Mark Your Calendars, Dollar’s Fate To Be Decided April 20 2009 G20 Meeting
The G20 Summit is set to happen in the UK on April 20th of this year. The meeting usually goes calmly, the leaders address certain economic and monetary policy issues and then they leave and nothing really happens. Except this year. In the midst of a global financial crisis, there’s going to be a lot of wheeling and dealing and plenty of discussions about world monetary policy.
The United States is going to be front and center and the target of plenty of discussion. For the last year we’ve seen the United States take the majority of the blame for the global slowdown and bank blowups - and its usually for a very good reason – our corporations led the world in screwing up!
Before the meeting there is plenty of news to consider and possible outcomes of the G20 meeting. No matter what gets decided on April 2, its likely not going to be very pretty for the dollar. As one of the largest borrowers in the world, we have to keep our mouth shut and avoid biting the hand that feeds us.
Ahead of the meeting are several important economic announcements. The first is China’s shrinking trade surplus, it fell some 90% in the month-ago period to $4 Billion in February. $4 Billion is practically nothing compared to its previous trade surpluses and likely a large reason the Fed decided to buy US Treasuries. If China isn’t drawing surpluses, its foreign reserves won’t be growing and the US will have to find a new creditor.
More radical news though is that Russia and China may press for the removal of the US dollar as the world’s reserve currency in favor of a basket of currencies. Instead of being 100% dollar, it might be something like 25% euro, 25% dollar, 25% pound, 25% yuan.
Should the world shift away from dollars the only possible outcome is a huge drop in the value of the dollar. If everyone is selling (or in currencies, trading) its a buyers market and the value of the currency will drop in order to attract buyers.
Now, I’m no odds maker nor am I knowledgeable about anything that goes on in the inner circle of the world’s elite, so I can’t say what the possibility is for a removal of the dollar standard. What I do know is the variety of reputable sources that have reported on the topic.
U.N. panel says world should ditch dollar
China backs talks on dollar as reserve -Russian source
Role and value of U.S. dollar set to fall: Asia think tanks
China drafts rules to ease banks’ FX conversions
This could be a firestorm, I’m watching the newswires and I’ll be on top of any news that comes out of the summit.
China’s trade surplus has to be improved .. otherwise the ‘foreign reserves’ of China may become ’stagnant’. if this happens, then US need to look for alternate ‘creditor’.