Posted on 01/08/2009 11:10:20 AM PST by Lorianne
The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.
Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.
The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.
Writing on his blog , Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."
(Excerpt) Read more at telegraph.co.uk ...
Why do I get the feeling that anti-American jerks the world over are trying their best to drag this country down?
Lots-o-bad stuff’s going to happen to us, but the crash of the dollar isn’t one of them.
“Why do I get the feeling that anti-American jerks the world over are trying their best to drag this country down?”
Because they are...It will be a huge mistake to thier economies as well if it happens. The domino effect will happen if teh dollar collapses.
But nobody overseas approaches the damage the Democrat Party is trying to do to our country.
I hate this talk as much as you do but there is the possibility that this may indeed happen. Who has 3 Trillion to spend on our bonds and even if they did, why buy them if your return is 0%. It sounds like a bad investment unless the world is going to hell and there is no more gold to be had. That’s the doomsday scenario, isn’t it?
Take away the BDS inspired sixth paragraph, and he makes a lot of good, and important points. Sometimes, your friends won’t tell you what you need to know. Sometimes, it takes a jerk.
its coming
This assumes other economies and currencies are less damaged.
You must believe his every word. He’s a former policymaker for the Bank of England, and British banks have been doing so well.
;-)
Looks like Willem isn’t meeting his goals for selling Euros.
I guess we know where this guy is coming from. Sounds like he has a political beef with the US as much as an economic complaint.
I'd like to ask this professor exactly where does he think that these foreign investments are going to go? If you liquidate your US investments, you must be buying something that you perceive to be better, right? As long as there is no single alternative, then the US slide (assuming he's right about that) will be a long one, but not unreversible.
unreversible = irreversible. Sheesh!
While I think one must be realistic and careful in how the finacial mess is handled, I think one must be equally careful regards propaganda and self-fulfilling prophecies.
It is very fashionable these days to talk down America but these jerks would do well to remember while it may be fun to bash the US, if indeed we do go down- the whole world is going with us.
The fall of the US $, which is coming sooner rather than later, will be encouraged by the Treasury Dept. and the Federal Reserve. The massive debt load requires cranking up the printing presses, inflating everything, while deflating the US $. Debt is then paid back with cheaper dollars.
The only other choice is for the US to default on it’s debt.
I think “Professor” Buiter is engaging in a little bit of ‘wishful thinking’. Need I remind him that it is the UK that has been failing to sell bonds to prop up all their socialist debt?, NOT the USA?
Spending $7 TRILLION in the past year is NOT going to help.
Stop whistling past the graveyard.
It seems more people would rather buy our bonds than those of the UK and Germany.
there is sound reasoning behind this. If anyones economy is going to improve first, it will be the USA's. It is far more likely that you will loose out buying euro's and sterling pounds and other currencies in the long haul as the world economy sours and then recovers.
Whether The prof likes it or not, it will be the American economy that drags the rest of the world to recovery, not the other way around.
Buy silver, people, and buy it now.
A Euronobody says something about America.
Agreed. England, China, maybe Russia? Where would smart investors put their money? In the U.S. even at 0%. It might be long and painful, but not as painful as the rest of the world.
True enough. But lets not forget, or fail to notice that we are in a period of deflation right now, which will lessen the effects of any future inflation.
Commodity prices are at record lows, which tells us just how much the world economy has slowed. When we see commodity prices in a stable rise, that will be the main indicator of the world economy (especially ours) recovering. I just don't see any indication of that happening in the slightest until spring. Even then I doubt we will see anything spectacular as far as recovery goes this year at all. At best we can hope things don't get any worse.
The printing presses may be shifting into a higher gear as we speak.
U.S. debt is losing its appeal in China
This was always going to happen at some point in our future because of the huge liability that is Social Security. It appears that the current financial downturn is the excuse that they will use to devalue all of our assets so that the government can continue 'playing the game'.
There isn't any. (except fake paper silver)Silver is oversold on paper, if there was a call for delivery, silver prices will jump. But because silver is a much more an industrial commodity than is gold, don't expect much movement in silver prices until all commodities begin to move upwards. Then you might see silver prices jump
You can’t print endless dollars and not end up making them worthless.
You can only have a currency collapse vis-a-vis one or more other currencies.
Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)
I try to be a little more optimistic. Certainly there will be regional ups and downs, which will make things seem worse or better depending where you live. I think we will get a much clearer picture as spring approaches. There is no doubt that a lot of economic stability will hinge on local infrastructure-make work projects all over the country. whether that results in the kind of spending needed remains to be seen.
One can guess as much as desired that a dump of dollar backed assets will take place.
As the professor says ‘old habits die hard’ because the dollar is still viewed as a safe haven.
And that is the key,’safe haven’. In order for the dollar to be dumped, there must be a new safe haven.
And there is no alternative safe haven anywhere because it is the US Market that drives international commerce.
The only way for an alternative safe haven to emerge is for the US economy to collapse completely while another economy emerges as a leader. The Japanese have a shot but they too have problems.
So the bottom line is the professor is blowing smoke and doing nothing more than reflecting exasperation.
Ignoring what leftist, anti-American politial hacks predict (desire!), money instinctively gravitates to most secure, and looking out over the vast wide world, what's the alternative, even when everyone knows Santa Claus is not real!
Or, maybe Germany’s inability to sell all of its bonds is the canary in the coal mine...the first salvo in a domino collapse that begins with the G7 and ends with the United States. I have to laugh at CNBC...if they were around in January 1930, they’d be telling folks the worst is over and a rally is underway...don’t miss it!!!
Yup. It's them furriners. The fact that the treasury is just printing new money like there is no tomorrow has nothing to do with this.
Sigh
Who said to buy it on paper? I’ve been buying 1oz Eagles since they were $4 each. The coins are going to be your grocery money if the fiat currency goes to hell.
That won't happen until the USA break up into the communists and people / states that want to be free.
I am not absolving our gubmint of anything. That is independent of the actions and motives of people like Willem Buiter.
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