Thread: US dollar decline, or collapse?

Day of reckoning looms for the U.S. dollar

Alia McMullen, Financial Post Published: Wednesday, May 20, 2009
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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

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.

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:

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.

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




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

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.

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.

I doubt this will be the big exodus from the $US because there has not been any big news to to trigger a panic. If the decline keeps going however, it could become a self fulfilling prophecy. Right now there are no good reasons to stay with the $US, but there are no good reasons to get out of it either. Its the lack of alternative safe havens for storing wealth in hard times that is propping up the value of the $US at the moment. But it only takes one person in a crowd to shout FIRE, and a few more to start running before a stampede begins.

Obamas recent admission that USA is essentially broke, and cant keep spending and borrowing at its present rate, while the US government itself continues to spend and borrow, may well be unnerving some investors.

Mmmmhh
Gold is on it,s way up again $955 oz

But too small an increase to say a flight to safety

Originally Posted by Panda

Doubt much will go into Brirish pounds

Funny you mention Sterling

Its up to 1.59 against the Dollar.

Rothschilds Bank (Jewish )a few months ago started buying heavily into Sterling when it was well down against the Dollar and Euro

They must know something we don,t, (can,t think what)

They have been very successfull for over 200 years

Chinese are buying heavily into Gold right now

So have I

UK is in worse shape than USA. In the short term, maybe there is some money to be made trading currencies as they fluctuate in value, but long term the Sterling has no future except down to pay off its balance of trade and get some income production going again. No country can go on spending more than they earn and borrowing to pay for the deficit. Though I am sure the politicians haven't figured that out yet.

they expect the UKP to collapse after that small rally,

The Chinese apparently are betting against the BP, buying USD and Neutral on EURO

Originally Posted by TSR2

Originally Posted by Panda

Doubt much will go into Brirish pounds

Funny you mention Sterling

Its up to 1.59 against the Dollar.

Rothschilds Bank (Jewish )a few months ago started buying heavily into Sterling when it was well down against the Dollar and Euro

They must know something we don,t, (can,t think what)

They have been very successfull for over 200 years

Chinese are buying heavily into Gold right now

So have I

The thing is that there isn't enough physical gold in the world to replace paper money at todays prices.
USA has by far the largest physical gold reserves of any government in the world. Over 8,000 tonnes of the stuff! Yet all that is only worth a few $billions at the present exchange between gold and $USs. Not even enough to pay off a fraction of the US debt.

Official gold reserves - Wikipedia, the free encyclopedia

For all the physical gold in the world to be worth as much as all the paper money we now play with, gold would have to be valued at at least $US 25,000 an ounce or probably a whole lot more. A whole lot more! You do the algebra.

Gold cant return as the worlds trading currency because it would blow the whole worlds economy to pieces. Most countries unloaded their gold reserves in exchange for $USs over the past 35years when the $US replaced gold totally as the worlds trading medium. That is, EXCEPT for USA.

Gold has the potential to go up to $2,000, $3,000 or even $5,000 an ounce when the world is in financial turmoil, but its never going to regain its position as the worlds sole trading medium. The world will adopt a productivity based world paper money currency before they go back to gold. And when that happens gold will go back to only being good for jewelry and worth maybe $300 an ounce.
But when that happens the world will have a reliable currency in which to trade. A currency not based on the ups and downs or exploitation of only one countries paper money.

Its something thats got to happen, and will happen, no matter how much governments around the world try to maintain the current unsustainable status quo. The only question is how long it will take for the worlds governments to come to a consensus and ditch the $US in favour of a new world productivity based basket of currencies. My guess is that this will be a long drawn out process (with the US government being the main obstruction), taking up to 10 years from now.

^

Agree with you entirely
but in the short term Gold will move upwards, maybe hitting $2000 but in reality only hedging the Dollars decline.

Fiat money is due for a good kicking

Originally Posted by Panda

UK is in worse shape than USA.

In what way?
The debt per capita must be much higher in USA than in the UK?

Originally Posted by Panda

In the short term, maybe there is some money to be made trading currencies as they fluctuate in value, but long term the Sterling has no future except down to pay off its balance of trade and get some income production going again. No country can go on spending more than they earn and borrowing to pay for the deficit. Though I am sure the politicians haven't figured that out yet.

The passage above is equally valid for USA, just replace Sterling with USD.

Originally Posted by lom

In what way?

The other part of UKs debt is whats needed to prop up the pension shortfall in the Public sector; it,s horrendous

Both countries are Anglo Saxon in outlook so validity to both applies

Originally Posted by lom

Originally Posted by Panda

UK is in worse shape than USA.

In what way?
The debt per capita must be much higher in USA than in the UK?

Originally Posted by Panda

In the short term, maybe there is some money to be made trading currencies as they fluctuate in value, but long term the Sterling has no future except down to pay off its balance of trade and get some income production going again. No country can go on spending more than they earn and borrowing to pay for the deficit. Though I am sure the politicians haven't figured that out yet.

The passage above is equally valid for USA, just replace Sterling with USD.

UK doesn't have much going for it in the way of exports verses imports unless its currency takes a big dive. US is in the same boat but not as bad.
UK citizens are in for a big cut in living standards over the next decade no matter which party is in power. Maybe time to immigrate and leave the place to the Pakkies?

Funny how basic arithmetic seems to confound the worlds financial experts.
They are always working on an angle to beat the system. And sometimes they find it, -- for a while at least.

Basic maths tells anyone that if you spend more than you earn, you end up going broke. Dont know whats so hard to understand about that?

Originally Posted by Panda

Dont know whats so hard to understand about that?

Its easy to understand, but ssshhh, dont tell Asian sweatshops who keep sending their real stuff in exchange for IOU's

Hey! American dollars are as good as the paper they are written on.

Originally Posted by Panda

Hey! American dollars are as good as the paper they are written on.

Trouble is it,s Bog paper , where does that go

Down the Tubes,

only joking , well maybe

Originally Posted by Panda

UK doesn't have much going for it in the way of exports verses imports unless its currency takes a big dive. US is in the same boat but not as bad.

I'd say that US is equally bad or maybe even worse.
The US industry is located in China nowadays and does not create a single job in US where it is very much needed.
A jobless citizen does not consume much and does not spin any wheels..

Originally Posted by Panda

UK citizens are in for a big cut in living standards over the next decade no matter which party is in power.

So are the US citizens but I think Brits are less spoiled and can easier adjust their
living standard.

You saw the cool reception Obama gave to Brown. The old Bush days of -- Hey! Lets go and rape and pillage some Middle Eastern country for its oil, -- are over.

Some tough times ahead and USA doesn't want to hitch its wagon to a falling star. Blair crawled up Bushes arse (as did Howard). Brown thought the love affair was still on, but Obama isn't playing the game. When the chips are down, UK is on its own. The British financial sector, plus a lot of borrowing from the Chinese and Japs, propped up the UK economy for a long time. The new American Century with UK as 2IC is just not going to happen now.

Would it not be so, that anyone holding large reserves in US Dollar would want to unload it as stealthily and slowly as possible not to trigger a crash?, and don't some of you honestly think that this process have started already, they might outwardly signal continued support for the Dollar serving a clear self interest, but in actual fact they are trying to get out as quickly as possible without taking to big a loss?.

Like China, they are still buying into US Dollar, but not as much as they could and not as much as they would have before, instead they have started to buy into other stuff like metals including gold?

But in the long run this will be impossible to keep hidden and the rush will come to avoid being the last out of the door?

I have this eerie feeling that there is this massive game of deception (not coordinated mind you) targeting the consumers worldwide going on, all the Governments know that only if the consumers start spending can this crisis be turned around.
Almost every day we have some Government official telling that now things have turned around, one day it is in the US next day in Germany aso, but when analysts then are asked to comment on it like yesterday with the news from Germany it turns to something like the crash dive have showed just a tiny sign of slowing down, which hardly can be described like the economic crisis have turned ?.

And in principle that is also what is going on with the US Dollar, a political economic game of deception.

Its just the redistribution of world wealth occurring as developing countries come to the fore and the old establishment fades into the background.
A natural process of evolution in world power. As has happened many times over the centuries.

People tend to look at things in the window of their own lifetime and think, -- thats the way its always been as far as I know it and therefore thats the way it will always be. However, the next generation will have a different perspective.
Times change.