2009/11/15 11：10
US$; the world key currency on a crater ('09. 11/15)
In 1971, then U.S Secretary of Treasury, >"John Bowden Connally, Jr.," said to his European counterparts that "US$ is our currency but your problem."
Indeed, all account surplus countries suffered huge amount of appraisal losses from their holding foreign assets due to the so called "Nixon Shock" on Aug. 15th 1971.
The reason why is really easy; US$ is the world key currency so that account surplus countries held their foreign reserves in dollar dominated assets.
In 1985, this proposition was proved again. Western leaders agreed to promote cheaper US$ collaboratively -- the Plaza Accord.
As I985 was at the height of the Cold War that western allies can't be helped but to support the U.S. as their leader. Germany didn't completely obey to the U.S. that became the remote cause of the so called "Black Monday" in 1987.
Namely, above mentioned logic of "US$ is our currency but your problem" was reproved again 1985.
As the result, account surplus countries -- such as Japan -- was suffered huge amount of appraisal losses from holding dollar dominated assets, mainly Treasury Bond.
Further more, as an exporter, Japan was forced to face lesser international competitiveness up due to higher currency -- so called "rising JPN\ recession."
In order to deal with difficulty, Japan eased monetary policy to boost domestic demands. The result was the "Bubble Economy" that busted in 1990.
Furthermore, foreign exchange rate once topped \80/$ level in 1995 that affected Japan's manufacturing sector severely that was the main cause the "Lost Decade."
Indeed, Japan has yet completely wiped the damage of the bubble economy out in specific sectors.
In other words, Japan's experience of being swung around by foreign exchange rates says that "although dollar is US currency it's also Japan's problem."
And the now must be the time to reconfirm the rightness of this logic -- dollar is U.S currency but it is also a world's problem.
US$ is on the edge of bold and radical depreciation, ref.(>"The American dollar, Down with the dollar" & "Dollar depreciation, Denial or acceptance")
In recent years, economists always warned that "US$ is to decline sooner or later because its twin deficits is absolutely unsustainable."
But even though there are some fluctuation, US$ kept its stability until recently. The reason why is that "there is neither alternative nor successor to replace US$ as a world key currency."
After the so called "Nixon Shock" in 1971, there is no tie between gold and US$.
So what backs value of greenback up is U.S national power. If U.S. national power vanishes, greenback is nothing more than a printed paper.
But no matter how far U.S twin deficits balloon, US$ keeps its status as a world key currency unless there is a promising successor.
Indeed, when the time bomb of "subprime housing bubble" busted in the U.S. in 2007, many forecasted the "the time has finally come."
Theoretically speaking, as Washington issued huge amount of paper money and Treasury Bond to launch a bail-out scheme of banks, TARP and economic stimulus measures, US$ must decline.
But the reality was completely opposite. Far from falling, US$ rose rapidly against other currencies amid global credit crunch in 2008 and 2009. Why?
Because financial institutions around the world were forced to secure fund of US$ because it became difficult to secure that in the market as the result of credit crunch following the Lehman Shock.
As demands for US$ rose, it was only natural that so does prices of US$. It is only a technical matter.
Although so called "unilateralism" is no longer a reality, neither China's Yuan nor Europe's EURO are capable to replace US$ to become a world key currency.
After all, in spite of its hegemony is shaken, the U.S. is still an only super power in the world. It is just a matter of "An old eagle is better than a young crow."
The reason of strength of US$ isn't its actual value but the fact of "lack of successor," ref.(>"No alternative to a new world architecture")
But from different point of view, recent stability of US$ means nothing more than a postponing of unavoidable rebalancing of the foreign exchange.
It is absolutely true that recent bold issuance of greenback and Treasury Bond is diluting real value of greenback rapidly.
So in the longer term, depreciation of US$ is unavoidable. But in the short run, not fundamental factor but technical supply-demand conditions decide foreign exchange rates.
And the world needs the U.S. and strong US$ as a last resort of consumption and a world key currency respectively.
Countries that hold huge amount of dollar-dominated assets are forced to continue to purchase more and more dollar-dominated asset -- mainly Treasury Bond -- to avoid realization of appraisal losses.
In this meaning, China and Japan that hold the world No.1 and No. 2 foreign reserves have strong incentive to want to avoid depreciation of US$.
In addition, net exporters -- especially China -- have solid bold appreciation of their currencies against US$ in order to keep its international price competitive edge.
Although Japan is in the situation that resembled China, Japan has yet execute foreign exchange intervention for more than 5 years.
So it is China that sustains prices of US$ via massive foreign exchange intervention. As the result, China replaced Japan to be the largest foreign reserve holder.
Technically speaking, when Beijing decides to stop, or reduce boldly, to purchase dollar dominated assets, it must be the time of collapse of US$.
Needless to say, Beijing knows that they have a problem on their foreign reserve, ref.(>"The Chinese have a massive dollar problem")
But due to an economic Sino-US MAD relation, crash of US$ won't occur at least for the time being, ref.(>"MAD; Fearful balance of Sino-U.S relation")
Taking above mentioned into consideration, some argue that >"Reports of the dollar's death are exaggerated."
Ostensibly, they are correct. Even though U.S. economy is in a serious conditions, there is no alternative as a world key currency.
To begin with, Yuan isn't a hard currency. It is unrealistic that not floating exchange rate currency is to be a key currency, ref.(>"Dollar dying at the hands of a weak renminbi")
Beijing still adopts almost fixed exchange rate system because they realize fundamental defects of China's economy well.
Needless to say, EURO can't be a key currency because it isn't a currency based on sovereign. EURO is a artificial and unnatural currency because decision making of fiscal policy is diversified among member countries.
Even though monetary policy is decided by the ECB, it is also affected by member countries.
As the result, EURO is nothing more than alternative for not a world key currency but foreign reserve one, ref.(>Reserve currencies, Cross my palm with euros?)
But just a moment please. What that decides one currency to be a world key currency is not only an economic factor.
After all, US$ is a world key currency because the U.S. is a hegemony. And essential elements of a hegemony is economic power, political power and military power.
When we pay attention to only economy, it seems true that US$ is relatively stable, ref(>"JAPANESE PERSPECTIVES, Mighty dollar's demise won't be quick despite depreciation woes")
But here, we should pay attention to military matters that could deliver critical damage to U.S. hegemony -- namely, Iraq and Afghanistan.
Even though it is improved a little bit, Iraqi conditions is far from stable and sustainable, ref.(>"Graceful withdrawal from Iraq, or not?")
As conditions in Afghanistan is rather deteriorating, Washington will be forced to execute "surge" within short, ref.(>"The Afghan conditions; getting worse")
Tactically speaking, U.S military forces are the world strongest and invincible. They can't be beaten in "battles.
But strategically, it possible to establish pro-U.S stable democratic regime in neither Iraq nor Afghanistan. Although the U.S. can win is "battles" but won't be able to win in "wars."
And it is fundamental principle that "a tactical success can't recover a strategic error." Namely, both the Iraq War and Afghan War are absolutely mistakes for the U.S.
Not only the U.S. is wasting national power in these wars. U.S. national dignity could be fallen as the result of "graceful withdrawals" -- or defeats in practical meaning.
It isn't an economic collapse but loss of U.S national prestige when US$ loses the status of a world key currency.
If war conditions in Iraq and Afghanistan deteriorate boldly, sudden decline of US$ could be possible.
Namely, as the U.S. is licked militarily and despised politically, its currency could lose "hegemony premium" and return to actual value. In this meaning, we should pay attention to not only economy but also war conditions.
Anyway, in the history of human beings, it was not "nonconvertible paper money" but "precious metals" that took role of fundamental currency.
Indeed, we should note that prices of gold is rising day after day. It seems to me that an partial returning pressure to conventional system is rising calmly and modestly.
Of course, complete return to conventional "gold (or silver) standard" isn't plausible. It is just evacuation of speculative money from US$.
When such move becomes mainstream, it can be called "capital flight." US$ is a world key currency that is on a crater of an active volcano.
------------------------------------
Crisis of US$; a decline of world key currency ('09. 6/21)
The U.S. has been enjoying excellent privileges as the result of US$ is the world key currency. Namely, the U.S. can utilize "seigniorage"-- printing paper money -- to finance its vast amount of twin deficits and import products and commodities from around the world.
So it is only natural that hypothesis enemies of the U.S., such as Russia and China -- want to destroy this U.S. privilege.
Indeed, following the China, Russia expressed intention to challenge US$ key currency structure.
>"ロシア大統領「ドル依存の通貨体制見直しを」"
> ロシアのメドベージェフ大統領はこのほど米 CNBCと会見し「世界の準備通貨を増やすべきだ」と述べ、米ドルに依存する現行の通貨体制の見直しが必要と指摘した。原油など資源輸出に頼るロシア経済については多様化に努めると強調。「ルーブルもユーロのように（地域の準備通貨に）なりえる」などと述べた。
> 大統領は米国発の金融危機について「全世界がドルの健全性に依存している」ことが原因の一つになったと指摘した。
> ロシア経済について今年の成長率はマイナス６%超になるだろうと予想した。一方、インフレ率は13%にのぼるだろうとし「警戒すべきことが起きている」と指摘。原油、天然ガスなど資源以外の産業基盤が弱いのが問題だとして「経済の多様化が最優先課題だ」と述べた。石油化学やバイオテクノロジー、環境技術などの分野で技術革新に取り組む考えを示した。会見内容は13日夕に日経 CNBCでも放映する。
Compared to Tokyo's action in the so called "Lost Decade," Washington's one is indeed quick.
Washington decided to inject public money into ailed U.S. major financial institutions much quicker than Tokyo, ref.(>"Will the U.S. economy recover under the President Obama?")
Washington also decided much quicker than Tokyo to nationalize ailed giant financial institutions, ref.(>'"Fannie Mae" & "Freddie Mac"' & "When will U.S. President Barack Obama be able to recover economy?")
In addition, Washington conducted "stress test" on U.S. giant financial institutions, ref.(>"How deep President Obama can be believed?")
Even though it is still doubtful that standard of inspection and calculation is strict enough or not, there is no doubt that Washington's action is again much quicker than Tokyo's in '90s.
Generally speaking, there is no doubt that U.S. government and financial authority are much abler than Japan's.
It is well said that "do-nothingness" and "inaction" of the 31th U.S. president Herbert Clark Hoover accelerated free-fall of economy during the Great Depression.
It is also said that "slowness" and "inaction" of Tokyo made deterioration of Japan's economy accelerate in '90s.
In this meaning, it can be said that Washington studied well about the Great Depression and Japan's Lost Decade, and acts as quick as possible to halt free-fall of economy.
Indeed, FRB Chairman Mr. Bernanke is well known as a "Great Depression buff." In particular, just like his nickname of "helicopter Ben," Mr. Bernanke is injecting as much liquidity as possible into financial system.
Cooperating well with Secretary of Treasury Mr. Tim Geitner, Mr. Bernanke won't hesitate to utilize public money to make financial system continue to work.
But just moment please. There is one problem -- how about financial resources?
For the sake of bail-out and nationalization of ailed giant financial institutions and public investment, the Obama Administration decided to issue enormous amount of Treasury Bond.
Needless to say, Treasury Bond is nothing more than "national debts" so that the U.S. needs purchasers who wants to lend money to the U.S.
At present, China takes a role of the largest purchaser of Treasury Bond, ref.(>"Balancing U.S.-China economic ties")
In addition, the U.S. must repay vast amount of debts sooner or later, ref.(>"Public debt, The biggest bill in history" & "Politics of debt, Seeing red")
But is it possible? I doubt that. U.S. national debts is too enormous to be repaid. When it comes to normal countries, such amount of debts means "default" just like Argentine in 2001.
But the U.S. has a national privilege. As the U.S. is a hegemony, its currency is the world key currency.
For a few decades, every economists have argued that "as its twin deficits is so enormous that bold depreciation of US$ is unavoidable." But they failed to forecast foreign exchange market exactly.
US$ is still valuable in spite of ballooning twin deficits as there are still enough purchase of Treasury Bond around the world.
But even so, such kind of magic -- I mean printing money scheme -- mustn't be eternal. Sooner or later, the amount of U.S. debts is to reach limit.
Indeed, the U.S. might almost reach the limit. Late Saddam Hussein decided in 2000 to receive payment for crude oil with not US$ but Euro.
But in 2003, the U.S. launched a making inroad into Iraq based on false cause of "WMD," then return Iraqi crude oil deals to US$.
Please understand that I don't want to say "this is the true cause of the Iraq War." I only described the "facts," and it depends on you how to interprete this facts.
Anyway, the world was forced to fully realize that the U.S. are too great to be challenged, and US$ avoided a crisis of falling from a status of the world key currency.
But later, the Iraqi conditions deteriorated and the U.S. was forced to waste awful amount of national power.
In addition, subprime fiasco made further attacks on the U.S. The U.S. is forced to issue enormous amount of Treasury Bond to finance two wars in Iraq and Afghanistan and economic recession.
The more Washington issues Treasury Bond, the more beneficial conditions it must offer for purchasers.
So it is only natural that yeild rate of Treasury Bond is rising gradually, ref.(>"米長期金利、3.83%に上昇"
> 18日のニューヨーク債券相場は大幅に続落。長期金利の指標である10年物国債利回りは前日比 0.14%高い（価格は安い）3.83%で終えた。一時3.85%と、11日以来の水準に上昇した。
> 同日発表された６月のフィラデルフィア連銀景気指数がマイナス 2.2と前月から大幅に改善したことなどを受け、景気悪化に対する懸念が和らぎ債券売りが優勢となった。)
Indeed, gradual and moderate depreciation of US$ is bless for U.S. economy rather than evil. Depreciation of US$ means partial default of U.S. national debts.
But if the world rejects to receive greenbacks saying "this is nothing more than printed paper," it must be an another story.
Theoretically speaking, as the U.S. printed and is printing excessive amount of paper money, value of that are already diluted boldly.
It means that current exchange rates of US$ is too high, and sudden and bold depreciation of that could occur anytime soon.
Taking such conditions into consideration, both China and Russia may think that "it is a perfect opportunity to challenge the U.S."
Even though it may be on the decline, the U.S. is still the overwhelming strongest country in the world. Neither China nor Russia alone can't compete against the U.S. hegemony.
But if they combine powers, they could shake the US$ world key currency structure, then realize multi-power structure.
Indeed, there is a sign of such moves, ref(>"上海協力機構、「多極化」推進を宣言へ 首脳会議"
> ロシア、中国と中央アジア４ヶ国（カザフスタン、キルギス、タジキスタン、ウズベキスタン）が加盟する上海協力機構（SCO）の首脳会議が15日、エカテリンブルクで開幕した。
> 16日には「多極化」の推進などをうたった共同宣言などの文書に署名する。核実験を強行した北朝鮮情勢についても協議する見通し。ロシアのメドベージェフ大統領は会議の冒頭「地域の安全保障問題と世界の金融危機について協議しよう」と述べた。
> ロシア大統領府によると、共同宣言では多極化推進を支持するほか、国際問題解決における国連の役割強化などが盛り込まれる。核拡散防止条約（NPT）体制への支持、国際金融面での協力などでも一致する。)
If the US$ world key currency structure collapse, it could deliver critical jolt to the world economy and both China and Russia could be hit hard.
But if a structural metamorphosis would be unavoidable sooner or later, it is not surprise that both China and Russia aims to maximize their national interests.
Indeed, it seems to me that it is impossible for the U.S. to repay its national debts. Or in the first place, Washington may not have an intention to do so.
Will China and Russia launch a full-scale action to challenge the US$ world key currency structure soon?
If the world economy hits bottom and starts recovery within short, they won't do so. If current lull state of the world economy is temporary and the world economy restarts to deteriorate soon, they will do so.
Here, I am sorry but I have to say that the later scenario seems to be more plausible, ref.(>"A lull state of the stock markets"
>"世界の製造拠点、輸出不振 中・東欧、西欧・旧ソ連向け低迷続く"
> 世界経済の低迷を受け、製造業の拠点である中・東欧諸国や東南アジア諸国連合（ASEAN）などで輸出不振が続いている。チェコなどの 2009年１〜３月期はユーロ圏向けの落ち込みで前年同期比で軒並み２ケタ減。
> ASEANも今年に入って単月ベースで大幅なマイナスが続く。日米欧など先進国の早急な需要回復は望み薄で、外需依存度の高い途上国には厳しい環境が続きそうだ。
> 中・東欧諸国はドイツ、フランス、イタリアを中心とした西欧の製造業の投資を誘致し、経済成長の原動力にしてきた。現在、輸出の７〜８割を欧州連合（EU）向けが占めており、欧州経済の低迷が中・東欧の輸出の足を大きく引っ張っている。１〜３月期はチェコが前年同期に比べて 23.6%減、ラトビアが同25.9%減となった。)
For your ref.>How deep President Obama can be believed?
>The irresistible rise of the Chinese renminbi
>New world order? Not yet
>Dollar beauty may be fading but it still tops currency pageant list
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Indeed, all account surplus countries suffered huge amount of appraisal losses from their holding foreign assets due to the so called "Nixon Shock" on Aug. 15th 1971.
The reason why is really easy; US$ is the world key currency so that account surplus countries held their foreign reserves in dollar dominated assets.
In 1985, this proposition was proved again. Western leaders agreed to promote cheaper US$ collaboratively -- the Plaza Accord.
As I985 was at the height of the Cold War that western allies can't be helped but to support the U.S. as their leader. Germany didn't completely obey to the U.S. that became the remote cause of the so called "Black Monday" in 1987.
Namely, above mentioned logic of "US$ is our currency but your problem" was reproved again 1985.
As the result, account surplus countries -- such as Japan -- was suffered huge amount of appraisal losses from holding dollar dominated assets, mainly Treasury Bond.
Further more, as an exporter, Japan was forced to face lesser international competitiveness up due to higher currency -- so called "rising JPN\ recession."
In order to deal with difficulty, Japan eased monetary policy to boost domestic demands. The result was the "Bubble Economy" that busted in 1990.
Furthermore, foreign exchange rate once topped \80/$ level in 1995 that affected Japan's manufacturing sector severely that was the main cause the "Lost Decade."
Indeed, Japan has yet completely wiped the damage of the bubble economy out in specific sectors.
In other words, Japan's experience of being swung around by foreign exchange rates says that "although dollar is US currency it's also Japan's problem."
And the now must be the time to reconfirm the rightness of this logic -- dollar is U.S currency but it is also a world's problem.
US$ is on the edge of bold and radical depreciation, ref.(>"The American dollar, Down with the dollar" & "Dollar depreciation, Denial or acceptance")
In recent years, economists always warned that "US$ is to decline sooner or later because its twin deficits is absolutely unsustainable."
But even though there are some fluctuation, US$ kept its stability until recently. The reason why is that "there is neither alternative nor successor to replace US$ as a world key currency."
After the so called "Nixon Shock" in 1971, there is no tie between gold and US$.
So what backs value of greenback up is U.S national power. If U.S. national power vanishes, greenback is nothing more than a printed paper.
But no matter how far U.S twin deficits balloon, US$ keeps its status as a world key currency unless there is a promising successor.
Indeed, when the time bomb of "subprime housing bubble" busted in the U.S. in 2007, many forecasted the "the time has finally come."
Theoretically speaking, as Washington issued huge amount of paper money and Treasury Bond to launch a bail-out scheme of banks, TARP and economic stimulus measures, US$ must decline.
But the reality was completely opposite. Far from falling, US$ rose rapidly against other currencies amid global credit crunch in 2008 and 2009. Why?
Because financial institutions around the world were forced to secure fund of US$ because it became difficult to secure that in the market as the result of credit crunch following the Lehman Shock.
As demands for US$ rose, it was only natural that so does prices of US$. It is only a technical matter.
Although so called "unilateralism" is no longer a reality, neither China's Yuan nor Europe's EURO are capable to replace US$ to become a world key currency.
After all, in spite of its hegemony is shaken, the U.S. is still an only super power in the world. It is just a matter of "An old eagle is better than a young crow."
The reason of strength of US$ isn't its actual value but the fact of "lack of successor," ref.(>"No alternative to a new world architecture")
But from different point of view, recent stability of US$ means nothing more than a postponing of unavoidable rebalancing of the foreign exchange.
It is absolutely true that recent bold issuance of greenback and Treasury Bond is diluting real value of greenback rapidly.
So in the longer term, depreciation of US$ is unavoidable. But in the short run, not fundamental factor but technical supply-demand conditions decide foreign exchange rates.
And the world needs the U.S. and strong US$ as a last resort of consumption and a world key currency respectively.
Countries that hold huge amount of dollar-dominated assets are forced to continue to purchase more and more dollar-dominated asset -- mainly Treasury Bond -- to avoid realization of appraisal losses.
In this meaning, China and Japan that hold the world No.1 and No. 2 foreign reserves have strong incentive to want to avoid depreciation of US$.
In addition, net exporters -- especially China -- have solid bold appreciation of their currencies against US$ in order to keep its international price competitive edge.
Although Japan is in the situation that resembled China, Japan has yet execute foreign exchange intervention for more than 5 years.
So it is China that sustains prices of US$ via massive foreign exchange intervention. As the result, China replaced Japan to be the largest foreign reserve holder.
Technically speaking, when Beijing decides to stop, or reduce boldly, to purchase dollar dominated assets, it must be the time of collapse of US$.
Needless to say, Beijing knows that they have a problem on their foreign reserve, ref.(>"The Chinese have a massive dollar problem")
But due to an economic Sino-US MAD relation, crash of US$ won't occur at least for the time being, ref.(>"MAD; Fearful balance of Sino-U.S relation")
Taking above mentioned into consideration, some argue that >"Reports of the dollar's death are exaggerated."
Ostensibly, they are correct. Even though U.S. economy is in a serious conditions, there is no alternative as a world key currency.
To begin with, Yuan isn't a hard currency. It is unrealistic that not floating exchange rate currency is to be a key currency, ref.(>"Dollar dying at the hands of a weak renminbi")
Beijing still adopts almost fixed exchange rate system because they realize fundamental defects of China's economy well.
Needless to say, EURO can't be a key currency because it isn't a currency based on sovereign. EURO is a artificial and unnatural currency because decision making of fiscal policy is diversified among member countries.
Even though monetary policy is decided by the ECB, it is also affected by member countries.
As the result, EURO is nothing more than alternative for not a world key currency but foreign reserve one, ref.(>Reserve currencies, Cross my palm with euros?)
But just a moment please. What that decides one currency to be a world key currency is not only an economic factor.
After all, US$ is a world key currency because the U.S. is a hegemony. And essential elements of a hegemony is economic power, political power and military power.
When we pay attention to only economy, it seems true that US$ is relatively stable, ref(>"JAPANESE PERSPECTIVES, Mighty dollar's demise won't be quick despite depreciation woes")
But here, we should pay attention to military matters that could deliver critical damage to U.S. hegemony -- namely, Iraq and Afghanistan.
Even though it is improved a little bit, Iraqi conditions is far from stable and sustainable, ref.(>"Graceful withdrawal from Iraq, or not?")
As conditions in Afghanistan is rather deteriorating, Washington will be forced to execute "surge" within short, ref.(>"The Afghan conditions; getting worse")
Tactically speaking, U.S military forces are the world strongest and invincible. They can't be beaten in "battles.
But strategically, it possible to establish pro-U.S stable democratic regime in neither Iraq nor Afghanistan. Although the U.S. can win is "battles" but won't be able to win in "wars."
And it is fundamental principle that "a tactical success can't recover a strategic error." Namely, both the Iraq War and Afghan War are absolutely mistakes for the U.S.
Not only the U.S. is wasting national power in these wars. U.S. national dignity could be fallen as the result of "graceful withdrawals" -- or defeats in practical meaning.
It isn't an economic collapse but loss of U.S national prestige when US$ loses the status of a world key currency.
If war conditions in Iraq and Afghanistan deteriorate boldly, sudden decline of US$ could be possible.
Namely, as the U.S. is licked militarily and despised politically, its currency could lose "hegemony premium" and return to actual value. In this meaning, we should pay attention to not only economy but also war conditions.
Anyway, in the history of human beings, it was not "nonconvertible paper money" but "precious metals" that took role of fundamental currency.
Indeed, we should note that prices of gold is rising day after day. It seems to me that an partial returning pressure to conventional system is rising calmly and modestly.
Of course, complete return to conventional "gold (or silver) standard" isn't plausible. It is just evacuation of speculative money from US$.
When such move becomes mainstream, it can be called "capital flight." US$ is a world key currency that is on a crater of an active volcano.
------------------------------------
Crisis of US$; a decline of world key currency ('09. 6/21)
The U.S. has been enjoying excellent privileges as the result of US$ is the world key currency. Namely, the U.S. can utilize "seigniorage"-- printing paper money -- to finance its vast amount of twin deficits and import products and commodities from around the world.
So it is only natural that hypothesis enemies of the U.S., such as Russia and China -- want to destroy this U.S. privilege.
Indeed, following the China, Russia expressed intention to challenge US$ key currency structure.
>"ロシア大統領「ドル依存の通貨体制見直しを」"
> ロシアのメドベージェフ大統領はこのほど米 CNBCと会見し「世界の準備通貨を増やすべきだ」と述べ、米ドルに依存する現行の通貨体制の見直しが必要と指摘した。原油など資源輸出に頼るロシア経済については多様化に努めると強調。「ルーブルもユーロのように（地域の準備通貨に）なりえる」などと述べた。
> 大統領は米国発の金融危機について「全世界がドルの健全性に依存している」ことが原因の一つになったと指摘した。
> ロシア経済について今年の成長率はマイナス６%超になるだろうと予想した。一方、インフレ率は13%にのぼるだろうとし「警戒すべきことが起きている」と指摘。原油、天然ガスなど資源以外の産業基盤が弱いのが問題だとして「経済の多様化が最優先課題だ」と述べた。石油化学やバイオテクノロジー、環境技術などの分野で技術革新に取り組む考えを示した。会見内容は13日夕に日経 CNBCでも放映する。
Compared to Tokyo's action in the so called "Lost Decade," Washington's one is indeed quick.
Washington decided to inject public money into ailed U.S. major financial institutions much quicker than Tokyo, ref.(>"Will the U.S. economy recover under the President Obama?")
Washington also decided much quicker than Tokyo to nationalize ailed giant financial institutions, ref.(>'"Fannie Mae" & "Freddie Mac"' & "When will U.S. President Barack Obama be able to recover economy?")
In addition, Washington conducted "stress test" on U.S. giant financial institutions, ref.(>"How deep President Obama can be believed?")
Even though it is still doubtful that standard of inspection and calculation is strict enough or not, there is no doubt that Washington's action is again much quicker than Tokyo's in '90s.
Generally speaking, there is no doubt that U.S. government and financial authority are much abler than Japan's.
It is well said that "do-nothingness" and "inaction" of the 31th U.S. president Herbert Clark Hoover accelerated free-fall of economy during the Great Depression.
It is also said that "slowness" and "inaction" of Tokyo made deterioration of Japan's economy accelerate in '90s.
In this meaning, it can be said that Washington studied well about the Great Depression and Japan's Lost Decade, and acts as quick as possible to halt free-fall of economy.
Indeed, FRB Chairman Mr. Bernanke is well known as a "Great Depression buff." In particular, just like his nickname of "helicopter Ben," Mr. Bernanke is injecting as much liquidity as possible into financial system.
Cooperating well with Secretary of Treasury Mr. Tim Geitner, Mr. Bernanke won't hesitate to utilize public money to make financial system continue to work.
But just moment please. There is one problem -- how about financial resources?
For the sake of bail-out and nationalization of ailed giant financial institutions and public investment, the Obama Administration decided to issue enormous amount of Treasury Bond.
Needless to say, Treasury Bond is nothing more than "national debts" so that the U.S. needs purchasers who wants to lend money to the U.S.
At present, China takes a role of the largest purchaser of Treasury Bond, ref.(>"Balancing U.S.-China economic ties")
In addition, the U.S. must repay vast amount of debts sooner or later, ref.(>"Public debt, The biggest bill in history" & "Politics of debt, Seeing red")
But is it possible? I doubt that. U.S. national debts is too enormous to be repaid. When it comes to normal countries, such amount of debts means "default" just like Argentine in 2001.
But the U.S. has a national privilege. As the U.S. is a hegemony, its currency is the world key currency.
For a few decades, every economists have argued that "as its twin deficits is so enormous that bold depreciation of US$ is unavoidable." But they failed to forecast foreign exchange market exactly.
US$ is still valuable in spite of ballooning twin deficits as there are still enough purchase of Treasury Bond around the world.
But even so, such kind of magic -- I mean printing money scheme -- mustn't be eternal. Sooner or later, the amount of U.S. debts is to reach limit.
Indeed, the U.S. might almost reach the limit. Late Saddam Hussein decided in 2000 to receive payment for crude oil with not US$ but Euro.
But in 2003, the U.S. launched a making inroad into Iraq based on false cause of "WMD," then return Iraqi crude oil deals to US$.
Please understand that I don't want to say "this is the true cause of the Iraq War." I only described the "facts," and it depends on you how to interprete this facts.
Anyway, the world was forced to fully realize that the U.S. are too great to be challenged, and US$ avoided a crisis of falling from a status of the world key currency.
But later, the Iraqi conditions deteriorated and the U.S. was forced to waste awful amount of national power.
In addition, subprime fiasco made further attacks on the U.S. The U.S. is forced to issue enormous amount of Treasury Bond to finance two wars in Iraq and Afghanistan and economic recession.
The more Washington issues Treasury Bond, the more beneficial conditions it must offer for purchasers.
So it is only natural that yeild rate of Treasury Bond is rising gradually, ref.(>"米長期金利、3.83%に上昇"
> 18日のニューヨーク債券相場は大幅に続落。長期金利の指標である10年物国債利回りは前日比 0.14%高い（価格は安い）3.83%で終えた。一時3.85%と、11日以来の水準に上昇した。
> 同日発表された６月のフィラデルフィア連銀景気指数がマイナス 2.2と前月から大幅に改善したことなどを受け、景気悪化に対する懸念が和らぎ債券売りが優勢となった。)
Indeed, gradual and moderate depreciation of US$ is bless for U.S. economy rather than evil. Depreciation of US$ means partial default of U.S. national debts.
But if the world rejects to receive greenbacks saying "this is nothing more than printed paper," it must be an another story.
Theoretically speaking, as the U.S. printed and is printing excessive amount of paper money, value of that are already diluted boldly.
It means that current exchange rates of US$ is too high, and sudden and bold depreciation of that could occur anytime soon.
Taking such conditions into consideration, both China and Russia may think that "it is a perfect opportunity to challenge the U.S."
Even though it may be on the decline, the U.S. is still the overwhelming strongest country in the world. Neither China nor Russia alone can't compete against the U.S. hegemony.
But if they combine powers, they could shake the US$ world key currency structure, then realize multi-power structure.
Indeed, there is a sign of such moves, ref(>"上海協力機構、「多極化」推進を宣言へ 首脳会議"
> ロシア、中国と中央アジア４ヶ国（カザフスタン、キルギス、タジキスタン、ウズベキスタン）が加盟する上海協力機構（SCO）の首脳会議が15日、エカテリンブルクで開幕した。
> 16日には「多極化」の推進などをうたった共同宣言などの文書に署名する。核実験を強行した北朝鮮情勢についても協議する見通し。ロシアのメドベージェフ大統領は会議の冒頭「地域の安全保障問題と世界の金融危機について協議しよう」と述べた。
> ロシア大統領府によると、共同宣言では多極化推進を支持するほか、国際問題解決における国連の役割強化などが盛り込まれる。核拡散防止条約（NPT）体制への支持、国際金融面での協力などでも一致する。)
If the US$ world key currency structure collapse, it could deliver critical jolt to the world economy and both China and Russia could be hit hard.
But if a structural metamorphosis would be unavoidable sooner or later, it is not surprise that both China and Russia aims to maximize their national interests.
Indeed, it seems to me that it is impossible for the U.S. to repay its national debts. Or in the first place, Washington may not have an intention to do so.
Will China and Russia launch a full-scale action to challenge the US$ world key currency structure soon?
If the world economy hits bottom and starts recovery within short, they won't do so. If current lull state of the world economy is temporary and the world economy restarts to deteriorate soon, they will do so.
Here, I am sorry but I have to say that the later scenario seems to be more plausible, ref.(>"A lull state of the stock markets"
>"世界の製造拠点、輸出不振 中・東欧、西欧・旧ソ連向け低迷続く"
> 世界経済の低迷を受け、製造業の拠点である中・東欧諸国や東南アジア諸国連合（ASEAN）などで輸出不振が続いている。チェコなどの 2009年１〜３月期はユーロ圏向けの落ち込みで前年同期比で軒並み２ケタ減。
> ASEANも今年に入って単月ベースで大幅なマイナスが続く。日米欧など先進国の早急な需要回復は望み薄で、外需依存度の高い途上国には厳しい環境が続きそうだ。
> 中・東欧諸国はドイツ、フランス、イタリアを中心とした西欧の製造業の投資を誘致し、経済成長の原動力にしてきた。現在、輸出の７〜８割を欧州連合（EU）向けが占めており、欧州経済の低迷が中・東欧の輸出の足を大きく引っ張っている。１〜３月期はチェコが前年同期に比べて 23.6%減、ラトビアが同25.9%減となった。)
For your ref.>How deep President Obama can be believed?
>The irresistible rise of the Chinese renminbi
>New world order? Not yet
>Dollar beauty may be fading but it still tops currency pageant list
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