Russia threatens to dump the dollar

[ncordless]

A relevant article on the topic in relation to how the US is pretty vulnerable

..

Economist John Williams says if Russia sells its U.S. dollar holdings, it could trigger hyperinflation. Could it collapse the financial system? Williams contends,

 

[Jack V Savage]

You mean the John Williams that writes CT pamphlets? Or the one that is legit?

What do you think? It's the "Shadowstats" con artist. No actual economist would be that ignorant.

 

[IDL]

Pretty much anything the state doesn't like is termed a CT these days. Makes sense really.

 

[Uchi Mata]

Hmm. Russia's major exports are oil and natural gas. Oil and natural gas are priced and paid for in dollars. If Russia drops the dollar, it just means they'll trade the dollars they get for some other currency, which has no net effect upon international currency prices. Or perhaps they'll request that nations buying their natural resources pay in something other than dollars; oh well, then that nation will have to exchange dollars for a different currency, again affecting nothing.

Russian can't affect the total supply of dollars in circulation, which is what primarily determines the prices of dollars. Only the US government can do that. China could hurt the US somewhat by refusing to buy any more debt (what people usually mean when they say a country is dropping another currency), but Russia doesn't buy enough US debt to make a big dent if they stop doing so. This is an empty threat, if it's even a real threat at all.

 

[IDL]

What do you think? It's the "Shadowstats" con artist. No actual economist would be that ignorant.

Hmm never heard of the Shadowstats site

"Shadowstats.com is a website that analyzes government economic and unemployment statistics based on methodologies used by previous United States administrations, from the pre-Clinton era to the time of the Great Depression.[1] The author of the site claims that using Depression-era methodology, for example, the U.S. unemployment rate would have been 16.5% in January 2009, more than double the announced rate of 6.7%.[2] The site is authored by John Williams, an economic consultant with an economics BA and an MBA from Dartmouth College, New Hampshire.[3]"

Seems like something you would absolutely detest because it wouldn't produce the same rosy outlook that the state loves to paint.

 

[ben236]

Hmm. Russia's major exports are oil and natural gas. Oil and natural gas are priced and paid for in dollars. If Russia drops the dollar, it just means they'll trade the dollars they get for some other currency, which has no net effect upon international currency prices. Or perhaps they'll request that nations buying their natural resources pay in something other than dollars; oh well, then that nation will have to exchange dollars for a different currency, again affecting nothing.

Russian can't affect the total supply of dollars in circulation, which is what primarily determines the prices of dollars. Only the US government can do that. China could hurt the US somewhat by refusing to buy any more debt (what people usually mean when they say a country is dropping another currency), but Russia doesn't buy enough US debt to make a big dent if they stop doing so. This is an empty threat, if it's even a real threat at all.

Red: Not true.

Blue: There are primarily two things that affect the value of dollars (or anything for that matter). You mentioned supply, can you figure out the other one? If you can, then you'll realize why what I highlighted in red is not true.

 

[Jack V Savage]

Pretty much anything the state doesn't like is termed a CT these days. Makes sense really.

The state isn't a conscious entity. About half the elected officials in America would love it if more dupes believed that stuff.

China could hurt the US somewhat by refusing to buy any more debt (what people usually mean when they say a country is dropping another currency), but Russia doesn't buy enough US debt to make a big dent if they stop doing so. This is an empty threat, if it's even a real threat at all.

China buying fewer treasuries would help us in our current environment (it would accelerate our recovery).

Seems like something you would absolutely detest because it wouldn't produce the same rosy outlook that the state loves to paint.

Have you ever heard of the Republican Party? They're kind of big in America. Might want to look them up to save yourself further embarrassment. And no one is painting a "rosy" picture of the economy--not since the late 1990s, anyway.

 

[Jukai]

The US may not have the ability to pay China. Much of what China is receiving in payments is just IOU's anyways.

I'm sure there are long term strategies at play.

The fact that you are sure of it means that there is no reason to worry.

China gets paid interest; the more loans, the more interest. China isn't expecting to be paid back in full anytime soon, that would actually be BAD for China.

 

[Jack V Savage]

The fact that you are sure of it means that there is no reason to worry.

China gets paid interest; the more loans, the more interest. China isn't expecting to be paid back in full anytime soon, that would actually be BAD for China.

I really don't get what's going through the minds of IDL and other right-wingers on this stuff. Do they think that there's some kind of clause enabling people who buy treasuries to demand all their money immediately? Are they living in fear that some day their bank is going to demand the rest of the money they owe on their house all at once? Do they think that the bank would want that?

 

[crowded]

While this is all interesting, none of us are in any position to determine what will or will not transpire and certainly who will be hurt in the long run. All we can do is speculate at this point and see how the events play out.

But economists get crystal balls upon graduation so speak for yourself.

 

[Jack V Savage]

But economists get crystal balls upon graduation so speak for yourself.

They don't have crystal balls, but recognizing that a minor player in the bond market deliberately crashing its own economy won't hurt us doesn't take one.

 

[Zankou]

I really don't get what's going through the minds of IDL and other right-wingers on this stuff. Do they think that there's some kind of clause enabling people who buy treasuries to demand all their money immediately? Are they living in fear that some day their bank is going to demand the rest of the money they owe on their house all at once? Do they think that the bank would want that?

I believe they simply don't care. If you follow the comments on international news sites (as I do), it would seem that 80% of the world's population is convinced that somebody holding a foreign debt obligation can "call it in" at any moment and "demand repayment," like an evil landlord seeking to enforce a judgment against an insolvent debtor. Thus China will "demand repayment" and "cripple the US."

Why do people misunderstand so badly? Because They Want To Believe, which is the governing principle behind nearly all human beliefs, only sporadically punctuated, against the grain, by reason.

 

[ben236]

Looking into this a little deeper, while Russia doesn't hold a significant amount of US treasuries, they are the largest oil and natural gas producer in the world and major power players in the natural resource sector in general. If they refuse to be paid in US dollars then that would have an impact.

BTW... This is basically a retaliatory threat in response to the US' threat of imposing sanctions over the Ukraine situation. They're essentially saying that if the US want's to go down that route, that they won't just take it lying down.

 

[Uchi Mata]

Red: Not true.

Blue: There are primarily two things that affect the value of dollars (or anything for that matter). You mentioned supply, can you figure out the other one? If you can, then you'll realize why what I highlighted in red is not true.

Supply and demand clearly both affect the price of dollars. But assuming demand is constant in the short term, I don't think Russia has enough dollar reserves to move the supply side to where the price drops significantly. The market for dollars is quite large, Russia can't 'flood' the dollar market by divesting its dollar foreign currency reserves. It would be a blip on the FX dollar market. Besides, Russia is going to keep receiving dollars for its natural resources, it's not as if can unilaterally leave a world where the dollar is both the reserve currency and the default currency for international settlements. It would hurt Russia far, far worse than the US if it did so.

 

[Jack V Savage]

Looking into this a little deeper, while Russia doesn't hold a significant amount of US treasuries, they are the largest oil and natural gas producer in the world and major power players in the natural resource sector in general. If they refuse to be paid in US dollars then that would have an impact.

What will the impact be? Enlighten us.

 

[Jukai]

Looking into this a little deeper, while Russia doesn't hold a significant amount of US treasuries, they are the largest oil and natural gas producer in the world and major power players in the natural resource sector in general. If they refuse to be paid in US dollars then that would have an impact.

BTW... This is basically a retaliatory threat in response to the US' threat of imposing sanctions over the Ukraine situation. They're essentially saying that if the US want's to go down that route, that they won't just take it lying down.

Right, but I think the question is, what could Russia do that would significantly hurt the US but not doubly hurt themselves? Someone said Russia could sell things via Euro and get Europe's support, which I could see significantly hurting the US, but Europe isn't going to do that because Europe is angrier than the US is at Russia.

 

[ben236]

What will the impact be? Enlighten us.

If the largest oil and natural gas producer in the world (who Europe is extremely dependent on in that regard) stopped accepting US dollars?

It would most likely be inflationary.

 

[Jack V Savage]

If the largest oil and natural gas producer in the world (who Europe is extremely dependent on in that regard) stopped accepting US dollars?

It would most likely be inflationary.

How?

 

[ben236]

Right, but I think the question is, what could Russia do that would significantly hurt the US but not doubly hurt themselves? Someone said Russia could sell things via Euro and get Europe's support, which I could see significantly hurting the US, but Europe isn't going to do that because Europe is angrier than the US is at Russia.

This is the problem though...

If Russia says "We want Euros, no more US dollars." Can Europe just say "fine, we'll just stop buying oil and natural gas from you" when considering those pipelines?

 

[ben236]

How?

It reduces demand for US dollars when they can't be used to buy things from what is essentially the largest natural resource producer in the world.