The End of FIAT money?

Alright so I did a quick search and couldn't find anything on the world Economy and the current financial problems around the world, so I thought I would make a little thead.

As many of you know and experience first hand, 2008 was a rough year for America and various other countries, most notably in the Euro zone. England, France, Netherlands, Greece, Iceland were all immediately affeced by the financial/banking crisis and various others are suffering now (Portugal, Spain, Italy).

Interestingly enough, during 2008 and up until Christmas, Canada actually seemed immune to the mayhem that was occuring South of our boarders. Despite a sharp drop in the equity markets (TSX) from about 14k, business went on as usual here. We didn't have major drop offs in GDP, employment, disposable income. Everything in Canada, or at least in Montreal went off without a hitch. People began to praise our tighter monetary policies, morgage system, and banking rules, that allowed us to avoid the accumulation fo toxic assets that U.S banks were spreading all over the world.

However, this month the government announced that inflation in Canada hit 3.3%. Just like the rest of the world, inflation seems to be rising at a scary pace around the world. So what exactly is happening?

http://www.theglobeandmail.com/repo...y/inflation-rate-surges-to-33/article1990859/

Fiat money is happening! America continues to take on massive amounts of federal debt, continously raising the debt ceiling time after time after time, spending uncontrollably and without check.

http://abcnews.go.com/Politics/geithner-congress-raise-debt-ceiling/story?id=13393920

In return the FED prints more and more and more money to service these added debt levels, to the tune of trillions of dollars. No other country is able to do this, the US is literally making money out of nothing. They are allowed to do this because the USD is the reserve currency of the world. Everyone wants it and uses it for transactions. China receives its good for USD, Canadian (timber, oil), Saudi Arabia (Oil) Germany products (Cars), etc...The list goes on. As a result America keeps printing money, and its the world who begins to absorb this debt, and inflation, especially for those markets that peg its dollar against the USD (China)....

But what happens if suddenly the world doesn't want USD anymore...well, thats when scary things start to run through my brain. How about the crisis of 2008 tenfold...

The 5 largest emerging economies, Brasil, China, India, China and South Africa have recently decided, and with no warning to the U.S.A, to discontinue using the USD as a medium of exchange when making purchases between themselves.

http://articles.economictimes.india...83_1_economies-food-security-local-currencies

This is a HUGE problem. It means that people don't trust the USD anymore. As soon as this begin to take effect, and countries realize around the world that the USD has a lesser and lesser influence, they will begin to demand that their currency be used. If the FED continues to print money (never mind the money that hasn't been released yet), American dollars wil flood the market. Add the massive amount of commedities that China, India have been buying up, whether it be actual gold, silver, copper, or the entire mining companies themselves (With American dollars no less, clever little bees) and you have a recipe for disaster....Hyperinflation, and I fear fiscal and social choas...

No more USD reserve currency, the end of Fiat money?

Brasil is actually a decent option. I was actually looking at the option of exercising my Portuguese passport (Almost free movement between Luso countries) to move there. China and Russia are fueling Brasil growth at an extraordinary rate (Mostly Commodities), and have a few other sectors (Tech, Tourism) that are growing. Add to the fact that their Government seems to be improving with each new term and its a desirable place to live.

Their President, and former president asked warned Portugal not to take a Euro or IMF bailout, that if worst came to worst they would give a helping hand (might have been a better idea).

Thats wishful thinking. The emerging markets and especially China showing signs of trying to move away from the USD is dangerous....

China. They hold about 3 trillion. They would suffer if they left it, alot. But they aren't. They are changing those same USD dollars into various assets. They are buying Euro's, last year they bought over 200 tons of Gold Bullion and are on schedule to outpace that number by August this year (Biggest bullion buyer in the world) they are buying hard commodities, entire mining operations. They are buying various companies left and right from tech to construction.

You see a trend. They are getting rid of the USD, at a crazy rate. They see the writing on the wall. The United States of America is printing obscene amounts of money, China is happily taking it in, and then they are turning around and buying everything with those same dolllars. Even more worrisome is the buying of American companies/assets, cause then they flood the US market with even more USD....

The USD is going to remain the world reserve currency for decades, likely our entire lifetimes. I'm in agreement with Cr7torossi.

The Chinese are both the biggest holder of US treasuries right now, and still remain one of their biggest buyers of recent releases.

However, what does need to happen is a re-balancing of the world currency structure, and this is the route cause to most of the political posturing right now.

The Chinese are the biggest manipulators of their currency (Yuan) out of all the major players. In reality, they should be letting their Yuan appreciative and rise naturally right now against the USD right now. They aren't.

They artificially suppress it because of their trade imbalance, and their massive need to keep the export machine churning over. And why do they need that export chain churning?

Because they need someone to consume their exports because their own domestic consumption is in no way great enough to support their production requirements, and more importantly, they are scared shitless of their asset bubble popping in the near term. The US and Chinese have a very symbiotic economic relationship right now, and the advantage the US have is that they are far, far more stable politically and socially than the Chinese.


Although we are likely heading for greater inflation (and 3.3% in Canada is peanuts in historical terms right now Joel - but that's a seperate topic) the Euro zone disbanding their own Euro is more likely than the "end of FIAT" money and the USD as world currency.

And I should add that the disbandment of the Euro is unlikely in and of itself.

Depends, what your motivation for studying in the UK?

While UK post secondary is currently experiencing some of their most savage cuts in recent memory, and will continue to experience such cuts, one cannot completely discount the reputation their institutions have earned over the years. And for good reason. It all comes down to the personal motivation for your move, which I can't answer.

All the scare mongering of this particular thread should have no bearing on your decision though.

Who remembers Joel as a joke cracking, bunda loving, moustache wearing, bball playing, porn site affiliate promoting kind of a guy?

What the hell happened to you man?

Come on man! I'm still that guy (Minus the stache) they just made me get a job and become a productive member of society those bastards.

Yes. I already touched base on this point. They are very active in the world market getting rid of those dollars. They are changing those same USD dollars into various assets. They are buying Euro's, last year they bought over 200 tons of Gold Bullion and are on schedule to outpace that number by August this year (Biggest bullion buyer in the world) they are buying hard commodities, entire mining operations. They are buying companies left and right from tech to construction and snatching up properties around the world.


Also to note. They have about 1 trillion in Treasury whether it be 10 years bonds or 30 years bonds (Some of which will be coming to maturity in ~ 10 years). The rest is supposedly liquid... 2 > 1. I am sure they are willing to let go of 1 trillion after repositioning themselves. Because indicators are pointing that exactly what they are doing.

Moving towards one currency, gold standard, Geographic currency. What do you propose?

Yes. Hit the nail on the head. But do you see why. Peg the dollar, as a result its still beneficial to import from China, they take in USD. USD remains fairly stable as inflation is spread around the world instead of remaining within its border. In turn China takes the USD and spreads it around the globe to other countries with the purchase of various assets which I described earlier. (I.E: They weaken world markets at the same time and make their country stronger in the long run.) After they have diversified their USD holding, and have snatched up many many companies, properties and other assets. They UNPEG the yuan to the dollar. USD is no longer the reserve currency of the world. America printed money now remains betweens its own boarders. Inflation in U.S skyrockets, Gold goes even higher, America is hoping Manufacturing jobs return to their shores, but oppps, China bought everything...

Of course, but look at inflation rising steadily across the globe, at similar rates. Euro won't disband. I believe if any of this is to happen the USD will lose its position as the worlds reserve currency before the Euro state fails (Chine is buying Euro with USD, they see at as alternative).

Another scary point. Germany has been asking for their Gold back for sometime now and the United States refuses to release it. Does that make any sense? If they weren't worried about the USD they would release it.