Are Americans less-evolved?

[Moonstruck888]

Europeans want Euros. Koreans want Wons. Brits wan Pounds. They can exchange their dollars for Euros, Wons, or Pounds, but that only delays the process. Eventually, those dollars will find their way to America.

You obviously aren’t familiar with short selling. If you know that the pound is going to crash against the dollar, you want to sell as many pounds as you can beforehand and then buy them back cheap afterwards, knowing that there value will rise and that you’ve already made a profit.

That is how a run on a currency is created. For people who deal with real money, people who live in a world that you and I are not privvy to, you want the currency that is going to give you the biggest return. Patriotism means nothing to people in that arena.

 

[JohnDamian]

Europeans want Euros. Koreans want Wons. Brits wan Pounds. They can exchange their dollars for Euros, Wons, or Pounds, but that only delays the process. Eventually, those dollars will find their way to America.

You mistake the medium for the end; in that – People want functional value; ie; people want valuable currency that can be traded with the greatest ease for the greatest profit; the medium of their currency (Euro, Dollar, Pound etc.) is only sensible in actualising a potential value, and is only contextually appropriate - ie; in general terms people will want a local currency because it makes it easier to actualise the value of the currency; however to presume that this currency by nessecity must be the local one misses two key points:

Primarily, that the relative values of currencies fluctuate, and therefore it may not be sensible to hold onto a local currency if a nonlocal one is increasing in value (or yours decreasing), in which case one sacrafices liquidity for value.

Secondarily, when countries have financial crises, especially when entering hyperinflation etc. the reliance upon foreign currencies (for stability) can emerge, hence the reliance purely upon a national currency may not only decimate the value, but also reduce the liquidity of cash.

Ie; I am British, and in general terms I want pounds, for I can actualise these with regards for trade for local products etc. However, to me, value superceeds the currency, and if Britain was entering a crises and the currency was going lose value, it would be sensible to preserve the value in my money by placing into more stable currencies; even if this in the short term reduces the ease of trade.

Furthermore, the speculation that the dollars will eventually reach America is an unfounded one, as their use as currency can be maintained outside of America easily, so long as the realisation of the value of a dollar is possible outside of America (like in many poorer countries, especially ones with unstable local currency) – What would be a sensible statement is that a currency (product) will gravitate towards markets where it’s value is realisable.

 

[tjm190]

You obviously aren’t familiar with short selling. If you know that the pound is going to crash against the dollar, you want to sell as many pounds as you can beforehand and then buy them back cheap afterwards, knowing that there value will rise and that you’ve already made a profit.

That is how a run on a currency is created. For people who deal with real money, people who live in a world that you and I are not privvy to, you want the currency that is going to give you the biggest return. Patriotism means nothing to people in that arena.

I’m aware of how short selling works- but a run is not created on a currency unless that currency is over valued or expected to fall already.

 

[tjm190]

You mistake the medium for the end; in that – People want functional value; ie; people want valuable currency that can be traded with the greatest ease for the greatest profit; the medium of their currency (Euro, Dollar, Pound etc.) is only sensible in actualising a potential value, and is only contextually appropriate - ie; in general terms people will want a local currency because it makes it easier to actualise the value of the currency; however to presume that this currency by nessecity must be the local one misses two key points:

Primarily, that the relative values of currencies fluctuate, and therefore it may not be sensible to hold onto a local currency if a nonlocal one is increasing in value (or yours decreasing), in which case one sacrafices liquidity for value.

Secondarily, when countries have financial crises, especially when entering hyperinflation etc. the reliance upon foreign currencies (for stability) can emerge, hence the reliance purely upon a national currency may not only decimate the value, but also reduce the liquidity of cash.

Ie; I am British, and in general terms I want pounds, for I can actualise these with regards for trade for local products etc. However, to me, value superceeds the currency, and if Britain was entering a crises and the currency was going lose value, it would be sensible to preserve the value in my money by placing into more stable currencies; even if this in the short term reduces the ease of trade.

Furthermore, the speculation that the dollars will eventually reach America is an unfounded one, as their use as currency can be maintained outside of America easily, so long as the realisation of the value of a dollar is possible outside of America (like in many poorer countries, especially ones with unstable local currency) – What would be a sensible statement is that a currency (product) will gravitate towards markets where it’s value is realisable.

Yes, I was oversimplifying- a number have nations in South America and such have gotten out of the currency business after their own inflation crises and jumped on the dollar band wagon, and of course many nations/people keep reserves of varying currencies. But the sheer volume of dollars China has limits their options- it would seem difficult for them to dispose of that much currency without investing the majority of it in American business/government. There are other options sure, but none of them offer the return/risk ration present in America.

 

[Moonstruck888]

Yes, I was oversimplifying- a number have nations in South America and such have gotten out of the currency business after their own inflation crises and jumped on the dollar band wagon, and of course many nations/people keep reserves of varying currencies. But the sheer volume of dollars China has limits their options- it would seem difficult for them to dispose of that much currency without investing the majority of it in American business/government. There are other options sure, but none of them offer the return/risk ration present in America.

That is a very naive point of view. China will have no problem whatsoever diversifying what currencies it invests in.

it also means that China can and no doubt will, when the time is right, create a run on the dollar.

 

[Moonstruck888]

I’m aware of how short selling works- but a run is not created on a currency unless that currency is over valued or expected to fall already.

So, let me give you an example of this.

China and America fall out over interests in Taiwan. China then tells the world that it is going to create a run on the dollar. The rest of the world start selling dollars hand over fist.

The American people would suddenly find that the dollar in their pocket was worth a lot less in real terms, causing them to panic and batten down the hatches, exaccerbating the situation further and forcing the US Government to devalue the dollar.

When China does create the run on the dollar, the short sellers then buy back the devalued dollars at rock bottom prices, knowing they have to go up in price at some point, leaving the USA to contemplate how they really should have regulated financial markets when they had the chance…

 

[Leela]

So, let me give you an example of this.

China and America fall out over interests in Taiwan. China then tells the world that it is going to create a run on the dollar. The rest of the world start selling dollars hand over fist.

The American people would suddenly find that the dollar in their pocket was worth a lot less in real terms, causing them to panic and batten down the hatches, exaccerbating the situation further and forcing the US Government to devalue the dollar.

When China does create the run on the dollar, the short sellers then buy back the devalued dollars at rock bottom prices, knowing they have to go up in price at some point, leaving the USA to contemplate how they really should have regulated financial markets when they had the chance…

What is a “run on the dollar”?

 

[Moonstruck888]

What is a “run on the dollar”?

It’s a situation in which investors in the dollar change their dollars for other currencies or sell them off and the US Federal Reserve does not have sufficient funds to cover the withdrawl of funding.

Ultimately it would cause the dollar to devalue.

 

[Hooding_Trees]

It’s a situation in which investors in the dollar change their dollars for other currencies or sell them off and the US Federal Reserve does not have sufficient funds to cover the withdrawl of funding.

Ultimately it would cause the dollar to devalue.

The irony of it all, that COMMUNIST China OWNS capitalist USA.

nypost.com/p/news/opinion/opedcolumnists/china_debt_bomb_onc23nzJdiQR7gTLkrwSpL

“But that’s not all. As its booming economy becomes more global, China is also the world’s largest holder of foreign-currency reserves. Most of that is in US dollars.** Indeed, without most Americans realizing it, China has become the largest foreign holder of US dollars in the world.** How many dollars foreign exchange traders at the Bank of China decide to sell or buy on any given day is increasingly determining whether the dollars in our purses and wallets buy a little or a lot.”

 

[tjm190]

So, let me give you an example of this.

China and America fall out over interests in Taiwan. China then tells the world that it is going to create a run on the dollar. The rest of the world start selling dollars hand over fist.

The American people would suddenly find that the dollar in their pocket was worth a lot less in real terms, causing them to panic and batten down the hatches, exaccerbating the situation further and forcing the US Government to devalue the dollar.

When China does create the run on the dollar, the short sellers then buy back the devalued dollars at rock bottom prices, knowing they have to go up in price at some point, leaving the USA to contemplate how they really should have regulated financial markets when they had the chance…

The US government does not control the value of the dollar because we do maintain a fixed exchange rate. And exactly what regulations would you recommend imposing?

And yes, China could absolute destroy the currency they’ve been saving up over the past several decades only to create a world wide recession that would hit their export market harder then ever before. Sounds like sound policy to me.

 

[Moonstruck888]

The US government does not control the value of the dollar because we do maintain a fixed exchange rate. And exactly what regulations would you recommend imposing?

A world wide ban on short selling and hedge funding, punishable by going to jail for a very long time.

And yes, China could absolute destroy the currency they’ve been saving up over the past several decades only to create a world wide recession that would hit their export market harder then ever before. Sounds like sound policy to me.

The trick is to wait for a time that would be most disastrous for the USA and most propitious for China. A situation like WWII for example, where they could sell you a loan that no one in their right mind would want to accept, maybe have you throw a few patents in with the re-payments and in the mean while, have all the politicians smiling and talking about “special” relationships.

 

[tjm190]

A world wide ban on short selling and hedge funding, punishable by going to jail for a very long time.

I haven’t looked into Germany’s moratorium, but how exactly do you ban short selling? Are you not allowed to sell assets you’ve borrowed? And America doesn’t have the power to ban short selling (world wide that is)- and again, unless everybody agrees to a ban, it won’t work. If it can happen anywhere, it will keep happening.

The trick is to wait for a time that would be most disastrous for the USA and most propitious for China. A situation like WWII for example, where they could sell you a loan that no one in their right mind would want to accept, maybe have you throw a few patents in with the re-payments and in the mean while, have all the politicians smiling and talking about “special” relationships.

You keep acting as if Britain could have hoped for a better deal- the deal as it stood was about as close to charity as one could hope for. (And again, the patents were exchanged for a reduction of billions in 1945 dollars)

And I’m abit foggy on how that is related to China- anything that hurts US imports hurts China. So, at present, China can not benefit from such a course of action.

 

[Hooding_Trees]

And I’m abit foggy on how that is related to China- anything that hurts US imports hurts China. So, at present, China can not benefit from such a course of action.

China is currently growing so you are correct. However when the time is right, probably when their infrastructure is equal to that of the west on a national level, and China wants to see the end of the USA as a superpower, they will.

China does not have to cripple America, and nor will it, what it will do is hurt it just enough to ensure that the USA cannot afford the billions of billions that currently goes into it military.

Now doubt at that point 15-20 year from now it will be the Chinese that are running about the globe invading countries like Iraq and stealing all their natural resources – Cough Liberating them

 

[Leela]

It’s a situation in which investors in the dollar change their dollars for other currencies or sell them off and the US Federal Reserve does not have sufficient funds to cover the withdrawl of funding.

Ultimately it would cause the dollar to devalue.

Is that something we should expect China to want to do? Wouldn’t doing that hurt them as much as us?

Can you reference any articles on this concern? Is there any reason to believe that this isn’t just one of those conspiracy theories that few people who are not members of militias in Montana take seriously?

 

[Moonstruck888]

Is that something we should expect China to want to do? Wouldn’t doing that hurt them as much as us?

Can you reference any articles on this concern? Is there any reason to believe that this isn’t just one of those conspiracy theories that few people who are not members of militias in Montana take seriously?

I would expect China to do that if I were a US economist. The USA has shipped industry out to China at an alarming rate in the last few years and China’s growth rate is far higher than the US or the EU. In Europe, apart from Britain, most countries had the good sense to protect their industries. China is already the manufacturing superpower on this planet. Now that George Bush has run the Federal Reserve into the ground, the economic spoils will follow, whether it is in one year, five years or twenty years, you can take it to the bank.

Just look at the tone the USA is taking with China, politely begging them not to exchange their US Federal Bonds. Twenty years ago, the USA wouldn’t have asked China anything, you’d have made them do as they were told.