Roubini: The yuan, the dollar and the coming age of austerity

You should read Nouriel Roubini’s op-ed on the ascent of the Chinese remnimbi (commonly known as the yuan, though remnimbi is the more encompassing term) from a few days ago. Roubini limns out some of the long-term economic implications of the world’s likely drift away from the dollar as the global benchmark currency:

“[I]magine a world in which China could borrow and lend internationally in its own currency. The renminbi, rather than the dollar, could eventually become a means of payment in trade and a unit of account in pricing imports and exports, as well as a store of value for wealth by international investors. Americans would pay the price. We would have to shell out more for imported goods, and interest rates on both private and public debt would rise. The higher private cost of borrowing could lead to weaker consumption and investment, and slower growth.”

This transformation is not imminent; it would take a period of years. And we should all pay particular attention to Roubini’s prescription for U.S. policymakers seeking to delay the day of reckoning: “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.”

In other words, there’s a period of pronounced austerity in government spending and U.S. fiscal policy ahead once the government’s largesse in the matter of financial bailouts has run its course. And much of the talk about “reforming” Social Security and Medicare sooner rather than later stems from concern about the global fate of the dollar.

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Comments (2)

  1. Submitted by Glenn Mesaros on 05/19/2009 - 02:14 pm.

    In October 1939, Nazi Leader Adolf Hitler issued an order, written in his own hand, ordering the extermination of those who were considered “unworthy of life.” The order, entitled “The Destruction of Lives Unworthy of Life,” stated that patients “considered incurable according to the best available human judgment of their state of health, be accorded a mercy death.”

    Hitler’s murder spree started with the mentally ill, the terminally ill, invalids, and the disabled, and eventually spread to millions of Jews, Gypsies, and other “undesirables”—worked to death or exterminated in concentration camps.

    This monstrous program was initially sold as an economic measure: “The economic burden represented by people suffering from hereditary diseases is a danger for the State and society,” Nazi Dr. Gerhard Wagner said at the Nazi party congress in 1934. The Nazis required all state institutions to report on patients who were chronically ill, and used those reports as the basis to decide which patients should be killed.

    Today, the Obama Administration is beginning to descend down that same road, promising to make the “tough choices” to cut entitlement programs such as Medicare and Social Security to save money—at precisely the time in which an increasing number of Americans are forced to depend on them as the economy slides deeper into Depression. Obama is willing to spend trillions of dollars to bail out the financial markets, and pay for it by slashing programs which keep ordinary Americans alive.

    Think I am exaggerating? Take the case of a paper entitled “What Are the Potential Cost Savings from Legalizing Physician-Assisted Suicide?” It sounds like something that might have been written by Jeremy Bentham, or Aldous Huxley, or maybe Nazi doctor Karl Brandt, but it was actually co-authored in 1998 by “bio-ethicist” Ezekiel Emanuel, brother of White House Chief of Staff Rahm Emanuel, a leading advisor to Obama’s budget director Peter Orszag, and a member of the 15-person Federal Coordinating Council on Comparative Effectiveness Research, the group which has been designated to prepare the list of which medical procedures will henceforth be permitted, and which will not. Emanuel’s co-author, Margaret Battin, has written other papers promoting suicide and selective refusal of medical treatment. The pair are really just echoing Karl Brandt’s defense of euthanasia at Nuremberg: “Death can mean deliverance. Death is life—just as much as birth. It was never meant to be murder.” But it was.

  2. Submitted by Richard Schulze on 05/23/2009 - 10:29 pm.

    They obviously serve the highest quality kool-aid at the Fed.

    There’s no way they’ll ever have the opportunity or time to unwind their positions, because the zombies they’re supporting simply cannot function without ongoing cash infusions, and the combined drain of DC deficits (including TARP, AIG, PBGC, etc.) / FDIC backstop / GSE MBS purchases / etc. will push monetization past everyone’s pain threshold.

    Their actions are not delaying or denying a depression, they’re guaranteeing one.

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