Roubini on the U.S. Dollar and the Chinese Yuan

The Almighty Renminbi?

Now, imagine a world in which China could borrow and lend internationally in its own currency. The renminbi, rather than the dollar, could eventually become a means of payment in trade and a unit of account in pricing imports and exports, as well as a store of value for wealth by international investors. Americans would pay the price. We would have to shell out more for imported goods, and interest rates on both private and public debt would rise. The higher private cost of borrowing could lead to weaker consumption and investment, and slower growth.

Also see Roubini vs. Zhou on the U.S. Dollar and the Chinese Yuan

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Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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$200.4 Trillion derivatives in U.S. Commercial Banks

The notional value of derivatives held by U.S. commercial banks increased $24.5 trillion in the fourth quarter (2008), or 14%, to $200.4 trillion.

•The notional value of derivatives held by U.S. commercial banks increased $24.5 trillion in the fourth quarter, or 14%, to $200.4 trillion, due to the migration of investment bank derivatives business into the commercial banking system.

• U.S. commercial banks lost $9.2 billion trading in cash and derivative instruments in the fourth quarter of 2008, and for the year they reported trading losses of $836 million. The poor results in 2008 reflect continued turmoil in financial markets, particularly for credit instruments.

• Net current credit exposure increased 84% from the third quarter to a record $800 billion, and much of this is attributable to the sharp decline in interest rates in the fourth quarter.

• Derivative contracts remain concentrated in interest rate products, which com
derivative notional values. The notional value of credit derivative contracts decreased by 2% during the quarter to $15.9 trillion. Credit default swaps are 98% of total credit derivatives.

Source: The Office of the Comptroller of the Currency (OCC), quarterly report.

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Dollar versus Euro Exchange Rate (Chart)

The chart has an interesting long term double bottom. The chart is evidencing a fear of inflation in the U. S. Along with the Chart on Money Supply, M2, these series should be watched closely.

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Trade Weighted Dollar Index Chart

A weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners.

Broad currency index includes the Euro Area, Canada, Japan, Mexico, China, United Kingdom, Taiwan, Korea, Singapore, Hong Kong, Malaysia, Brazil, Switzerland, Thailand, Philippines, Australia, Indonesia, India, Israel, Saudi Arabia, Russia, Sweden, Argentina, Venezuela, Chile and Colombia.

For more information about trade-weighted indexes see http://www.federalreserve.gov/pubs/bulletin/2005/winter05_index.pdf.

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Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now

Rogers Bullish on China, Bearish on the Dollar

China to Overcome Global Recession First, Rogers Says

China’s stimulus spending will help its economy overcome the global recession sooner than the U.S. and other countries, investor Jim Rogers said.

“I certainly expect China to come out of it sooner than the U.S.,” Rogers, chairman of Singapore-based Rogers Holdings, said in a Bloomberg TV interview in the city-state. “They seem to be spending the money on the right things. China is doing a far better job than the others.”

“I plan later this year to get out of the rest of my U.S. dollars,” he said. “It’s had an artificial rally too but it’s a terribly flawed currency. The U.S. is printing money as fast as it can and that’s always throughout history led to currency problems down the road.”

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