Nations prepare to abandon US Dollar as reserve currency

[davkakach]

http://www.theglobeandmail.com/servlet/story/LAC.20061128.RDOLLAR28/TPStory/Business

Struggling U.S. dollar triggers currency concerns
Long-term threat of 'trade chaos' cited

BARRIE MCKENNA

WASHINGTON -- Renewed fears that the Chinese central bank may be poised to start liquidating its $1-trillion stash of U.S. dollars briefly drove the greenback to a 20-month low against the euro and a two-year low against the British pound in trading yesterday.

The euro surged to $1.3172 (U.S.) against the greenback and the pound to $1.9469, before losing ground by day's end. The loonie and the yen have also gained on the U.S. dollar in recent days.

The sudden weakness of the U.S. dollar began late last week, soon after Chinese officials suggested that holding a lot of dollars might be a losing investment strategy. Investors read that as a signal that the massive trade and financial imbalances between Asia and the U.S. may be about to unwind.

The chief worry is that if China's central bank -- the largest foreign holder of U.S. dollars -- begins to unload its reserves, the dollar will plunge. With China's yuan effectively pegged to the dollar, other leading currencies would move higher after the realignment.

There's no evidence yet that's what China is actually doing. But few investors want to be the ones left holding dollars when the plunge comes. "People are getting very nervous," said Andrew Busch, chief foreign exchange strategist at BMO Nesbitt Burns in Chicago.

"It's a wonderful behavioural science experiment and it's being played out with billions of dollars. The first to get out tips the scales."

Central banks in Russia and in some Middle Eastern countries have already announced plans to cut their U.S. dollar holdings.

China's currency rose to a new high against the greenback yesterday as the Chinese central bank set its official exchange rate at 7.8402 yuan to the U.S. dollar. That's the highest level since July of last year when China relaxed its tight currency controls. Since then, however, the yuan is up just 3.3 per cent versus the dollar.

By contrast, the greenback is down 10 per cent against the euro and roughly 2 per cent against the yen and the Canadian dollar so far this year. The loonie closed at 88.32 U.S. cents, up from 88.05 Friday, while the U.S. dollar rose to 116.13 Japanese yen from 115.55 yen.

Also pushing the movement in currencies is the slowing U.S. economy, which could force the U.S. Federal Reserve Board to cut interest rates in the coming months. Meanwhile, the European Central Bank is looking at a possible interest rate increase next month.

The net effect is to make euros more attractive. It has also begun to encourage Europeans to buy more imported goods, and even take trips to the United States.

The British pound is rising alongside the euro, spurring a resurgence of holiday shopping junkets to New York by British tourists, according to Dee Byrne, spokeswoman for the Association of British Travel Agents.

"There has been an upturn in bookings to the States, for Christmas shopping in particular," Ms. Byrne told Reuters News Agency. "People are going to New York to do their Christmas shopping, where they will get much more for their money: It couldn't have come at a better time."

But other experts see a much more ominous impact of these potentially seismic currency shifts.

The surging euro could cause permanent damage to the European economy, and even spur calls for exchange rate controls.

Peter Morici, a former chief economist at the U.S. International Trade Commission, said China is to blame for unleashing a potentially destabilizing period of currency realignment by stubbornly refusing to let its currency float to absorb its soaring trade surplus with the rest of the world.

"The long-term consequences of this could be trade chaos," warned Mr. Morici, now a business professor at the University of Maryland.

Talk of exchange rate controls in Europe is an ominous reminder of the 1930s, when protectionism and currency controls helped trigger a global recession.

"It's like water. There are too many dollars out there, looking for a place to go," Mr. Morici said. "China is pushing on a wall of competitive devaluation."

Investors are betting the most likely place for all those dollars to go is the euro -- often touted as a reserve currency for the world. "The Europeans wanted a reserve currency and now they're about to find out what it's like," Mr. Morici said.

[davkakach]

London stock trader urges move to 'Amero,' a currency to replace US, Mexican, and Canadian money

http://www.wnd.com/news/article.asp?ARTICLE_ID=53124

London stock trader urges move to 'amero'
Says many unaware of plan to replace dollar with N. American currency
Posted: November 28, 2006
1:00 a.m. Eastern

By Jerome R. Corsi
© 2006 WorldNetDaily.com

In an interview with CNBC, a vice president for a prominent London investment firm yesterday urged a move away from the dollar to the "amero," a coming North American currency, he said, that "will have a big impact on everybody's life, in Canada, the U.S. and Mexico."

Steve Previs, a vice president at Jefferies International Ltd., explained the Amero "is the proposed new currency for the North American Community which is being developed right now between Canada, the U.S. and Mexico."

The aim, he said, according to a transcript provided by CNBC to WND, is to make a "borderless community, much like the European Union, with the U.S. dollar, the Canadian dollar and the Mexican peso being replaced by the amero."

Previs told the television audience many Canadians are "upset" about the amero. Most Americans outside of Texas largely are unaware of the amero or the plans to integrate North America, Previs observed, claiming many are just "putting their head in the sand" over the plans.

    

WND Exclusive THE NEW WORLD DISORDER
London stock trader urges move to 'amero'
Says many unaware of plan to replace dollar with N. American currency
Posted: November 28, 2006
1:00 a.m. Eastern

By Jerome R. Corsi
© 2006 WorldNetDaily.com


In an interview with CNBC, a vice president for a prominent London investment firm yesterday urged a move away from the dollar to the "amero," a coming North American currency, he said, that "will have a big impact on everybody's life, in Canada, the U.S. and Mexico."

Steve Previs, a vice president at Jefferies International Ltd., explained the Amero "is the proposed new currency for the North American Community which is being developed right now between Canada, the U.S. and Mexico."

The aim, he said, according to a transcript provided by CNBC to WND, is to make a "borderless community, much like the European Union, with the U.S. dollar, the Canadian dollar and the Mexican peso being replaced by the amero."

Previs told the television audience many Canadians are "upset" about the amero. Most Americans outside of Texas largely are unaware of the amero or the plans to integrate North America, Previs observed, claiming many are just "putting their head in the sand" over the plans.

(Story continues below)

CNBC asked Previs whether he thought NAFTA was "working and doing enough."

He replied: "Until it created a lot of illegal immigrants coming across the border. I don't know. You get the pros and cons on NAFTA. For some people it is a good thing, and for other people it has been a disaster."

The speculation on the future of a new North American currency came amid a major U.S. dollar sell-off worldwide that began last week.

Yesterday, the dollar also reached new multi-month low against the euro, breaking through the $1.30 per euro technical high that had held since April 2005.

At the same time, the Chinese central bank set the yuan at 7.0402 per dollar, the highest level since Beijing established a new currency exchange system in 2005 that severed China's previous policy of tying the value of the yuan to the U.S. dollar.

Many analysts worldwide attributed the dramatic fall in the value of the U.S. dollar at least partially to China's announcement last week that it would seek to diversify its foreign exchange currency holdings away from the U.S. dollar. China recently has crossed the threshold of holding $1 trillion in U.S. dollar foreign-exchange reserves, surpassing Japan as the largest holder in the world.

Barry Ritholtz, chief market strategist for Ritholtz Research & Analytics in New York City, in a phone interview with WND, characterized today's downward move of the dollar as "wackage," a new word he coined to convey that the dollar is being "whacked" in this current market movement.

Ritholtz told WND that yesterday's downward move "was a major market correction that points to the risk of subsequent downside to the dollar."

Asked whether he would characterize the dollar's downside move as signaling a possible collapse, Mr Ritholtz told WND, "Not yet."

Ritholtz pointed out market professionals had long looked at a dollar collapse as a "low probability event," but the recent fall suggests "the probabilities have increased of a major dollar correction, or even of a collapse."

U.S. trade imbalances with China have hit a record $228 billion this year, largely reflecting a surging flow of containers from China with retail goods headed for the U.S. mass market.

Secretary of Commerce Carlos Gutierrez is in Bejing leading a trade delegation of more than two dozen U.S. business executives.

"The future should be focused on exporting to China," Guiterrez told reporters in Bejing, noting that this year, U.S. exports to China are up 34 percent on a year-to-year basis, surpassing last year's gain of 20 percent.

One way to improve the U.S. trade imbalance may be to ease up on restrictions of exporting high-tech products and allowing technology transfers to China, a move likely to be politically charged in the U.S.

The decline in value of the dollar will also make U.S. exports more attractive and Chinese exports to the U.S. more expensive.

In February 2007, a virtually unprecedented top-level U.S. economic mission is scheduled to travel to China. Included in the mission are Treasury Secretary Henry Paulson, Jr., Secretary of Commerce Carlos Gutierrez and Federal Reserve Chairman Ben Bernanke.

Previs declined to be interviewed for this article, telling WND in an e-mail he did not want to be quoted directly in any article that may express a political point of view.

[MassuhDGoodName]

I HAVE NO WORRIES!

THE U.S. DOLLAR LONG AGO ABANDONED ME!

[cjd]

      This alone should be an indicator of how bad things have become for Americans when the American government is willing to mingle its money supply with inferior economies.
       Its bad enough that many of the countries in South America use American currency and have none of their own. Most of the Islands in the West Caribbean use American money and only use the Dutch Gilder or the Caribbean Dollar for small local exchanges.
        Exactly where would it benefit Americans to go to a regional money supply with Mexico and Canada.?The simple answer is it doesn't.
        This is another step in the open border policy that the powers that be who push this open border crap are presenting. I hear this being talked about more and more in different venues.
         Look at Europe last month balking at Turkey wanting to join the European union. Why? Could open borders between Muslim Turkey and the rest of Europe be the reason.
          Also I was surprised to an extent to find out that England still has the British Pound. Why is that? Aren't they a member of the E.U ? Why are they clinging to their national money?
           I am not an economist so much of this stuff is very abstract to me as it is for most Americans. Unless someone can tell me different why in the world would you combine monetary systems with countries that are inferior  unless it was to bring the standards of living of the people in the stronger country down to the level of the others.
            Can Americans make this adjustment? Are you willing to live almost like the average Mexican. This is where I see America headed a small elite class and the rest of the populations slaving away in 60 hour weeks to maintain some semblance of our former lifestyle.
            Ready to split up the Pie?