YouTube - Peter Schiff issues a Red Alert: "Get out of the US dollar"
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why is being old a joke?Quote:
Originally Posted by Nomaifalang
^^ It's worth noting the Peter Schiff is running for office as a US Senator, so although his comments make sense you have to wonder if they are politically motivated...
----
Here is an interesting view from an investor and contributor to thestreet.com...
TheStreet.com
The Dollar's Problem
By Don Dion
TheStreet.com Contributor
10/24/09 12:54 PM EDT
Editor's note: The following article was originally published as two RealMoney blog entries, on 10/22/09 and 10/23/09. It is being republished as a bonus for TheStreet.com readers. Click here for information on RealMoney, where you can see all the blogs, including Don Dion's -- and reader comments -- in real time.
NEW YORK (TheStreet) -- Betting against the U.S. dollar has become extremely popular in recent weeks. It's an axiom in investing that when an asset rises or falls greatly in price, only then will it become widely popular to be bullish or bearish on it. No one was interested in gold at the height of the dot-com boom, when it could be had for $250 an ounce. And most folks still weren't interested throughout the 2000s.
Since the financial crisis began in 2007, gold has become an increasingly popular asset for a variety of reasons. SPDR Gold Shares (GLD:NYSE) has become the second-largest exchange-traded fund in existence, behind only SPDR (SPY:NYSE).
Similarly, investors appear to realize the dollar is weak all of a sudden, even though the dollar has been in decline since 2000. At that time, the dollar was worth more than one euro, while today it fetches about 0.67 euros. Still, one of the best trading and investing maxims is, "the trend is your friend."
I hold PowerShares DB U.S. Dollar Bearish (UDN:NYSE) as part of some client portfolios and it has performed decently as the dollar declines. Aggressive traders may prefer more volatile currencies, such as the Australian or New Zealand dollars, or emerging-market currencies.
Recently, traders have been focused on which countries will raise interest rates. The Australian dollar rallied against the greenback after the Australian central bank increased rates on Oct. 6, and the pound rallied this week after Mervyn King, the Governor of the Bank of England, wrote in a newspaper opinion article that U.K. interest rates would have to rise "at some point".
The U.S. central bank is seen as willing to hold rates low for much longer than its peers, and that has made the dollar the choice of the carry traders, who borrow in dollars and purchase assets with higher yields. On the flip side, the sum of money supply and credit hasn't been growing, and the Federal Reserve wants to reverse its liquidity injections and end quantitative easing.
The policy change is starting right now and will pick up steam as more programs peter out, unless the Fed extends them. Short term, the carry-trade-driven trend will continue to deliver small gains until something reinforces or stops it in the longer term.
The trade has become more crowded, which increases the chances of a correction, but it doesn't mean it signals a reversal.
Still, dollar-positive forces are building and investors should be prepared for a surprise correction.
The biggest driver for a weaker dollar is the U.S. government. The politically easy solution to a debt problem is to create inflation to lower that debt over time, but the federal government is borrowing way too much money. A country can't get out of debt by going deeper into debt.
One way of measuring the potential impact of U.S. borrowing on future inflation that is making the rounds in the blogosphere comes from Peter Bernholz, a professor at the University of Basel, Switzerland. His work was cited by hedge fund Hayman Advisors in a letter to clients mentioned in this Atlantic blog. In a study of inflation and hyperinflation, Bernholz found that the worst cases of hyperinflation begin when a government borrows more than 40% of its expenditures. Hayman noted that the U.S. is at that threshold.
It's unlikely that the U.S. will experience a hyperinflation, one data point aside, but it is the federal government that is most important here, not the Federal Reserve.
The federal deficits and economic policy are the biggest threats to the value of the dollar. The bullish side isn't without arguments, though.
The most obvious is that foreign governments do not want a weaker U.S. dollar. It means painful economic adjustment to their export models, and we've already seen Taiwan and Brazil, to name two, try to stop the rise in their currencies.
The Fed is exporting inflation via the carry trade, and that is showing up as asset inflation in emerging markets. The weaker the dollar becomes, the more central banks will be trying to weaken their own currency against the dollar in order to pop asset bubbles.
Another factor is the demographic and financial position of foreign countries. Europe and Japan are in much worse shape than the U.S. when it comes to government debt, demographics and future welfare liabilities.
The Telegraph's Ambrose Evans-Pritchard wrote about those risks recently in a blog entry that was somewhat bullish on the dollar, and hedge fund manager David Einhorn mentioned those risks as part of a case for being bearish on all currencies and bullish on gold.
Lastly, the popularity of Ron Paul's effort to audit the Federal Reserve shows that inflation is already politically unpopular.
The debt limit needs to be raised by the Senate in order for Treasury to continue borrowing, but consider the following, reported by Politico.com: " [Sen. Evan Bayh (D., Ind.)] and nine other Democrats sent a letter to Senate Majority Leader Harry Reid (D., Nev.) last week that called on Congress to approve a "special process" to control the deficit -- warning that adding trillions more dollars to the country's credit card could force a sharp rise in interest rates and cause the price of goods and services to decline while limiting the country's ability to act on a range of pressing issues."
Politico.com reports that the GOP leadership believes all 40 of its senators will vote against an increase in the debt ceiling. If 10 Democrats join them, it leaves it to Vice President Joe Biden to break the impasse and put the rising deficit squarely on the shoulders of the Obama administration, or it means Democrats must cave into demands for more responsible fiscal policy.
It often pays to be a contrarian in financial markets, but not a mindless one. The trend is currently in favor of a weaker dollar, and that's what is likely to pay off in the near term. Forces are building for a short-term reversal however, with sentiment reaching an extreme and money and credit supply not cooperating.
Longer term, a big move is likely, but the direction is unclear. World governments are flooding the globe with liquidity, potentially leading to much higher inflation and a weaker dollar, confirming the herd and the popular arguments made against the greenback today.
If the dollar reverses, then a few years from now, the herd will be talking about how weak Europe and Japan are relative to the U.S., and they'll want to pile into the dollar. Of course, by then, instead of costing 0.67 euros or 90 yen, a dollar might cost 1 euro or 150 yen.
-- Written by Don Dion in Williamstown, Mass.
Turkey is a US ally.
I doubt there are any specific ramifications to this, but it's the beginning of a trend, IMO. Many nations, in different areas of the globe have changed their sentiment of using the USD as the de factor international trading currency.
Turkey to use national currencies in trade with Iran, China
Quote:
NKARA, October 28 (RIA Novosti) - Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20% of its commodity turnover, local media reported on Wednesday.
Turkey has already switched to settlements in national currencies with Russia amid weakening confidence in the greenback as the world's major reserve currency. The move was initiated by Turkish President Abdullah Gul during his visit to Moscow in February.
Turkey's decision to make settlements with Iran and China in national currencies was announced during a visit to Iran by Turkish Prime Minister Recep Tayyip Erdogan. The Turkish premier told a Turkish-Iranian business forum on Tuesday that the countries had prepared a legal framework for transition to settlements in national currencies.
"We have adopted a necessary legislative act and are prepared for the transition," the Turkish newspaper Milliyet quoted Erdogan as saying.
According to the paper, Turkey's trade with Russia, Iran and China exceeds $65 billion a year. Russia is Turkey's largest trade partner, with $37.8 billion commodity turnover registered last year.
Russian Prime Minister Vladimir Putin said on October 14 that Russia was ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings.
"We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.
Britain's Independent newspaper reported in early October that Russian officials had held "secret meetings" with Arab states, China and France on ending the use of the U.S. dollar in international oil trade.
The countries are reportedly seeking to switch from the dollar to a basket of currencies including the euro, Japanese yen, Chinese yuan, gold, and a new unified currency of leading Arab oil producing countries.
The Independent said the meetings have been confirmed by Chinese and Arab banking sources, although Russian officials said they had no knowledge of the talks.
From the Singapore Strait. I don't always believe in the hype and dire forecasts, but this does mean there is a world consensus on the dollar - that isn't good. And "faith" was always a factor in this reserve currency of the world. This faith, is gone.
Link: http://www.straitstimes.com/Breaking...2.html?vgnmr=1
Quote:
NEW YORK - A DOLLAR plunge could ravage the US economy as soon as 2012, when foreign investors are likely to exit en masse from US assets, according to a new book by two analysts who forecast the recent credit crisis.
Even after credit, stock and housing bubbles popped in the past two years, dollar denominated assets are still overvalued, and a bigger crisis is yet to come, write the authors of 'Aftershock: Protect yourself and profit in the next global financial meltdown'.
Huge US government debt issuance will drag the dollar into a much deeper dive, say analysts David Wiedemer and Robert Wiedemer, and writer Cindy Spitzer.
In the short term, China and other foreign investors will keep buying Treasuries to curb their currencies' appreciation against the dollar, say the analysts, who forecast the financial crisis in the 2006 book, 'America's Bubble Economy'. Over the long run, investors will slash purchases as bond prices drop, according to the book published this month.
Though most of the pressure on the dollar will come from the Chinese yuan and other resurgent Asian currencies, the euro will eventually punish the debt-burdened dollar, said Robert Wiedemer in a telephone interview with Reuters this week.
The euro will rise to about US$2 (S$2.77) over the next two to three years, before surging rapidly above US$3, forecast Wiedemer, whose risk assessment firm advises hedge funds and businesses.
At first, Treasuries will keep their safe haven status. A year or two of double-digit inflation and interest rates will then trigger a sell off in US government bonds and batter stocks, says the book published by John Wiley & Sons. -- THOMSON REUTERS
So we are due a long period of shit in other words..?
The talking heads seem to think we have 18 - 24 months before the excrement hits the aircon unit...
Maud,Quote:
Originally Posted by Muadib
This is what is disturbing me.
Yes, these talking heads (Roubini, Jim Rogers, Schiff) and a lot of other analysts, from Singapore to the US to Europe are saying the US will have a case of:
STHF - sh*t hit the fan.
With so many of these analyst/experts (and yes, they can be wrong) agreeing on this, I am starting think things will get worse.
I may stay in Asia for a while, and continue to visit Family for a Summer in the US.
Being single w/ no kids, and not having debt, I have more flexibility and more mobility, and I am happy to be in this situation.
Inflation is inevitable... Hyper-inflation is the prediction by some, while others such as Paul Krugman believe it's much ado about nothing... Who are you to believe???
History has proven that you cannot simply print notes and flood the market without paying for it with inflation... Then add to the mix the overwhelming debt the US is piling up... Very soon, the US will have $500 billion per year interest payments to make on outstanding debt... Where do you think those $$$ will come from???
The USD is a double-edged sword... On one hand, the manipulation of the USD with zero interest rates & devaluation benefits the US economy & stock market, but on the other hand being the defacto world trading currency the same efforts devalues the economies of those countries holding USD in reserve & US debt...
The real question is how long will these foreign countries continue to hold greenbacks... Yet another double edged sword as if they dump them, the USD will drop like a stone and they will loose their investment on the sell-off and they can write off the US as an export customer as the US will not be able to afford to purchase goods at hyper-inflated rates... If they hold them, they bite the bullet and ride out the storm with the US...
I don't profess to have any insight into these matters or specific knowledge other than what is presented in the media... My observations are from a layman's standpoint at best as I've only had a passing interest in the matters in the past... Some of it scares the crap out of me and it makes it difficult to plan for the future, trying to decide which direction to jump...
Things are not pretty in the US right now... Unemployment approaching 20% overall makes it very difficult to find work, even if you are over-qualified for a position... My advice would be to stay in Asia if you can hack it... That's where I am going as soon as I fulfill my commitments in the US...
Here is a piece from Paul Krugman's blog from the New Yourk TImes... Fairly succinct...
It’s the stupidity economy - Paul Krugman Blog - NYTimes.com
November 13, 2009, 6:53 pm
It’s the stupidity economy
OK, maybe a more polite way to say it is this: bad ideas are acting as serious constraints on policy.
We’re in a liquidity trap, with interest rates up against the zero bound. This means that conventional monetary policy isn’t sufficient. What should we do?
The first-best answer — that is, the answer that economic models, like my old Japan’s trap analysis, suggest would be optimal — would be to credibly commit to higher inflation, so as to reduce real interest rates.
But the key thing to recognize about this answer is that it’s all about expectations — the central bank only has traction over expected inflation to the extent that it can convince people that it will deliver that inflation after the liquidity trap is over.
So to make this policy work you have to (i) convince current policymakers that it’s the right answer (ii) Make that argument persuasive enough that it will guide the actions of future policymakers (iii) Convince investors, consumers, and firms that you have in fact achieved (i) and (ii).
In reality, we haven’t even gotten anywhere near (i): the conventional wisdom is still that any rise in expected inflation above 2 percent is a bad thing, when it’s actually good.
So some readers have asked why I’m not making the same arguments for America now that I was making for Japan a decade ago. The answer is that I don’t think I’ll get anywhere, at least not until or unless the slump goes on for a long time.
OK, so what’s next? The second-best answer would be a really big fiscal expansion, sufficient to mostly close the output gap. The economic case for doing that is really clear. But Washington is caught up in deficit phobia, and there doesn’t seem to be any chance of getting a big enough push.
That’s why, at this point, I’m turning to what I understand perfectly well to be a third-best solution: subsidizing jobs and promoting work-sharing.
Call it constrained optimization, where the constraint comes from the power of bad ideas.
I don't think we are in a liquidity trap, unlike Japan
technically we should be, and yes we run out of options in terms of monetary policy, but the situation is extreme so "investors" understand the current move as it is temporary
A report on the weakening of the dollar, and also the new plan to begin the Gulfo. Prediction is a slow move away from the dollar, and the USD will remain for oil for some time.
But this is one American banker's, opinion:
https://www.youtube.com/watch?v=iDRiitECPAY
Another discussion by Jim Rogers: Very good, IMO.
https://www.youtube.com/watch?v=ZrTpo...eature=related
Article on the dollar.....and Vietnam.....
The USD is....was.....backed by faith. Now this erosion in faith has gone beyond articles and esoteric programs to become, mainstream.
Comments on the USD?
Comments on Vietnam?
Link & Entire: http://www.bloomberg.com/apps/news?p...d=a_1UjBOzaP_gQuote:
Why Franklin’s $100 Bill Now $1,000: William Pesek (Update1)
Commentary by William Pesek
https://teakdoor.com/images/smilies1/You_Rock_Emoticon.gif
Dec. 18 (Bloomberg) -- Add Benjamin Franklin’s wink to the U.S. dollar’s list of humiliations.
The 18th-century American statesman is perhaps best-known in Asia for gracing the front of the $100 bill. Asians used to worry about counterfeit “Benjamins.” Now, they’re frightened of the real thing. Since January 2008, 25 percent of the dollar’s value has melted away versus the yen. Time for a redenomination? Japanese toymaker Bandai certainly thinks so.
This week it unveiled “Bubbly Bubble Bath” dollar soap. It’s a paper-thin replica of the $100. Only, this one is a $1,000 bill. Just so the most gullible among us aren’t fooled, it features a winking Franklin -- as if he’s in on the joke.
Comedians like David Letterman are increasingly working the dollar into their acts. That’s where the humor ends. It would be fun and games if not for an experience I had recently in Hanoi: merchants were far less keen on taking my dollars than a year ago. It’s an important man-on-the-street sign of the dollar’s plight, one that may grow as Asian central banks protect their holdings.
Waning demand for dollars in places where it’s long been rock-solid can be seen among Vietnam’s eclectic gold speculators. When we think of gold gamblers, an image closer to George Soros often comes to mind. Stereotypes die fast when visiting one of Hanoi’s ubiquitous black-market areas. Housewives, many with toddlers in the arms, jostle to unload their dong and dollars for the safety of hard assets.
Love Affair
Think of this as ground zero of Asia’s fast-growing love affair with gold -- and a sign the dollar’s stability this week won’t last.
The dollar was trading at 89.57 yen in Tokyo today, after reaching a 14-year low 84.83 on Nov. 27. The ICE futures exchange’s Dollar Index has risen 1.2 percent this week.
Times were when Vietnamese merchants knocked one another over to get their hands on dollars. Today, the world’s reserve currency is under more pressure than ever as hedge funds begin wondering if Dubai will go the way of Iceland.
Few considered the economy of the tiny North Atlantic nation before it collapsed last year. It sent shockwaves around the globe and had investors scrutinizing Asia for economies similarly run like national hedge funds. At the time, many investors homed in on South Korea, which was thought to be overexposed with too much short-term debt.
Korea turned out to be fine. Many wouldn’t say the
same thing about Vietnam these days. On Dec. 8, for example, Nomura Holdings Inc. said Vietnam has the makings of a “classic” emerging-market crisis and investors should buy protection against a sovereign default.
Interesting comments on the US dollar from Wolf. To paraphrase: the only thing propping up the USD is.....China.
Quote:
http://www.business24-7.ae/Articles/...c0ee85802.aspx
Do we need a new reserve currency?
A new global currency should replace the US dollar as the international reserve currency, as the long-term deterioration of America's economy and the greenback is fuelling a "currency-regime crisis", says Martin Wolf, associate editor and chief economics commentator of the Financial Times.
Indeed, Wolf said he's in complete agreement with China's Central Bank Governor Zhou Xiaochuan, who has argued for a new global currency "most credibly and convincingly"
"On the dollar, there is nothing to support this currency except the Chinese government and a few other governments that are prepared to buy it," said Wolf. "Anybody can look at the arithmetic of the fiscal deficit, the monetary policy, the external balance, which has improved but largely because of the recession, the dollar is not adequately supported." The US currently has a national debt in excess of $12 trillion (Dh44trn) or almost $40,000 per citizen, with a debt to GDP ratio of more than 85 per cent. In the July-September quarter, the US current account deficit rose sharply by 10.3 per cent from the previous quarter to $108bn. In the past year, the US dollar index, which measures the performance of the greenback against a basket of currencies, has also fallen significantly.
"This is simply the American way of shifting the recession from them(selves) to their trading partners," said Wolf.
"Because the dollar, to my mind, given its underlying conditions, is no longer a credible long-term store of value," said Wolf.
"The Americans no longer have the means to save themselves, this is what I think people don't understand. There is no credible American policy," said Wolf.
Meanwhile, a trade skirmish between the US and China could ensue, if Beijing continues to devalue its currency to bolster export-driven economic growth at the expense of economic recovery in the US, said Wolf.
The amazing thing is that when the world economy was going well 2001 to 2008, the $US was in steady decline against other major currencies. But as soon as the world financial crisis hit, the tradable value of the $US shot up. Then when things looked to be not as bad as first suspected the $US started to decline again.
So the pattern over the past several years has been that when the world economy is going well the $US falls and when things are looking bad it gains.
Obviously people pull their money out of shares and put it into $USs when the world economy looks like its on a downer. A lot of large investors must be of the opinion that $USs are the safest place to store their wealth in the bad times.
But it is ironic that the heart of the worlds economic problems is an overvalued $US as a result of its status as the worlds default trading currency. The US seems to be doing everything it can to devalue its currency by increasing debt and printing more money, but investors still flock to it when things are bad.
If another country such as Greece tried to do what USA is doing they would be another Zimbabwe almost overnight. The only reason USA can get away with it is because of the $US hegemony.
The whole worlds trading system is out of balance because they are using money that really doesn't exist (US printing press $s and debt) to trade with. Such a system can not keep going for long. Its like counterfeiting on a grand scale.
The $US value is the worlds greatest financial bubble of all time. And its going to take a lot of other countries down with it when it bursts.
^won't burst because it wont be allowed to. :)
actually I won't call it going well, more like being in speculative modeQuote:
Originally Posted by Panda
USD was still going strong until 2003, things start to go wrong as soon as the war in Iraq startedQuote:
Originally Posted by Panda
Soud bites, but many see this coming:
https://www.youtube.com/watch?v=eZA0qNsf4m0
Dr. Paul Craig Roberts on the US Dollar:
https://www.youtube.com/watch?v=QxHol...layer_embedded
Actually, the $US started its decline this decade at the beginning of February 2002 with some sustained major losses against a basket of other major currencies.Quote:
Originally Posted by Butterfly
US Dollar Index
You will need to choose the monthly option to see back that far.
I don't buy it. Trillions of dollars held in USD currency reserves/bonds around the world. Countries holding these reserves will do whatever it takes to ensure the USD does not collapse. If there is to be a "collapse" it will come after the USD is replaced by an alternative reserve currency. May never happen once world economies stabilize but if it does, more like 10 years.Quote:
Originally Posted by Muadib
The 18 - 24 month time frame was for a bursting of the currency bubble and a slump into worldwide depression... All indications at this point that economies around the world are recovering at a slow pace, even in the US... The 'reported' US retail sales were actually up 3.6% in 2009, despite the recession... Unemployment will continue to be the primary issue moving forward...
I've read the 10 years time frame also on replacing the USD as the world's reserve currency... The question is, that once the world's economies have stabilized, will there be a real push to replace the USD...
That is a very unsafe situation for the US, what you say is that other nations at present are the only guarantee against a total collapse, what if one or more nations start shaking, how much will it take to start a panic fire sale, what if some nations see a long term Political/influence/economic advantage in letting the US economy/Empire fail, the nations that keep this sinking boat afloat will only do so as long as they see a national advantage in doing so, how much more of their own money will they continue to use before they think it is time to cut their losses and jump ship, if the trust that the dollar can be saved finally goes it will be messy.Quote:
Originally Posted by Norton
It certainly is. The US gov and consumers have for far too long lived on unsustainable low interest credit fueled by more than willing foriegn debtor countries. Will the US learn from the current economic woes? If they don't, the current problems will be considered minor in comparison to what is in store in the future.Quote:
Originally Posted by larvidchr