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Is The Credibility Bubble Bursting?

In a fiat currency system, perception is, by definition, everything. Paper money has no intrinsic value. So the people saving it and accepting it in exchange aren’t expressing faith in the money itself but in the competence and honesty — and power — of the institutions managing it. Let that faith erode and those slips of colored paper and ephemeral computer bits revert to their intrinsic value.

And on the credibility front, the trends aren’t encouraging. Consider the coverage of this weekend’s Washington DC meetings of the International Monetary Fund and World Bank, two global financial institutions that the US dominates. From the New York Times:

At global economic gathering, concerns that US is ceding its leadership role

This article is available only to subscribers, but a similar one from India’s Business Standard makes many of the same points:

US primacy seen ebbing at global meet

As world leaders converge here for their semiannual trek to the capital of what is still the world’s most powerful economy, concern is rising in many quarters that the United States is retreating from global economic leadership just when it is needed most.

The spring meetings of the International Monetary Fund and World Bank have filled Washington with motorcades and traffic jams and loaded the schedules of President Obama and Treasury Secretary Jacob J Lew. But they have also highlighted what some in Washington and around the world see as a United States government so bitterly divided that it is on the verge of ceding the global economic stage it built at the end of World War II and has largely directed ever since.

“It’s almost handing over legitimacy to the rising powers,” Arvind Subramanian, the chief economic adviser to the government of India, said of the United States in an interview. “People can’t be too public about these things, but I would argue this is the single most important issue of these spring meetings.”

Other officials attending the meetings this week, speaking on the condition of anonymity, agreed that the role of the United States around the world was at the top of their concerns.

Washington’s retreat is not so much by intent, Mr. Subramanian said, but a result of dysfunction and a lack of resources to project economic power the way it once did. Because of tight budgets and competing financial demands, the United States is less able to maintain its economic power, and because of political infighting, it has been unable to formally share it either.

Experts say that is giving rise to a more chaotic global shift, especially toward China, which even Obama administration officials worry is extending its economic influence in Asia and elsewhere without following the higher standards for environmental protection, worker rights and business transparency that have become the norms among Western institutions.

And check out this exchange on CNBC’s Fast Money traders roundtable:
Bernanke’s hedge fund gig ‘wrong on so many levels’: Adami

Suddenly it’s okay, even on CNBC, to question not just Fed policy but the character of its governors.

What’s important here isn’t the sentiment but the source. Peter Schiff or Gerald Celente can point out America’s moral and technical dysfunction all day long, but by now they’re mostly just preaching to the choir. The New York Times and CNBC, however, are virtual branches of the US government, trading in access to the folks running the big institutions and profiting from the latter’s machinations. If the government loses them, it loses everything.

15 thoughts on "Is The Credibility Bubble Bursting?"

  1. Do you mean credibility in banking, leadership, reporting, medicine, “democracy” etc. ?
    The answer is yes.

  2. Bringing down America has been the goal for liberals parasites for years, finally the masses are figuring it out.

  3. Whether we are going down the path of socialism or fascism the extremes of either will be barbed wire for the majority. The powers that dictate seem to pick China as their next pretty boy
    A continuous cycle of destruction when paper financial instruments replaces solid industrial output as a nations source of wealth…history repeats itself with the likes of Spain, England etc etc. This country would have been insolvent years ago were it not for the ilks of drug money laundering by the banking system while agencies were purposely looking the other way…of course the users were incarcerated while the top dog pushers were allowed to roam….a full circle deal

  4. While thank god they didn’t………”the beginning of the down turn in US world power leadership was it’s allies refusing to join in the Syrian war” ……Martin Armstrong.

  5. “Paper money has no intrinsic value”.
    You must have never been stranded on the bowl my friend…because THAT will be the value of the paper we call currency soon.

  6. The US is so tied up trying to project military power it cannot match China or Russia as these countries project economic power. China is buying up resources and companies it considers of strategic importance. Russia makes deals with Turkey and Greece.

    Where are the US companies making comparable deals? Not in Greece. Where?

    But if you want tanks or drones or weapons, boy has America got a deal for you!

    We can’t take care of our own people. We don’t keep our promises at home. Our infrastructure is rotting away. Why would anyone trust us or want to do business with us?

  7. WOW,If we could get CNBC on our side? we are almost their,get rid of the cronies.Nice work John Rubino.

  8. The US is experiencing end stage socialism. It doesn’t claim to be socialist but its confiscatory monetary debt system tells another story. According to the BLS 65 million US jobs out of 137 million total reside in bloated wasteful government, health care, pharmacy and education. Insurance, law, building and finance, (management of the bloodletting), make up another 35 million. Manufacturing is only 8.7% of total jobs. This upside down perversion is possible due primarily to the dollars world reserve currency status, allowing the central bank to print unprecedented amounts of money and government to go into unfathomable debt. The US is worse than Greece without king dollar.

      1. The US will start a major war before king dollar tanks. They will blame economic failure on war which will justify totalitarian control.

    1. The US is worse than Greece, by leaps and bounds…the only difference is WE have a printing press and they don’t. But that will only keep us in the game for so long, and when we go down, we are going down HARD.

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