Bachmann and Beck Double-Down on Currency Conspiracy Theory
Michele Bachmann was recently on Glenn Beck’s radio show, so that two of the right-wing’s most prominent nutters could talk, inaccurately, about currency issues:
BACHMANN: Let me tell you, there’s something that’s happening this week in Congress that could be the eventual unravelling for our freedom, and it’s this. I had asked the Treasury Secretary and Ben Bernanke, the Federal Reserve Chair, if they would categorically denounce–
BECK: I know.
BACHMANN: –taking the United States off of the dollar and putting us on an international global currency. Because as you know, Russia, China, Brazil, India, South Africa, many national have lined up now and called for an international currency, a One World currency. And they want to get off the dollar as the reserve currency.
BECK: Most people don’t understand what that means.
Here, for once, Beck is on the money. As we’ll shortly see, neither he nor Bachmann understands what that means:
BACHMANN: What that means is that all of the countries of the world would have a single currency. We would give up the dollar as our currency and we would just go with a One World currency. And now for the first time, we’re seeing major countires like China, India, Russia, countries like that, calling for a one world currency and they want this discussion to occur at the G20. So I asked both the Treasury Secretary and the Federal Reserve chair if they would categorically denounce this. The reason why is because if we give up the dollar as our standard, and co-mingle the value of the dollar with the value of coinage in Zimbabwe, that dilutes our money supply. We lose country over our economy. And economic liberty is inextricably entwined with political liberty. Once you lose your economic freedom, you lose your political freedom. And then we are no more, as an exceptional nation, as we always have been. So this is imperative.
This falsehoods here are coming so fast and loose that it’s hard to know where to start here. But to get to the main point, most countries hold “reserves” of various kinds—foreign currency and gold. Most countries, right now, primarily hold dollars. Euros are also popular, and Yen and British Pounds somewhat less so. The United States of America does not, obviously, hold any dollars in our reserves. We actually have quite a lot of gold. And different countries vary their practices in this regard. But most countries mostly hold their reserves in dollars. So the dollar is, in effect, the “global reserve currency.” The IMF also issues something called Special Drawing Rights that countries can use as a reserve asset. SDRs work as a kind of meta-currency, with their value based on a basket of major world currencies. A Chinese official suggested that it might be good for the world to tilt away from such a heavy reliance on dollars as the reserve currency of choice, since this leaves countries exposed to policy decisions in the United States, and toward something more SDR-like that would be balanced between dollars and euros and yen and pounds and so forth.
This has nothing to do with replacing the dollars in your bank account—or Michele Bachmann’s—with a new currency. Nor would it be the creation of a One World Currency. And to be clear, while the United States could prevent the IMF from formally creating any kind of new internationalized reserve currency, there’s nothing we can do to stop foreign countries from weighting their reserve baskets away from dollars. It’s just not up to us.
At any rate, my colleague Ali Frick found this remarkable exchange and has the audio for your pleasure:
Keep in mind that these aren’t just two weirdos hiding out in a cabin somewhere. Beck has a show on a major cable news network and Bachmann has a seat in congress.
74 Responses to “Bachmann and Beck Double-Down on Currency Conspiracy Theory”
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March 27th, 2009 at 2:28 pm
Is everyone around these people as stupid as they are? Has no one pulled Bachmann aside to say, “hey lady, here’s what the real story is…and, by the way, you’re looking like a fool…” Or are they willfully attempting to mislead and incite the “Left Behind” crowd?
March 27th, 2009 at 2:32 pm
Madame Bachmann is completely uninformed on this issue. But as Beck acknowledges, so are 99% of the people, so this is an easy one for her to grandstand on and bamboozle a lot of people. What R in congress wouldn’t want to fearmonger on an issue that is impenetrable for most voters?
I wish she’d stick to more approachable issues like the Light bulb Freedom of Choice Act.
March 27th, 2009 at 2:36 pm
Thank you Matt. That was, finally, a real explanation. Bravo.
March 27th, 2009 at 2:37 pm
This lady is a few mondos short of a globo.
March 27th, 2009 at 2:37 pm
Bachman is the gift that keeps on giving. Beck is just crazy … he needs to be locked up in an asylum before he shoots someone.
March 27th, 2009 at 2:38 pm
One world currency is a total Christian conservative dogwhistle–setting up such a currency is Item 1 on the Antichrist’s to-do list.
March 27th, 2009 at 2:42 pm
Beck, Bachmann, and their elk are mining it.
Elk? I think you meant “moose—” you were referring to Sarah Palin, right?
March 27th, 2009 at 2:42 pm
Madame Bachmann is completely uninformed on this issue.
I disagree. She’s no genius, but she’s not this stupid. She manages to eat, get dressed and go back and forth to work without injuring herself everyday. I like the way Tinare put it — it’s a calculated effort to mislead and incite people. It’s disgusting. Stewart needs to invite her on the Daily Show.
March 27th, 2009 at 2:43 pm
Remember when people said liberals had “Bush Derangement Syndrome”?
March 27th, 2009 at 2:44 pm
Going Galt finally got the better of the Republican party. They have systematically alienated and rejected any Republican politicians and up-and-comers who were smart, well-informed, and rational who decided to leave for greener pastures where their talents would be appreciated (ie, the Democratic party). As a consequence, they are left with Bachmann, Beck, and Pence running the show.
March 27th, 2009 at 2:47 pm
Just so those of you who haven’t read the Left Behind series (I got all the way to Book 4 or so before it got to stupid and boring to tolerate) this One World Currency is pure Christian apocalyptic legend stuff that is meant to fuel Obama-is-the-antichrist hysteria. Glenn Beck is absolutely the worst when it comes to stoking this fantasy. He’s going to get someone hurt before it’s all over.
March 27th, 2009 at 2:50 pm
Whither 50 Cent when we switch currencies? Will Curtis Jackson and Andrew Jackson be relegated to the dustbin of numismatics? Is the Loch Ness monster really Evan Bayh? Tune in next week on Bullshit Or Not? with your host Rep. Michele Bachmann* (R-MN-6).
* don’t forget the extra ‘n’ for nutjob
March 27th, 2009 at 2:57 pm
I think there is something that a lot of people are missing with Bachmann and Beck and their rants about global currency. I was listening to NPR this morning and a caller asked about this same issue. The panel explained the difference between the currency reserve and a ‘global’ currency. Bachmann is a confessed Christian social conservative and many of her ideas, statements and beliefs lead me to believe that she is an evangelical. Evangelicals believe that the book of Revelations predicts that the world will come under a one world government with a one world currency. This event and others usher in the Antichrist and his reign on earth. I think these are the ideas behind her misunderstanding of global monetary policy. Some engaging journalist needs to pin Bachmann and others down about the true motives behind these ideas and attacks on the President’s economic policies.
March 27th, 2009 at 2:58 pm
Going Galt and Getting Left Behind is a marvelous phrase. Let them defend books they’ve never read. “Ms. Bachman, you’re accused of Going Galt. Who is that and what did he mean?” “((G)), will you be pulled up in The Rapture? Shouldn’t AC Obama be pushing for a One World Currency?”
March 27th, 2009 at 3:02 pm
Between this, her recent appearance on Hannity calling for revolution, and her insistence that folks take up arms for revolution, there’s no chance she gets reelected. I assume she does realize that she only got 47% of the vote last time, right? She said crazy shit before that election too, but it was too little, too late to sink her incumbent bid.
March 27th, 2009 at 3:03 pm
From ‘The Authorized Left Behind Handbook’ by Tim F. LaHaye, Jerry B. Jenkins, & Sandi Swanson:
Note – my own quick transcription from Google books.
March 27th, 2009 at 3:09 pm
It’s not just the religious right. There’s plenty of secular nuts who also believe that a One World Government dictatorship will be swept in by an international currency. Conspiracy theorists love getting worked up about monetary policy, for all sorts of historical reasons.
March 27th, 2009 at 3:09 pm
Matt she’s talking to people who unfortunately have no want to ferret out the truth or understand economics and finance in the first place.
It’s unfortunate that CNBC (and your colleague McCardle) takes every opportunity to jump on misinformed members of the CBC but don’t feel obliged to correct Ms. Bachman in her analysis.
She is still under the Bush rules, where you can say yada yada yada I love America yada yada yada Sovereign yada yada yada I love the troops. It’s completely unbelievable that the people of Minnesota would re-elect her, but I digress.
ryanculver.blogspot.com
March 27th, 2009 at 3:13 pm
Good to see lots of good – and funny! – Xian bashing above.
It’s also great to see MattY deflecting attention away from the various steps our wonderful new administration took to get us to the point where BHO had to defend the use of the dollar as the reserve currency.
Good job! But, MattY needs to try harder to get the Amanda Terkel Award for Journalistic Excellence.
March 27th, 2009 at 3:24 pm
They’re going to prattle on regardless of reality. I’d like to see a discussion on what it would mean if U.S. dollars were no longer the reserve currency. I’m just sort of biased in favor of reality that way.
March 27th, 2009 at 3:31 pm
All this talk of “diluting” and “co-mingling” in the same sentence with “Zimbabwe” is a fascinating throwback. Do these people think money has a race?
March 27th, 2009 at 3:35 pm
The sad part is having this kind of stupidity obscure the real problem: the huge deficits being proposed have foreign bond buyers getting spooked (just ponder any of the recent statements out of China).
If they go beyond spooked to not having enough faith in the dollar to buy our debt, all of our policy choices are going to become massively constrained. That’s the risk Obama is running right now.
And never mind whether it would or or would not be sensible for China (et. al.) to steer clear of our bonds; once psychology starts entering into it, reason stops being part of the equation.
March 27th, 2009 at 3:35 pm
That’s what staff is for. It’s generally not until their second term in the house that most congressmen discover that there are left shoes and right shoes.
March 27th, 2009 at 3:35 pm
I think it’s comforting to believe that she “knows better” and is pulling one over on the rubes, but I’m willing to bet cash money that neither Beck nor Bachmann know that they are pushing BS. She reminds me a lot of my brother-in-law’s soon-to-be ex-wife. She can be personable, is ambitious, comes off as sincere, but is absolutely bat-sh*t insane.
March 27th, 2009 at 3:38 pm
Bachman doesn’t only have a seat in Congress. She has a seat on the House Financial Services Committe’s Subcommittee on International Monetary Policy & Trade. Party leaders have invested her with responsibility for these issues.
March 27th, 2009 at 3:39 pm
The funny thing is, that they’re even more spooked by this idea. After the Chinese floated this concept, Geithner said he thought it was interesting and was at least open to it. Then the dollar plummeted and the Chinese requested that he not talk about it anymore. I heard one commenter saying it was a case of “everyone wants to go to heaven, just not right now”.
March 27th, 2009 at 3:47 pm
As a Democrat, I’m tempted to rejoice that the other party contains so many apocalyptic nutcases.
Except that — as many commenters have hinted — this kind of hysteria has a decent chance of fostering violence. It sure did in the 90s.
March 27th, 2009 at 3:54 pm
Before y’all get repetitive stress from patting yourselves on the back for being so politically smart and all: what happens when China and other countries DO switch their reserves from the dollar?
Guess who gets the blame for it — and guess who identifies this deeply mysterious, alarming activity with a loud “told you so”.
March 27th, 2009 at 3:56 pm
I agree with “Rum raisin” that she is the gift that keeps giving. Hey Minnesota, great job with your elected officials! I’m from Colorado and we finally got rid of our own lunatic fringe in Tom Tancredo and Marilyn Musgrave. I say keep those kinds of Republicans in office as it’s a godsend for the Dem’s and normal thinking people.
March 27th, 2009 at 4:00 pm
Oh good, a guessing game.
I’m going to guess the answer to the first question is “China.”
And I’m going to guess the answer to the second question is “Ron Paul”. . . no, wait, that’s not my final answer . . .
But while I’m trying to figure out question #2, let me ask you a question: why would a country switch their reserves from one currency to another *all at once*?
By doing so they’d drive down the value of the currency and thus devalue their own investment.
When this change takes place, it’s much more likely to happen slowly, and thus unlikely to fit neatly into the tit-for-tat blame cycles of cable news.
When The Economist writes it all up as a retrospective, I trust they will apportion the credit and blame a little more intelligently than Lou Dobbs would.
March 27th, 2009 at 4:04 pm
Hey “anonymous,”
You’re straying away from the point and I’d just like to ask you a serious question with no malice intended; again, just a question. Do you think that Bachmann is a loon or is she an intelligent person?
March 27th, 2009 at 4:10 pm
Do you know who needs to be slapped? Bernacke and Geitner. When Bachmann asked them to categorically declare their opposition to taking the US off of the dollar, they should have told her she was an idiot. Instead, they both went along and denounced the idea of changing our currency. By responding in this way, they acknowledged the validity of the question itself. Shame on them. Bachmann is an ignorant buffoon but Geitner and Bernacke should have known better.
March 27th, 2009 at 4:14 pm
Shut the fuck up, Lonewacko.
March 27th, 2009 at 4:35 pm
THe republican party, the district in Minnesota that elected Bachmann, and Fox News network should be utterly embarrassed to have these two people represent them.
If I hadn’t heard their exchange on the radio myself, I wouldn’t have initially believed the story.
Surely some one around them would have said, “hey you need to look into that because you are Flat Out reaching the wrong conclusion.”
Instead, they are allowed to mis-inform MILLIONS of Americans and scare the bejesus out of them on the basis of that “new world order”, anti christ, and one world government bs.
Not to be repetitive, but there is something wrong with Glenn Beck and now evidently Bachmann.
March 27th, 2009 at 4:56 pm
the Eurodollar, which may be the precursor to a one-world currency.
So dollar-denominated deposits held by non-U.S. banks are precursors of the apocalypse?
Oh, he meant “Euro”. A bright one, that Lahaye…
March 27th, 2009 at 5:08 pm
Let’s not forget — Bachmann’s husband, a “therapist” who got his masters’ degree from Regent “University” and his “doctorate” from a correspondence course, specializes in “curing” homosexuality.
As it is written in the Bible (somewhere near the back), “The nutjob doth not fall far from the whackjob.”
March 27th, 2009 at 5:22 pm
oh you guys… you really don’t understand republicans, do you?
It’s like the crusade to “save talk radio” by making a big stink about a non-existant attempt to bring back the Fairness Doctrine. It doesn’t happen, because it was never going to happen because no one was actually pushing for such a thing – but then the right wing wackos get a two-fer – they can still claim that it WAS going to happen just to keep people scared, and they can also claim that it didn’t happen because of their awesome opposition.
Let’s try it:
Claim that Obama is going to change the country to Marxism!! Get everybody scared and worked up.
When it doesn’t happen, it’s because that e-vil Obama was caught before he could pull the wool over everybody’s eyes (but don’t relax because he still might do it!) – and it’s a good thing those conservatives who love America are there making their voices heard and making Obama back down.
Intso-presto- the crazy right winger is a hero!
March 27th, 2009 at 5:32 pm
Ted,
Who says China (or anyone else) would drop all US bonds immediately? It would be bad enough if they just stopped buying new debt, and started slowly selling off the existing stuff. The resulting loss of confidence would do enormous damage, and make it impossible to sustain the kind of spending Obama has in mind.
As to the commenter who thought it was clever to point out that Republicans spent lots – so what? Is it now the height of political responsibility for each party to pay off their own interest groups with a shower of spending?
The level of spending we are embarking on is simply not sustainable, without regard to what it’s spent on, or on who spends it.
March 27th, 2009 at 5:40 pm
Bachman doesn’t only have a seat in Congress. She has a seat on the House Financial Services Committe’s Subcommittee on International Monetary Policy & Trade.
That’s terrifying. We need a better opposition party. Seriously, this is dangerous for democracy.
The level of spending we are embarking on is simply not sustainable
Give me a break. Republicans have proved we can’t cut our way to prosperity. So, we just put back the tax rates we had under Eisenhower, it’s problem solved. We’ll get there, after we’ve exhausted every other possibility.
March 27th, 2009 at 6:11 pm
anon,
The Republicans didn’t cut spending. All through the Bush years, spending rose dramatically. Now Obama plans to double or triple the ante, and spend even more. The choices we’ve had have been:
– spend a lot
– spend even more
We had “spend a lot”
Now we’re getting “spend even more”.
Yay.
March 27th, 2009 at 6:26 pm
I’m just concerned these guys are trying to incite some more Timothy Mcveigh types to start committing domestic acts of terrorism or make an assassination attempt on the president. They are seriously trying to stir up the crazies who let Bush get away with murder because he was one of them. Never mind the fact that we have a liberal, Black President with a muslim name.
These guys seriously want to bring on the End Times.
March 27th, 2009 at 6:27 pm
And, Bachmann is stuck on stupid.
Beck is just mentally deranged and in serious need of an intervention.
March 27th, 2009 at 7:14 pm
You write: “We actually have quite a lot of gold.”
Really? How much gold do we have? What’s your source for that information? Just curious, since I heard we had very little gold reserves.
March 27th, 2009 at 7:25 pm
Someone needs to address what, exactly, China would start buying if they halted buying US bonds because of our public debt? Consider that Germany and Japan, amongst others, already have a greater public debt:GDP ratio.
March 27th, 2009 at 7:32 pm
The Republican party must be annihilated.
March 27th, 2009 at 7:32 pm
http://en.wikipedia.org/wiki/Official_gold_reserves
March 27th, 2009 at 7:42 pm
We could fix the debt dramatically by simply returning to the tax rates of Reagan’s first term.
Also, if this is all really dog-whistle politics for the apocalypse crowd, then I think all 4 members of the Obama family should go out of their way to get their picture taken riding 4 horses and appearing near signs with 666 on them.
Just to mess with the crazy Christianists in the GOP.
March 27th, 2009 at 8:23 pm
Michelle Bachmann, while giving every indication of being a serious tiger in the sack – amirite? – is so embarrassing that our usual assortment of right-wing trolls won’t defend her.
Think about that. The people who insisted that George Will’s global warming denial column was a beacon of intellectual honesty don’t have anything to say about this woman.
Remarkable.
March 27th, 2009 at 9:40 pm
I’ma Christian, and I find Bachmann and Beck’s attempts to distort things and whip themselves (and the country) into a frenzy of fear, in order to destroy Obama quite disturbing. Obama is not trying to establish a global currency, as the facts show. I think Beck is genuinely insane, and considering past statements she’s made, I wonder if Bachmann is either ignorant (which is also disturbing considering the power she holds), or just as insane. The breakdown of the Right is quite a thing to behold.
THey’re not just going John Galt, they’rte going John Birch, too.
March 27th, 2009 at 9:55 pm
How did Bachmann get re-elected again?
March 27th, 2009 at 10:09 pm
Her opponent was named – I swear to God I’m not making this up – “Elwin Tinklenberg.”
March 28th, 2009 at 12:35 am
Does anyone listen to rightwing radio? Limbaugh is actually the sanest of the bunch. Try Michael Savage, Mark Levin, Lars Larsen, etc. These dimbulbs have amazingly large audiences off into 6-7 digits and have 24/7 access to markets across the US. And have alarmingly unbalanced minds or just a major appetite for selling crap to rightwing dimbulbs for 6-7 digits measured in $$$$$. So, no, they are not two weirdos in a cabin. They have very large constituencies, audiences. And can effectively pull the strings of a large number of republican lawmakers. Bachman was elected because she represents a large number of people who vote for her. And believe and support her points of view.
March 28th, 2009 at 12:54 am
DTM – please enlighten me as to what you describe as “slightly higher taxes”. What kinds of rates? What kinds of deductions? I seriously doubt that the math comes close to working, but go ahead.
March 28th, 2009 at 6:53 am
When Jesus returns in glory to judge the quick and the dead, one can but hope that he’ll also hold hearings to determine the precise moment when the Republican Party definitively went off its rocker.
Were we to consider the recent past with any honesty, we’d see the groundwork being laid quite carefully for all this nutcake behaviour during the Reagan administration when the president’s somewhat distracted managerial style permitted any number of industrial-strength loons to scamper about the West Wing as they pleased.
(Nancy Reagan’s reliance on astrology and astrologers as “must haves” when planning the president’s schedule and informing his policy decisions was very much a clue that the First Lady didn’t really pull her weight when it came to making the White House a comfortable destination for hard-nosed rationalists).
The country won merciful reprieve from this freak show while Papa Bush was in office and he and Barbara successfully employed their Northeastern irony and hauteur to keep the snake-handlers and crypto-Klansmen in check. (Mama Bush made it clear that she didn’t do evangelical, much less Pentecostal, and had any uppity right-to-lifer yammered at her about abortion, she’d have ordered the Secret Service to horsewhip the offender on the White House lawn.)
What’s interesting is to watch the intellectual cadres of the Reagan Revolution get just a tad sweaty as they’re forced to witness the revolution they aided and abetted run its natural course.
While it was useful for a time to unleash the religious hysterics and right-wing visionaries when a Democratic someone or something needed humiliating, Reagan’s intellectual cadres never quite thought ahead far enough to see that once the hysterics and visionaries had tasted blood, there’d be no stopping them until they’d had their fill of it.
You can rest assured that absolutely none of this right-wing rabble-rousing, these unequivocal calls to violence, are random or accidental.
These people know very well what they’re doing.
All they have to do is keep the message out there, and keep it shrill and wild and relentless.
And they know very well that all it takes is just one person who doesn’t get the joke.
March 28th, 2009 at 7:13 am
Matt, also worth noting is the lingo describing this global currency as a “One World” (always capitalized) currency. That’s a dog-whistle reference to the infamous 1959 John Birch Society pamphlet that claimed President Eisenhower was the leader the global communist conspiracy that sought “to build One World Government).”
Sometimes I start wondering whether the likes of Bachmann and Beck, instead of just being incredibly stupid and ignorant, are in fact reading Hofstadter’s “Paranoid Style” essay and trying to replicate the strategies described therein, knowing that doing so will allow them to tap a deep cultural vein.
Then I slap myself and realize that, actually, no, in fact they are just incredibly fucking stupid.
March 28th, 2009 at 7:43 am
America will need a new currency before Geithner and the politicians are finished expanding the debt and destroying the dollar but the solution is a gold backed currency free of government manipulation. The Campaign to Cancel the Washington National Debt by 12/21/2012 through constitutional amendment begins. See our facebook page at http://www.facebook.com/group.php?gid=67594690498&ref=ts
We are also planning to have a booth at FreedomFest 2009, the world’s largest gathering of free minds! July 9–11 http://www.freedomfest.com in Las Vegas. Ron
March 28th, 2009 at 9:11 am
essay from Market skeptics
1) Fed is planning 15-fold increase in us monetary base
2) U.N. panel says world should ditch dollar
3) Zimbabwe has ditched the US dollar in favor of the rand
4) China and Russia rethinking the dollar’s status as world’s reserve currency
With the US monetary base expanding at a breathtaking pace and nations around the world worrying about the value of their US holdings, the dollar looks virtually guaranteed to lose its status as the international reserve currency. This begs the question: how big a deal is the loss of the dollar’s reserve status?
To answer this question, lets first calculate just how large are the dollar holdings of foreign governments. From the C
According to Wikipedia, at the end of 2007, 63.90% of the identified official foreign exchange reserves were held in United States dollars. Therefore, total dollar reserves at the beginning of 2008 were about $4,408 billion (63.90% of $6,898 billion). However that is not the end of the story, as we still need to account for stabilization funds or Sovereign Wealth Funds. Wikipedia explains:
Excess reserves
Foreign exchange reserves are important indicators of ability to repay foreign debt and for currency defense, and are used to determine credit ratings of nations, however, other government funds that are counted as liquid assets that can be applied to liabilities in times of crisis include stabilization funds, otherwise known as sovereign wealth funds. If those were included, Norway and Persian Gulf States would rank higher on these lists, and UAE’s $1.3 trillion Abu Dhabi Investment Authority would be second after China. Singapore also has significant government funds including Temasek Holdings and GIC. India is also planning to create its own investment firm from its foreign exchange reserves.
For more, the Market Oracle explains sovereign wealth funds.
Sovereign Wealth Funds
June 30th, 2007
Central banks have traditionally kept their reserves in relatively low-yielding, highly liquid government securities, agency debt, money-market instruments and bank deposits. The most current official IMF figure for official worldwide foreign currency reserves is US$5.89 trillion [Worldwide foreign currency reserves increased by about 1 trillion over 2007]. At US$1.35 trillion, China holds the world’s largest pool of official reserves, followed by Japan with US$911 billion and Russia with US$403 billion.
In addition to these reserves, market estimates for the total value of Sovereign Wealth Funds (SWF) run as high as US$2.5 trillion. This compares to US1.6 trillion for hedge funds. These are state-owned and operated funds, comprising of financial assets such as stocks, bonds, or property not included in the IMF figures. The use of these funds enables large reserve holders to invest in higher yielding instruments.
With around 40 percent of stabilization funds invested in the US, the dollar holdings of sovereign wealth funds are around $1,000 billion (40% of $2,500 billion). After combining the numbers from foreign exchange reserves and stabilization funds, the dollar holdings of foreign governments are about $5,385 billion. Meanwhile, as you might have noticed from the CIA’s ranking above, the United States holdings of foreign currencies is around $71 billion.
Implications of the loss of the dollar’s reserve status
As the dollar loses its reserves status, at least half of the world’s $5,385 billion dollar reserves will be sold off and replaced with other currencies (yuan, euro, khaleeji, gold, rand, etc…). The US, with its $71 foreign reserves, will not be able to do anything to counteract this mass exodus from the dollar. With outflows of this magnitude, the dollar’s value will collapse to a fraction of where it is now.
The process of foreign nations extracting themselves from the dollar is not going to be pretty. The likely impacts are:
1) The dollar’s value will plunge as investors see the writing on the wall and jump ship.
2) US credit markets will collapse. As the dollar fall, a mass exodus from credit market will begin. Investors sitting on toxic securities will sell at firesale prices to escape the currency depreciation.
3) The fed’s balance sheet will explode beyond all reason. In response to the mass exodus from credit markets, the fed will buy trillions worth debt in a desperate attempt to hold interest rates down. Unfortunately, the more debt the fed buys, the more quickly the dollar will fall, and the more panicked the credit selloff will become.
4) US interest rates will soar, despite (or because of) the fed’s efforts.
5) Countries around the world will be hurt badly by the dollar’s decline. These countries include:
A) Nations which are heavily dependent on US exports: Japan, Mexico, etc…
B) Nations with large dollar reserves: Japan, China, Gulf oil states, etc…
C) Nations which receive large amount of US foreign aid: Israel, Egypt, etc…
D) Nations which rely on remittances from citizens working in the US: Mexico, India, etc…
E) Nations which use dollars as their official currency: Liberia, Panama, etc…
F) Nations which have large amounts of dollars in circulation: Central and South America (especially Argentina), Eastern Europe, etc…
6) Some nations will see benefits from the dollar’s decline. These countries include:
A) Nations with large gold reserves: EU zone, Switzerland, etc…
B) Nations which owe dollar denominated debt will see that debt wiped out: Iceland, African nations, etc…
C) Nations who stable currencies: EU zone, Switzerland, China, etc…
7) World politics will be greatly altered. There will be considerable anger at the US from nations hurt by dollar’s fall. The US will lose influence to Asia (mainly China).
9) American lifestyles will change radically. The end of cheap oil, low interest rates, and deficit spending will mean a lower quality of life and higher taxes.
10) The price of gold and other precious metals will explode.
11) US will experience hyperinflation.
March 28th, 2009 at 9:44 am
I know Elwin. I actually sent Elwin money for his campaign. My uber-sane, ex-boss is from Minnesota so I assumed that most Minnesotans were sane.
My bad.
March 28th, 2009 at 9:47 am
For the various people who are certain that the massive injection of money and debt will have no consequences: it’s worth noting that in July of 1914, the intelligentsia of Europe knew that war was impossible.
Events have a way of running beyond the control of “reasonable” people.
March 28th, 2009 at 10:29 am
Hey, look over there! Interest rates, socialism, inflation, World War I!
Please, for the love of God, forget what the subject of this thread was!
March 28th, 2009 at 11:28 am
In a study of recent sundry polls I have concluded that 35% of Americans identify themselves as insane, with approx 35% more identifying themselves as sane but precariously straddling the razors edge.
Clearly, if my analysis of the data is correct, Bachmann, Beck and the rest of their ilk are addressing the majority.
This bodes well for a Republican comeback, I surmise.
March 28th, 2009 at 12:16 pm
At this rate the OP will be about as respectable as the Larouchies in twenty years.
March 28th, 2009 at 12:36 pm
One World Currency? Everybody Knows we’re switching from the dollar to the Union of North America’s Amero!
March 28th, 2009 at 12:41 pm
Wow these two need an emergency appointment with psychotherapists right away. They need to be talked down from their faux hysteria!! Scratching my head as to how they even managed to get their positions on TV and or congress???
March 28th, 2009 at 1:42 pm
Conservatives need to stop throwing up so many obvious straw men and be germane for once. No one in the administration wants a single international currency, and no one wants other countries abandon the US dollar as a reserve currency. They’d be crazy if they did.
At the same time, the Chinese are smart to push for abandonment of the dollar as the main international reserve currency. They would like to knock us down from our position of economic hegemony. They would like to take away the advantage that it gives us, and they’ll push for this again in the future. We must resist.
But calling for an immediate freeze in spending in order to shore up the greenback as the international reserve currency of choice is backwards and upside-down. The current weakness in our economy is the immediate threat. The entire developed world is spending more money in order to boost their economies, China included. If we do not fix what is wrong with our economy in the short term, we do not have a chance of maintaining our position of economic strength, and that would be a disaster for us and the world.
March 28th, 2009 at 2:59 pm
Republicans are worried about the dollar losing its status as the main reserve currency?
Lemme guess…the solution to this problem is…uh…I’m going to say “tax cuts, spending freeze, and financial deregulation.”
How’d I do?
March 28th, 2009 at 4:44 pm
And since when did the Republican politicians have any interest in the facts, anyway? 1952? Words are but tools of persuasion to them, nothing more.
March 28th, 2009 at 4:56 pm
I think the quantity of Republicans who say outrageous things, but actually know what they’re saying is BS is quickly approaching zero. For example, despite the blatant and obvious total failure of Reaganomics we are now experiencing, I think most of the GOP really do believe that everything would be just fine if we only had some more top-end tax cuts and deregulation.
As to Beck and Bachmann, there’s not doubt in my mind that they believe what they say. They have no grasp on reality.
March 28th, 2009 at 6:01 pm
Keep in mind that these aren’t just two weirdos hiding out in a cabin somewhere.
Not yet, anyway.
March 28th, 2009 at 6:51 pm
Keep in mind that these aren’t just two weirdos hiding out in a cabin somewhere.
Somewhere like Costa Rica, perhaps.
March 30th, 2009 at 12:40 am
I saw the start of Beck’s program a few times when he was on HLN. I could never watch more than a few minutes because he was the stupidest person I ever saw on TV, and that’s really hard to accomplish.
When he went to Fox I thought that was where he belonged. Unfortunately his audience has grown considerably there.
Bachman is well, just amazing.
March 30th, 2009 at 11:00 am
One thing that would help combat these “shows”on TV and radio would restore the Fairness rule in the FCC that President Reagan
removed.It required equal time be given,free,to reply to those attacked.When it was done away with you had the people like Rush and others to stir up the ditto heads who believe whats said because it’s on the air.Ask your politicians to reinstate the Fairness Rule.
April 4th, 2009 at 4:37 pm
When the Einstien Bozo’s who say a one world currency is impossible, start buying their groceries with the O-World-O or what ever they decide to call it, remember this; a single world currency would most likely be inflated and would create huge amounts of mischief. This currency would basically be used politically in a way to so disrupt the financial system that it would fall apart. That’s when you will need a wheelbarrow full of money to by your daily needs. It is clear that there is a lot of tyranny in our future.
April 19th, 2009 at 10:54 am
[...] currency, this particular story appears to have garnered little attention from those paranoid of a “one world currency“. However, this development is of crucial strategic importance and should be recognized by US [...]