WASHINGTON – The hottest selling book in China right now is called “Currency Wars,” which makes the case that the U.S. Federal Reserve is a puppet of the Rothschilds banking dynasty and it has persuaded some top officials Beijing should resist America’s demands to appreciate its own undervalued currency, the yuan.
This might not be news of concern to most Americans if the U.S. dollar were not in precipitous free-fall, having reached record lows against the euro yesterday.
What would it mean if China ever threw its economic weight around by dumping dollars in a major way?
Suffice it to say it is referred to in some quarters as China’s financial “nuclear option,” because it would be the economic equivalent of detonating a thermonuclear weapon in the world’s financial markets.
But the American dollar’s fate is hardly in the hands of the Chinese alone. Other foreign parties suspected of participating in a new “Currency Cold War” are Iran, Russia and Venezuela.
Diane Francis, a financial reporter for the National Post in Canada, says it plainly and boldly: “There is a Currency Cold War being waged by Russia, Iran and various allies such as Venezuela.”
The grand strategy being engineered by Vladimir Putin, she writes, is to force the use of euros as the international monetary standard as a transition to the Russian ruble.
“This is simply a monetary version of the old Cold War, minus the missiles,” she writes.
Experts don’t see any short-term reprieve for the falling value of the dollar. Kathy Lien, chief currency strategist with DailyFX.com in the US, told Bloomberg she expects the American dollar to slide even further, forcing more lending rates cuts in the U.S. to stave off recession.
“It seems like every single passing day we have a new record low in the dollar, and a new record high in the euro, and it’s driven by the fact that U.S. data is continuing to deteriorate,” she said.
If other nations do not follow the U.S. in cutting rates, the slide in the value of the dollar would most likely continue.
If the dollar trend continues spiraling downward, the risk is that nations like China – or Japan or Saudi Arabia – which have been buying U.S. Treasury bonds and thereby funding America’s deficit, would stop that practice.
That would be the nuclear option.
China, with $1.3 trillion in foreign exchange reserves as a result of the massive and growing $260 billion U.S. trade deficit, has taken huge losses with the falling dollar, given that some 80 percent of China’s $1.3 trillion in foreign reserves is held in U.S. dollar assets, largely in U.S. treasury securities.
Meanwhile, Song Hongbing, the author of China’s runaway bestseller, “The Currency Wars,” says he’s pleasantly surprised at the 200,000 copies his book has sold. He is probably not eager to see the dollar punished as he lives in Washington, D.C.
“I never imagined it could be so hot and that top leaders would be reading it,” he says during a book tour in Shanghai. “People in China are nervous about what’s going on in financial markets, but they don’t know how to handle the real dangers. This book gives them some ideas.”
Among the research findings that shocked him most was that the Fed is a privately owned and run bank.
“I just never imagined a central bank could be a private body.”
Some, meanwhile, are standing on the sidelines cheering the currency wars – seeing them as a way of reducing the power and influence of the “imperialistic” U.S.
Rohini Hensman, who describes himself as “independent scholar, writer and activist based in India and Sri Lanka,” says it’s about time the U.S. got its comeuppance.
“As the bombs started falling on Iraq in 2003, I wrote and circulated an appeal entitled ‘Boycott the Dollar to Stop the War!,’ arguing that although the military strength of the U.S. was enormous, its economy was in a mess; with a massive gross national debt, the only reason it could finance its foreign wars and occupations was because of the inflow of over a billion dollars a day from countries accumulating foreign exchange reserves in dollars because it was the world’s sole reserve currency. The denomination of the oil trade in dollars made it additionally desirable. With the advent of the euro, however, there was the possibility of an alternative world currency; therefore individuals, institutions and countries opposed to the war on Iraq should refuse to accumulate dollars or use them outside the U.S., because these were activities that helped to finance U.S.-Israeli aggression against Palestinians, Iraqis and Afghanis. After the World Social Forum meeting in 2004, the Boycott Bush Campaign adopted the dollar boycott as part of its strategy.”
In early trading today, the dollar advanced slightly, prompting gold prices back from 28-year highs set yesterday. The dollar’s value against a basket of six major currencies rose slightly to 77.950 from a lifetime low of 77.657 a day earlier. The dollar traded at $1.4223 per euro, stronger than a record low on Monday of $1.4283.
WND has reported the Federal Reserve is in a dilemma.
The stock market has demanded rate cuts, wanting to return to the free credit policies of the Federal Reserve that fueled the liquidity bubble that has boosted home prices and pumped the Dow Jones Industrial Average since 9/11.
Yet, the Fed giving in to stock market demands and lowering rates threatens an international dollar sell-off that could lead to a dollar collapse.
Former Fed Reserve Chairman Alan Greenspan also sparked controversy by suggesting in his recently published book, “The Age of Turbulence,” the euro is rivaling the dollar as the international foreign exchange reserve currency of choice.
The Wall Street Journal recently quoted a rule of thumb advanced by Harvard University economist Kenneth Rogoff, a former chief economist for the International Monetary Fund. According to Rogoff’s “back-of-the-envelope” calculation, a 20 percent drop in the dollar’s exchange value reduces Americans’ income by 3 percent, adjusted by inflation.