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Robert Fisk and the coming dollar panic
Robert Fisk has put is fox among the chickens with his scoop on the dollar. According to Fisk the Gulf Sheiks along with China, Russia, Japan and France are all holding talks aimed at no longer pricing oil in US dollars.
Of course all of the above rushed to deny it. However Fisk insists in his story and if I have to choose between the word of Robert Fisk and word of a group of diplomats, I'll take Fisk every time.
What explanation could fit both versions?
Well, if these people have huge dollar reserves they are primarily concerned about the value represented by those reserves. They don't want to do anything to create a panicky run on the dollar which would drain the value from their reserves. That would explain the denials.
At the same time, if they believe that it is quite possible that the dollar might collapse in a foreseeable future, they would like to have a plan B to avoid being wiped out. That would explain the conversations.
The important thing for them would be, in case of a panic, not to trample each other to death running for the exits like in a theater of discotheque fire. They would have to have a commonly agreed on vehicle to transfer the value of the dollars to something else in an instant. They might only have a few hours to act before markets opened after some traumatic event that set off the panic. There would be no time to improvise, it would have to all go like clockwork or their economies would be ruined.
In other words, Fisk has observed them running a fire drill.
Why are they so worried?
Why have they so little confidence in America's ability to come through all this with flying colors?
What has happened?
I have my own little theory which I will share with you.
A while back I wrote this:
This particular crisis is about a vacuum in credibility. It isn't exactly America's "fall of the wall" moment... yet, but it is moving in that direction. Think what it means when a whole ideology crashes.Now that ideology has been trashed too.
When I was a young fellow many people truly believed, and had made huge personal sacrifices all their long lives in the belief that history's inevitable march was toward socialism and that the Soviet Union was the genuine vanguard in that march. Many were still believing it right up till the moment when Gorbachev pulled down the Red Flag on the Kremlin.
It is impossible to exaggerate what an intellectual and political hole that left... a hole big enough for people like Alan Greenspan and George W. Bush to walk through.
The vacuum it leaves is of even greater proportions and those proportions are only beginning to sink in.
There is a curious wrinkle here. This is not just about dry figures, there is a grotesque, intensely human story that sums it all up: Madoff.
For me the Madoff story is the poster boy of the whole credibility collapse and the collapse of the American myth.
Huh?
Let me explain.
When I first came to Europe, many years ago, I was amazed -- shocked at first -- at how so many Europeans of both the left and right, would affirm with a totally straight face that America was run by its Jewish citizens. I thought that it was simple antisemitism at first, but it was and is much more complicated than that.
It is really the only explanation they can find for our success.
Most Europeans think that the average, white bread, boy and girl next door, all-American type, is just too spontaneous, too innocent, too narrow minded or just too plain dumb if you will, to have ever put together anything like our good ol' evil empire.
Since the only Americans that Europeans find "European", which for most Europeans -- no matter how dumb they are -- means intelligent, educated, subtle and sophisticated, are the American Jews, Europeans just naturally assume the Jews are behind America's success.
That is why the Madoff scandal embodies the damage this crisis has done to US credibility: American Jews have turned out to be just as dumb as American goyim.
The Madoff scandal is the quintessential caricature of the whole moment. The idea that people had around the world had was that American Jewish people were the only people intelligent enough to really understand advanced financial products and it turns out that America's richest, therefore smartest, Jewish people were as stupid as it was possible to be, and even Madoff himself was, dumb to ever think he could get away with it, all this has destroyed centuries of malignant stereotypes of the Jews preternatural craftiness at the worst possible and inopportune moment. The bottom line is: If America's richest Jews are just as stupid as the rest of the world's goyim, then... who is minding the store?So, the world is waiting for the other shoe to drop.
They hope it wont come too soon, but they have to be prepared for when it does otherwise they too will be pulled down to ruin.
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In terms of the a-bomb, they certainly were. It was all Jewish physics after all.
Seriously, David, where did you get such an outlandish statement? I really wanted to rec this comment to have something intelligent on the TPM front page but there must be something in the water today. Maybe it's a flame.
October 7, 2009 5:40 PM | Reply | Permalink
It is my (long) experience that Europeans see most Americans as overgrown children, except for the Jewish people.
This might explain the love-hate relationship American Jews have with Europe.
October 8, 2009 1:47 AM | Reply | Permalink
If this happens, the Neocons will dig up Leon Trotsky.
Seriously, reserve currency holdings are the only thing giving our fiat dollars value. It's like cleaning out Ft. Knox.
Woe is we.
October 7, 2009 9:08 PM | Reply | Permalink
October 8, 2009 1:49 AM | Reply | Permalink
Robert Fisk's warnings notwithstanding, US Treasury bills today increased in value and decreased in interest rate for 10 to 30 year bonds, indicating high demand. Bid to cover was up at over 3.01 (three bids for every one sale).
October 7, 2009 11:48 PM | Reply | Permalink
The T bills will go up and down every day, every week. For the moment that is all there is. That is what the story is about, the world is looking for alternatives.
The problem people have is like in a family company where everyone has all their savings, where it is looking like the CEO (daddy) is showing symptoms of Alzheimer. What to do? Family members begin to have discreet meetings to talk about the problem.
They have to have a plan. US debt is unsustainable anything could set off a panic dash for the doors.
October 8, 2009 1:57 AM | Reply | Permalink
Here is comment just in at my home blog, where I cross post, from "Pirate Laddie"
The entire question of the dollar revolves around credibility and the general impression is that America's feet are slipping on the bicycle pedals.October 8, 2009 2:21 AM | Reply | Permalink
But we are warned on the dollar, "In God We Trust" so why should they ever trust the US government. Even the government is declaring themselves not to be trustworthy and suggesting we trust something else. hehehe
October 8, 2009 12:39 PM | Reply | Permalink
David, interesting to hear there's more to the dollar aversion syndrome than just too many dollars floating around the world markets. I suspect the lack of any decisive admonishment to the Banking and Financial industry by Obama is a leading cause for concern by those holding large quantities of dollars, in various forms, in reserve. Also, the lack of any Congressional effort to work together to re-enact depression era regulations,or similar legislation, that were allowed to expire 10 years ago which many believe would have prevented the financial meltdown last year. I suspect the current debacle by republicans and their base over health care is enough to convince America's stakeholders their investments in the financial fabric of America are in serious doubt. The question is, how will they be able to divest themselves of all those US denominated dollar assets in their reserves without causing the markets for them to collapse? There's too many dollars out there to go about slowly divesting oneself without drawing attention to what you're doing and having other follow suit - that would snowball real quick into a panic.
Of course the US could buy those assets back, but that would require taxing the public instead of printing more - which is a primary reason for the financial jitters. And its' that same public who is currently running on empty in the area of job satisfaction, or lack thereof. Plus their financial losses of home equity, 401-K retirements and other saving instruments they were heavily relying upon. Sounds like Congress is going to have to finally face the music on all the tax cuts they've favored over the years since Reagan or take full responsibility for the financial collapse of the dollar.
October 8, 2009 8:11 AM | Reply | Permalink
Is anyone out there up for a New Economy?
October 8, 2009 3:17 PM | Reply | Permalink
I'm for that. If wealth was measured by the accumulation of broken Chinese lawn sprinklers, I would be a rich man.
http://www.youtube.com/watch?v=MlgALQRg78I
October 8, 2009 4:50 PM | Reply | Permalink