Thread: US dollar decline, or collapse?

^ and ^^ and ^^^ and ^^^^, all valid points.

And right now, interest rates in the US is now 0%.

Some say inflation is already happening, and seen in foods.

Its unlikely that a single currency (such as the Euro, Yen or Yuan) will ever replace the $US as the worlds default trading currency. That would simply be inviting another disaster down the track such as has been caused by this experiment of the past 38 years with the $US hegemony. A far more likely scenario is that a basket of major currencies with perhaps some precious metals thrown in would become the measure of value for individual currencies. And it is almost certain that the $US would be a significant component of that new world trading currency.

I feel sure the groundwork for such a change has already been laid by governments around the world as it is in no ones interest to see the $US completely collapse.

Originally Posted by Milkman

Some say inflation is already happening, and seen in foods.

Never one to trust what inflation rates really are but according to official government consumer price index for year 2009, food prices at home have decreased -2.9%. Food away from home, increased 2.1%.

Consumer Price Index Summary

Yikes! That's a grim prediction.

The thing is, Panda, the US remains the consumer of last resort. No replacement yet.

Originally Posted by robuzo

The thing is, Panda, the US remains the consumer of last resort. No replacement yet.

Everyone in the world is a consumer. Only the price varies.

The world would continue, even if a great earthquake swallowed up the whole USA.
America is not indispensable.

Great, informative comments on the USD. Thanks for the info, as I learn, and want to learn more.

Here is Jim Rogers on the USD and current US gov policy.

The Euro zone is as of 2008 the largest importer of goods and services in the world, and has as such replaced US in that position, Americans buying power of foreign goods will fall dramatically in the future as the currency looses value, China is the most dependant country of the US consumers but as the Chinese have said if they have to they can do without and rely much more on the domestic market.

The consumer of last resort thing is not a pillow I would go to sleep on if I was the US, things are rapidly slipping much more so than I think many over there realises.

The US have got to stop thinking that the dependency they have created on the dollar around in the world will ultimately save them, if some economic analysts are right and a second US mortgage bubble is about to burst just as big as the first one, the demise of the dollar as the trade currency could happen much more rapidly than expected.

Many of the country's that up till now have used huge sums to support the dollar are themselves in dire straits, and at what point exactly does it become more costly, and to risky, for them to keep supporting the dollar than bailing out and take the losses that will give.??

Panda and larvichr seem to misunderstand what I mean by pointing out that the US remains the "consumer of last resort," which is, irrespective of how much Europe in total imports, indisputable. The US remains the number one destination for exports of finished goods from Europe and Asia, and despite the anticipation that China will one day start importing large amounts of goods from other countries (an anticipation that will remain unfulfilled, I think) the US is still the enabler of Chinese mercantilism, and the only reason the Japanese and other developed export economies did well in the past decade was due to the US consumer spending what was money borrowed against assets on imported goods. Panda- "Everyone in the world is a consumer." Sorry, that's just dumb. The only countries with consumers with spending power to rival the US are in Western Europe and Japan, both of which rely heavily on consumption of their expensive finished goods by American consumers.

As to "pillow I would go to sleep on if I was the US", actually it is quite the opposite- I see this as a net negative for the US, with the only hope for US economy being to restore manufacturing strength and start exporting again. Success along those lines requires that the dollar be weakened to make US exports more attractive; a weaker US$ will suck for those of us living overseas, but it would be positive thing for the US, as difficult as it is for some Americans to understand.

Originally Posted by robuzo

Panda and larvichr seem to misunderstand what I mean by pointing out that the US remains the "consumer of last resort," which is, irrespective of how much Europe in total imports, indisputable. The US remains the number one destination for exports of finished goods from Europe and Asia, and despite the anticipation that China will one day start importing large amounts of goods from other countries (an anticipation that will remain unfulfilled, I think) the US is still the enabler of Chinese mercantilism, and the only reason the Japanese and other developed export economies did well in the past decade was due to the US consumer spending what was money borrowed against assets on imported goods. Panda- "Everyone in the world is a consumer." Sorry, that's just dumb. The only countries with consumers with spending power to rival the US are in Western Europe and Japan, both of which rely heavily on consumption of their expensive finished goods by American consumers.

As to "pillow I would go to sleep on if I was the US", actually it is quite the opposite- I see this as a net negative for the US, with the only hope for US economy being to restore manufacturing strength and start exporting again. Success along those lines requires that the dollar be weakened to make US exports more attractive; a weaker US$ will suck for those of us living overseas, but it would be positive thing for the US, as difficult as it is for some Americans to understand.

You seem to have figured out how things are going there Robuzo.
However, the point I think you have missed is that everyone in the world who buys stuff is a consumer. China is exporting technology and cash into Africa. In return they get the raw materials they need and eventually send it back as finished products. World trade will not finish when USA comes to rely more on domestic production as a result of the declining $US. Sure, China may not retain double digit growth when the US market slows down. But the world will keep turning over, -- trade between countries will continue. A readjustment will take place,-- the financial growth of countries reliant on the US credit bubble may be slowed down somewhat as new, more sustainable trading partners are found, but the world will not stop turning when the $US retreats to its its natural tradable value based on productivity rather than hegemony. Its something that just simply got to happen sooner of later. The $US hegemony debt bubble will eventually run its course. The USA is NOT the only consumer that keeps the world economy afloat. As stated before, if the whole USA was swallowed up by a giant earthquake, the world economy would adjust and keep ticking over without it. Now that USA is on the decline financially, and their consumption of imports is waning, it will certainly slow down GDP growth in many exporting countries, but it ain't going to be the end of the world. USA and all the other countries who have taken the debt based $US as a store of wealth are just going to have to cut their losses and get on with business. And they will.

Mr. Schiff on the USD. January 4, 2010.

These shows often devolve into 2 people speaking at the same time, saying opposite things.

We'll see if Mr. Schiff if partially right, right, or wrong for 2010:

The rest of the world moves up...

nie Approaching Parity (Update1) Share Business ExchangeTwitterFacebook| Email | Print | A A A


By Oliver Biggadike and Candice Zachariahs



Jan. 11 (Bloomberg) -- The biggest monthly rebound in the Dollar Index since January means faster gains for Australia’s and Canada’s currencies as the recovering U.S. economy boosts demand for their commodities.
The Canadian and Australian dollars will strengthen to trade at parity with the greenback or better together in 2010 for the first time in 34 years, appreciating at least 2.6 percent and 7.4 percent, three of last year’s four best forecasters for both currencies say. Traders are favoring the so-called loonie and Aussie over the dollar on the Chicago Mercantile Exchange even while betting more than ever on the Dollar Index advancing.
Accelerating U.S. growth will spur demand for Canadian oil and natural gas as China’s expansion boosts purchases of Australian iron ore and coal, pushing both currencies higher, said Sacha Tihanyi, a foreign-exchange strategist in Toronto at Bank of Nova Scotia. The loonie and Aussie both rose last week even as the People’s Bank of China took steps to curb lending.
“The global economy is going to strengthen, and the recovery is going to broaden out from what has so far been a China-, Asia-led global recovery,” said John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd., the most accurate predictor for both currencies last year.
“We’re forecasting parity for the Aussie dollar, and we actually think the

Link & Entire: Dollar No Match for Aussie, Loonie Approaching Parity (Update1) - Bloomberg.com

^The problem with headlines such as "Dollar No Match. . ." is that it gives people the impression that somehow a strong currency equals a strong nation, whereas in fact a weaker dollar, for example, would be a benefit in terms of job creation and export promotion in the US.

Jim Rogers, on:

US dollar, Fed, Diminishing oil reserves. Perhaps 1 1/2 years old more or less, but very on the mark, IMO.

Interestingly, when the wheels fell off the world economy in 2008 there was a great rush into $USs for safety despite the low interest rates. And when the world economy looked like recovering in 2009, the money went out of the $US.

In relation to the price of oil, we didnt see $US 200 a barrel because the world economy had a big setback and dampened demand, which scared most of the speculators (who were mainly driving the price) out of the market. But sooner or later the world economy will recover and the demand for oil will outstrip supply. Saudi Arabia (and to a lesser extent, OPEC) has been the great moderating factor on the world price of oil, increasing or decreasing supply to keep the supply/demand price relatitively stable. And of course thats particularly, economically important for the worlds biggest oil consumer, -- USA. For those of the older generation, consider what the 1974 oil crisis did to the world economy. Oil is one of those tangible things that modern society needs to function normally. Just like food or minerals or other real stuff we can actually use in our lives, --but unlike paper money, and particularly the $US which is something that has value only based on faith in what it can be traded for.
Getting back to oil now and how it affects the words economy, here is a very interesting link --- History and Analysis -Crude Oil Prices . It does explain how the supply and production of oil has been modulated for nearly a century now to meet the economic demands of primarily the USA, but also the whole world.
In recent decades the Saudis have been the key to that price modulation. However, the Saudis are nearing the end of their rein as the worlds biggest provider of cheap, high quality oil, and thus their ability to moderate the world price. Despite the fact that the Saudi royals refuse to allow outside auditing of their oil reserves, current general world opinion is that the Saudis have no more than 10 to 30 years of easy to extract, good quality oil under their ground. And further, that the Saudis are already pumping it out at very close to 100% capacity today. This gives the Saudis an extremely limited capacity to increase supply when demand increases and the US calls on their Saudi friends to increase supply in order to drive down prices. Something that got the speculators very excited when it looked like demand would exceed supply just prior to the recent world economic recession. The world economic slowdown caused a drop in demand for oil and put supply back in balance with demand, thereby causing a huge drop in the price when the speculators moved out of the market competing with genuine buyers.

So, yea, what Jim Rogers says about the price of oil is right, just that the world has been given a temporary reprieve with this current economic recession. When the economic situation finally gets better and the demand for oil once again closes in on the ability to supply, the price is going through the roof again. Which of course is going to hurt the worlds biggest oil consumer the most.

Please allow me to digress once again onto the subject of the $US.
Because the $US is the worlds default trading currency, particularly with oil priced in $USs, the real value of commodities like oil are somewhat skewed for the vast majority of the worlds other 4 billion inhabitants who live outside the USA.
Because the $US has been in gradual decline against other major currencies for several years now, the increase in the price of commodities such as oil has not been as great as for USA. But at the same time, foreign exchange reserves held in $USs have been losing purchasing power. It only stands to reason for countries outside USA that if you own a bunch of paper money that is losing its purchasing power for real goods by something like an average of 3% a year, then its best to get rid of it.

Originally Posted by Panda

So, yea, what Jim Rogers says about the price of oil is right, just that the world has been given a temporary reprieve with this current economic recession. When the economic situation finally gets better and the demand for oil once again closes in on the ability to supply, the price is going through the roof again. Which of course is going to hurt the worlds biggest oil consumer the most.

the only reason Oil was going so high and commodities went through the roof has nothing to do with real demand, but only speculative or "projected" demand. With so much money, and so little assets, it was a question of time before institutional money and about every amateurs out there started to chase "alternative" assets.

The big surge oil for all that matter only accomplish a supply shock, followed by a collapse in AD, leading to the big recession, which I believe we haven't seen yet.

The world is balancing on a "peak oil" scenario right now. The world economy takes off again then the demand (particularly from Asia) will outstrip supply. That means prices go up as Saudi Arabia doesn't have the capacity to increase supply anymore, --- no matter how hard USA presses them. Then the speculators get in on the act creating the illusion of a further increase in demand, which drives up prices even further in a spiral. The higher prices go the more futures speculators are attracted to the market and the illusion of actual demand increases driving up prices even further. Just as happened in 2007/08 before the big crash. I hope the speculators lost a lot of money back then because for every ordinary wage earner who paid a dollar extra putting fuel in their gas tank, the speculators got 50 cents.
Those speculators who may be private individuals or big investment companies got rich on the labour of ordinary citizens while producing nothing at all of value to society. In fact, they are nothing more than parasites on the economy. I know there was some talk of reining in their activities, but not sure if it actually happened?

Originally Posted by Panda

The world is balancing on a "peak oil" scenario right now.

only as a perception for some, an illusion for others. There is no evidence of Peak Oil, only studies. Could be a dreamed up scam by oil executive.

Originally Posted by Panda

The world economy takes off again then the demand (particularly from Asia) will outstrip supply.

again not true, there is no evidence of a shortage of supply. It's a tap, you open it when the prices are high or the volume is there. Today the volume is lower, but the high price saves the day for oil producers.

Originally Posted by Panda

That means prices go up as Saudi Arabia doesn't have the capacity to increase supply anymore

it's a flow, they can meet world demand, you are confusing stock and flow. Oil Market prices are determined by flow, not the stock or reserves.

Originally Posted by Panda

Those speculators who may be private individuals or big investment companies got rich on the labour of ordinary citizens

actually they get more than that, since they are usually highly leveraged (borrowing money), for every 1 USD spent, they make 5 USD

Originally Posted by Panda

Those speculators who may be private individuals or big investment companies got rich on the labour of ordinary citizens while producing nothing

Welcome to the real world

Originally Posted by Panda

In fact, they are nothing more than parasites on the economy.

Yes and no. They do serve a purpose, create liquidity in market or else our financial system would stop to flow smoothly and could be illiquid at times. It's really debatable. But at the same time, as we can see, those speculators do create disturbances in strategic "assets" than can have real impact in economic terms. Can't have the good without the bad unfortunately.

Originally Posted by Butterfly

Originally Posted by Panda

The world is balancing on a "peak oil" scenario right now.

only as a perception for some, an illusion for others. There is no evidence of Peak Oil, only studies. Could be a dreamed up scam by oil executive.

Originally Posted by Panda

The world economy takes off again then the demand (particularly from Asia) will outstrip supply.

again not true, there is no evidence of a shortage of supply. It's a tap, you open it when the prices are high or the volume is there. Today the volume is lower, but the high price saves the day for oil producers.
.

Believe it or not, supply and demand is what primarily drives world oil prices, (as it does just about everything else).
Control of supply in order to control prices has been going on for the best part of a century since USA was the worlds big oil producer.

Have a read here, it may broaden your horizons.
History and Analysis -Crude Oil Prices

Saudi Arabias reserves of cheap to extract, good quality oil is fast running out and the "taps" are nearly full open at the moment to meet USAs demand for cheap gas. Once the world economy gets back on track and the demand picks up again beyond Saudis ability to offset the supply/demand deficit, the oil price will once again spiral.

There is plenty of oil in various places around the world, -- enough to keep the world going for perhaps another hundred years or more at present rates of consumption. However, most of that oil is of poor quality, difficult to extract or in small quantities in remote locations. Canada has the second largest reserves of oil, but its in oil sands. Difficult and dirty to extract so very expensive by todays standards. Not sure of exact figures, but Canadas oil sands industry really took off back in the pre-bust times when oil hit around $US140 a barrel. Oil can be produced from waste and even algae too, but at a price. So there will never really be any long term oil shortage. Just and increase of about double of what it costs today to pay for its production. In the short term though, while infrastructure is assembled to compete with dwindling supplies of cheap sweet lite crude, there is very likely to be a major price spike above $US 200 a barrel.

It aint simply a matter of turning up the taps when they are already running at 99% of capacity too meet demand.

Originally Posted by Panda

Believe it or not, supply and demand is what primarily drives world oil prices, (as it does just about everything else).
Control of supply in order to control prices has been going on for the best part of a century since USA was the worlds big oil producer.

Saudi Arabias reserves of cheap to extract, good quality oil is fast running out and the "taps" are nearly full open at the moment to meet USAs demand for cheap gas. Once the world economy gets back on track and the demand picks up again beyond Saudis ability to offset the supply/demand deficit, the oil price will once again spiral.

complete non-sense as usual, Panda. If it was real demand, explain how oil was so cheap when we had a spectacular 20 years of growth

Originally Posted by Panda

History and Analysis -Crude Oil Prices

gee, another study with interpreted statistics from some oil industry newsletter, get real

Originally Posted by Panda

It aint simply a matter of turning up the taps

actually it is, please refer to the commodities chapters in any financial or economic handbook

see also Hoteling effect, and not to mention the short term commodity exchange rate to add another twist in the price of oil

Originally Posted by Panda

they are already running at 99% of capacity

no they aren't, refinery capacity is also a different issue

Originally Posted by Butterfly

The big surge oil for all that matter only accomplish a supply shock, followed by a collapse in AD, leading to the big recession, which I believe we haven't seen yet.

I'm really afraid you're right!

Thieving cocksuckers.