Wrong medicine kills US Dollar

The doctors were called in, the patient was very ill but still not life threatening sick. They unanimous diagnosed too much debt as cause of the illness and described restructuring instead of reviving his bloodstream-economy.
Then father Obama came along and he didn’t believe the doctors. So he called in his own crew of specialists, their diagnosis was: just a powerful blood infusion with bogus fiat money would be the best remedy for a quick recovery and revival of this patient. Those specialists opposing the opinion of a minority of well-trained logic thinking doctors, caused the prescription of the wrong medicine that was administered to the patient named US Dollar.

The blood infusion of taxpayer’s money poured trillions of dollars in the already blood sick patient’s system, guaranteeing his rescue and avoiding the collapse of its payment system that otherwise would have caused a depression, as was seriously deliberated. But nowadays the patient still has not recovered and his condition is worsening rapidly.

Yet it is just from which angle you look at the patient, his specialists see the beginning of his recovery they even see "green shoots" of a revival. His temperature is falling, since noticing rising stock prices. Sufficient confidence is justifiable by letting the family and all others believe that the worst is over. And if the worst is over, better times must arrive, with further rising prices. Everyone should be happy again and making money in the process. The businesses should be expanding too, except that those businesses aren't expanding as long growth in turnover and profits aren’t materialized. The underlying blood condition of the patient’s economy has not really improved. Actually the patient is getting weaker by the day, because of the huge amount of debt accumulated in his blood streams that yet haven’t been removed. But Obama’s crew still is of a different opinion and continue with their wishful thinking regarding their patient’s health.

Meanwhile all over the world there are very much-concerned outsiders who are not so sure about the patient’s condition. Their unsolicited advice is circulating, when reading the papers.   

The Financial Times quote reads:
"Brazil and China eye plan to axe dollar," the article begins.
"Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil's central bank and aides to Luiz Inácio Lula da Silva, Brazil's president.
"The move follows recent Chinese challenges to the status of the US Dollar as the world's leading international currency.
"Mr Lula da Silva, who is visiting Beijing this week, and Hu Jintao, China's president, first discussed the idea of replacing the dollar with the renminbi and the real as trade currencies when they met at the G20 summit in London last month”.
"An official at Brazil's central bank stressed that talks were at an early stage. He also said that what was under discussion was not a currency swap* of the kind China recently agreed with Argentina and which the US had agreed with several countries, including Brazil”. "Currency swaps* are not necessarily trade related," the official said. "The funds can be drawn down for any use. What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with renminbi."
"Mr Zhou recently proposed replacing the US dollar as the world's leading currency with a new international reserve currency, possibly in the form of special drawing rights (SDRs), a unit of account used by the International Monetary Fund”.

"In an essay posted on the People's Bank of China's website, Mr Zhou said the goal would be to create a ‘reserve currency’ that is disconnected from individual nations.'"

In The New York Times is read:
"We may now be entering the Asian century, dominated by a rising China and its currency." and "This decline of the dollar might take more than a decade, but it could happen even sooner if we do not get our financial house in order. The United States must rein in spending and borrowing, and pursue growth that is not based on asset and credit bubbles. For the last two decades America has been spending more than its income, increasing its foreign liabilities and amassing debts that have become unsustainable."
Unquote.

All what is needed is an unexpected move by China, an appalling inflation figure in the US, a Treasury bond auction that doesn't go as planned, are just a few of the possibilities that could be the start of the downfall and killing the patient US Dollar.

Foreigners, holding trillions of dollar-based assets, which are dollars not to pay their bills, but used for speculation. They still think the dollar will hold its value better than other currencies. However they may become nervous, once hearing and reading other bulletins about the patient’s condition, once they do realize how actually the US takes care of the patient and is running their financial businesses. They already know that the US is running a budget deficit equal to four times the biggest budget deficit ever.

The Chinese informed the US about their worries. "We trust you to protect the value of our assets," was said to the American Treasury secretary.

As long the Chinese trust the US as caretakers to keep its promises and protect its US Dollar, they will continue to keep their accumulated two trillion US dollars. But the day this trust is over, in a matter of minutes, China could dump enough US Dollars to set off alarms all over the world. All of a sudden all US Dollar holders would rush for the exits, each one trying to get out first. In minutes, the dollar market could collapse, and the patient US Dollar will be dead, as a result of administering the wrong medicine by the Obama specialists.

* Currency swap is an arrangement in which two parties exchange specific amounts of different currencies initially, and a series of interest payments on the initial cash flows are exchanged. At the maturity of the swap, the principal amounts are exchanged back. Unlike an interest rate swap, the principal and interest are both exchanged in full in a currency-swap.