This is a big deal. Today’s action with falling equities, falling bond prices, and a falling dollar (with sharply rising gold prices in dollar terms) pretty much boxes Bernanke and little Timmy Geithner in.
The American way of life is about to change whether we like it or not.
Notice that no shots were fired, no one sent up a balloon saying “Russia no longer uses the dollar as a reserve currency!” No, it happened slowly and subtly. (ht Comrade)
The US dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent, The Vedomosti newspaper wrote.
The dollar has thus lost the status of the basic reserve currency for the Russian Central Bank, the annual report, which the bank provided to the State Duma, said.
In accordance with the report, about 47.5 percent of the currency assets of the Russian Central Bank were based on the euro, whereas the dollar-based assets made up 41.5 percent as of the beginning of the current year. The situation was totally different at the beginning of the previous year: 47 percent of investments were made in US dollars, while the euro investments were evaluated at 42 percent.
The dollar share had increased to 49 percent and remained so as of October 1. The euro share made up 40 percent. The rest of investments were based on the British pound, the Japanese yen and the Swiss frank. More here »
If that little development doesn’t bother you, then how about the possibility of the U.S. losing her AAA credit rating?:
Commentary by Mark Gilbert
May 21 (Bloomberg) — The odds on the dollar, Treasury bonds and the U.S. government’s AAA grade all heading for the dumpster are shortening.
While currency forecasting is a mug’s game and bond yields can’t quite decide whether to dive toward deflation or surge in anticipation of inflation, every time I think about that credit rating, I hear what Agent Smith in the “Matrix” movies called “the sound of inevitability.”
Several policy missteps suggest that investors should stop trusting — and lending to — the U.S. government. These include the state’s pressure on Bank of America Corp. to buy Merrill Lynch & Co.; the priority given to Chrysler LLC’s unions over the automaker’s secured creditors; and the freedom that some banks will regain to supersize executive bonuses by giving back part of the government money bolstering their balance sheets.
Currency markets have been in a weird state of what looks almost like equilibrium for the past couple of months. What’s really going on is something akin to an evenly matched tug of war that fails to move the ribbon tied around the center of the rope, giving the impression of harmony while powerful forces do silent battle until someone slips.
“All currencies are being debased dramatically by their central banks at extraordinary speeds and so in relative terms it appears there is no currency problem,” Lee Quaintance and Paul Brodsky of QB Asset Management said in a research note earlier this month. “In reality, however, paper money is highly vulnerable to a public catalyst that serves to acknowledge it is all merely vapor money.” More here »
Okay, first of all, we are ALREADY BANKRUPT as our collective debts exceed our collective assets. But let’s just ignore that, shall we? The credit rating agencies have NO CREDIBILITY left at all. They, and their pay for rating scheme, are a huge part of the problem to begin with. They will only downgrade AFTER people have stopped buying our debt which basically began in January of this year.
Secondly, when a country begins printing money to buy back their own debt, DEFAULT HAS ALREADY OCCURRED. Again, don’t look for the headline that reads, U.S. DEFAULTS ON HER DEBT!” It will never come. But we already have, that’s what quantitative easing (printing) is all about.
Rule of law? Third world country? Naw, only banana republics think people will be fooled by stunts like that.
Eh, it’s only money. Money for nothing, get your tricks for free!