials,China->cheap stuff) and in exchange they indebt themselves,create huge trade deficits with these countries ...
So cars,machines,resources and cheap stuff goods go to the US and dollar obligations go to the rest of the world.
When a crisis strikes(like the current) when the American consumers and the American state cannot pay the debt down they owe to the rest of the world they start printing money (alias QE 1 or QE 2)"to pay down" the debt via inflation.

The result:They become after a few years debt-free while other countries import inflation which hurts their industries and wipes out the worth of their dollar savings.
And then a new cycle begins!

Why are the others so dumb to create stuff and give it to the others for worthless paper money?
Because the US currently controls the oil in the Middle East which gives it the power to facture the oil price in dollars,and because everybody needs to buy oil everybody also needs to herd dollars in reserve...
Oil is the most important for transporting and making the world economy "move" and you will find it in every value added chain of a high tech product.
And there is a second reason:
The US had most of its trading partners under a firm military-economic control(Germany,Japan)and it had the biggest market so its trading partners were ready to accept certain losses of their savings to preserve the American market...

Now some things will change though,China will become the biggest market,most of the US biggest trading partners will not be their political-military colonies like Japan and Germany and the Persian gulf will in future be controlled by Russia and China which will give them the power to issue their own reserve currency.

The most important thing is to introduce a new reserve currency which will pay for oil and other resources and to form strong political-military-economic structures which will serve as a hub to those countries that will control the issueance of the new reserve currency!

Of course the Germans and the Chinese are objecting - both of them depend on exports for a living, and the US is cutting prices, essentially.

But the idea that the US is facing hyper-inflation is really pretty ridiculous. You get inflation when the competition for goods and productive capacity and labor drives up prices and costs, especially wages. In a country with about 1% inflation right now, unused production capacity, and 17% of the population unemployed or underemployed, there's not going to be scary inflation any time soon. On the other hand, the thought alone that things will cost more next year rather than less may be enough to unlock some of the cash currently being earned by 90% of the population for current purchases rather than savings, thereby encouraging factories to hire more people to increase output. The Chinese may either continue to keep the yuan artificially low, meaning imports will help hold down inflation, or let it rise, cutting the share of imports on the market and encouraging more US production. This has been a manufacturing-led recovery so far, so it's not as though the country can't build what it needs, or sell what it builds abroad when the dollar isn't too high. And if things begin to get out of hand, the Fed can stop the printing presses - the $600 bln they're talking about will be made available at the rate of $75 bln a month, not dumped all at once.

There are no guarantees, of course, but the plan has more of a chance than doing nothing does.

I know you and most Europeans would like to see it more than anything else. What you constantly forget is that trillions of dollars are kept in reserve around the world. IIf the dollar would collapse you would feel it as much as twe would or even more. Because of our weight we are able to transfer a big portion of the consequences to the whole world but mainly to Europe. This happened in tthe last 1-2 years. This will happen again and the Europeans will take "a big bite". Due to their malevolence I will not be sorry for them. AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.
(Joe, 5 November 2010 19:51)

Well Mr Original Joe this is excatly what I tried to explain in one of MY recent comments which I addressed to Non-original Joe who was writing about america going down the drain.
http://www.b92.net/eng/news/comments.php?nav_id=70663
And indeed diversification is the keyword here .Have a good weekend and do not forget to feed those beutiful squirrels in the parks along Hudson river.

"I can just imagine, you have a couple of bucks in shares and you’re the type that sits in front of the TV watching those stocks and breaking out in a sweat when they go down a few points."
sj

Typical Eastern European thinking, common to Serbia, Hungary, etc. The average Joe there can't imagine that somebody has more than a couple of stocks, more than a house, etc.
And the funny thing "sitting in front of TV" watching those stocks"...this tells me a lot about you. You really live in a different, let say Eastern European world. Some people speculate there too but not the big majority. Also they have mostly 3-4 main stocks to invest. In Hungary 2 stocks, MOL and OTP make up most of the volume. The fluctuations from one day to the other can be big, which is great for people who do "day trade" type trades.
I work on Wall Street and don't sit in front of the TV. Nine years ago I had my share of loses, when with my friends I went overboard with casino type stock gambling. I learned my lesson. The good thing was that already at that time I was diversified. I pushed diversification (real estate, metals) even further and also geographically into Europe at the right time when 1 euro bought only $0.86. Anyway I had no intention to write about all this (somebody I forgot his name will tell again that I am bragging)but by reading your naive comment I had to do it.

Just like I have been saying... the US is about to collapse. Inflating the money supply to pay off their creditors....while this will make its own citizens poor...
and the US will be the next Zimbabawe.

"Just like I have been saying... the US is about to collapse."

Envious Europeans are hoping for that for many years.

"Inflating the money supply to pay off their creditors.."

That is what the FED is doing. You are right with that. I am not crazy about it either.

"..while this will make its own citizens poor... "

Not necessarly.

"and the US will be the next Zimbabawe."
Mladen

I know you and most Europeans would like to see it more than anything else. What you constantly forget is that trillions of dollars are kept in reserve around the world. IIf the dollar would collapse you would feel it as much as twe would or even more. Because of our weight we are able to transfer a big portion of the consequences to the whole world but mainly to Europe. This happened in tthe last 1-2 years. This will happen again and the Europeans will take "a big bite". Due to their malevolence I will not be sorry for them. AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.

AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.
(Joe, 5 November 2010 19:51

We know that.Great patriots waving the flag always look after number 1.

Joe -

"Inflating the money supply to pay off their creditors.."

That is what the FED is doing. You are right with that. I am not crazy about it either. "

The Fed is pumping money into the economy to encourage growth - not to pay off creditors (holders of Treasuries) with cheap dollars. The first QE ("quantitative easing," pumping of dollars into the economy) rescued the economy from freefall, but there were those who said at the time it simply wasn't big enough to do the job of returning the economy to growth, and it looks like they were right. Now Bernanke et al. are going to give it another shot, and the whole world had better hope it works, for it's own sake, if not for ours.

Employment figures for October were the best they've been in months, so companies may not need all that much encouragement to get back to work seriously. In which case, unemployment will fall and the dollar will go back up again.

“Yes, they would definitely need to start all over again after colossal loses if they would exchange their some 2 trillion dollars let say against euros. For a short time the euro's value would reach maybe 10-15 dollars or even more. Europe's export oriented economy would collapse. Most of the population would line up in front of soup kitchens. In many ways it would be even worse than in WWII.
In reality both China and Germany (the most exposed European country in case of serious dollar weakness) have no effective defense in case of a worse dollar scenario. That is the reason why they are so vocal about the dollar. They are afraid.
The Germans knew hardship between the 2 world wars and after WWII. Since then they became spoiled and soft. Confronted with a sudden economic hardship due to exchange rates they would have a very hard time to adjust.
(Joe, 6 November 2010 00:57)”

Well, methinks they should just go ahead and dump those greenback asap -- for euros, yen, Swiss francs, diamonds, gold, industrial metals, precious metals, petroleum etc etc, anything that has real value. rather than hold on to what I see to be the banana currency of the future. And they seem to have already embarked on this diversification already.

As for your remark that “…. they have become spoiled and soft”…. Actually methinks that very sentence would describe perfectly many of you Yankees today!”

Finally your “serious dollar weakness” and “worse dollar scenario” prediction seems belated to me, The greenback IS currently weak – it is actually trading slightly below the Canadian and Aussie dollars, something unheard of as far as I know in recent memory – I do recall that even during the financial crisis brought about by your banking and mortgage fiasco a couple of years back that your currency actually went up in spite of everything. I would think that a big part of that phenomena then was due to the misguided confidence that the world still had in the greenback at that time. But no more now obviously. The day of reckoning seems to have started at last. And better late than never for the world to wake up to the reality of the Yankee financial fig leaf.

"Some countries fear that the US Federal Reserve's move could hurt their exports by making their currencies stronger. "

-- Well if nobody else joins the US in pressuring China to do something about its artificial weak currency; then we take matters into our own hands. China doesn't want its currency to hold the real value but keeps maintaining it at artificially low levels; the US will take steps to increase China's currency value. Something needs to be done to balance things out. It seems like they just started.

Cutting taxes, since Reagan, has been proposed by Republicans as the best way to "grow the economy," by stimulating business. Supposedly, tax revenue will rise as a result of all the new economic activity inspired by the chance for business owners to keep more of what they make. They've tried this, and it doesn't work - you simply don't make up the amount of the taxes that are cut. (Tax revenues went up under Reagan - but only due to inflation.) Clinton came in, raised taxes, and the economy boomed, and we started paying down the national debt.

Amer, why is it that liberals always forget who it is that actually controls the purse strings?

Reagan had little control over spending and Dems who did reneged on their end of the bargain by not cutting spending after Reagan allowed certain taxes increases to take place.

Clinton on the other hand was forced by a Republican congress to show a little fiscal restrain while riding the tech bubble and cold war dividend until that blew up in our face.

By the way, congress has been controlled by dems since 2006 and hows that been working.

BTW, I'm an independent who believes both parties to be part of a bi-factional ruling elite who could care less for me my Country or the rest of the World. THEY JUST WANT CONTROL.

I know you and most Europeans would like to see it more than anything else. What you constantly forget is that trillions of dollars are kept in reserve around the world. IIf the dollar would collapse you would feel it as much as twe would or even more. Because of our weight we are able to transfer a big portion of the consequences to the whole world but mainly to Europe. This happened in tthe last 1-2 years. This will happen again and the Europeans will take "a big bite". Due to their malevolence I will not be sorry for them. AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.

I actually live in Canada.... and I really dont care what happens to us over here as long as the states collapses.

as of not making u poor... of course it will make u poorer as you have more money chasing a limited amount of goods there by raising the prices.

The US is not the engine of the world... its the wagon... you dont produce anything and exchange goods from other countries for pieces of paper IOUs.

Im an Engineer not an economist and I can see this coming.

on the plus side.... its good that your having your savings in metals. Its the only thing that will retain its value soon... I also have alot of physical Silver/Gold

I can’t stop laughing at some of these postings. “We are doing this for the good of the world, ha, ha. Please stop it, I can take it anymore my stomach hurts.
If you believe the US Department of Labor unemployment figures then the CEO is Snow White and her assistance are the seven dwarfs. Even your financial sector does not believe them.
Here is an extract that tells you the real situation in the US:

….if the government raised taxes to seize 100% of all wages, salaries and corporate profits, it still would show an annual deficit. At the same time, given current revenues, if it stopped all spending such as defense and homeland security other than Social Security and Medicare obligations, the government still would show an annual deficit." The hole is so deep, it's impossible to dig out……”
Oh, if you print more money the people that invest in your bonds demand higher interest rates to compensate for the devalued dollar – so you’re no better off.
All jokes aside, the situation in the US is very serious and if it thinks it’s going to play with China and Yuan then it better think again because the Chinese have massive reserves while the US has massive debt – one minor slip and no more US.

AS for me personally I am fully diversified, even in precious metals so I that storm comes maybe I will even profit from it.
(Joe, 5 November 2010 19:51

I can just imagine, you have a couple of bucks in shares and you’re the type that sits in front of the TV watching those stocks and breaking out in a sweat when they go down a few points.
If this storm breaks your few stocks will not help you.

"The US central bank announced on Wednesday that it would spend $600bn to buy government bonds, in the hope that the cash injection can kickstart the country's economy."

Spending money by printing ever more paper money ..... the world's next major bananan currency in the making. Avoid the greenback like the plague! http://www.federalbudget.com/

"Germany's finance minister Wolfgang Schaeuble said on German television that "with all due respect, US policy is clueless." "

Clueless and downright idiotic. If the Yankees' main target is the Chinese yuan, they may well be in for a nasty surprise. True, China currently holds lots of greenback as reserves, but it is already diversifying its portfolio away from the dollar and US treasuries. If push comes to shove, the Chinese will most likely cut their losses completely and jettision the dollar when the latter really start to turn Zimbawe and actually hasten its collapse, not forestall it.

Unlike these Yankee consumers spoilt rotten by living the high life on credit even when they don't have their own pot to pee in during the last decade, the Chinese have gone through enough hardship and foreign subjugation over the centuries to have ingrained into their cultural values the tenacity to survive and start all over again if need be.

"It's been my opinion for sometime now the US will default on itd debt on one way or another."

It is not impossible. Being a patriot doesn't mean I am blind to realities.

"At the moment the US is in an economic twilight zone.There is apparent stability in the economy.The stock market is high,bonds are high.Only the real estate market is in visible trouble.But this is a temporary situation.At some point trillions of dollars created by the US goverment are going to have an effect.The timing is uncertain but i think is going to be soon."

I tend to agree. It is my "gut feeling" (an expression here) too that something sooner or later will happen. My exposure to stocks is pretty limited. I learned the hard way the negatives of "buy and hold" strategy. A "super" stock can become in a short time a real dog. A sold stocks yesterday to cut down my exposure. Maybe some of them will continue to go up but there is the saying "the bulls win, the bears win and the pigs lose". Normally in September, October stocks don't do well...November, December are better. This time September, October were good. The "good time" can't last too long.


"Joe and the other American guys must've seen what is happening on the ground across the US.Towns, cities, and states across America are resorting to drastic actions to reduce their debts, such as closing fire stations, scaling back trash collection, turning off street lights, ending bus services and public transportation, cutting back on library hours or closing them altogether, school districts cutting down the school day, week or year, and it was reported in September of 2010 that “local governments will eliminate roughly half a million employees in the next fiscal year, with public safety, public works, public health, social services, and parks and recreation hardest hit by the cutbacks."

Leonidas I see you are well informed. In California for example state employees work only 4 days per week because the state wants to save money.

In March of 2009, an article appeared in the Washington Post written by Desmond Lachman, a fellow at the American Enterprise Institute, a previous emerging market strategist at Salomon Smith Barney and deputy director of the IMF’s Policy and Review Department, in which he referred to America as the “world’s scariest emerging market.” In other words, America resembles a third world debtor nation, from its corrupt banking elite, to the inept political class, and a massive foreign debt, America “is coming to resemble Colombia, Argentina and other so-called emerging markets, both in what led us to the crisis, and in how we're trying to fix it. "

I am not sure if it is the scariest but it is good to keep an open mind and have a good personal strategy.

BTW There is an excellent chance Joe the trillions of dollars that Bernake and his predessesor have printed to create a bubble in gold and a big bubble in gold stocks.

Again everything is possible. Was it 2-300 years ago that there was a tulip bubble?
Also I am not in gold stocks but mainly in silver bullion. I took physical delivery over time when it was pretty cheap.
In the last 2 days alone it went up some 10% to close to 27 dollars per once. It is also called the poor man's gold. Also in percentage it goes up much faster. Based on my average purchase price even after a huge drop I would remain in plus territory.
By working on Wall Street I am not allowed to do "short sells". I used to do it a long time ago. It can be pretty nerve racking. If I would be in position I would contemplate doing it again in a limited way with sufficient safety cushion.

"BTW, I'm an independent who believes both parties to be part of a bi-factional ruling elite who could care less for me my Country or the rest of the World. THEY JUST WANT CONTROL.
jla

Knowing that you should come up with your own strategies. Don't follow clueless millions and millions, who let themselves drift in today's economic whirlpool.

This is not the best way to get the economy going, but after the election, it is the only choice.

The party that took over in power in the House (where all spending bills originate) wants to reduce the national debt - currently treated more as a sin than a financial problem by cetain politicians - by cutting taxes (to stimulate the economy) and by cutting spending. The problem is, they've tried this approach in the past, and it hasn't worked. Especially not when taxes are relatively low, historically and relative to other countries.

Reducing the deficit and the national debt is an admirable idea, but doing it right now is like kicking a patient out of the recovery room to go back to work to start paying his hospital bill (the deficit) and his unpaid credit card bills (the national debt). He'll probably relapse under the strain, and who knows how long he'll be in the hospital the next time.

Cutting taxes, since Reagan, has been proposed by Republicans as the best way to "grow the economy," by stimulating business. Supposedly, tax revenue will rise as a result of all the new economic activity inspired by the chance for business owners to keep more of what they make. They've tried this, and it doesn't work - you simply don't make up the amount of the taxes that are cut. (Tax revenues went up under Reagan - but only due to inflation.) Clinton came in, raised taxes, and the economy boomed, and we started paying down the national debt.

And then there's cutting government spending. It sounds virtuous, especially to the people who imagine that it's other, undeserving people who will be the ones to suffer. But when individuals aren't spending, due to fear of unemployment even if they are currently working, business slows down, tax revenues fall, unemployment rises leading to even less spending and more fear, and you have a real vicious cycle going. Producing for export is a possibility, but as long as other countries are also in a slump, sales will be low here too. Especially if competitors (for example, China) are keeping their currency (= prices) artificially low. When private demand is as low as it is now, the government is left as the spender of last resort. (And the infrastructure certainly could use the work, scientific research has been underfunded, teachers need to be kept in the classroom ...)

So the political means to getting the economy moving are unusable, for political - almost theological - reasons, and we're left with the (independent) Fed's ability to print money, which may inspire businesses to expand and banks to lend, simply because there's more money cheaply available. And it should help exports, since the value of the dollar outside the country will be lower, with more dollars in circulation. Developing countries are especially worried by this - some of those extra dollars are going to flood their economies, causing their assets to appreciate, raising the values of their currencies, and making it harder for them to compete, and risking inflation of their economies.

If China decides to lower the yuan even more in response, in order to keep its factories operating, the new House will be even more inclined than the current one to impose tariffs on Chinese products, leading to even more tension between the world's two largest economies. It could get really unpleasant in the next year.

" the Chinese have gone through enough hardship and foreign subjugation over the centuries to have ingrained into their cultural values the tenacity to survive and start all over again if need be."
lowe

Yes, they would definitely need to start all over again after colossal loses if they would exchange their some 2 trillion dollars let say against euros. For a short time the euro's value would reach maybe 10-15 dollars or even more. Europe's export oriented economy would collapse. Most of the population would line up in front of soup kitchens. In many ways it would be even worse than in WWII.
In reality both China and Germany (the most exposed European country in case of serious dollar weakness) have no effective defense in case of a worse dollar scenario. That is the reason why they are so vocal about the dollar. They are afraid.
The Germans knew hardship between the 2 world wars and after WWII. Since then they became spoiled and soft. Confronted with a sudden economic hardship due to exchange rates they would have a very hard time to adjust.

-- Well if nobody else joins the US in pressuring China to do something about its artificial weak currency; then we take matters into our own hands. China doesn't want its currency to hold the real value but keeps maintaining it at artificially low levels; the US will take steps to increase China's currency value. Something needs to be done to balance things out. It seems like they just started.
(johny, 5 November 2010 19:58

Why should China pay for Bernake's fraud? Printing new money out of thin air is just fraud.

The fraud begins when money is created from nothing then loaned out and expected to be returned with interest. Each individual loan is an unfulfillable contract as the money for the interest was never created, a great way to steal an existing money supply such as a gold and silver based economy. After stealing all the gold and silver from the American money supply, the banks proceed to steal the value of their man made currency using the same process.

BTW The dollar is crashing against virtually every form of money on the planet.And all the dollars the Fed is printing aren't doing squat for the domestic economy. Instead, they're flooding out of the country to places
more profitable.

"The most important thing is to introduce a new reserve currency".
GC

Many countries dream about it for a long time. Their big problem - and our good luck - is that they can't find an other reserve currency. Things are much more complicated. Even the Chinese acknowledge this openly.

Of course the Germans and the Chinese are objecting - both of them depend on exports for a living, and the US is cutting prices, essentially.

But the idea that the US is facing hyper-inflation is really pretty ridiculous. You get inflation when the competition for goods and productive capacity and labor drives up prices and costs, especially wages. In a country with about 1% inflation right now, unused production capacity, and 17% of the population unemployed or underemployed, there's not going to be scary inflation any time soon. On the other hand, the thought alone that things will cost more next year rather than less may be enough to unlock some of the cash currently being earned by 90% of the population for current purchases rather than savings, thereby encouraging factories to hire more people to increase output. The Chinese may either continue to keep the yuan artificially low, meaning imports will help hold down inflation, or let it rise, cutting the share of imports on the market and encouraging more US production. This has been a manufacturing-led recovery so far, so it's not as though the country can't build what it needs, or sell what it builds abroad when the dollar isn't too high. And if things begin to get out of hand, the Fed can stop the printing presses - the $600 bln they're talking about will be made available at the rate of $75 bln a month, not dumped all at once.

There are no guarantees, of course, but the plan has more of a chance than doing nothing does.

"cut their losses and jettison the dollar," lowe? Just how do you envision that happening? If you mean unpegging the yuan from the dollar and letting it float, that would make most of the world happy, especially every other exporting country. Or just stop buying US debt? They slowed down last summer, and nobody noticed because domestic demand for it went up. Anyway, if the US goes bust, just whom are they going to export to? Serbia? They are hooked on exports to keep their population employed - start shutting down the factories, and the Chinese will remember their centuries-old experience of dealing with governments that have lost the mandate of Heaven. Given time and some changes to public policy (a national pension scheme, for example) they should be able to rely on domestic demand to drive their economy, but they're not there yet.

" Well if nobody else joins the US in pressuring China to do something about its artificial weak currency; then we take matters into our own hands. China doesn't want its currency to hold the real value but keeps maintaining it at artificially low levels; the US will take steps to increase China's currency value. Something needs to be done to balance things out. It seems like they just started.
johny

Johnny you are right. When the need calls for it we can take matters into our own hands. Nobody else is able to do it definitly not the EU, to coward to confront China.

"We know that.Great patriots waving the flag always look after number 1.
Leonidas

Well, well Leonidas, from you, who sometimes have good economic ideas this is a very cheap polemic shot. Where is the contradiction of being a patriot and at the same time taking care of himself in a legal way? I think this is even something natural in Greece. Being a patriot for you does it mean in your socialist thinking that you should let yourself burned even though you can avoid it using your brain?

"Why should China pay for Bernake's fraud? Printing new money out of thin air is just fraud. "

It's not when the other side has been doing it for decades. Leveling the plain field will be forced if the other side wants to maintain a competitive advantage by means that cheat this side. There will be a response every time the Chinese think they're smooth enough to maintain a trade imbalance based on artificial monetary value. If they want to compete on equal terms they're more than welcome to do so. If they don't listen and want to cheat their way ahead of us; then we'll take matters into our own hands.

"The fraud begins when money is created from nothing then loaned out and expected to be returned with interest. Each individual loan is an unfulfillable contract as the money for the interest was never created, a great way to steal an existing money supply such as a gold and silver based economy. After stealing all the gold and silver from the American money supply, the banks proceed to steal the value of their man made currency using the same process."

-- This doesn't have much to do with the fact that China keeps its currency undervalued for the sole purpose of unfair competition. They've been doing this since the 70's. That may sit well with you but not with many of us.

"BTW The dollar is crashing against virtually every form of money on the planet.And all the dollars the Fed is printing aren't doing squat for the domestic economy. Instead, they're flooding out of the country to places
more profitable."

-- Not so sure about that. We'll see as time passes.

"And indeed diversification is the keyword here .Have a good weekend and do not forget to feed those beutiful squirrels in the parks along Hudson river.
Je¿ amerykanski

I am glad that you see it the same way, that diversification is not only necessary but something smart. "Isten azert adott eszet hogy hasznaljuk" (God gave us brains to use it).

As for the squirrels we have a lot. Some of them also like to run on our long deck driving our cat crazy. They need feeding when we have a lot of snow. Somehow they do not hibernate or maybe just for a short time.

Apologies to Joe for hurting his patriotic feelings.There is nothing wrong for a patriot investing in gold and other precious metals.

Again iam in total agreement with Lowe and SJ's comments.
It's been my opinion for sometime now the US will default on itd debt on one way or another.The trouble is they're almost certainly going to default on it through inflation,by destroying thecurrency,which is much worse than defaulting on it overtly.

Thete are two ways they can default-one by saying"we don't have the money and we're not going to pay you" and the other by continuing to print up money and giving people the number of dllars that they're owed,except the dollars are worthless.

At the moment the US is in an
economic twilight zone.There is apparent stability in the economy.The stock market is high,bonds are high.Only the real estate market is in visible trouble.But this is a temporary situation.At some point trillions of dollars created by the US goverment are going to have an effect.The timing is uncertain but i think is going to be soon.

Joe and the other American guys must've seen what is happening on the ground across the US.Towns, cities, and states across America are resorting to drastic actions to reduce their debts, such as closing fire stations, scaling back trash collection, turning off street lights, ending bus services and public transportation, cutting back on library hours or closing them altogether, school districts cutting down the school day, week or year, and it was reported in September of 2010 that “local governments will eliminate roughly half a million employees in the next fiscal year, with public safety, public works, public health, social services, and parks and recreation hardest hit by the cutbacks.

In March of 2009, an article appeared in the Washington Post written by Desmond Lachman, a fellow at the American Enterprise Institute, a previous emerging market strategist at Salomon Smith Barney and deputy director of the IMF’s Policy and Review Department, in which he referred to America as the “world’s scariest emerging market.” In other words, America resembles a third world debtor nation, from its corrupt banking elite, to the inept political class, and a massive foreign debt, America “is coming to resemble Colombia, Argentina and other so-called emerging markets, both in what led us to the crisis, and in how we're trying to fix it.

BTW There is an excellent chance Joe the trillions of dollars that Bernake and his predessesor have printed to create a bubble in gold and a big bubble in gold stocks.

In short the world wide economic cycle goes this way:

The US consumes the goods that the rest of the other world produces(Germany,Japan-> high tech stuff,Russia->materials,China->cheap stuff) and in exchange they indebt themselves,create huge trade deficits with these countries ...
So cars,machines,resources and cheap stuff goods go to the US and dollar obligations go to the rest of the world.
When a crisis strikes(like the current) when the American consumers and the American state cannot pay the debt down they owe to the rest of the world they start printing money (alias QE 1 or QE 2)"to pay down" the debt via inflation.

The result:They become after a few years debt-free while other countries import inflation which hurts their industries and wipes out the worth of their dollar savings.
And then a new cycle begins!

Why are the others so dumb to create stuff and give it to the others for worthless paper money?
Because the US currently controls the oil in the Middle East which gives it the power to facture the oil price in dollars,and because everybody needs to buy oil everybody also needs to herd dollars in reserve...
Oil is the most important for transporting and making the world economy "move" and you will find it in every value added chain of a high tech product.
And there is a second reason:
The US had most of its trading partners under a firm military-economic control(Germany,Japan)and it had the biggest market so its trading partners were ready to accept certain losses of their savings to preserve the American market...

Now some things will change though,China will become the biggest market,most of the US biggest trading partners will not be their political-military colonies like Japan and Germany and the Persian gulf will in future be controlled by Russia and China which will give them the power to issue their own reserve currency.

The most important thing is to introduce a new reserve currency which will pay for oil and other resources and to form strong political-military-economic structures which will serve as a hub to those countries that will control the issueance of the new reserve currency!

(Joe, 6 November 2010 14:49)

Seeing that you’re a mover and shaker in the financial world, here is a free tip for you. If you want to secure your investment I suggest that you diversify even more and look at the Australian share market, in particular its banking and mineral industries – neither the US or Europe are safe investments.
Real estate is fine if you own quality investments, for example, an apartment opposite Central Park in NY or say St Marks square in Venice – these are the type of investments that may take a small drop, but overall keep their value. The rest is a problem just like the real estate industry in the US.
Joe, printing more money is a problem that leads to the printing of even more money. However, there is no other alternative for the US, in fact if this does not work then the US is finished and there are many that believe it will not work. The US economy was recently described as a man flat on his back and this new money was trying to raise him not on his knees or to make him stand upright, but to prop him up on his elbows.
The Corporations on the US stock market are here today gone tomorrow to say Singapore or Hong Kong or Kuala Lumpur or Sydney. They really are untrustworthy bastards. Look up a company called James Hardy in Wiki. It will give you an idea of how faithful Corporations are.

There are no guarantees, of course, but the plan has more of a chance than doing nothing does.
(Amer, 6 November 2010 21:21)
There is no other choice.
Yes, China and Germany have voiced their concerns, but for China its more “crocodile tears” because it has more than enough reserves to see it through, but Germany’s concerns are real in the sense that this crises could bring it down as well. Unfortunately the “three musketeers” attitude of “all for one and one for all” has interconnected their economies – naturally this was designed by the US to keep it on top for another century, but they never counted on the series of US numbskulls in power like George Walker Bush who would bring them down.