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raycarey · 31-03-2009, 02:16 PM

i think most would agree that the dollar is in trouble....but the pertinent question is when will the bottom fall out? right now, i'm in 6 different currencies (actually five plus commodities), but i'm extremely overweight $US at nearly 60%.

it seems to me that if/when we retest the lows in world stock markets, there will be additional rushes to safety (ie the dollar).
after that, massive stimulus plans and inflation in the US would seem to be the biggest worry for the dollar. market timing is a gift few have, but finding the sweet spot between these two would be ideal.

Milkman · 31-03-2009, 03:28 PM

Quote:

Originally Posted by raycarey

i think most would agree that the dollar is in trouble....but the pertinent question is when will the bottom fall out? right now, i'm in 6 different currencies (actually five plus commodities), but i'm extremely overweight $US at nearly 60%.

That is a high ratio, but you can switch currencies with the click of a mouse, correct?

Quote:

it seems to me that if/when we retest the lows in world stock markets, there will be additional rushes to safety (ie the dollar).

The recent strength of the US dollar is happening now.

Here is a current take. But when? We have to track it, and watch.

YouTube - Peter Schiff The Dollar is Gonna Drop Like a Stone

Panda · 31-03-2009, 05:14 PM

Downside of the oversupply of the $US and its eventual decline is going to be inflation with higher costs and reduced standard of living for US citizens.

Upside is going to be a more competitive export position which will lead to more jobs and less government debt.

Its an adjustment that HAS TO HAPPEN sooner or later for not just the USAs economy to function properly, but for the whole worlds economy to function properly.

Same, same British Pound.
Wealth is also going into the Japanese Yen, which is pushing up its value and hurting the Japanese economy.

All the more reason why we need a truly international currency based on production of real goods and services to move ahead with a stable world economy. The experiment with the $US as a free floating currency of world trade has ended in failure. The time for a more sensible alternative is approaching.

The real danger is that the world will take the loss when the $US drops in trading value and continue to limp along with it or worse, move to the Euro as the preferred trading currency. Staying with the old failed financial exchange system or moving to the Euro would only start the artificial boom and bust cycle all over again.

baldrick · 02-04-2009, 11:17 AM

interesting article from atimes

Quote:

THE BEAR'S LAIR
Beyond the dollar
By Martin Hutchinson

People's Bank of China governor Zhou Xiaochuan said last week that the Special Drawing Rights (SDR) of the International Monetary Fund (IMF) should replace the dollar as the world's main currency. The political reasons for his proposal are clear, its merits rather less so. Could the world economy work better with a global central bank, whether in the form of the IMF or some other body, and with a global currency as its main reserve unit?

There is certainly a good argument for the world ditching the dollar. It's estimated that the US budget deficit for the current fiscal year that runs through September will be 12% of gross domestic product (GDP). Broad money supply, whether measured
by M2 or the St Louis Fed's MZM, has risen at annual rate of 17% in the six months through March 16, before the start this week of the Fed's potentially hyper-inflationary purchase of US$300 billion of Treasury bonds over the next six months.

There is thus no reason to believe that the dollar represents a sound store of value, the principal function of a reserve currency. While liquidity in US dollar debt instruments is enormous and ever increasing as their supply skyrockets, there must be a danger of disruptions in the Treasury bond market similar to that caused by the "failed auction" last week in the UK gilts market, potentially causing price discontinuities and liquidity outages. In criticizing US economic management, therefore, Zhou is on solid ground, reflecting many of the criticisms this column has made of US monetary policy since 1995 and fiscal policy since 2002.

Other major world currencies don't look any more solid than the dollar. The pound is equally affected by the financial services disaster, and the UK has a budget deficit that is as large as the United States in terms of GDP, has been much worse managed over the last several years, and has an economy with very little raison d'etre outside the shrunken financial services sector. The yen has been strong recently, but that strength has caused a collapse in Japanese exports, down in February by almost half from the previous year. Domestically, the Japanese economy had been quite well run until September 2008, but Prime Minister Taro Aso represents a reversion to the worst tendencies of the 1990s, with four wasteful public spending "stimulus" plans announced, a budget deficit as large as that of the United States, and a government debt three times larger.

Only the euro represents a haven of stability, particularly if the German and French reluctance to indulge in excessive public spending spreads to the remainder of the currency's members. While the Mediterranean group of countries have structural weaknesses, their membership in the euro will force discipline on them, and so the chances are that the euro bloc will hold together. If it does, the euro will provide a satisfactory store of value, since the European Central Bank's policy has been far less inflationary than that of the United States and its members' budget deficits are much smaller. The danger is that of the unit's relative novelty; in a deep and prolonged recession, it is possible that Italian, Greek and Irish profligacy will overwhelm German and French good management, either debauching the unit or splitting it apart.

Zhou no doubt regards China's monetary management as a model of solidity. That is nonsense. For one thing, in spite of its $2 trillion in reserves and massive balance of payments surpluses, China has still not allowed its ordinary residents to invest abroad on a free basis. Doubtless that policy results from a desire to maintain the apparatus of a police state rather than from balance of payments paranoia. Still, it is highly immoral, blocking one of the most fundamental and important economic freedoms and protections against arbitrary government. No currency that is subject to an exchange control regime has any claim to be included in the international monetary system, the essence of which is the free movement of capital.

There are also, incidentally, remaining questions about the Chinese banking system. The $911 billion of bad loans in the system estimated by Ernst & Young in the boom year of 2006 will certainly not have diminished and may well have increased further in the current downturn, which appears to be more severe than the Chinese authorities are admitting.

Nevertheless, whether or not his own currency is in a fit state to travel, with $2 trillion of international reserves Zhou has a perfectly reasonable desire that the value of those reserves should not disappear in an orgy of inflationary monetary policy and "Yes, We Can" deficit spending. US authorities may object to this desire, since a withdrawal of any significant portion of China's reserves would irretrievably doom the Treasury bond market, but their right to object is vitiated by their responsibility for the spendthrift policies that led to the dollar's vulnerability.

As the proprietor of a non-convertible currency, Zhou doubtless has only a limited grasp of the purpose of a reserve currency. This is threefold. First, it must provide immediate liquidity for the world's pools of international reserves. Second, it should provide a store of value, preventing those reserves from being artificially devalued. Third, it should as far as possible be "politician-proof", gaining its value through some automatic mechanism that is not dependant on the whims of central bankers and politicians. As the current unpleasantness has demonstrated, central bankers and politicians are only too likely to panic in crises and engage in value-destroying currency debasement.

The gold standard, in place with a few interludes for more than 200 years from its establishment by Isaac Newton as Master of the Mint in London in 1717 until its final collapse in 1931, fulfilled all three purposes admirably. Since gold could be melted down and re-minted in the form of any of the world's currencies, it was admirably liquid. It provided a superb store of value, although that value fluctuated by as much as 20% to 25% with periods of new gold discoveries (California and Victoria for a decade from 1849-51, South Africa and the Klondike in the 1890s) when prices rose, and periods of economic expansion faster than the rate of gold discovery (1870-93) when prices declined. Most important, it was automatic and independent of political and central banker control. Under it, bubbles were throttled fairly early by shortages of specie and downturns were ended by natural means rather than by dissolute floods of money creation.

In an ideal world, we would satisfy Zhou's requirements by a simple return to the gold standard at a parity, of perhaps $1,000 per ounce, that was high enough not to be excessively deflationary. There would doubtless be a few years of disruption, as there were in 1815-19 when Britain was forced into deflation to return to the gold standard at its pre-1797 parity. However, in the long term, the world's monetary system would settle down on the basis of the major currencies being linked to gold. Central banks and politicians would be deprived of much though not all of their power over money creation. Damaging bubbles such as those of 1995-2007 would be cut short by a drain of gold from the banking system, forcing higher interest rates before prices of stocks, housing and commodities got too far out of line.

In the world we live in, that option is not politically available. In any case, with global population growth running at around 1% annually, it is doubtful whether gold can be discovered fast enough to prevent an excessively deflationary price regime under a gold standard. Contrary to the absurdly overblown view of Federal Reserve chairman Ben Bernanke, deflation of 1% to 2% per annum is harmless, even beneficial, but in extreme cases such as that of 1930-33, when US prices fell 25% in terms of gold dollars, it stifles productive investment because holding cash becomes highly profitable in real terms.

Gold mine production in 2008 of 2,407 tonnes, higher than in recent years because of high gold prices, was only 1.4% of the gold stock of 170,000 tons. If velocity were constant, that would not be sufficient to accommodate 1% population growth and desired global economic growth of 3% without an unpleasant average annual deflation of 2.6%. (In the 19th century, gold mine output was higher in terms of the existing gold stock while population increase averaged only about 0.5% annually. The faster population growth and relatively slower gold stock increase after 1900 made the 1920s' gold standard unpleasantly deflationary.) Thus a global return to the gold standard is at present impossible, though it would certainly be feasible and possibly attractive for an individual country.

Zhou's proposal for increasing SDR issuance passes none of the above tests for a reserve currency. Before 1971, the SDR was linked nominally to gold, but it is currently a basket made up of 63 US cents, 41 euro cents and smaller amounts of yen and sterling. The total of SDR quotas is currently SDR 21.4 billion; a proposal has been outstanding since 1997 (effectively blocked by the United States), which would increase that total to SDR 64.2 billion (about US$100 billion.) Smaller than the money supply of Malaysia, that is a laughably inadequate amount of money to provide adequate liquidity for the world's reserves.

Zhou would propose - with the breathless endorsement of senior IMF officials - that new SDRs be created to raise the SDR money supply to an adequate value comparable to the broad US money supply of $9.6 trillion. Needless to say, this would be extraordinarily inflationary.

Spurred by the grossly over-expansionary US monetary policy, and later by similar follies elsewhere, international reserves more than quadrupled in the decade from 1998, rising at an average annual rate of over 16%. Since September, most monetary authorities have pursued even laxer monetary policies, so an epidemic of high global inflation is inevitable once the recession bottoms out. A large expansion of SDRs would greatly worsen that problem, preventing the SDRs themselves or any other currency from representing an adequate store of value, for international reserves or any other purpose.

However, the most serious reason why the SDR should not be used as a reserve currency is its control by the unaccountable bureaucrats of the IMF. Far from being immune to political control, SDRs would be managed by international bureaucrats subject to no outside control by electorates or the market. Such bureaucrats would be at least as prone to damaging panic as domestic monetary authorities. Even more dangerous, they would be free to manage the world's money by whatever cockamamie left-wing economic theories they chose, and to siphon off resources from the world's money supply to every corrupt Third World Marxist regime they wanted to support.

Allowing the SDR to become the world's reserve currency, even on a non-exclusive basis, would place global monetary policy entirely on a non-market basis, without individual countries having any recourse but to purge their international reserves of SDR assets and refuse to accept SDRs in payment - which would defeat the point of the exercise. It is a proposal worthy of the impoverished and genocidal China of Mao Zedong, not the hopeful market-oriented China of today.

If China is really worried about the value of its reserves and wishes to provide a long-term benefit to the world economy and its own citizens' wealth, it has an alternative to the SDR, which would weaken rather than strengthen the trans-national bureaucrat class. The IMF, typically enough, forbids its members from linking their currencies to gold. Governor Zhou should break that prohibition and put the yuan on the gold standard. With $2 trillion in reserves and a structural balance of payments surplus, China can well afford it.

Asia Times Online :: Asian news and current affairs

and this article - too long to post in its entirety - is a very good take on the US financial system

The Quiet Coup - The Atlantic (May 2009)

Milkman · 04-04-2009, 03:43 PM

Long article, but worth a browse. It's about the Fed increasing the money supply:

Quote:

There Will Be (Hyper)Inflation - Thorsten Polleit - Mises Institute

Mises Daily by Thorsten Polleit | Posted on 4/2/2009 12:00:00 AM
Thorsten Polleit is Honorary Professor at the Frankfurt School of Finance & Management.

Increasing "Excess Reserves"

The demise of fiat-money regimes around the world has become unmistakable. They can only be kept alive by central banks creating ever greater amounts of base money and governments underwriting commercial banks' liabilities.

The US Federal Reserve, for instance, increased the stock of the monetary base — which includes banks' demand deposits held with the Fed, plus coins and notes in circulation — from $870.9 billion in August 2008 to $1735.3 billion in January 2009.

Banks' "excess reserves" — banks' base-money holdings minus required reserves — rose from $1.9 billion to $798.2 billion. These excess reserves allow the banking sector, which operates under fractional reserves, to increase the credit and money supply manifold.

The monetary base expands when the central bank takes over the troubled assets of commercial banks in order to extend new credit to those banks. This process is gaining momentum: on March 18, 2009, the Federal Open Market Committee (FOMC) announced that it will increase base money by purchasing another $1,150 billion of securities. It is also considering increasing base money by extending credit to private households and small businesses.

Causing Inflation

What the Fed does is produce inflation — and this is a truth that stands in sharp contrast to what mainstream economists say, namely that the rise in base money will just increase the liquidity in the interbank market and will not affect the money holdings in the hands of consumers, firms, and the government, which — they admit — could then inflate consumer prices.

In contrast, Austrian economists stress that inflation is a result of a rise in the stock of money. This viewpoint rests on sound economics, firmly rooted in the notion that, first and foremost, value is a subjective concept. Money is a good, like any other, and it is therefore subject to the law of diminishing marginal utility.

A rise in the money stock necessarily reduces the marginal utility of a money unit — and therefore its value — from the viewpoint of the individual; likewise, the marginal utility of a money unit — and therefore its value — would increase if the money stock declines.

Changes in the value individuals assign to a money unit are reflected in prices for vendible items. For instance, if the money stock in the hands of an individual rises, he may wish to increase his holdings of other goods. As he exchanges money against vendible items, the prices of the latter are bid up.

In that sense, the change in the money stock is what must be called inflation, while changes in the prices for goods and services are just symptoms of the underlying cause, which is the change in the stock of money.

What the rise in base money has done so far is prevent prices of banks' security holdings to decline to free-market levels. In other words, the money injection helps to keep asset prices at artificially elevated levels, thereby preventing prices in financial markets, credit markets in particular, from adjusting.

The Path Toward Ever-Higher Inflation

The government controlled fiat-money regime is highly inflationary, as it allows for an increase in the stock of money mostly through bank credit in excess of real savings (circulation credit). The rising money stock pushes up prices — be it consumer or asset prices (such as stocks, housing, etc.).

Expanding the money stock through circulation credit sets into motion an illusionary boom, leading to malinvestment. However, the latter does not come to the surface as long as the credit and money supply keeps growing.

If money supply growth slows down all of a sudden, however, investor expectations are disappointed, and investment projects, which were — in a world of ever more money and rising prices — considered economically viable, become unprofitable.

The slowing down of money growth reveals that the production structure does not comply with actual demand, thereby unmasking the squandering of scarce resources. And so the artificial boom, induced by new money injections, turns into bust.

A policy of holding up the artificial boom would require ever-greater increases in money. Ludwig von Mises saw that this would lead to disaster:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.[1]

Schemes for Producing Inflation

In an attempt to keep credit and money supply from slowing down and the economies from going into recession, monetary policies around the world are about to push short-term interest rates towards zero and expand the stock of base money, and thereby banks' excess reserves, drastically.

Commercial banks can be expected to put their excess reserves to use, because base-money balances do not yield any interest: banks need to generate income to be in a position to pay interest on their liabilities (demand, time and savings deposits, and debentures).

Extending loans is one option. However, in an economic environment of financially overstretched borrowers, banks might be hesitant to increase their loan exposure vis-à-vis households and firms. In fact, it might be increasingly difficult for banks to do so given that equity capital has become increasingly scarce and costly.

So commercial banks may wish to monetize government debt, as the latter does not require putting equity capital to use. The government then spends the additionally created money stock on politically expedient projects (unemployment benefits, infrastructure, defense, etc.), and the money stock in the hands of households and firms rises.

If, however, commercial banks decide to refrain from additional lending, and even call in loans falling due, the government may decide — as another drastic, but logically consequential step of interventionism — to nationalize the banking industry (or at least a great part of it). By doing so, it can make the banks increase the credit and money supply.

Alternatively, the central bank could print additional money, distributing it to households and firms as a transfer payment.[2] Under a fiat-money regime, this can be done at any time and without limit, as Federal Reserve Chairman Ben S. Bernanke made unmistakably clear in a notorious speech in 2002:

[T]he U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.[3]

The Way Toward Hyperinflation

Government-controlled fiat money is fraudulent money. It is money that is created out of thin air, in violation of property rights: fiat-money production doesn't require any of the wealth-producing activities characteristic of the free market. It is and will always be, by construction, fraudulent money.

What is more, fiat money created through bank credit expansion necessarily causes boom-and-bust cycles, inducing governments to push back free-market forces to prop up the economy and keep the fiat-money regime afloat; in fact, fiat money will increasingly undermine the free-market order.

Mises was well aware of the final consequences of a monetary regime that rests on ever-greater increases in the money stock produced by banks' expanding circulation credit. It would, at some point, lead to bankruptcies on the grandest scale, resulting in a contraction of the credit and money supply (deflation).

Or it would end in hyperinflation:

But if once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum size. For under these circumstances the regular costs incurred by holding cash are increased by the losses caused by the progressive fall in purchasing power. The advantages of holding cash must be paid for by sacrifices which are deemed unreasonably burdensome. This phenomenon was, in the great European inflations of the 'twenties, called flight into real goods (Flucht in die Sachwerte) or crack-up boom (Katastrophenhausse).[4]

Mises knew very well what he was referring to. He had lived through the period of great inflation that started in Europe in 1914 with World War I. This finally led to hyperinflation and a complete destruction of Germany's Reichsmark in 1923. On a technical level, Germany's hyperinflation was the result of the German Reichsbank monetizing the growing government debt, issued for financing social benefits, subsidies, and reparation payments.

In Age of Inflation (1979), reviewing Germany's hyperinflation from a political-economic viewpoint, Hans F. Sennholz asked, "Who would inflict on a great nation such evil which had ominous economic, social, and political ramifications not only for Germany but for the whole world?"[5] His sobering answer was that

[e]very mark was printed by Germans and issued by a central bank that was governed by Germans under a government that was purely German. It was German political parties, such as the Socialists, the Catholic Centre Party, and the Democrats, forming various coalition governments that were solely responsible for the policies they conducted. Of course, admission of responsibility for any calamity cannot be expected from any political party.[6]

That said, the German hyperinflation was the result of a policy that considered the financing of government debt by an accelerating increase in the money stock as the politically least unfavorable method. It seems that the state of opinion hasn't actually changed much. Today, there is great public support when it comes to expanding the base-money stock for financing ailing banks, insurance companies and, most important, rising government debt.

"The doctrines and theories that led to the German monetary destruction have since then caused destruction in many other countries. In fact, they may be at work right now all over the western world."[7]

Austrian economics would rightly maintain that current fiat-money polices have become increasingly inflationary — and they should have little doubt that the forces and instruments that can pave the way towards hyperinflation are already in place and gaining strength by the day .

The solution to a destruction of the currency is the return to sound money — free-market money — as outlined by Mises and further developed by Murray N. Rothbard. It would presumably, at least in the initial stage, result in gold-backed money under 100% reserves. The edging up of the gold price seems to support the view that people consider gold as the ultimate means of payment — a status that will become increasingly obvious once people fear that the exchange value of fiat money will be eroded substantially.

Link at the topc.

passengers · 05-04-2009, 05:24 AM

Total fiat collapse. That includes USD as well as all the rest. Good luck to anyone holding that shit.

raycarey · 05-04-2009, 11:36 AM

passengers, when do you think the bottom will fall out of the US dollar?

and are you totally in precious metals and other commodities?

Marmite the Dog · 05-04-2009, 11:41 AM

Quote:

Originally Posted by raycarey

and are you totally in precious metals and other commodities?

I very much doubt Harry is in anything apart from a cheap SLAGDOG.

Felix Sphinx · 05-04-2009, 12:11 PM

Quote:

Originally Posted by Butterfly

The law of average will mean that the USD should rebound soon, hopefully the Fed will keep interests at current level and stop cutting interest rates, but it seems not according to the latest news, Bernake wants more cut

Hope and so called"laws " do not determine currency equivalences In addition to economic data war ,natural disaster and government intervention determine long term rates Also we are looking at a basket of world currencies While at any stage theUS $ will be up or down in relation to others This is inevitable since 1971 break from fixed rates

passengers · 05-04-2009, 03:27 PM

Quote:

Originally Posted by raycarey

passengers, when do you think the bottom will fall out of the US dollar?

and are you totally in precious metals and other commodities?

Just diversified assets now. Total change from 6-months ago. You have to keep ahead of the curve.

USD collapse is too political to be able to pinpoint a particular timeframe or tipping point for that timeframe. It is inevitable however.

Milkman · 06-04-2009, 08:35 PM

A general article on the Greenback from Time Magazine.

Quote:

Is the Dollar Doomed?

By Michael Schuman Monday, Apr. 06, 2009

....The dollar is a universal medium of exchange, because it is liquid, readily available and backed by the largest economy in the world. There has been little reason for global commerce to function any other way.

Until now.

....There is also the possibility that the dollar, after its recent show of strength, will again weaken in value against other major currencies, eroding its attractiveness as a reserve currency. Confidence in the health of the U.S. economy, and therefore the U.S. dollar, could plunge due to continued large U.S. current-account deficits, an unstable banking sector and a recession-busting, expansionist monetary policy. The budget deficit, which the Congressional Budget Office estimates will reach $1.8 trillion this fiscal year, or 13% of GDP, is reaching heights not seen since World War II.

The dollar has also been supported recently by the deleveraging taking place within the American financial system. Desperate for cash, U.S. financial institutions have been liquidating foreign assets and repatriating the funds, pushing up the value of the dollar. As that process plays out, a key support of the dollar's value could be removed. Currency markets are clearly jittery. In late March, U.S. Treasury Secretary Timothy Geithner sent the dollar tumbling when he said he was "actually quite open" to China's proposal for a greater role for SDRs. The dollar lost 1.3% against the euro within 10 minutes of Geithner's unexpected comment. (The greenback recovered a short time later, after Geithner said he expected the dollar to remain the top global currency.) "The chance of a very abrupt fall in the dollar is quite possible," says Harvard University economist Jeffrey Frankel.

Link & Entire: Is the Dollar Doomed? - TIME

blackgang · 16-04-2009, 11:53 AM

Couple days ago I got at BKK bank ATM 34.98=$1 US and I see today it is better so might go get another $1000 worth.
Had to buy wifey a new desk top PC. so she can wear it out on Govt work for the school.
That HP laptop we bought her a few years back is still kicking so we did good on that buy.

Milkman · 21-05-2009, 08:56 AM

Russia has shifted its foreign currency reserves enough so that now its main holdings are in Euros.

Quote:

Russia Dumps the U.S. Dollar for Euro as Reserve Currency

Currencies / Global Financial System May 19, 2009

The US dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent, The Vedomosti newspaper wrote.

The dollar has thus lost the status of the basic reserve currency for the Russian Central Bank, the annual report, which the bank provided to the State Duma, said.

In accordance with the report, about 47.5 percent of the currency assets of the Russian Central Bank were based on the euro, whereas the dollar-based assets made up 41.5 percent as of the beginning of the current year. The situation was totally different at the beginning of the previous year: 47 percent of investments were made in US dollars, while the euro investments were evaluated at 42 percent.

Link & Entire: Russia Dumps the U.S. Dollar for Euro as Reserve Currency :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

robuzo · 21-05-2009, 12:33 PM

Interesting comments here Beat the Press Archive | The American Prospect from Dean Baker about why China keeps buying US T-bills, and from Krugman about the liquidity trap here China and the liquidity trap - Paul Krugman Blog - NYTimes.com

Butterfly · 21-05-2009, 12:49 PM

Quote:

Originally Posted by Milkman

Russia has shifted its foreign currency reserves enough so that now its main holdings are in Euros

Actually it makes more sense, closer to home

having Russians becoming the new center of USD exchange like in the late 90s was absolutely ridiculous, probably contributed to the overvaluation of the USD. Maybe that crash was long overdue, hence return to the mean.

Milkman · 21-05-2009, 12:50 PM

Quote:

Day of reckoning looms for the U.S. dollar

Alia McMullen, Financial Post Published: Wednesday, May 20, 2009
More On This Story

iStockThe greenback may be headed for a tumble as intense selling is underway.

The U.S. dollar's day of reckoning may be inching closer as its status as a safe-haven currency fades with every uptick in stocks and commodities and its potential risks - debt and inflation - are brought under a harsher spotlight.

Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a "serious case of dollar damage" was underway.

"We long warned about the day of reckoning for the dollar emerging at the next economic recovery," Mr. Laidi said in a note.

Mr. Laidi said economic recovery would weigh on the greenback as real demand for commodities, coupled with improved risk appetite, caused investors to seek higher yields in emerging markets and commodity currencies. This would draw investment away from the U.S. dollar, which was dragged down by growing debt and the risk quantitative easing would eventually spark a surge in inflation.

The U.S. dollar slid against most major currencies Wednesday, hitting a five-month low of US$1.3775 against the euro and pushing the Canadian dollar up US1.21¢ to a seven-month high of US87.69¢.

John Curran, the senior corporate dealer at Canadian Forex, said the U.S. dollar would likely fall further in the next week, with the Canadian dollar likely reaching about US88.35¢, at which point it could break higher to test the US92.35¢ level.
"The U.S. dollar is continuing to slide as investor appetite is gaining momentum," Mr. Curran said. "People are getting comfortable about taking on a little more risk."

Link & Entire: Day of reckoning looms for the U.S. dollar

Butterfly · 21-05-2009, 12:59 PM

Quote:

Originally Posted by Felix Sphinx

Hope and so called"laws " do not determine currency equivalences

it does actually. They all follow mathematical patterns, not easy to predict or identify, but they are there.

Milkman · 21-05-2009, 01:11 PM

Quote:

Originally Posted by robuzo

Interesting comments here Beat the Press Archive | The American Prospect from Dean Baker about why China keeps buying US T-bills,

Thanks, but can you please put a snippet of the article.

Here is some of the Baker article. The last paragraph sums it up:

Quote:

Finally, China is not buying these bonds as an investment. It absolutely will lose money on these bonds.The dollar will fall and interest rates will rise. This makes U.S. Treasury bonds a really bad investment for the Chinese compared to say, buying short-term euro assets or almost anything else in the world. They are obviously buying U.S. Treasury bonds for the purpose of sustaining their export market in the United States. This is not an accidental outcome of their actions.

Link: see above.

robuzo · 21-05-2009, 02:58 PM

Quote:

Originally Posted by Milkman

Quote:

Originally Posted by robuzo

Interesting comments here Beat the Press Archive | The American Prospect from Dean Baker about why China keeps buying US T-bills,

Thanks, but can you please put a snippet of the article.

Here is some of the Baker article. The last paragraph sums it up:

Quote:

Finally, China is not buying these bonds as an investment. It absolutely will lose money on these bonds.The dollar will fall and interest rates will rise. This makes U.S. Treasury bonds a really bad investment for the Chinese compared to say, buying short-term euro assets or almost anything else in the world. They are obviously buying U.S. Treasury bonds for the purpose of sustaining their export market in the United States. This is not an accidental outcome of their actions.

Link: see above.

I think you posted the important part of the Baker article. Here is part of the Krugman:
China and the liquidity trap - Paul Krugman Blog - NYTimes.com
China and the liquidity trap

I liked this David Leonhardt article about the China-US economic relationship. But I do have a problem with this passage:

The most obviously worrisome part of the situation today is that the Chinese could decide that they no longer want to buy Treasury bonds. The U.S. government’s recent spending for bank bailouts and stimulus may be necessary to get the economy moving again, but it also raises the specter of eventual inflation, which would damage the value of Treasuries. If the Chinese are unnerved by this, they could instead use their cash to buy the bonds of other countries, which would cause interest rates here to jump, prolonging the recession.

Um, no. Right now we’re in a liquidity trap, which, as I explained in an earlier post, means that we have an incipient excess supply of savings even at a zero interest rate.

Milkman · 25-05-2009, 12:00 PM

Has the Greenback turned the corner? Starting its deline, now? We'll wait and see.

Link & Entire: DOLLAR IN DISTRE$$ - New York Post

Quote:

May 23, 2009

The greenback tumbled to its lowest level of the year on global fears that Uncle Sam is borrowing too much with credit that's already stretched too thin.

Investors around the world dumped their hoards of dollars in favor of other currencies and under-priced stocks and corporate bonds, as they moved away from the belief that the dollar remained a haven for investors.

Quote:

Sources told The Post that part of the pressure on the dollar might be tied to the growing perception that the US can no longer be called upon as the world's rich uncle. Indeed, Uncle Sam's status in the world has suffered a number of knocks as a result of the credit crisis.

"The markets are beginning to anticipate the possibility" of a US credit rating cut, Bill Gross, co-chief investment officer of bond giant Pimco, told Bloomberg.

31-03-2009, 02:16 PM	#61 (permalink)
raycarey ........ Last Online: Yesterday 11:22 PM Join Date: Jan 2006 Location: deleting posts in issues Posts: 6,674	i think most would agree that the dollar is in trouble....but the pertinent question is when will the bottom fall out? right now, i'm in 6 different currencies (actually five plus commodities), but i'm extremely overweight $US at nearly 60%. it seems to me that if/when we retest the lows in world stock markets, there will be additional rushes to safety (ie the dollar). after that, massive stimulus plans and inflation in the US would seem to be the biggest worry for the dollar. market timing is a gift few have, but finding the sweet spot between these two would be ideal. Last edited by raycarey : 31-03-2009 at 02:30 PM.

16-04-2009, 11:53 AM	#72 (permalink)
blackgang Thailand Travel Forum Last Online: Today 08:59 AM Join Date: Dec 2006 Location: Phetchabun city Posts: 13,358	Couple days ago I got at BKK bank ATM 34.98=$1 US and I see today it is better so might go get another $1000 worth. Had to buy wifey a new desk top PC. so she can wear it out on Govt work for the school. That HP laptop we bought her a few years back is still kicking so we did good on that buy. __________________ To view links or images in signatures your post count must be 10 or greater. You currently have 0 posts. Did you know the average male is 6 inches long, and the average female is 8 inches deep? So in New York City alone there is over 3 miles of unused pussy! To view links or images in signatures your post count must be 10 or greater. You currently have 0 posts.

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31-03-2009, 05:14 PM	#63 (permalink)
Panda Thailand Travel Forum Last Online: Today 05:47 AM Join Date: Jul 2007 Posts: 5,001	Downside of the oversupply of the $US and its eventual decline is going to be inflation with higher costs and reduced standard of living for US citizens. Upside is going to be a more competitive export position which will lead to more jobs and less government debt. Its an adjustment that HAS TO HAPPEN sooner or later for not just the USAs economy to function properly, but for the whole worlds economy to function properly. Same, same British Pound. Wealth is also going into the Japanese Yen, which is pushing up its value and hurting the Japanese economy. All the more reason why we need a truly international currency based on production of real goods and services to move ahead with a stable world economy. The experiment with the $US as a free floating currency of world trade has ended in failure. The time for a more sensible alternative is approaching. The real danger is that the world will take the loss when the $US drops in trading value and continue to limp along with it or worse, move to the Euro as the preferred trading currency. Staying with the old failed financial exchange system or moving to the Euro would only start the artificial boom and bust cycle all over again.

05-04-2009, 05:24 AM	#66 (permalink)
passengers I am in Jail Last Online: Today 06:40 AM Join Date: Jan 2009 Posts: 589	Total fiat collapse. That includes USD as well as all the rest. Good luck to anyone holding that shit.

05-04-2009, 11:36 AM	#67 (permalink)
raycarey ........ Last Online: Yesterday 11:22 PM Join Date: Jan 2006 Location: deleting posts in issues Posts: 6,674	passengers, when do you think the bottom will fall out of the US dollar? and are you totally in precious metals and other commodities?

21-05-2009, 12:33 PM	#74 (permalink)
robuzo Thailand Expat Last Online: Today 07:29 AM Join Date: Feb 2008 Location: Paese dei Balocchi Posts: 1,812	Interesting comments here Beat the Press Archive \| The American Prospect from Dean Baker about why China keeps buying US T-bills, and from Krugman about the liquidity trap here China and the liquidity trap - Paul Krugman Blog - NYTimes.com

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