XIAM007

Making Unique Observations in a Very Cluttered World

Saturday 9 November 2013

How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System -

How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System - 



The death of the dollar is coming, and it will probably be China that pulls the trigger.  What you are about to read is understood by only a very small fraction of all Americans.  Right now, the U.S. dollar is the de facto reserve currency of the planet.  Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars.  More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it.  As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world. 

Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.

As I mentioned above, nations all over the globe use U.S. dollars to trade with one another.  This has created tremendous demand for U.S. dollars and has kept the value of the dollar up.  It also means that Americans can import things that they need much more inexpensively than they otherwise would be able to.

The largest exporting nations such as Saudi Arabia (oil) and China (cheap plastic trinkets at Wal-Mart) end up with massive piles of U.S. dollars...

Are You Ready For The Death Of The Petrodollar - Photo By Revisorweb

Instead of just sitting on all of that cash, these exporting nations often reinvest much of that cash into low risk securities that can be rapidly turned back into dollars if necessary.  For a very long time, U.S. Treasury bonds have been considered to be the perfect way to do this.  This has created tremendous demand for U.S. government debt and has helped keep interest rates super low.  So every year, massive amounts of money that gets sent out of the country ends up being loaned back to the U.S. Treasury at super low interest rates...

United States Treasury Building - Photo by Rchuon24

And it has been a very good thing for the U.S. economy that the federal government has been able to borrow money so cheaply, because the interest rate on 10 year U.S. Treasuries affects thousands upon thousands of other interest rates throughout our financial system.  For example, as the rate on 10 year U.S. Treasuries has risen in recent months, so have the rates on U.S. home mortgages.

Our entire way of life in the United States depends upon this game continuing.  We must have the rest of the world use our currency and loan it back to us at ultra low interest rates.  At this point we have painted ourselves into a corner by accumulating so much debt.  We simply cannot afford to have rates rise significantly.

For example, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has been much higher than that at various times in the past), we would be paying more than a trillion dollars a year just in interest on the national debt.

But it wouldn't be just the federal government that would suffer.  Just consider what higher rates would do to the real estate market.

About a year ago, the rate on 30 year mortgages was sitting at 3.31 percent.  The monthly payment on a 30 year, $300,000 mortgage at that rate is $1315.52.

If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage would be $2201.29.

Does 8 percent sound crazy to you?

It shouldn't.  8 percent was considered to be normal back in the year 2000.

Are you starting to get the picture?

We need other countries to use our dollars and buy our debt so that we can have super low interest rates and so that we can afford to buy lots of cheap stuff from them.

Unfortunately, the truly bizarre behavior of the Federal Reserve and the U.S. government over the past several years is causing the rest of the world to lose faith in our currency.  In particular, China is leading the call for a "de-Americanized" world.  The following is from a recent article posted on the website of France 24...

For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback's role as the default global reserve unit.

But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China's official Xinhua news agency called for a "de-Americanised" world.

It also urged the creation of a "new international reserve currency... to replace the dominant US dollar".
So why should the rest of the planet listen to China?

Well, China now accounts for more global trade than anyone else does, including the United States.

China is also now the number one importer of oil in the world.

At this point, China is even importing more oil from Saudi Arabia than the United States is.

China now has an enormous amount of economic power globally, and the Chinese want the rest of the planet to start using less U.S. dollars and to start using more of their own currency.  The following is from a recent article in the Vancouver Sun...

Three years after China allowed the yuan to start trading in Hong Kong’s offshore market, banks and investors around the world are positioning themselves to get involved in what Nomura Holdings Inc. calls the biggest revolution in the $5.3 trillion currency market since the creation of the euro in 1999.
And over the past few years we have seen the global use of the yuan rise dramatically...

International use of the yuan is increasing as the world’s second-largest economy opens up its capital markets. In the first nine months of this year, about 17 percent of China’s global trade was settled in the currency, compared with less than one percent in 2009, according to Deutsche Bank AG.
Of course the U.S. dollar is still king for now, but thanks to a whole host of recent international currency agreements this status is slipping.  For example, China just recently signed a major currency agreement with the European Central Bank...

The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.

"It's a way of promoting European and Chinese trade, but not doing it with the U.S. dollar," said Brooks. "It's a bit like cutting out the middleman, all of a sudden there's potentially no U.S. dollar risk."

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The United States Has More People In Jail Than High School Teachers And Engineers -

The United States Has More People In Jail Than High School Teachers And Engineers - 

Screen Shot 2013-11-08 at 9.25.20 AM

America has become a gigantic gulag over the past few decades and most of its citizens don’t know, or just don’t care. One of the primary causes of the over incarceration in the U.S. is the absurd, tragic failure that is the “war on drugs”, and indeed nearly half of the folks in prison are there for drug related offenses. Making matters worse is a rapidly growing private prison system, which adds a profit motive to the equation. Recently, I wrote an extensive rant against the private prison system and provided details on how it works in:  A Deep Look into the Shady World of the Private Prison Industry.

Now here are some of the sad facts. There are 1.57 million people in federal and state prison (does not even include county and local jail) according to the Department of Justice. That’s above the nation’s 1.53 million engineers and 1.05 million high school teachers.

More from the Huffington Post:

If sitting in a prison cell was a job, it would be one of the most common jobs in the United States. In 2012, there were some1,570,000 inmates in state and federal prisons in the U.S., according to data from the Justice Department.

By contrast, there were about 1,530,000 engineers in America last year, 815,000 construction workers, and 1 million high school teachers, according to the Bureau of Labor Statistics.

There were also 750,000 car technicians.
Yep, you know it. USA! USA!

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Las Vegas Installs 'Intellistreets' Light Fixtures Capable Of Recording Conversations... -

Las Vegas Installs 'Intellistreets' Light Fixtures Capable Of Recording Conversations... - 



The Las Vegas Public Works Department has begun testing a newly installed street light system around City Hall with wide-ranging capabilities including audio and video recording.

According to the Michigan based “Illuminating Concepts,” the system’s main benefits include “energy management, security and entertainment.” The Las Vegas setup includes such features as emergency notification flashers, playable music and a sound announcement system, all controlled from an Ipad.
“Actually, there’s a server that’s housed by the company that’s providing this product and we’re communicating with just a wireless, wi-fi connection,” Neil Rohleder of the Public Works Department told My News 3.
The company’s lights, which also offer a “Homeland Security” feature, received major backlash in 2011 following reports of the system’s federally-funded roll out across the country. The feature allows for emergency government announcements which will likely include such slogans as “See Something, Say Something” as well as other irrationally fear-based messages already seen in Wal Mart’s DHS-run “telescreens.”
Local privacy advocate Daphne Lee has begun speaking out against the system, pointing to the ever-increasing surveillance dragnet cast over everyday innocent Americans.
“This technology, you know is taking us to a place where, you know, you’ll essentially be monitored from the moment you leave your home till the moment you get home,” said Lee.
The Public Works Department claims they have no plans to use the system’s surveillance cameras… for now, leading many to believe the plan is already well underway as city-wide implementation is discussed.
“Right now our intention is not to have any cameras or recording devices…it’s just to provide output out there, not to get any feed or video feed coming back,” said Public Works Director, Jorge Servantes.
In light of the TrapWire system, a sophisticated program that uses advanced facial recognition software through regular CCTV surveillance cameras across the country, the likelihood of the city’s cameras being covertly used by the federal government, or with permission, remains a likely outcome.
Talking street lights have already been implemented in parts of Europe for a number of years. Apartment residents in North London were shocked to discover cameras ordering them to stay away from their communal garden, warning them that their photograph was being taken for entering a “restricted area.”
“At what point do we say this is the land of the free? People have a right to a reasonable amount of privacy,” Lee added.
As new NSA revelations widen the general public’s understanding of just how pervasive the surveillance state has become, the real question lies in whether or not the public will demand accountability as well as their privacy rights.

Read more - 
http://www.storyleak.com/las-vegas-installs-intellistreets-light-fixtures-capable-video-recording/#ixzz2k9tNngHb