The article below was written by a very left wing anti-American member of the Council on Foreign Relations (CFR) . Mr. Stiglitz slants his writings to affix blame on the previous administration. When in reality the blame is upon him and his cronies, Carter, Clinton, Obama, Kissinger, George Soros, et al. In the very first paragraph Stiglitz blames the Bush Administration...but doesn't mention Obama's vote for the first stimulus package while he was still Senator Obama. He doesn't tell you the role that the Community Re-investment Act (CRA) played in the current crisis. The CRA is a product of the aforementioned who incidentally all belong to the New World Order clan. He doesn't tell you the United Nations role in the New World Order...money order, that is! He doesn't tell you about ACORN's role...remember, ACORN is one of the most corrupt organizations in the country who Obama gave millions of your taxpayers dollars to further their corrupt causes. He doesn't tell you about Goldman-Sachs role...Goldman-Sachs! How can Goldman-Sachs be making so much money off this ordeal when everybody else is losing? (In the first six months of the year, Goldman Sachs Group Inc. accrued $11.4 billion for total compensation, an average of $386,429 per employee, a Wall Street record.) Where Stiglitz says, "...a new and more stable global reserve system is likely to emerge, and for the world as a whole, as well as for the United States, this would be a good thing." He knows damn well it will emerge (not "likely") and we all know it's a bad thing!
Stiglitz should stop trying to manage globalization and let Adam Smith's invisible hand continue it's job...it's been pretty good up to now.
No my friends, this crisis was not inherited from George Bush...it has been in the planning stages for many years...just ask Bill Clinton or George Soros they know! (I don't know who is worse, George Soros or Joe Stiglitz...probably Stiglitz because he's a professor at Columbia where he feeds his poison to young minds. ["If you train up a child in the way that they should go, when he is old, he will not depart from it." ~ An excerpt from Michael D. Jones' 'Learn From Obama' ]) - Norman E. Hooben
New world monetary system inevitable
8:50 a.m. Tuesday, September 8, 2009
We just learned that the 10-year national debt is likely to grow to more than $9 trillion. That’s not great news — no one likes a big deficit — but President Barack Obama inherited an economic mess from the Bush administration, and the cleanup comes with an inevitably high price tag. We’re paying it now.
There are no easy options. When financial crises strike, economic growth declines and living standards drop, resulting in lower tax revenues and greater need for government assistance — all of which leads to higher deficits.
What really matters is not the size of the deficit but how we’re spending our money. If we expand our debt to make high-return, productive investments, the economy can become stronger than if we slash expenditures.
There are other consequences, however, that we’re missing. Our budget deficit, as well as the Federal Reserve’s ballooning lending programs and other financial obligations, will accelerate a process already well underway — a changing role for the U.S. dollar in the global economy.
The domino effect is straightforward: Higher deficits spark market concerns over future inflation; concerns of inflation contribute to a weaker dollar; and both come together to undermine the greenback’s role as a reliable store of value around the world.
Right now, with so much unused capacity in the American economy and so much unemployment — likely to persist for at least another year or two — the more pressing worry is deflation (a general decrease in prices), not inflation. But as the economy eventually recovers, the possibility of inflation will loom, and with forward-looking markets, worries about the future often play out in the present. Anxieties about future inflation can lead to a weaker dollar today.
So, are these anxieties justifiable? And what do they portend for the global financial system?
The worries are justified, even though Fed Chairman Ben Bernanke assures us that he will deftly manage monetary policy to keep the economy on an even kilter.
This is a tough balancing act — move too quickly or too vigorously, and you plunge the economy into another downturn; too slowly or too weakly, and inflation can be unleashed.
Anyone looking at the Fed’s record in recent years will be skeptical of its forecasting skills and its ability to get the balance right.
In addition, international markets understand that the U.S. may face strong incentives to reduce the real value of its debts through inflation, which makes each dollar owed worth less.
If market players are worried about inflation (or even if they are worried that others might be worried) that is bad news for the dollar. Holding dollars today represents risk without reward: The returns to U.S. Treasury bills are near zero, and even those most confident in the Federal Reserve must acknowledge the chance that things will not go smoothly.
For decades, other nations have held dollars in their central bank reserves, seeking to give confidence to their country and currency. But in a globalized economy, why should the financial system depend on the vagaries of what happens in America?
The current system is not only bad for the world, it is bad for us, too. In effect, as other countries hold more dollar reserves, we are exporting T-bills rather than automobiles, and exporting T-bills doesn’t create jobs. We used to offset this drag on the economy by running a fiscal deficit. But going forward, we won’t find it as easy to do this. And the Fed may not be able to do the trick — expansionary monetary policy poses its own risks.
Like it or not, out of the ashes of this debacle a new and more stable global reserve system is likely to emerge, and for the world as a whole, as well as for the United States, this would be a good thing. It would lead to a more stable worldwide financial system and stronger global economic growth.
The current system entails developing countries putting aside hundreds of billions of dollars a year — only weakening global demand and contributing to our economic difficulties.
Also, there is something a little unseemly about poor countries lending the United States trillions of dollars, now at an interest rate of close to zero.
Discussions on the design of the new system are already underway. The United Nations’ Commission of Experts on Reforms of the International Monetary and Financial System — a body I chaired — has argued that a new global reserve currency system may be the most important reform to ensure the long-term health of the world’s economy; it also suggested how to design an orderly transition from the dollar-based system.
In its interim report in June, the commission described a number of alternatives. Some involve building on the International Monetary Fund’s “special drawing rights,” or SDRs — a kind of “IMF money” — but making the issuance of this global reserve money annual and more predictable. (Currently, issuances of SDRs are small and episodic.) Other proposed reforms are more complex and ambitious, such as issuing new global reserves in ways and amounts that could be used to stabilize the world’s economy or to invest in “global public goods,” such as helping developing nations reduce greenhouse gas emissions.
The U.S. has resisted these changes, but they will come regardless, and it’s better for us to participate in the construction of a new system than have it happen without us.
The U.S. has seen great advantages with the dollar as the world’s reserve currency of choice, particularly the ability to borrow at low interest rates seemingly without limit.
But we haven’t seen the costs as clearly: the inevitable trade deficits, the instability, the weaker global economy. The benefits to us are likely to shrink, and rapidly so, as countries shift their holdings away from the dollar.
It’s happening now, and the process is likely to accelerate. The Chinese have expressed concerns about the country’s vast dollar reserves.
Not surprisingly, China and other nations holding lots of U.S. debt support efforts to build a new system.
We should show leadership in helping shape this new structure and managing the transition, rather than burying its head in the sand.
We may have preferred to keep the old system, in which the dollar reigned supreme, but that’s no longer an option.
Joseph Stiglitz, the 2001 Nobel Prize winner in economics, is a professor of economics at Columbia University and former chairman of the Council of Economic Advisers.
Note from Norm: Don't let that Nobel Prize crap affect your thinking...Al Gore got the prize for blowing a lot of hot air.
We just learned that the 10-year national debt is likely to grow to more than $9 trillion. That’s not great news — no one likes a big deficit — but President Barack Obama inherited an economic mess from the Bush administration, and the cleanup comes with an inevitably high price tag. We’re paying it now.
There are no easy options. When financial crises strike, economic growth declines and living standards drop, resulting in lower tax revenues and greater need for government assistance — all of which leads to higher deficits.
What really matters is not the size of the deficit but how we’re spending our money. If we expand our debt to make high-return, productive investments, the economy can become stronger than if we slash expenditures.
There are other consequences, however, that we’re missing. Our budget deficit, as well as the Federal Reserve’s ballooning lending programs and other financial obligations, will accelerate a process already well underway — a changing role for the U.S. dollar in the global economy.
The domino effect is straightforward: Higher deficits spark market concerns over future inflation; concerns of inflation contribute to a weaker dollar; and both come together to undermine the greenback’s role as a reliable store of value around the world.
Right now, with so much unused capacity in the American economy and so much unemployment — likely to persist for at least another year or two — the more pressing worry is deflation (a general decrease in prices), not inflation. But as the economy eventually recovers, the possibility of inflation will loom, and with forward-looking markets, worries about the future often play out in the present. Anxieties about future inflation can lead to a weaker dollar today.
So, are these anxieties justifiable? And what do they portend for the global financial system?
The worries are justified, even though Fed Chairman Ben Bernanke assures us that he will deftly manage monetary policy to keep the economy on an even kilter.
This is a tough balancing act — move too quickly or too vigorously, and you plunge the economy into another downturn; too slowly or too weakly, and inflation can be unleashed.
Anyone looking at the Fed’s record in recent years will be skeptical of its forecasting skills and its ability to get the balance right.
In addition, international markets understand that the U.S. may face strong incentives to reduce the real value of its debts through inflation, which makes each dollar owed worth less.
If market players are worried about inflation (or even if they are worried that others might be worried) that is bad news for the dollar. Holding dollars today represents risk without reward: The returns to U.S. Treasury bills are near zero, and even those most confident in the Federal Reserve must acknowledge the chance that things will not go smoothly.
For decades, other nations have held dollars in their central bank reserves, seeking to give confidence to their country and currency. But in a globalized economy, why should the financial system depend on the vagaries of what happens in America?
The current system is not only bad for the world, it is bad for us, too. In effect, as other countries hold more dollar reserves, we are exporting T-bills rather than automobiles, and exporting T-bills doesn’t create jobs. We used to offset this drag on the economy by running a fiscal deficit. But going forward, we won’t find it as easy to do this. And the Fed may not be able to do the trick — expansionary monetary policy poses its own risks.
Like it or not, out of the ashes of this debacle a new and more stable global reserve system is likely to emerge, and for the world as a whole, as well as for the United States, this would be a good thing. It would lead to a more stable worldwide financial system and stronger global economic growth.
The current system entails developing countries putting aside hundreds of billions of dollars a year — only weakening global demand and contributing to our economic difficulties.
Also, there is something a little unseemly about poor countries lending the United States trillions of dollars, now at an interest rate of close to zero.
Discussions on the design of the new system are already underway. The United Nations’ Commission of Experts on Reforms of the International Monetary and Financial System — a body I chaired — has argued that a new global reserve currency system may be the most important reform to ensure the long-term health of the world’s economy; it also suggested how to design an orderly transition from the dollar-based system.
In its interim report in June, the commission described a number of alternatives. Some involve building on the International Monetary Fund’s “special drawing rights,” or SDRs — a kind of “IMF money” — but making the issuance of this global reserve money annual and more predictable. (Currently, issuances of SDRs are small and episodic.) Other proposed reforms are more complex and ambitious, such as issuing new global reserves in ways and amounts that could be used to stabilize the world’s economy or to invest in “global public goods,” such as helping developing nations reduce greenhouse gas emissions.
The U.S. has resisted these changes, but they will come regardless, and it’s better for us to participate in the construction of a new system than have it happen without us.
The U.S. has seen great advantages with the dollar as the world’s reserve currency of choice, particularly the ability to borrow at low interest rates seemingly without limit.
But we haven’t seen the costs as clearly: the inevitable trade deficits, the instability, the weaker global economy. The benefits to us are likely to shrink, and rapidly so, as countries shift their holdings away from the dollar.
It’s happening now, and the process is likely to accelerate. The Chinese have expressed concerns about the country’s vast dollar reserves.
Not surprisingly, China and other nations holding lots of U.S. debt support efforts to build a new system.
We should show leadership in helping shape this new structure and managing the transition, rather than burying its head in the sand.
We may have preferred to keep the old system, in which the dollar reigned supreme, but that’s no longer an option.
Joseph Stiglitz, the 2001 Nobel Prize winner in economics, is a professor of economics at Columbia University and former chairman of the Council of Economic Advisers.
Note from Norm: Don't let that Nobel Prize crap affect your thinking...Al Gore got the prize for blowing a lot of hot air.
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