China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury’s first-ever direct relationship with a foreign government, according to documents viewed by Reuters. The relationship means the People’s Bank of China buys U.S. debt using a different method than any other central bank in the world. The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions. China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn’t been necessary. The documents viewed by Reuters show the U.S. Treasury Department has given the People’s Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011. China can now participate in auctions without placing bids through primary dealers. If it wants to sell, however, it still has to go through the market..."
Sunday, May 27, 2012
A Closer Look at Chinese Purchases of US Treasuries
"Reuters – U.S. lets China bypass Wall Street for Treasury orders
China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury’s first-ever direct relationship with a foreign government, according to documents viewed by Reuters. The relationship means the People’s Bank of China buys U.S. debt using a different method than any other central bank in the world. The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions. China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn’t been necessary. The documents viewed by Reuters show the U.S. Treasury Department has given the People’s Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011. China can now participate in auctions without placing bids through primary dealers. If it wants to sell, however, it still has to go through the market..."
China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury’s first-ever direct relationship with a foreign government, according to documents viewed by Reuters. The relationship means the People’s Bank of China buys U.S. debt using a different method than any other central bank in the world. The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions. China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn’t been necessary. The documents viewed by Reuters show the U.S. Treasury Department has given the People’s Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011. China can now participate in auctions without placing bids through primary dealers. If it wants to sell, however, it still has to go through the market..."
The next steps in ASEAN+3 monetary integration
"Now is probably not a great time to be talking about further monetary integration – even if it is in Asia. But this column argues that the ASEAN+3 has taken a number of significant steps recently to further deepen monetary integration. The next steps should be to introduce a regional weighted currency basket and expand membership.
On 3 May 2012, on the sidelines of the Asian Development Bank’s Annual Meeting in Manila, the ASEAN+3 took a number of significant steps to further deepen monetary integration in the region (Joint Ministerial Statement 2012). In the midst of a flurry of other activities and announcements – including the sharp increase in ADB lending last year and the launching of the ASEAN Infrastructure Fund – these important steps went relatively unnoticed.
The most significant outcome of the Manila meeting was the upgrading of the ASEAN +3 Finance Ministers Meeting (AFMM+3) to the ASEAN+3 Finance Ministers and Central Bank Governors’ Meeting (AFMGM+3); the central bank governors of the 13 member countries (plus Hong Kong) have been invited to join. In the past, the region’s firewall for crisis prevention and crisis resolution had been run solely by finance officials responsible for tax and expenditure policies. Officials responsible for monetary and exchange-rate policies were left out. This major gap has now finally been filled..."
"ECB Will be Insolvent and Costs May Exceed 1 Trillion Euros" Says IIF Director; If the ECB Prints, Would Germany Exit the Euro?
"According to IIF director Charles Dallara in a Bloomberg interview, "ECB will be insolvent if Greece were to exit the euro. Europe would have to first and foremost recapitalize its central bank."
Excuse me for asking but how would they attempt to do that? Print Euros?
Please consider Dallara Says Greek Euro Exit May Exceed 1 Trillion Euros
at http://globaleconomicanalysis.blogspot.com/2012/05/ecb-will-be-insolvent-and-costs-may.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29
Excuse me for asking but how would they attempt to do that? Print Euros?
Please consider Dallara Says Greek Euro Exit May Exceed 1 Trillion Euros
The cost of Greece exiting the euro would be unmanageable and probably exceed the 1 trillion euros ($1.25 trillion) previously estimated by the Institute of International Finance, the group’s managing director said.
The Washington-based IIF’s projection from earlier this year is “a bit dated now” and “probably on the low side,” Charles Dallara said in an interview in Rome today. “Those who think that Europe, and more broadly the global economy, are really prepared for a Greek exit should think again.”
The European Central Bank’s exposure to Greek liabilities is more than twice as big as the ECB’s capital, said Dallara, who represented banks in their negotiations with the Greek government on its debt restructuring. As a result, he predicted the bank would be unable to provide liquidity and stabilize the euro-area financial sector.
“The ECB will be insolvent” if Greece were to exit the euro, Dallara said. “Europe would have to first and foremost recapitalize its central bank.”
at http://globaleconomicanalysis.blogspot.com/2012/05/ecb-will-be-insolvent-and-costs-may.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29
Are The Europeans About To Start The Second Half Of Our Great Depression?
""Just when we think the worst is over - and let's face it we have been in this crisis for five years - we get the second half; are the Europeans about to start the second half our Great Depression with massive bank runs" are the Jaws-music-inspired words that recent media-favorite (yes, us too) Niall Ferguson uses in an interview with CBC. His main concern is that this kind of (bank-run) event can quickly spiral out of the control of even the ECB as he uncomfortably conjures the image of the initial US stabilization that occurred in 1930 to May 1931 only to be knocked back into a greater depression by the failure of Credit-Anstalt, which set off bank failures and eventually defaults in 1932 on many government debts. The deposit run potential is the single-biggest reason to care about Greek-exit - in itself it is not large enough economically to interfere with global growth but it is the message and contagion that it sends that is critical in bringing forth a pan-European banking crisis and implicitly spilling over to the US and Asia via global trade and banking transmission channels. An excellent brief interview that summarizes the exact fears that face Europe and implicitly the US, explains the rather simple solution of fiscal federalism and the fact that today's German politik is very different from 1989's Helmut Kohl-era with regard to their commitment to the Federal outcome. His conclusions are worrisome. Germany is the key - and there is not a good understanding of financial markets in Berlin..."
at http://www.zerohedge.com/news/are-europeans-about-start-second-half-our-great-depression
at http://www.zerohedge.com/news/are-europeans-about-start-second-half-our-great-depression
Panic/Euphoria Model Is In “Panic” Territory – So Where’s the Fear?
"With stocks declining in the last few weeks all the various sentiment
surveys point to excessive bearishness/excessive fear. That’s in spite of the fact that market based indicators such as the VIX Index are not showing very much fear at all. While this market is deeply oversold and due for a relief rally, these readings are suggestive that there is more downside before we see an intermediate term bottom..."
surveys point to excessive bearishness/excessive fear. That’s in spite of the fact that market based indicators such as the VIX Index are not showing very much fear at all. While this market is deeply oversold and due for a relief rally, these readings are suggestive that there is more downside before we see an intermediate term bottom..."
Hathaway: Central Banks & Wealthy Are Now Big Buyers of Gold
"Four-decade veteran John Hathaway told King World News, “I was in California last week and I met with a lot of people. They are buying physical gold. Wealthy, private investors are buying gold.” The prolific manager of the Tocqueville Gold Fund also said, “we are starting to see a lot of central bank buying of gold.” Hathaway had this to say about gold bouncing solidly off the low $1,500 level: “That’s very encouraging. That was a very good test of the December low at $1,523, and it seems to me we are in good shape for six months or more. It could be (gold gaining) for the next two years.”
at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/25_Hathaway__Central_Banks_%26_Wealthy_Are_Now_Big_Buyers_of_Gold.html
at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/25_Hathaway__Central_Banks_%26_Wealthy_Are_Now_Big_Buyers_of_Gold.html
Friday, May 25, 2012
When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets
"Conventional wisdom states that the dollar took over as the leading international currency after the Second World War. This column presents new evidence from the bond markets suggesting it was much earlier in the 1920s. This implies that inertia and lock-in effects in international currencies are not all they’re cracked up to be and that the shift to a multipolar currency system might happen sooner than commonly believed.
The global economic and financial crisis has lent new impetus to discussions of the future of the international monetary and financial system. Some advocate moving to a multipolar system in which the US dollar shares its international currency role with the euro, the Chinese renminbi and/or the IMF’s Special Drawing Rights. At the Cannes Summit of November 2011, G20 Leaders committed to taking “concrete steps” to ensure that the international monetary system reflects “the changing equilibrium and the emergence of new international currencies”.
Some observers expect this change to develop spontaneously, as a natural consequence of the declining economic and financial dominance of the US and the increasingly multipolar nature of the global economy, together with the advent of the euro and gradual internationalisation of the renminbi. Sceptics object that the prospect of a shift to a multipolar monetary and financial system is remote. If it occurs, they insist, such a transition would take many decades to complete.
The view that a shift to a multipolar system is unlikely to occur rapidly is rooted in theoretical models where international currency status is characterised by network externalities (see for example Krugman 1980 and 1984; Matsuyama et al. 1993; Zhou 1997; Hartmann 1998; and Rey 2001). These give rise to lock-in and inertia effects, which benefit the incumbent.
Such models rest, in turn, on a conventional historical narrative, epitomised by Triffin (1960), according to which it took between 30 and 70 years, depending on the aspects of economic and international currency status considered, from when the US overtook Britain as the leading economic and commercial power and when the dollar overtook sterling as the dominant international currency. Allegedly, sterling remained the dominant international currency throughout the interwar years and even for a time after the Second World War.
Recent studies (Eichengreen and Flandreau 2009 and 2010) have challenged this conventional account, showing that the dollar in fact overtook sterling already in the mid-1920s as lead currency for financing and settling trade and the leading form of international reserves. This “new view”, to paraphrase Frankel (2011), also challenges broader implications of the conventional narrative. It suggests that inertia and the advantages of incumbency are not all they are cracked up to be. It challenges the notion that there is room for only one international currency in the global system, as well as the presumption that dominance, once lost, is gone forever.
In a recent paper (Chiţu et al. 2012), we reexamine the role of international currencies as vehicles and currencies of denomination for foreign investment. Specifically, we analyse the currency denomination of foreign public debt for 33 countries in the period 1914-1946. The results lend further support to the “new view”..."
at http://www.voxeu.org/index.php?q=node/8024
The global economic and financial crisis has lent new impetus to discussions of the future of the international monetary and financial system. Some advocate moving to a multipolar system in which the US dollar shares its international currency role with the euro, the Chinese renminbi and/or the IMF’s Special Drawing Rights. At the Cannes Summit of November 2011, G20 Leaders committed to taking “concrete steps” to ensure that the international monetary system reflects “the changing equilibrium and the emergence of new international currencies”.
Some observers expect this change to develop spontaneously, as a natural consequence of the declining economic and financial dominance of the US and the increasingly multipolar nature of the global economy, together with the advent of the euro and gradual internationalisation of the renminbi. Sceptics object that the prospect of a shift to a multipolar monetary and financial system is remote. If it occurs, they insist, such a transition would take many decades to complete.
The view that a shift to a multipolar system is unlikely to occur rapidly is rooted in theoretical models where international currency status is characterised by network externalities (see for example Krugman 1980 and 1984; Matsuyama et al. 1993; Zhou 1997; Hartmann 1998; and Rey 2001). These give rise to lock-in and inertia effects, which benefit the incumbent.
Such models rest, in turn, on a conventional historical narrative, epitomised by Triffin (1960), according to which it took between 30 and 70 years, depending on the aspects of economic and international currency status considered, from when the US overtook Britain as the leading economic and commercial power and when the dollar overtook sterling as the dominant international currency. Allegedly, sterling remained the dominant international currency throughout the interwar years and even for a time after the Second World War.
Recent studies (Eichengreen and Flandreau 2009 and 2010) have challenged this conventional account, showing that the dollar in fact overtook sterling already in the mid-1920s as lead currency for financing and settling trade and the leading form of international reserves. This “new view”, to paraphrase Frankel (2011), also challenges broader implications of the conventional narrative. It suggests that inertia and the advantages of incumbency are not all they are cracked up to be. It challenges the notion that there is room for only one international currency in the global system, as well as the presumption that dominance, once lost, is gone forever.
In a recent paper (Chiţu et al. 2012), we reexamine the role of international currencies as vehicles and currencies of denomination for foreign investment. Specifically, we analyse the currency denomination of foreign public debt for 33 countries in the period 1914-1946. The results lend further support to the “new view”..."
at http://www.voxeu.org/index.php?q=node/8024
Bank Of Russia To Buy “Considerable Figure" Of Gold Tonnage In 2012
"...The IMF central bank gold demand figures for April were very bullish and suggest that central bank demand in 2012 may be even higher than the 456.4 tons added last year – which was the most in almost five decades.
XAU/EUR Currency Chart – (Bloomberg)
The World Gold Council estimates that central banks will buy as much as 400 tons this year.
The data yesterday suggests that demand may be even higher than these levels and there is also the near certainty that larger central banks, such as the People’s Bank of China, are quietly accumulating gold reserves and not reporting their purchases to the IMF - as was done previously.
XAU/EUR Currency Chart – (Bloomberg)
Today, the deputy chairman of Russia's central bank, Sergey Shvetsov, said that the Bank of Russia plans to keep buying gold on the domestic market in order to diversify their foreign exchange reserves.
"Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov told Reuters on the sidelines of a financial conference in Milan.
Russia's gold and foreign exchange reserves fell to $514.3 billion in the week ending May 18, from $518.8 billion a week earlier. However, they have risen from the $498.6 billion seen at the end of 2011.
Yesterday, Shvetsov said that Greece has plans for a parallel currency and that it is a “necessity” for Greece to leave the euro..."
Greece Has Proved That the ECB Bailout Scheme is Based On Nothing But Lies and Fraud
"I’ve assess the significance of the Greek elections in an earlier article.
However, there is one final element to Greece’s current predicament that is even more important than any of the above items. That element is the following:
The Second Greek Bailout has proven to be based on a total and complete lie on the part of the ECB and EU politicians.
If you’ll recall, during the Second Greek bailout, private Greek bondholders were told that they HAD to accept the terms of the bailout (a 70% haircut, and new bonds with lower interest rates and longer repayment periods). The alternative to this, as promoted by the ECB and EU politicians, was the total loss of money.
As you may or may not know, only 97% of private bondholders went for the deal. The remaining 3% (representing roughly €6.5 billion in Greek debt) decided they would maintain their bond holdings as they were and see if they got their money back.
Last Tuesday, Greece was scheduled to make €436 million in principle payments on this €6.5 billion. And it did. Every single penny.
And they didn’t even have to! Indeed, under normal conditions if Greece missed this payment deadline, it would have seven days to make the payment. However, this time around, Greece had 30 days to make the payment before it would be considered to be in default.
And Greece chose to pay bondholders every penny right on time.
Put another way, those Greek bondholders who DIDN’T go for the Second Bailout, just got their money back at 100 cents on the Dollar (compared to those who DID go for the Second Bailout and lost 70% of their money).
This has shown the ECB and EU bureaucrats to be complete and total liars. It also shows the entire bailout/ austerity measures process to be garbage. Private bondholders got screwed. Greece got more debt and an even weaker economy. In fact, the only group that has so far gotten through the Greek mess relatively well has been the ECB, which swapped out ALL of its Greek exposure for bonds that DIDN’T take a haircut..."
Welcome to the Currency War, Part 1: Iceland and the Tragedy of the Commons
"Think of devaluation as the monetary equivalent of the “tragedy of the commons”. In a nutshell, if everyone owns something, it is in each individual’s interest to grab what they can as quickly as possible, which soon depletes the resource.
With currencies, as with fisheries and sheep pastures, there’s an advantage for those who move first and pain for those who dither. Consider Iceland’s nearly-instantaneous recovery from its epic banking crash:..."
Bank Runs in Europe: Reflection of the Global Financial Crises of 2009
"We often talk of once bitten twice shy, or so the saying goes. The current financial crisis in Greece, which is mooted to have spread to Spain, is causing bank runs in Europe albeit fears that the ‘wind’ that swept across the globe in 2009 is on the horizon. Greece has lost more than one third of its bank deposits as investors continue to seek for safer havens for their money. Spain, on the other hand has already shaded out more than $50 billion through direct withdrawals from banks, despite losing more than $140 billion from investment sellouts.
Bank Runs in Europe Mirroring the 2009 Global Financial Crises
Toward the end of the year 2008, a similar scenario took place at the Wall Street that sounded the beginning of the global financial crises. The current bank runs in Europe, albeit at the early stages, is nothing very different to what marked the beginning of 2009 global financial crises. The current divestiture taking place in Greece and Spain can only spark global crises if not monitored.
Even U.S banks with operations in Europe have already started feeling the pinch, as reported early this year during in their end year financial statements. The likes of Citigroup Inc. (NYSE:C), Unicredit Group, headquartered in Milan with operations in 22 countries including the U.S, and Credit Suisse Group AG (NYSE:CS) headquartered in Zurich with operations in U.S, can bear witness to the impact of Greece financial crises. Some investors continue to substitute their Euro denominated assets with the pound or the dollar, while others seek the refuge of their investments in what appears to be stronger Euro zone countries, like Germany..."
Thursday, May 24, 2012
Richard Russell: Stay In Cash, Something, Something 'BIG' Is Heading Our Way
"Bearish newsletter guy Richard Russell finds the market action to be very strange and ominous.
at http://www.businessinsider.com/richard-russell-stay-in-cash-something-something-big-is-heading-our-way-2012-5#ixzz1voa47VB8
He's specifically concerned by the endless grinding down of the Dow in a manner that's steady but not yet panicky.
Here's his reaction after yesterday's market close, which was published on King World News
As of today's closing, Dow down 14 out of 16 sessions! This is one you can tell your kids about. And still no collapse in breadth, and still no crash. The only thing I can make out of it is that a lot of people are "standing their ground."
Maybe it's just the Dow that is dying, and the rest of the market is OK. But don't you believe it. The Dow represents the manufacturing capabilities of the United States, and when you see the Dow doing what it's doing, you can be sure that somewhere ahead business is going to take it on the chin..."
at http://www.businessinsider.com/richard-russell-stay-in-cash-something-something-big-is-heading-our-way-2012-5#ixzz1voa47VB8
Containment Theory Blows Sky High: German Manufacturing PMI Plunges to 45; French Manufacturing PMI Plunges to 44.4, Sharpest Contraction in 3 Years
"The Pollyannas who thought the European recession would be
short, shallow, and contained to the periphery have another thing coming. All
three ideas were downright silly as I have long stated.
French Manufacturing PMI Plunges to 44.4, Sharpest
Contraction in 3 Years
Markit reports French private sector output falls at
sharpest rate for over three years.
Key points:
Flash France Composite Output Index drops to 44.7 (45.9 in
April), 37-month low
Flash France Services Activity Index unchanged at 45.2
Flash France Manufacturing PMI falls to 44.4 (46.9 in
April), 36-month low
Flash France Manufacturing Output Index declines to 43.6
(47.5 in April), 36-month low..."
Central Banks Still Significant Buyers On Gold Dip
"While the gold tonnage demand from central banks in recent
months has been significant, gold remains a tiny fraction of most central
banks, especially emerging market creditor nations such as China, foreign
exchange reserves and therefore the trend is sustainable and indeed may
accelerate.
Central bank reserve diversification into gold may increase
given the Eurozone debt crisis and the risk of debt crisis spreading to Japan,
the UK and the U.S.
Indeed, there is the increasing possibility that some G8
debtor nations, such as the UK and Japan, may decide to once again add to their
gold reserves in order to protect their currencies and guard against the risk
of devaluations of the euro, dollar, yen, pound and a wider international
monetary crisis.
Price is not a determining factor in central bank buying
rather they are more likely being guided to secure an allocation of a
percentage of their overall foreign exchange reserves into gold bullion.
Sovereign government buying of gold is likely to support
gold at these levels and indeed could be the driver to higher prices in the
coming weeks and months."
Caesar Bryan - Global Investors Are Frightened At This Point
"With investors wondering where global markets are headed next, today King World News interviewed 25 year veteran Caesar Bryan. Gabelli & Company has over $31 billion under management and Caesar Bryan has managed the gold fund since its inception in 1994. Caesar told KWN that yesterday the “german bund yield fell below 2% for the first time ever.” Caesar also said this “reveals just how frightened people are at this point in time.” But first, here is what Caesar had to say about the battle taking place in key markets: “I think there’s a little bit of a battle going on. There’s clearly a lot of fear in capital markets around the world and that’s usually represented by a rush to short-term government bonds, in particular US dollar government bonds. With this type of fear and the need for liquidity, just about all assets get sold and gold is one of those assets.”
at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/24_Caesar_Bryan_-_Global_Investors_Are_Frightened_At_This_Point.html
at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/24_Caesar_Bryan_-_Global_Investors_Are_Frightened_At_This_Point.html
Wednesday, May 23, 2012
Gold Does Not Pay Interest (Neither Do Dollars in Your Wallet); Questions On Swapping Gold For Silver; Gold and Gold Shares Bottoming?
" Adam Fleming, Chairman of Wits Gold and Fleming Family &
Partners, discusses the gold bull market with GoldMoney's Chairman James Turk.
Topics include metal price action, the eurozone's debt crisis, and mining in
South Africa.
Adam points out that gold bull markets usually result in a
1:1 Dow/Gold ratio, something that he expects to see happen in the coming
years. In other words, it is still a great time to buy gold.
Adam is pessimistic about the eurozone, and thought plans
for European Monetary Union were delusional, on account of the differences in
culture and political economy between different European Union countries. He
also discusses his mining experience in South Africa, and why – contrary to
much negative press the country gets – it is actually still a great place to
live and work. He expects companies to increase their mining investments in the
Witwatersrand Basin, and thinks that this region will remain the world's
premier gold mining location.
This video was recorded on May 18 2012 in Jersey, British
Channel Islands..."
Japanese Debt Downgraded by Fitch; No Urgency for Japan (Until Sudden Panic Hits)
"With Japan's public debt about to hit 240% of GDP, Fitch
Downgrades Japan's Sovereign Rating
The ratings agency
Fitch on Tuesday lowered its assessment of Japan’s sovereign credit to A+, an
investment grade just above the likes of Spain and Italy, and criticized Tokyo
for not doing more to pare down its burgeoning debt.
Japan’s public debt will hit almost 240 percent of its gross
domestic product by the end of the year, Fitch warned.
The new rating also heightens the pressure on Prime Minister
Yoshihiko Noda to rein in spending and raise taxes at a delicate time, when the
Japanese economy is still recovering from natural and nuclear disasters last
year.
Mr. Noda has warned that Japan could eventually face a debt
crisis akin to that afflicting Europe and is staking his job on a plan to
double the consumption tax rate to 10 percent by late 2015. That increase, he
has argued, is necessary to pay for soaring welfare costs and pension payments..."
There Can Be Only One: China Sovereign Wealth Fund Says Renminbi Will Become Reserve Currency
"First the CIC stirs havoc in Europe, saying it would rather invest in Africa than in Brussels finmin summit caterers, which at this stage in the business cycle are the most profitable corporation imaginable... and now this:
- CIC'S JIN SAYS RENMINBI WILL BECOME GLOBAL RESERVE CURRENCY
Naturally, to parahprase titles of cheesy 80s movies, there can be only one.
So what would happen to the current one? Maybe the same as what happened to all the prior global "reserve" currencies:
Flowcharting The Eurocalypse
"We have laid out in great detail over the past few months the contagious paths, game-theoretical endgames, and transmission channels that would occur should a nation (Greece for example) leave the Euro. Yet the covered matter is not simple, which is why sometimes the best representation is the visual one. The Financial Times has outdone themselves with the best graphical (and audio walkthrough) representation of this process. From the collapse of the domestic banking system (and its possible social implications) to the creation of a new 'local' currency absent foreign capital aid, to the obvious 'who's next?' question that leads inevitably to exaggerated bank runs across other weak European nations and ultimately more pressure on already weak economies to exit the Euro - hastening a wholesale Euro-breakup. Eurocalypse now indeed."
Source: The Financial Times
Roubini : By Next Year You Could Have a Perfect Storm
"Nouriel Roubini : WELL, I SEE, 2% GROWTH IS BETTER THAN EUROPE THAT IS ONE BELOW U.S. POTENTIAL OF UNEMPLOYMENT BEING HIGH. BUT I WORRY ABOUT NEXT YEAR BECAUSE BY NEXT YEAR THERE IS A FISCAL DRIVE AND GIVEN THE FISCAL CLIFF AND WAGES ARE NOT GROWING REAL TERMS , SUSTAINABLE INCOME GROWTH THAT'S BEEN TAXES AND TRANSFERS. SOME OF THEM ARE GOING TO EXPIRE NEXT YEAR SO DOUBLE WHAMMY. FISCAL DRIVE AND ANOTHER DELEVERAGING ON HOUSE NOTES. THAN IF THE GROWTH IS ONLY 2% YOU GET THIS DRAG, GO TOWARDS 1% IS BACK TO STALLED SPEED, THE RISK OF A DOUBLE DIP IN A SITUATION IN WHICH EUROPE IS IN TROUBLE AND WE MIGHT HAVE A WAR WITH IRAN, THE ISSUE OF THE NUCLEAR PROLIFERATION, CHINA IS RUNNING DOWN, EVENTUAL HARD LANDING SO BY NEXT YEAR YOU COULD HAVE A PERFECT STORM. - in CNBC"
at http://nourielroubini.blogspot.com/2012/05/roubini-by-next-year-you-could-have.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NourielRoubiniBlog+%28Nouriel+Roubini+Blog%29
at http://nourielroubini.blogspot.com/2012/05/roubini-by-next-year-you-could-have.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NourielRoubiniBlog+%28Nouriel+Roubini+Blog%29
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