Wednesday, October 14, 2009

Central Banks Fleeing U.S. Dollar

Banks are fleeing the U.S. dollar at an unprecedented rate as 63 percent of new cash is going into the euro and yen rather than the dollar over the last three months.

A decade ago the U.S. dollar accounted for about 66 percent of investment for the new cash in banks, while today it stands at only 37 percent.

Overall the greenback is only 62 percent of the currency reserve at central banks, the lowest level ever that has been recorded, according to the International Monetary Fund.

The obvious reason is it's losing it's value at an unprecedented rate, as it's down 10 percent over the last 90 days alone, generating interest in abandoning the U.S. dollar as the reserve currency and looking at alternatives, although that would take time to happen.

In the short term, money will continue to flow away from the dollar as the extraordinary run of the printing presses of the Federal Reserve and the outrageous Obama administration bailouts continue to hammer the U.S. dollar into the ground.

Government, central banks and investors are getting more concerned about the U.S. dollar going forward, as the almost non-existent return isn't worth the money they've invested in it to cover the growing U.S. government debt.

"He's (Bernanke) in a crisis worse than the meltdown ever was," said Peter Schiff, president of Euro Pacific Capital. "I fear that he could be the Fed chairman who brought down the whole thing."

With the horrific decision by the Obama administration to bail out everything, it has left no viable options on the table, because if the Federal Reserve raises interest rates, it'll smother any economic growth and clobber the housing market, which would slump back into a horrid situation it hasn't even escaped at this time.

On the other hand if he keeps things like they are, inflation could go as high as into the triple digits, collapsing the economy into something we would no longer recognize.

As Schiff and others have rightly concluded, "The stimulus is what's toxic -- we're poisoning ourselves and the global economy with it." Unfortunately no one that has power to make monetary decisions has the political and personal will to step in and stop the monetary madness of the Obama administration and the Federal Reserve.

Sunday, October 11, 2009

Jim Rogers: Bond Bubble Burst

Basing his assertion upon unsustainable borrowing, Jim Rogers said that the next bubble to burst will be the U.S. government bond market. Rogers added in a recent interview that equities are sure to experience correction as well, after six months of going straight up.

"The next bubble that I see developing is in the United States government bond market. It is inconceivable to me that anybody would lend money to the U.S. government for 30 years in U.S. dollars at 3 to 6 percent interest rate," he said.

"So, somewhere along the line, this bubble is going to pop. If any of you own bonds, I'd be terribly worried, I would think about getting out of the bond."

As far as equities, while Rogers expects a correction, he isn't selling equities short, and the market could possibly continue going up. His idea is it's a probability that the market could go through a period of correction.

Rogers continues to be bullish on commodities, and he favors oil, precious metals and agriculture at this time.

Thursday, October 8, 2009

Asia Intervenes - Props Up Dollar

Central banks in Asia moved into the currency markets in order to stop the strengthening of their currencies against the U.S. dollar in order to keep their manufacturing sector from faltering as their exports slow down.

From the middle of 2005, China has allowed the renminbi to appreciate against the U.S. dollar by about 20 percent, but now has re-pegged the currency with the U.S. dollar to also protect their exports against slowing down, thus the response by the other Asian countries to strengthen their currencies in order to counter China's move.

Among Asian central banks buying U.S. dollars were Hong Kong, Singapore, Taiwan, Thailand and Malaysia.

While some fear the move violated the recent agreement of the Group of 20 to work on a more balanced global economic growth, most traders seem to feel that this is an effort to control the pace of the weakening U.S. dollar, rather than attempt to artificially prop it up.

Jim Rogers: Dollar May Rally

While Jim Rogers has no faith in the U.S. dollar in the long term, and expects it to be replaced some time as the world's reserve currency, at the same time he's holding on to his dollars at this time because everyone understands the weakness and poor future outlook of the dollar, and have priced it into it, and so that could set things up for a rally, that while not sustainable, could make some money for investors fairly quickly.

So Jim Rogers is holding his U.S. dollars in order to offload his dollar holdings if and when a rally starts.

Rogers added that the bull market in U.S. bonds is winding down, and equities will go nowhere overall over the next 10 years or so, and will largely move sideways.

Dollar Index Slides to Lowest in 14 Months

The Dollar Index has fallen to its lowest level since August 2008, dropping to 75.767. The Dollar Index measures the U.S. dollar against the Canadian dollar, Swedish krona, Swiss franc, yen, pound and euro.

Low interest rates and U.S. dollar value have investors treating the greenback as a carry trade, and are selling of their dollars in order to get better returns on higher-yielding currencies.

While the U.S. asserts they want a strong dollar, their practices contradict that assertion, and foreign countries are concerned over their own manufacturing bases which are dependent on a stronger dollar to sell goods in the U.S. at a decent profit.

Of course U.S. manufacturers would like a weak dollar to continue, as that would help prop up the industry; strengthening it and eventually creating more jobs, while also shrinking trade deficits.

Wednesday, October 7, 2009

Collapsing US Dollar Driving Gold Prices

The continuing weakness and collapse of the U.S. dollar is driving gold prices as much as anything else, as in terms of the U.S. dollar, gold broke an all time record again, reaching $1,500 a troy ounce, as investors ignore the plunging jewelry demand from India and other nations and look toward safety and an inflation hedge.

To get a grasp of how weak the U.S dollar is, in other currencies gold is far from breaking records, as in being measured by the yen it's 15 percent below their all time record in gold, and the Australian dollar is even stronger, being 30 percent away from their all-time high for gold prices as measured by their currency. Even against sterling gold is 6 percent away from record past highs.

Again, gold is being moved by the increasing lack of faith in the U.S. dollar, along with complete uncertainty on the condition of the economy, as mixed signals and postive thinking reports from the government continue to hide the real condition of the global and U.S. economy, which is probably much worse than being reported.

The response to the U.S. dollar shows investors believe this completely.

Will Weak Dollar Destroy Wal-Mart?

Peter Schiff made an interesting correlation between the weak U.S dollar, the Chinese and the future of Wal-Mart (NYSE:WMT).

Schiff asserts that the days of Wal-Mart being able to buy up cheap products from the Chinese like they've done in the past are over, he even said Wal-Mart could become the next Saks Fifth Avenue, meaning their prices will only rise, taking away their unique competitive advantage.

Of course if that were to become a reality, Wal-Mart would struggle, so would their competitors who rely on Chinese products as well.

Wal-Mart could of course go to other countries providing cheaper prices like China currently does and take advantage of that, but it would take a lot of workers to make up the difference, seeming to imply they would have to enlist a number of countries to meet the low price demand behind the reason people shop Wal-Mart in the first place.

If Wal-Marts' competitors are better positioned than they are in getting their products from other countries, then this really could make things interesting, and bring the price differences between them and their competitors much closer.

Maybe this one of the reasons Wal-Mart has been working hard at attempting to bring in higher end clothing to the stores, other than attempting to reach people at higher income levels.

Tuesday, October 6, 2009

U.S. Dollar Still Under Pressure

As some foreign currencies respond to their own pressures and result in raising of interest rates, the decision by the Federal Reserve to hold its rates down will continue to put downward pressure on the collapsing U.S. dollar, as the Fed holds to its loose monetary policy.

Other growing factors of concern for the dollar are the increasing number of countries calling for either a new reserve currency, basket of reserve currencies, or to trade in targeted sectors like oil not using the dollar as the currency used for trade.

That will also continue pushing the price of gold up as investors migrate to the yellow metal to hedge against the inevitable inflation coming, and which some say is largely understated by the U.S. government.

UN: New Global Reserve Currency

U.S. Dollar Reserve Currency

Saying that the U.S. dollar as the global reserve currency has empowered America to build up their huge trade deficit, UN undersecretary-general for economic and social affairs, Sha Zukang, said "Greater use of a truly global reserve currency, such as the IMF's special drawing rights (SDRs), enables the seigniorage gained to be deployed for development purposes."

Zukank added, "Important progress in managing imbalances can be made by reducing the reserve currency country's 'privilege' to run external deficits in order to provide international liquidity."

SDRs are used for IMF transactions, and currently base their value on a basket of four currencies: the U.S. dollar, pound, yen and euro.

There is mounting pressure for the U.S. dollar to play a lesser role as the reserve currency of choice around the world, and a number of talks have gone on on how to go about that.

U.S. Dollar Reserve Currency

Monday, October 5, 2009

Oil Trading with U.S. Dollars? Not for long!

A number of nations have been getting together and discussing using a basket of currencies in place of the U.S. dollar to trade oil with one another.

Along with some Arab states, also participating in talks to stop using the U.S. dollar for trading oil are France, Russia Japan Brazil and China.

Evidently the deadline for all of this to transpire is 2018.

While publicly a number of countries and U.S. officials have talked about the importance of a strong U.S. dollar, that has largely become a joke privately, and we'll continually see a private push to move away from the U.S. dollar with the failed policies of the Obama administration, along with the continued actions and practices of the Federal Reserve.

This is why Ron Paul and so many others are moving so strongly to audit the Fed, and Paul's case - eventually end it altogether.

The U.S. dollar is collapsing all around us, and so-called financial experts, in many cases, continue to act as if it has a long life ahead. It may have, but it's going to continue to be on a respirator as its buying power continues to weaken.

We'll get some occasional spurts and upward movement of the dollar, as nothing falls straight off the cliff, but it will continually fall in strength endlessly unless our policies concerning the U.S. dollar change.

From the looks of it, very few have the will to make that decision, and so we'll go on until the pain of it forces the decision to be made. Hopefully by that time it won't be too late.

Jim Rogers: Inflation Going Higher

U.S. Dollar Inflation

In a recent interview, Jim Rogers said that the U.S. government is lying about inflation, and that the current rate is probably more around six to seven percent, in contrast to what is being asserted.

Rogers simply points to the obvious, that when you go out shopping, the prices are definitely higher, and obviously that can't be spun by the government.

The best play going forward, according to Jim Rogers is to invest in gold and commodities, as raw materials will outperform other assets in the future.

U.S. Dollar Inflation

Thursday, October 1, 2009

Jim Rogers: Dollar Collapse Long-term

Most people that understand the cause and effect of the disastrous policies of the Obama administration and how it will continue to damage the U.S. dollar, are rightly very pessimistic about its long term future.

But because people run in packs and follow the crowd, and most at this time see the U.S. dollar as a disaster, over the short term it wouldn't be a surprise to see it rally, and Jim Rogers concurs with that assessment, saying many investors have sold the dollar short, so that could result in a short term rally, which while not being a true measure of the U.S. dollar strength, would benefit those on the right side of the trade.

Even so, over the long term Jim Rogers continues to believe the U.S. dollar will remain a disaster and will continue to collapse.

Long term there is no doubt about the U.S. dollar continuing to lose its value. But there will be times when the dollar will temporarily shoot up in response to the ongoing negative feeling toward it, so it's something to keep in mind when making your plays on the dollar.

Timothy Geithner Wants Strong Dollar?

The idea that U.S. Treasury Secretary Timothy Geithner said a strong U.S. dollar was important to the U.S. would be hilarious if it wasn't so pathetic and damaging.

Geithner's boss Barack Obama and the Federal Reserve have done everything they can to continually debase and destroy the value of the U.S. dollar, and they still aren't stopping printing money as Geithner speaks out of one side of his mouth, while giving orders to spend more money on the other.

We don't have to believe Geithner, who pleaded that we have to "recognize" that he means it. All we have to do is watch his actions, the Federal Reserves actions, and the horrendous policies of Barack Obama to know the U.S. dollar is in one of the biggest crisis of its existence, and absolutely nothing is being done to correct that except nonsensical talk from people like Geithner, while they continue in the same practices they always have. which led us to this economic crisis in the first place.

This year an extraordinary record-breaking deficit of about $1.8 trillion will be experienced by the U.S.

None of us should listen to anything politicians say about the U.S. dollar, with the exception of Ron Paul, as the rest are either clueless or outright dishonest as to what they've allowed the secretive and renegade Federal Reserve to do. Just watch and observe what is being done while you block out the talk. That's the only way to get the reality of what's happening, and not the fiction being asserted.

Hopefully the bill to audit the Fed will go through. At that time we'll see what it is they've been fighting to keep from having to disclose. They're worried. They should be!

U.S Dollar Collapse

Peter Schiff: Carry Trade Dollar

Peter Schiff has been making the rounds lately and talking about the continuing collapse of the U.S. dollar, which will make it an ideal carry trade candidate going forward, and which will make many people very wealthy as a result.

Schiff has also said that he has no idea when, or even if, the U.S. dollar will strengthen any time soon. Of course that can't be counted on at all with the ongoing spending spree of the Federal Reserve and U.S. government.

Schiff is of course the president of Euro Pacific Capital, an investment firm he runs.

Peter Schiff - Collapsing U.S. Dollar