Re: [OPE] Ken Rogoff wins the funnies prize

From: Patrick Bond <>
Date: Sat Oct 10 2009 - 05:07:40 EDT

Jurriaan Bendien wrote:
> Patrick
> I make no comment about Prof Rogoff's character, he cannot help being
> who he is, I was just referring to what he said. Respect the person

No thanks!

> ...Perhaps we should discuss "dollar hegemony" some more.
> (1) Given that there is about $6-7 trillion in global USD reserves
> (depending on how you estimate and value the total), then if you want
> to get rid of much of these dollars (for example because they are
> inescapably depreciating in value), and trade in another currency, who
> is actually going to BUY those dollar claims (the problem of
> convertibility)?

Depends on the price, right? If the price of the dollar falls, like it
did in the late 1970s or the 1980s, and if there's no Paul Volcker with
a huge interest rate increase or no Plaza/Louvre coordinating capacity,
then we'd see much more generalised inflationary tendencies.

> (2) The second problem is, once a big sell-off of USD is set in
> motion, can you prevent this from rapidly lowering the value of the
> USD, providing a disincentive to sell more, and creating a political
> backlash? (A sudden, massive sell-off of the USD would be equal to a
> "run on the banks").

Isn't such a scenario in the interest of the majority of the world's
people, so as to delink some of the worst power relations, e.g.
repayment of international financial institutions (commercial and
'public') in $s; dollar-based trade which is os damaging to countries
with low or declining reserves; dollar-based repayment of FDI
profits/dividends; the lack of currency controls (a crashing US$ may
give national elites the impetus to try and reclaim a bit of financial
sovereignty); and the terrible distinction between 'hard' and 'soft'
currency which has bedeviled economic activity in my part of the world
and given exporters and 'foreign investment' so much more social power
than is deserved. If a dollar crash weakened these linkages, then sign
me up. I'll cash out my tiny US$ account in BofA immediately, I pledge.

> (3) The third problem is: if you succeed in selling off a large chunk
> of USD, can you cope with the global political fall-out of all this?

What ever do you mean? Obama won the Nobel Peace Prize - he'll obviously
take the US into bankruptcy with nonviolent grace.

> Unfortunately most "Marxists" don't understand this problematic at all.

Hmm? Like who? (Ok, ok, you can say cdes Henwood and Panitch - am
debating these points with them elsewhere now.)

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