Bharat Rakshak

Christopher Sidor wrote:The American senate has a proposal which will lead to kicking the can down the road. The govt will be funded till mid jan 2014 and the debt ceiling would be raised till feb 2014. So Obama had to climb down and accept the governance by crisis, with the next one due in early 2014.

Off course this depends on the US House of Representatives actually accepting the US Senate proposal. Previously too US House of Representatives had rejected a Senate proposal leading to very nearly the US Economy derailing in 2008. They only accepted the Senate proposal when the FDIC insurance limit was raised to 2.5 lakh dollars and a few other changes. Will we see an encore? Or will the republicans keep their powder dry and hit next year or closer to the next US Presidential Elections?

Satya_anveshi wrote:There is simply lack of debate on policy basics of which the big ticket item of Defense and defense related spending that eats out significant portion of budget and even bigger portion of tax revenues.

19% of the budget ($3.5T) and given the deficit spending in excess of $1T, it would constitute about 28% of tax revenues. With increasing Russian and Chinese calls to adher to the international law (as in UN), does US need to sustain that kind of defense spending going forward? Wwhere is any level of discussion around this? Instead what we hear is repeated threats on social security payments of poor folks who already paid into it.

Satya_anveshi wrote:This is from 2011 and see how almost similar the arguments were then (then meaning from Clinton's time to Obama2011 to Obama2013). Point is that it is all part of the playbook while the real work (or lack of) is someplace else. This is evident from the fact that republicans have not come up with a strategy to hold their ground in all these years.

Basically, US is in a systemic fix - US constitutional stand on the having a "debt limit" (does not matter what it is) and its centrality to having symbolic role for the House. US President will spend the heck out of the system and House can't do jack about it but to approve and raise the limit. Getting rid of the limit will take away even that symbolic role and supreme court might even pitch in questioning the decision.

Repub decision to push it for 3 months is basically making Obama come back to them with hat in hand (and Obama promptly will act like he is huffing, puffing, and kicking a$$) when they will have to raise it yet again. show must go on!!!

TSJones wrote:^^^^^Let's see if they can come up with a system that lets some countries export more than they buy to the detriment of their citizens. If they can find a monetary system that continually allows that, then good for them. Nobody has come up with anything yet for a global scale.

I know a system that is completely neutral, it is called the gold standard. Let's everybody get on that. Then we will see for how long China can continue to export without buying other countries manufactured goods and services. Now, what country or agency wants to guarantee the steady price of gold?

Maybe the UN?

Gold standard is not neutral. Gold standard is deflationary. Gresham law- bad money drives out good money.

Neshant wrote:^^^A currency that is supposedly backed by gold but cannot be exchanged for the physical metal (like gold ETF) is automatically suspect. In a crisis, the market will test the theory of whether the gold etf actually represents real gold or is just a proxy for it by selling off the ETF and buying the physical.

TSJones wrote:^^^^^Find some country that is willing to be completely transparent, open up their economy to everyone regardless of nationality or political persuasion, allowed untampered ownership of its coporations and land, have relatively easy or unrestricted immigration, oh, the list goes on! Then bingo, you will have a new reserve currency. No problemo. You will have taken America's sandwich out of its mouth and eaten it. Now, who wishes for their country to volunteer?

Gold standard is not neutral. Gold standard is deflationary. Gresham law- bad money drives out good money.

Yes, deflationary, however it would not be an "American" reserve currency, thus my point.

Austin wrote:They can perhaps use a combination of IMF SDR and Gold as some sort of reserve currency for the future ...... as to who will manage it perhaps WB or IMF or some other body that involved international financial institution.

This is not about China export or import issue here but about the larger issue of stability of Global Economy and a acceptable notion of Reserve Currency.

The only reason $ exist as reserve currency is due to TINA factor but that factor will remain unless some one does something about it.

Austin wrote:

Neshant wrote:^^^A currency that is supposedly backed by gold but cannot be exchanged for the physical metal (like gold ETF) is automatically suspect. In a crisis, the market will test the theory of whether the gold etf actually represents real gold or is just a proxy for it by selling off the ETF and buying the physical.

I am some how suspicious of the Gold ETF or the paper gold investement we have in the Indian market , every big player are into it and it is always sold as better then keeping physical gold in ur bank and faster liquidity.

I suspect these paper gold are not really backed by real gold for most part and it is based on stastics that not every one will exchange it for real gold ( they say you can always trade the paper gold for real gold if required ) and is like some sort of ponzi scheme.

Better to buy real gold and keep it it could be short time headache but it will be a safe bet.

How can it not be an American reserve currency? Isnt the whole idea of a currency on gold standard the permit for the country whose currency is on the reserve, print when ever they wish.

panduranghari wrote:Come on now Austin. Think this thing through.
So often in commentaries of this sort that propose a “solution”, the author is strangely obsessed with the notion of replacing the dollar (as a reserve currency unit) with simply another institutional emission of similar ilk (such as currencies of other nations, SDRs, bancors and whatnot). Their avoidance of any meaningful discussion of the most obvious remedy is almost pathological in the extreme. To be sure, we don’t need to invent any manner of universal reserve currency to fill the role of a unit of account because that role is already served in a fully functional capacity for any given country by its own monetary unit.

What IS desperately needed, however, is a universally respected reserve asset capable of filling our current void with a reliable presence that serves as a store of value. And far from needing to be conjured or created by complex international committees, that asset is already in existence and held in goodly store by central bankers and prudent individuals around the world — it’s known as gold. From amid the ruins of a chaotic financial crisis that was brought about by its own complexity, a degree of sanity will prevail, and gold as a freely floating asset will arise in stature as THE important element of global monetary reserves. The floating aspect is the vital evolutionary improvement over all previous structural monetary failures which tried to use a gold standard at a fixed price (i.e., unit of account) perversely joined to the very elastic money supply of any given country’s banking system.

Theo_Fidel wrote:Reminbi is the paper currency that has been printed the most over the past 20 years or so. There is 2-3 times as much renminbi as there are dollars sloshing around per some recent reports. If necessary Panda will print more. The CPI inflation in china is much higher than USA.

Austin wrote:

panduranghari wrote:Come on now Austin. Think this thing through.
So often in commentaries of this sort that propose a “solution”, the author is strangely obsessed with the notion of replacing the dollar (as a reserve currency unit) with simply another institutional emission of similar ilk (such as currencies of other nations, SDRs, bancors and whatnot). Their avoidance of any meaningful discussion of the most obvious remedy is almost pathological in the extreme. To be sure, we don’t need to invent any manner of universal reserve currency to fill the role of a unit of account because that role is already served in a fully functional capacity for any given country by its own monetary unit.

Agree the idea to replace $$ is to bring in more stability to the status of reserve currency so that is not tied to political situation ( eg Debt Ceiling ) or Printing Money backed by nothing i.e unlimited money by just raising the ceiling.

What IS desperately needed, however, is a universally respected reserve asset capable of filling our current void with a reliable presence that serves as a store of value. And far from needing to be conjured or created by complex international committees, that asset is already in existence and held in goodly store by central bankers and prudent individuals around the world — it’s known as gold. From amid the ruins of a chaotic financial crisis that was brought about by its own complexity, a degree of sanity will prevail, and gold as a freely floating asset will arise in stature as THE important element of global monetary reserves. The floating aspect is the vital evolutionary improvement over all previous structural monetary failures which tried to use a gold standard at a fixed price (i.e., unit of account) perversely joined to the very elastic money supply of any given country’s banking system.

“…I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
-John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
-William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963

Austin wrote: But then to be backed up Gold wont it limit the amount of currency in circulation ? Surely the gold available now is far far lower then the currency in circulation , So Gold alone cannot be the only asset one can back their currency with there should be combination of something says Gold , SDR , Natural Resource like Oil ?

Austin wrote:BTW what is wrong with Euro regaining far greater status as reserve currency then it is now ? Surely they are in crises like USD but does Euro has better long term sustainability ?

Austin wrote:Also what is wrong with Yuan as reserve currency other then they are chinese and we dont like them and they are not democratic ........ if Chinese Economy attains the 2nd or 1st largest economy status then they are bound to raise the Yuan as reserve currency ......after all there are so many currency other then $$ and Euro , like Australian or Canadian or UK pound that are convertible so why cant Chinese currency enjoy the same status

I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
-John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
-William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963


Lesson: When someone says you can exchange paper for precious metals – make the swap before they change the rules.

the G-20 group of wealthy nations authorized the issuance of $250 billion dollars worth of an alternative currency called "Special Drawing Rights". Special Drawing Rights (SDR), are a currency issued by the International Monetary Fund, an inernational organization which provides aid to countries which are struggling financially.

Russia also backs making the SDR the world's reserve currency, and that Russia wants the SDR to be pegged to a basket of yuans, rubles and gold (currently, the SDR is pegged to four currencies: the dollar, yen, euro and sterling).

Indeed, the head of the China's central bank wrote recently:

Though the super-sovereign reserve currency has long since been proposed, yet no substantive progress has been achieved to date. Back in the 1940s, Keynes had already proposed to introduce an international currency unit named "Bancor", based on the value of 30 representative commodities. Unfortunately, the proposal was not accepted. The collapse of the Bretton Woods system, which was based on the White approach, indicates that the Keynesian approach may have been more farsighted. The IMF also created the SDR in 1969, when the defects of the Bretton Woods system initially emerged, to mitigate the inherent risks sovereign reserve currencies caused. Yet, the role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system.

the countries experiencing the biggest improvements in their current accounts did so not because of the targeted export growth, but because of fewer imports. In Spain, for example, the current account -- the broadest measure of trade because it includes investment -- improved 8.9 percentage points as a share of GDP between 2007 and 2012. While exports rose an annual average 2 percent over that period, they were outpaced by a 3 percent decline in imports.
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Current account disparities endure, albeit at lower levels. While the aggregate surplus of emerging markets is down from $676 billion in 2008, it remains at $300 billion this year. The deficit of advanced countries fell to $50 billion from $479 billion.
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Two of the poorest major U.S. trade partners, Mexico and China, increased their importance as import sources and even more as destinations of exports, economist Alexander Monge-Naranjo wrote in a study published last month. By contrast, Canada, Japan, Germany, the U.K. and France lost some of their importance as providers and purchasers of goods.
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The goods purchased by lower income groups have tended to experience faster price increases than the goods purchased by higher income groups
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This has meant that almost universally across developed economies the economic downturn meant that it was more expensive to be poor than to be higher-income, and as a result inflation inequality persisted.

This is, in brief, the answer to the question why capital shows so marked a tendency to export itself abroad. On the one hand, capital accumulates in a civilised country so fast that the standard of living of the working classes, and their demands as consumers, do not keep pace with it. On the other hand it seeks abroad for labour which can be even more easily and ruthlessly exploited than that of Western lands. These are the two economic roots of Imperialism.

To complete our survey of the motives of "real politics," it is necessary to glance at two powerful but secondary interests which Imperialism calls into action as it develops. There is first of all the social pressure due to the fact that Imperialism makes careers for "younger sons." Distant possessions have to be administered, and native levies must be officered. Even in James Mill's time---and few men knew India better---this was so obvious that he defined the empire as a system of out-door relief for the upper classes.

A peer may hope for anything from a viceroy's almost regal glory to the decent splendours that attend the governor of some minor colony. The posts in the Army and the Civil Services have long been so numerous that they are opened to the sons of the prosperous middle classes. 1 To these people India and Egypt have acquired at last a real meaning---they are the places where a son, a brother, or at the least a cousin, is "doing well."

Every demand for self-government in India or Egypt is a blow at the vested interests of that comfortable family in Kensington or Yorkshire. Every revolt threatens, it may be, the life of their nearest and dearest. There must be tens of thousands of families, all relatively wealthy, influential and well educated, to whom the sudden ending of the Empire would mean financial ruin and social extinction. The larger the Empire grows, the more numerous are the posts which it has to offer.

The well-known facts about India supply some measure of this enormous force, half-social, half-economic, which makes for Imperialism. The annual drain of wealth from India, the indirect tribute which it pays to the ruling class at home, is believed to amount to about thirty millions sterling, consisting of the interest on capital sunk in India or lent to India, of pensions paid to ex-Anglo-Indians now resident at home, and of remittances sent home by Anglo-Indians resident in India.

This sum is, of course, in great part a payment for real services rendered by Englishmen to India, but the rate of remuneration is high, and the services are sometimes such as Indians do not desire and often such as natives could more cheaply perform. It differs from similar payments made to capitalists, officials and officers at home chiefly in this, that it is spent not in India but in a foreign country.

In that sense it is a tribute, a sum of wealth annually withdrawn from India and spent for the advantage of Englishmen in England. When Imperialists argue that our rule is providentially necessary to India, it is well to remember that their judgment on such a point is biassed by the fact that our rule in India is profitable to ourselves.

Enquire why it is that, despite the eulogies on the martial virtues and the proved loyalty of Sikhs and Moslems, native Indians are not allowed to hold commissions in the Indian army above subaltern rank, and the only candid answer will be that the closing of these posts to the young men of the English upper and middle classes would not be tolerated by public opinion at home. The same influences have restricted the efforts made by reforming viceroys to admit a larger proportion of Indians to the Civil Service. The real obstacle to their employment in its higher branches is not so much the supposed weakness of Indian character, as the interest of the educated class in England.

The US debt jumped above 17 trillion dollars for the first time in history, the Treasury Department said Friday. The debt at the end of business Thursday, after Congress lifted the debt limit, was 17.075 trillion dollars.

On Wednesday, the debt was 16.7 trillion dollars - a figure held steady by Treasury Secretary Jacob Lew as he used extraordinary measures to keep it under that mandated limit since May.

After weeks of stalemate and a government shutdown, Congress agreed on Wednesday to lift the debt limit until February 7, when the battle will resume again unless Republicans and Democrats come to an agreement before then.

The manoeuvres that Lew had undertaken since May meant there was immediate need to replenish various pension funds and other sources he had borrowed from, explaining the huge jump in the debt.

TSJones wrote:

I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
-John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
-William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963


Lesson: When someone says you can exchange paper for precious metals – make the swap before they change the rules.

Well yes, but in this case you had until August 15, 1971 when the US stopped the dollar convertibility to gold.