u.s. dollar

QE2 Has Arrived - Fed to buy $900 Billion in U.S. Treasuries

The long awaited day is here. In the spirit of QE2, aka quantitative easing part II, the Federal Reserve has announced $600 billion in U.S. Treasury purchases:

The Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

Also, the thing every one knows, they will keep the Federal Funds Rate at effective zero and sure doesn't look like they will raise it anytime soon:

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

Kansas City Fed President Thomas M. Hoenig voted against this.

But wait! There's more. From the New York Federal Reserve press release is appears they are actually buying up about $900 billion U.S. Treasuries de facto.

Supply of U.S. Dollars Overseas is Shrinking Says China's Central Bank

It helps to read global newspapers because according to Shanghai Daily:

It is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.

Oops! Fewer U.S. dollars to buy up U.S. debt?

Central banks snubbing the dollar

The world's central banks are starting to get serious about diversification, and it all started when the Federal Reserve started monetizing debt.

(Bloomberg) -- Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades.
Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.

When you were young, was this article title even imaginable?

Did you ever imagine, when you were young and America was invincible that you would wake up, coffee in hand, and read this title? Asian countries step in to support dollar

Asian central banks intervened heavily in the currency markets on Thursday to slow the slide of the US dollar amid growing concern about the potential impact on the region’s export driven economies.

Another milestone in the demise of the dollar

The headline appears more scary than it actually is, but it is still a significant step down the road.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The Precipitous Decline in the U$D

Last years sudden surge in demand for the U$D as the debt bubble burst allowed an artificial jump in the U$D index. That .... is over.

The U$D is now sounding its death nell as our trading partners are seeking ways to minimize their exposure to our exported inflation.

You may have heard about the recent China/Brazil trade agreement.

Chinese President Hu Jintao and Brazilian President Lula da Silva witnessed the signing of 13 agreements in Beijing.

The highlight was a $10 billion loan from China Development Bank to Brazil's state-owned Petrobras oil company. In return, Petrobras is to supply China's state-owned Sinopec with up to 200,000 barrels of oil a day for the next 10 years.

[..}China last month overtook the United States to become Brazil's number one trading partner, with two-way trade in April reaching $3.2 billion.

China wants to replace U.S. dollar with new reserve currency

Here we go. China pushes SDR as global super-currency:

Zhou's speech shows that the issue is a pressing one for China, whose top officials regularly bemoan the volatility of the dollar and what they see as U.S. economic mismanagement.

Creating a new, widely accepted reserve currency may take a long time, Zhou acknowledged. It would be a "bold initiative that requires extraordinary political vision and courage".


Allocating more SDRs would give the IMF more resources and help it address imbalances in power within the fund, where big emerging economies like China muster a fraction of the votes cast by Europe and by the United States, which wields a veto.

As well as a further allocation of SDRs, Zhou proposed a series of steps to broaden the unit's use so it can evolve into a reserve currency: