The next collapsing bubble: US Dollar?

[annarborgator]

The current strength of the dollar is temporary and the US currency risks a hard landing in 2009, according to a team of United Nations economists who foresaw a year ago that a US downturn would bring the global economy to a near standstill.

In their annual report on the world economy published on Monday, the economists said the dollar’s sharp rebound this autumn had been driven mainly by a flight to the safety of the international reserve currency as the financial crisis spread beyond the US.

The overall trend remained a downward one, however, reflecting perceptions that the US debt position was approaching unsustainable levels. An accelerated fall of the dollar could bring new turmoil to financial markets.

“Investors might renew their flight to safety, though this time away from dollar-denominated assets, thereby forcing the US economy into a hard landing and pulling the global economy into a deeper recession,” the report said.

Publication of the annual survey by the UN’s Department of Economic and Social Affairs, its trade organisation Unctad and UN regional bodies, was brought forward by a month in the light of the financial crisis. It was launched in Doha to coincide with the UN-sponsored development financing conference in the Qatari capital.

The UN team said that, as the financial crisis spread beyond the US, there had been a massive shift of global financial assets into US Treasury bills, driving their yields almost to zero and pushing the dollar sharply higher. At the same time, however, the US’s external debt had risen to new heights that could provoke a dollar collapse.

The report recommends reform of the international reserve system away from almost exclusive reliance on the dollar and towards a globally backed multi-currency system.

Rob Vos, a Dutch economist who heads the UN’s policy and analysis division and who is responsible for the annual economic review, said the global economic pain could be eased if governments co-ordinated a spate of stimulus packages that were already under way.

“There has been a sea change in attitudes in favour of intervention and concerted action,” he told the Financial Times. He welcomed statements from US president-elect Barack Obama’s transition team in support of spending on infrastructure.

Thoughts?

[annarborgator]

Ron Paul asks Bernanke if the possibility of a new world reserve currency to replace the dollar system ever comes up in any of their meetings:
http://www.youtube.com/watch?v=lumsamPlDGc&feature=related

So, even though many folks are out there questioning the continued viability of our currency, Bernanke and his tools aren't even discussing the possibility? Is this just political BS where he can't be honest about it? Or is our leadership this idiotic?

[radbag]

i watched the congressional hearings live and kinda thought ron paul came off as being the town charlatan...he ranted and raved and didn't really ask a question until after his 5 minutes were up...the committee asked paulson and bernanke to come to DC and answer to the committee's questions but when it came time to paul's turn, he didn't ask a question til the very end.



to answer your question about bernanke's response - bernanke has to be very, very careful about what he says or doesn't say for that matter...the market makes/loses hundreds of millions of dollars based on what he says and how he says it....it'd be irresponsible of him to telegraph anything to the market that had nothing to do with what he was there to testify about.

[annarborgator]

Fair enough...I figured it was political in that nature.

Agree about RP's style in the hearings....I get the sense he's pretty annoyed at the role he has to play, though....he's forced to explain his position much more than the average congressman simply because his view is rather different. Otherwise it'd be too easy to dismiss his questions as lunacy simply because they are abnormal. That's what we do as a society.

I just hope this IS being discussed behind closed doors and that they have a damn good plan for the transition because it's coming IMO, regardless of how tight-lipped TPTB remain.