Rbc Foreign Exchange Forecast
The future of the U.S. dollar
by futureofdollar.com ©
INTRODUCTION
The world cares what the dollar not play the role of the principal reserve currency any longer after the financial crisis sparked by the collapse of the U.S. mortgage market has led to the worst recession world since the 1930's. government stimulus, bailouts, the need to support the liquidity of Treasury securities to maintain interest rates at the finest level under the circumstances of slow economic growth, unemployment tax collection highs and lows for the printing of more dollars. This leads to increased risk of high inflation or hyperinflation in the long term.
With a debt of $ 12.3 billion nationwide and $ 55 billion in unfunded liabilities for programs such as Social Security, Medicare and Medicaid, the total commitments of the Federal Reserve and the Treasury bailout is now at 11.8 billion, including $ 3,600,000,000,000 dollars have been spent in the United States should take immediate steps to protect against possible loss of purchasing power of U.S. dollars, warns inflation.us.
Although no substantial data on U.S. inflation International stock markets and commodity prices increased abnormally in the last eleven months. Analysts called the "flight from the dollar" or risk "diversify."
There are many factors to testify against future of the dollar as world reserve currency. In this section futureofdollar.com pay attention to the crucial points of analysis after conducting extensive research on the subject.
Part I
Weak U.S. economic fundamentals
Nobel laureate Paul Krugman said "a country whose fundamentals are consistent and predictable necessarily worsening crisis [currency] at some point. "(1)
1. Public debt
In mid-February 2010, Obama passed the bill raising the minimum public debt to $ 12.394 billion U.S. $ 14294000000000. This is a second increase of ceiling on the national debt in less than two months.
The last time in December, Majority Leader Steny Hoyer House, said Congress simply had no choice: if the United States to pay its debts, which would be another disaster for the financial markets. (2)
"Management U.S. Treasury Financial estimates that total U.S. public debt exceeded 90 billion dollars, "said David Ross Asset Management radiant in their research. (3) Includes hospital insurance, supplementary medical insurance and social security. "[L] to raise money (he borrowed the Treasury and Congress last) is far from what is needed to meet long-term liabilities of these programs, even if it had not been passed. Nearly all bonds are promised $ 90000000000000 by any method established payment. "(4)
Including funded obligations, the United States moves to 1, well above Taiwan and Zimbabwe, for the highest ratio debt / GDP … U.S. total debt plus obligations funded 625% of total GDP. "(5)
The Peterson-Pew Commission on budget reform said that "the United States almost certainly experience a debt crisis has" that "could take place gradually or occur suddenly, but the high costs anyway. "The debt would be excessive… Affect citizens in their daily lives, undermining the American standard of living through an economic growth slower and wet wages, and reducing the government's ability to cut taxes, invest, or provide a safety net. "(6)
2. Unemployment
In February, the economy lost 36,000 jobs after losing 26,000 jobs in January and 109,000 jobs in December, and the rate of Unemployment remained at 9.7 percent. (7)
In January, the unemployment rate fell from 10.0 to 9.7 percent. According to Reuters "a sharp increase in the number of people leaving for work has helped to reduce unemployment. The number of "discouraged job seekers" rose to 1.1 million in January of 734,000 a year ago. "(8) The number of discouraged workers rose to 1.2 million in February (9).
Gallup reported in late February 2010 that "19.9% of the workforce in the United States has been underemployed during the month of January, resulting in about 30 million Americans who work less desired capacity. "(10)
In his summary of Mars comment on the current economic situation in the regions subject to the Beige Book, the government believes that "labor markets generally remained weak throughout the nation." Although "[t] he pace of layoffs slowed in most districts … hiring plans remained generally mild. "(11)
3. The budget deficit
IMF Managing Director Dominique Strauss-Kahn said in the 10 th Annual Herzliya Conference in Tel Aviv that the global crisis has created a problem of sustainability of public finances in many countries could take decades to fix because of the huge debt accumulated during the crisis, particularly in developed countries. (12)
The United States reached a record budget deficit of 1,415 million dollars for the fiscal year ending September 2009. (13) The deficit could exceed one billion again dollars in the fiscal year, which has more than 651 million dollars.
The excess of expenditure over income of 220.9 billion U.S. dollars in February 2010, compared with a deficit of 193.9 billion in February 2009, the Treasury Department announced in its monthly budget statement. It was the 17th consecutive month in which the government registered a deficit, CNNMoney.com said. (14)
In early February 2010 Obama gave a budget of 3.8 trillion U.S. dollars for 2011 Congress with a record $ 1.6 trillion deficit. (15)
During the debate on the national debt in the Senate "rejected a commission proposed bipartisan recommend ways to reduce the budget deficit of the United States, "said Bloomberg." The bill required that the recommendations panel to be approved by Congress without being changed. "(16) Instead of the original idea that the committee considered by Congress, Obama tries to create a commission government deficit would be no requirement for Congress to act on his advice. Experts see as a symbol rather a practical measure.
4. The economic impact of U.S. operations international military
The cost of conducting the wars in Iraq and Afghanistan pushed the budget numbers red during the presidency of George W. George W. Bush. The situation deteriorated after the start of the financial crisis, when the government has taken steps, such as packages stimulus, bailouts financial need to support the liquidity of Treasury securities, etc. Furthermore, in early December 2009, which increased its spending unproductive agreement that will send 30,000 troops to fight in Afghanistan.
All economists agree that one reason core inflation is the existence of non-monetary a significant non-productive spending such as military spending.
Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said Obama may be too much on his plate. "You can not take the war, the financial crisis, a recession, and add health care coverage to uninsured at the same time, he said. "It is simply a recipe for disaster." (17)
However important objective of the war might be, the operations military are, without doubt, very expensive for U.S. citizens, in particular, when the financial crisis and the growing deficit. Moreover, the situation does not improve and taking into account that nearly 40 percent of the funds for the war has been borrowed from abroad, Joseph Stiglitz, Nobel Prize winner, shows in his study "The war three trillion dollars. The true cost of the conflict in Iraq "
Why wars are expensive, said that the soldiers not only spending limited to direct operating costs, but also (most of) the loss of life, cost of future disability income loss, increased oil prices, opportunity costs, the welfare of veterans and labor, non-productive expenditure, loss of confidence in future economic conditions increasing the national debt, and so on.
"The Obama administration has asked Congress a defense budget of over $ 700 billion … – Nearly 5% of GDP – for the next year, "Guardian.co.uk reported in late February 2010.'s Exactly 1 / 3 of income Total budget for fiscal year 2009.
"If we stay the course, which will spend more money," Stiglitz said. "The fact we financed the war by all means that when the deficit 10 years from now we decide to return, I do not know if we go, the amount should be increased more taxes because the debt will be even greater. "
5. China's dollar peg
So far China is the low yuan rate giving its exports a competitive advantage over countries with currency appreciation against the U.S. dollar.
As a result, China is actually "steal" employment in many countries because, with currency appreciation of their companies are not able to compete with Chinese producers.
In relation to States Together, this means that the country should not depend on the previous recovery. China's peg to the dollar makes imports cheaper in the United States. This confirms the high level of unemployment in the U.S.. Unemployment keeps GDP growth and reduced income.
Part II
LACK OF CONFIDENCE
Definition of the main reasons for currency crises Paul Krugman says the most important is the lack of confidence. lack of investor confidence – is a characteristic of a currency crisis, holds (18).
Below are the views of a number of people from different parts of the world, many of us know very well. Their views of the U.S. concern dollar and U.S. economy.
Nouriel Roubini, a professor at New York University who predicted the crisis Financial said the dollar could weaken in the next three years. (19)
Warren Buffett, a successful international investors: "It the likelihood of higher inflation down the road. "(20)
Robert B. Zoellick, World Bank president: "There is very little the U.S. can do about the sinking value of the dollar, but the restoration of growth of its economy. "(21)
George Soros, an internationally successful investors: "Regardless of the situation in the stock market or the state of the economy will move later in the dollar real estate assets in a long term. "(22)
Jim Rogers, a successful international investors. "Printing money to help the U.S. economy will weaken dollar and the Treasury in the long run "(23)
Joseph Stiglitz, Nobel Laureate in Economics: The greenback will continue to head down for now given the huge U.S. trade deficit and the imbalance of world trade. (24) "[M] all the factors entering the U.S. dollar's decline. But Clearly, one factor is a total loss of confidence, loss of confidence especially in the economic future. "(25)
Fan Gang, an eminent economist and advisor to the Central Bank of China: "This crisis is a dollar crisis in the United States, which takes a relatively long time to solve the problem is the dollar U.S. and Canada. the debt of the United States, and eventually must be resolved by the depreciation of U.S. dollar "(26).
Yuri Luzhkov Mayor of Moscow, Russia: The world is on the verge of a radical devaluation of U.S. currency. Therefore, Russia must give up their addiction to the dollar as soon as possible. U.S. currency reserves is backed by nothing and industrial production in this country is very low. (27)
The list of like-minded people is known endless. In his research futureofdollar.com face difficulty in finding investors for success, economists and foreign policy thinking opposite. There are just some of them. Most of them are U.S. government officials, whose job is to restore confidence in the U.S. economy with a part of This work is talking about "positive" terms.
People in this group is to believe that:
* Recession is complete and the economy U.S. be a strong recovery, or
* If the dollar remains the dominant reserve currency for a long time, because during this last financial crisis in U.S. investors found a haven of peace, or
* That there is no threat of inflation, based on government data U.S. or
* By saying that "we will sink or swim with the dollar."
For example, Barack Obama is convinced that the dollar "extraordinarily strong" because investors have confidence in the ability of the United States to lead the global recovery. (28)
The president of the U.S. Federal Reserve, Ben Bernanke, believes that U.S. prices assets are not out of proportion to the underlying securities and central bank policy ensure that the "strong dollar." (29)
The U.S. Treasury secretary, Timothy Geithner, expects the dollar will remain in the world "dominant reserve currency." (30)
Therefore, we conclude that, unfortunately, the U.S. dollar economy and cynical. The government U.S. must work even harder now to restore it.
Part III
DIVERSIFICATION FROM THE DOLLAR
Maurice Obstfeld and Kenneth Rogoff said that "there is a long-term trend of diversification of official dollar reserves away from U.S., especially among fast-growing emerging economies and developing reserves hunger, and this trend continues in the data years. "(31)
It is difficult say that the dollar's future now depends significantly developing countries like China, India, Brazil, Russia, among others. These countries are accumulating large reserve quantities and the U.S. debt.
Discover their recent positions of the U.S. dollar with an attempt to predict your future.
1. China
And for a long period of time China has been very aggressive in diversifying their reserves and the protection against the weakening dollar, recommending its private sector to do the same.
The Ministry of Finance of China began to sell bonds worth 6,000 billion yuan in Hong Kong in late September 2009, a major step internationalization of its currency at a time of deep concern about the dollar. (32)
The same month, China has bought 50 billion U.S. dollars of sale of bonds by the first International Monetary Fund, a purchase that could raise permanent capital in Beijing and help the government's campaign to expand the scope silence of its currency. China has taken the unusual step of paying for the IMF's obligations to 341.2 billion yuan – which is not traded on world markets – instead of dollars. (33)
The country has signed a monetary agreement with Argentina and decided to credit in South Korea, Malaysia, Indonesia and Belarus, with its own currency. (34)
In mid-September 2009, the International Monetary Fund announced it would sell 403 tonnes of gold. Chinese central bank has shown its willingness to buy the whole range. (35)
People's Bank of China has demonstrated its intention to reduce its dollar reserves. The Chinese authorities to increase their reserves in euros and yen. (36)
China and Brazil established international payments in local currency of the Republic of China. Zhuhai Geli company received a shipment of several million yuan of San Pablo in the fall 2009. (37)
The country seeks to expand its oil reserves in Africa to bid for up to one sixth of Nigeria's gross reserves of approximately 6 billion barrels. Value close to 30-50 billion Chinese bid is greater than the current owners. China buys oil resources in the world for the second year now. (38)
Chinese companies can invest about $ 4,400,000,000 dollars in the Peruvian mining sector over the next three years, according to the statement by the Prime Minister of Peru, Javier Velásquez. (39)
Nearly 44% (14.3 million) of total investment China during the first nine months of 2009 have been the entry into the mining and production. Representative of Asian Development Bank said that investment in the sector mining by purchasing shares corresponded to a long-term strategy of the country to ensure the security of resources. (40)
China Investment Corporation (CIC), a sovereign wealth fund responsible for managing a part of China's foreign exchange reserves, has been quietly accumulating shares of resource companies, including Canada, Kinross Gold Corp. and Potash Corp. of Saskatchewan, according to a filing with securities regulators. "(41)
CIC chairman Lou Jiwei "Has recently stated that the CIC will focus on investment in emerging markets in 2010. In October, the ICC president, said the Fund has allocated $ 110 billion foreign investment and has deployed about half of that. "(42)
"In addition to its 3.5 billion U.S. dollars of interest in Teck, CIC has a stake of $ 652 million in iron ore and nickel Brazilian giant Vale SA, a contribution of $ 4.7 million Freeport-McMoRan Copper and 9,100,000 share of the largest steel producer ArcelorMittal. CIC also acquired stakes in a number of the leading brand in America North and Research In Motion Ltd., Apple Inc., News Corp., and AIG Inc. (43)
China reduced its holdings of U.S. Treasury bonds of $ 34.2 billion in December 2009, but remained the largest holder of foreign debt of the United States. (44)
2. India
Suresh Tendulkar, economic adviser Indian Prime Minister, urged the government in the summer of 2009 to diversify its U.S. 264.6 billion U.S. dollars of foreign reserves and fewer dollars to maintain. (45)
The IMF has sold 200 tonnes of gold in India in early November 2009. The sale of $ 6.7 billion is "the largest single purchase of central bank know at least 30 years in a short period of time, "said Timothy Green, author of" golden ages. "The only comparable event not U.S. has stopped buying in 1930 and 1940. "(46)
3. Brazil
Central of Brazil, Henrique Meirelles, the Bank President said the country elimination U.S. planned. Dollar in trade with China, Russia and India. (47)
In October 2009, the Central Bank of Brazil announced that it reached agreement with the authorities of Uruguay to implement the system cheap calls SML operations in bilateral trade. (48)
Brazilian Finance Minister Guido Mantega said Brazil spends 10 billion dollars in bonds to purchase the International Monetary Fund to increase the fund's resources. This "radical change" will help Brazil to diversify its resources, he added. (49)
4. Russia
The Central Bank of Russia has increased the share of Japanese yen and the franc Subject to Switzerland in mid-2008. Japanese yen is currently 2 percent of Russia's reserves. The proportion of the franc is smaller because liquidity is limited.
Russian President Dmitry Medvedev told the St. Petersburg International Economic Forum in June 2009: "We must not exclude the possibility of a scenario where the dollar will subject to strong inflationary pressures. "(50)
Russia's reserves now consist primarily of U.S. dollar and the euro. However, it is quite possible that Russia will join the Chinese yuan there, "said Finance Minister Alexei Kudrin of Russia. The lack of convertibility of the currency of China and the free movement of capital was main obstacle at present. (51)
Brazil and India are interested in resolving bilateral trade with the Russian national currency, "said Alexander Potemkin, the Minister President of the Central Bank of Russia, echoing Moscow's drive for greater use of national currencies and the U.S. dollar less. "It was an initiative within the BRIC. These countries intend to create conditions for direct payments for trade in national currencies, "he said. Also said Russia had brought an experience of reciprocal payments in local currencies with China. It is estimated that the legislation in the ruble and the yuan and account for about 2 percent of Russian trade with China. (52)
Moscow also believes that the national currency trading with other countries, including Turkey and Vietnam. (53)
Russian Central Bank first vice president Alexei Ulyukayev said in November 2009 that Russia might add that the Canadian dollar its gold and currency reserves in the next months, its share would be negligible. (54)
Russia, Belarus and Kazakhstan, members of the Community Customs Union of Independent States, may adopt a single currency in 2012, according to First Deputy Prime Minister of Russia Igor Shuvalov. (55) Experts believe that Russia, Belarus and Kazakhstan to save at least 1 percent of total transactions (tens of millions of dollars), avoiding the payment in dollars and euros. (56)
Russian President Dmitry Medvedev criticized delays in the development of a new international financial system, and announced that the French president and he would take the initiative, as long as "Bretton Bretton do not reflect the current economic situation further. "(57)" Both President Sarkozy and I worry about the new international financial architecture is not only far of perfection is, we have not taken serious steps to respect, "said Medvedev (58).
5. Other countries
In April 2009 leaders Latin America signed into effect a new currency of South America, to be called the "sugar." ALBA leaders (representing Venezuela, Cuba, Bolivia, Honduras, Nicaragua and Dominica) said that sugar is needed to help defray the regional impact of the global economic crisis by replacing its trade in dollars, a currency alternative. ALBA countries and its allies intend to use the virtual sugar in early 2010. (59)
In the second quarter ending June 2009, the world's central banks invested 63 percent of its reserves of cash in euros and yen new, and put only 37 percent in dollars. (60)
Kuwait, Saudi Arabia, Qatar and Bahrain signed an agreement in June 2009 to establish a joint council of monetary union, the prelude of the establishment of a Gulf central bank and launch a monetary union and single currency. The other two members of the Gulf Cooperation Council (GCC), United Arab Emirates and Oman, has not signed after the decision to withdraw from the project. GCC states have set 2010 as the deadline for the release of monetary union and single currency experts, but many believe that this goal is too ambitious and unrealistic. (61)
Turkey announced in late October 2009 was the change to local currencies in trade with Iran and China, ending the dependence on the dollar and the euro by around 20% of their income from commodities. (62)
The International Monetary Fund has sold two tons of gold the Bank of Mauritius on the basis of prevailing market prices on November 11, 2009. (63)
Soon after, the IMF has sold 10 tonnes of gold in Central Bank of Sri Lanka for about $ 375 million. The purchase is part of Sri Lanka to diversify its reserves and has gradually accumulated the metal in the past nine months. "Gold is a great base and cover have in these volatile circumstances," said Nivard Cabraal, the bank governor. "We believe this is a good time to buy." (64)
In early January 2010, Canada announced it would sell about of 1 million euros in 10-year bonds, issuance of debt for the first time in the euro more than a decade. This strategy will help attract new investors, while debt denominated in U.S. dollars is less popular among creditors, given the devaluation of U.S. currency. (65)
It is obvious that the trend towards diversification dollar has maintained throughout the year of 2009 and continued in 2010.
Part IV
OUTPUT
Peterson-Pew Commission Budget Reform stated that "the U.S. must show its creditors who are serious about stabilizing the federal debt in a reasonable period. Both cuts spending and tax increases will be necessary. "
Most economists suggest that the U.S. strategy to combat inflation must include:
* The elimination of inflation expectations and encouraging savings;
* Balance achieved between income and expenditure;
* Increasing the quantity of commodities, and
strengthening the national currency * in the establishment of an unconditional priority of inflation targeting in other programs government (such as military spending, the unemployment rate regulation, market influence of national currencies, etc.).
Does the U.S. have a pain to reduce spending and deficit fighting? Probably not, bearing in mind the words of Sir John Templeton, John Templeton Foundation, who said in 2005: "Psychology in the whole world is that people do not re-elect the leaders they want to be thrifty. Voters will elect a government that spends more money. "(66)
Many analysts are fairly certain that the weak dollar policy is beneficial to the U.S. Therefore, whatever the authorities, there will be resistance the depreciation of them.
Most experts doubt that the solution and the problem depends largely on the United States and called global action. "We must reform the international monetary system," Yu Yongding, a former Chinese central bank adviser, said in mid-November 2009. "A good monetary system must rely on us. But do not trust the U.S. dollar today, "he added. (67)
George Soros is convinced that "we need a new monetary system and special drawing rights are not the characteristics of a system," he told the Financial Times.
The future of dollar
The dollar's future is in danger today, because obviously the article.
This topic is the main futureofdollar.com center. We follow recent developments in this field and to provide our readers with the information from reliable sources.
This analysis was prepared by © http://www.futureofdollar.com
March 11, 2010
Notes:
(1) Paul Krugman, currency crises, 1997;
(2), Reuters, December 17, 2009;
(3) Justin David Ross, The Future of China and the dollar: the threat of collapse and the evolution of a new reserve currency, October 27, 2009 Radiant Asset Management, LLC;
(4) Ibid.
(5) Ibid.
(6) budgetreform.org, December 14, 2009;
(7) U.S. Department of Labor March 5, 2010;
(8), Reuters, February 8, 2010;
(9) U.S. Department of Labor, March 5, 2010;
(10) Gallup, February 23, 2010;
(11) The Beige Book March 3, 2010;
(12) IMF January 31, 2010;
(13) The Department of the Treasury;
(14) March 10, 2010 CNNMoney.com;
(15) Bloomberg, February 01, 2010;
(16) Bloomberg, January 26, 2010;
(17) Bloomberg January 8, 2010;
(18) Paul Krugman, currency crises, 1997;
(19) Bloomberg, February 4, 2010;
(20) Fox Business Network, June 24, 2009;
(21) The Economic Times, November 13, 2009;
(22) Reuters October 26, 2009;
(23) Bloomberg, October 28, 2009;
(24) The Korea Times, October 28, 2009;
(25) The war of three billion dollars: The actual cost the conflict in Iraq Discussion Paper, April 8, 2008;
(26) Reuters, December 2009;
(27) companies in Russia RB.ru September 1, 2009;
(28) Bloomberg Mar. 24, 2009;
(29) Bloomberg Nov. 17, 2009;
(30) U.S. Today March 25, 2009;
(31) Maurice Obstfeld and Kenneth Rogoff, global imbalances and financial crises: Revenue from the most common causes in November 2009;
(32) People's Daily Online September 28, 2009;
(33) The Associated Press September 3, 2009;
(34) The New York Times, September 4, 2009;
(35) September CommodityOnline.com 21, 2009;
(36) November RosBusinessConsulting 6, 2009;
(37) NEWSru.com, October 28, 2009;
(38) Vedomosti, September 28, 2009;
(39) Bloomberg, 25 November 2009;
(40) ChinaPro.ru / November Vedomosti, 25, 2009;
(41) The Globe and Mail, February 08, 2010;
(42) Ibid.
(43) Ibid.
(44) Xinhua, March 1, 2010;
(45) Bloomberg, July 4, 2009;
(46) Bloomberg Nov. 3, 2009;
(47) Merco Press, 29 October 2009;
(48) Ibid.
(49) Bloomberg, October 4, 2009;
(50) June 5, 2009 RIA Novosti;
(51) Bloomberg, October 24, 2009;
(52) Reuters, November 25, 2009;
(53) Ibid.
(54) Reuters, November 2009;
(55) Rossiiskaya Gazeta, March 9, 2010;
(56) RBC-TV March 10, 2010;
(57), RIA Novosti, March 1, 2010;
(58) Ibid.
(59) Venezuelanalysis.com, April 17, 2009;
(60) CNBC October 14, 2009;
(61) ArabianBusiness.com, October 11, 2009;
(62) RIA Novosti, October 28 2009;
(63) IMF Press Release 16 November 2009;
(64) Bloomberg, 25 November 2009;
(65) Bloomberg, January 5 2010;
(66) Newsman;
(67) Bloomberg, November 17, 2009.
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Futureofdollar.com is a group of people who, just like billions of other people around the World, will have to live with the future consequences of the current global crisis provoked by short-sighted politicians. We wish as many people as possible were aware of such consequences.
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