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: 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.

U.S. Dollar Losing Global Favor

World Bank president Robert Zoellick said recently that the U.S. can no longer assume its position as the economic superpower will remain unchallenged, and that the days of the U.S. dollar being the preferred global currency are coming to an end.

Zoellick also stated that it would be a mistake to think that the dollar be the major reserve currency in the world as well. Other currencies expected to gain more favor and global acceptance are the Chinese renminbi and the euro.

In other words in the mid-term future there will be more options as the U.S. dollar continues to be battered under the misguided policies of the Obama administration and the Federal Reserve printing press.

In remarks considered unusual for a World Bank president, Zoeller also criticized the Obama administration for attempts to make the Federal Reserve even more powerful, while saying the Treasury Department should be vested with more power because of the oversight Congress now has over it, which at this time the Federal Reserve doesn't have.

The U.S. Dollar is the New Peso Not the New Yen Says Peter Schiff

In a recent converversation about the collapse of the U.S. dollar, Peter Schiff stated that the Federal Reserve is facing a dilemna that they'll have to make a decisions about, neither one which looks like it'll end in a good way for the U.S. dollar.

The first one is to continue on with close to zero interest rates where inexpensive dollars are the endless supply for carry traders, or they could stop the carry trade in its tracks by raising interest rates, which would cause a deeper recession "than anything we’ve experienced so far.”

Schiff added that the use of the yen for carry trade is now over, and it should continue strengthening, as the Japanese consider it a good move for their domestic economy for it to strengthen rather than be weak with low interest rates connected to it any longer.

When asked about the future of the U.S. dollar and carry trade, Schiff responed in a CNBC interview, “I don’t know when [the dollar] is going to strengthen. The dollar isn’t the new yen, it’s unfortunately the new peso.

Either way, as far as making money on the carry trade, Schiff said that because the U.S. dollar will continue to collapse, those using it to invest in higher yielding currencies and assets should make a fortune for some time to come.

Investing in ETFs to Take Advantage of Weak US Dollar

With the U.S. dollar continuing to collapse in value, one way to play that ongoing trend would be to invest in an Exchange-traded fund which provides you targeted exposure to foreign currencies.

Foreign exchange trading is nothing more or less than investiing in one currency versus another. Do your homework, find solid currency performers against the U.S. dollar, and invest in an ETF that caters to those circumstances and currencies.

One thing to understand about currencies in general; when one is going up another is coming down, and the U.S. dollar will be coming down for some time to come, so it'll be a good play for quite a while when choosing the opposite currencies correctly.

Sell Dollar Investments Fast

The warning is getting stronger as time goes on from about any credible investor in the world, that the U.S. dollar is on its way to crashing, and those heavily invested in dollar-denominated vehicles will be crushed if they don't get out of them as soon as possible.

At minimum, we should at least own something not denominated in U.S. dollars, and weight our investment portfolios in that direction.

Even today it was announced the Federal Reserve is going to continue to buy up mortgage-backed securities, to the tune of over $500 billion more through April 2010. That means even more dollars are going to be printed to pay for all of that, again, putting even more downward pressure on the U.S. dollar.

If you're overexposed, you'll sink along with the U.S. dollar collapse, don't let that happen to you while you still have time to change things.

Marc Faber: Ignore Ben Bernanke

Marc Faber

Marc Faber is advising people to not keep their investments in the U.S. dollar, and not to invest in things like US bonds.

As far as the assertion by Ben Bernanke that "We will keep inflation in check," Faber says to completely ignore that fantasy.

Why Faber says this is the inevitable need for the U.S. government, via the Federal Reserve, to print more money, which will continue to put downward pressure on the greenback. He said with someone like Bernanke running the Federal Reserve, we need to operaton under the assumption the U.S. dollar will be worth close to zero, if not zero. He reinforces what he has said in the past, that we shouldn't in any way trust the Federal Reserve.

Faber instead says investors should place their money in investments that will hold their value, using gold as one of the options investors need to have some of their money in.

Over the next 10 years, Faber points to the soon rush to retirement of Baby Boomers, who will put increasing demands on Medicare and Social Security, which, along with other areas, will force the government to print an enormous amount of money.

That will result in even more inflation, and the loss in buying power of the U.S. dollar, if not its complete collapse.

Marc Faber

US Dollar Carry Trade Currency?

The statement from the Federal Reserve that slow economic conditions "warrant exceptionally low levels of the federal funds rate for an extended period," caused great pause today for those understanding what this will mean for the U.S. dollar, as it will probably take the place of the yen as the currency used for carry trades.

A carry trade is when an investor borrows using a currency with low interest rates for the purpose of investing that capital in higher-yielding assets. The problem with that is it is bad for the currency used as the investment of choice to start the process, which looks to be the U.S. dollar through probably a minimum of 2010.

The Federal Reserve said these conditions will continue, essentially reinforcing the reality that the U.S. dollar will be the carry trade currency going forward, although obviously not stating that specifically.

Dollar Collapse G10 Economic Power

The collapse of the U.S. dollar will be accompanied by the further erosion of the fading G10 bloc countries and their economic power, preparing the way for an world which will eventually be completely changes in focus and power.

Even so, the U.S. dollar will fall the most of the currencies like the yen, euro, Swiss fran, British sterling, among others.

Some think the regional currencies of larger countries will be the new safety valve for smaller countries, while the U.S dollar will assume the role of Japan in "carry trade" status going forward. That's not a good thing.

While this was happening before the economic crisis, the crisis has actually temporarily hidden this reality, but when growth truly resumes, the growing disparity between emerging markets and old money will come to light even further as that chasm continues to grow.

The U.S. dollar is expected to be hit the hardest, and the misguided policies of the U.S government from administration to administration, culminating in the total lack of control of the Obama administration and the Federal Reserve, will only hasten the downfall and make it worse going forward.

Jim Rogers Selling U.S. Dollars

Jim Rogers has never been one to shy away from stating his mind, and in his chosen field of commodities, he is right far more than he is wrong, and with the U.S. dollar, he has been warning for years that people need to divest of it and put their money in other currencies and investments.

Rogers stated in at the China International Financial Services Conference (CIFSC) last week in Guangzhou that he is winding down his position in the U.S. dollar, and will sell all of U.S dollars before he's through.

Citing the non-stop growth of debt by the U.S. government from administration to administrations, Rogers has asserted for some time that it's a flawed currency, which it is.

Radically and truthfully, Rogers has said the "story of the United States is over. A new story belongs to China.”

Rogers also stated that he no longer has an interest in investing in U.S. Treasury bonds, “because the government is constantly printing more banknotes.”

This means that the inflationary pressures about to hit us would cause an investment in U.S. Treasuries to lose value, even if returns move up some. Even so, Rogers said more than likely bond prices will rise significantly from where they are today, but he will focus on raw materials and companies that do business with a "real economy."

Printing Dollars: Commodities and Inflation

Even if the economic crisis hadn't hit and the U.S. government printed an outrageous amount of dollars, prices of commodities would have still went up, but add that to the eventual demand from the emerging middle classes in China and the rest of the BRIC countries, and you can see the commodity bull market will pick up where it left off, and even go further out than it would have without the temporary setback from the economy.

Jim Rogers talking recently said historically, whenever governments print money commodities will always rise in price, and that will be the consequences of an out of control Federal Reserve, probably far more than it would have been based on supply and demand for raw materials on their own.

The U.S. dollar will get crushed by these circumstances, and ultimately, could end up collapsing under the weight of trillions of new pieces of paper printed because the Federal Reserve refused to let the free market clean itself out, and had to interfere in attempts to garner favor and reinforce its image as a rescuer in the minds of the American people.

While that backfired and brought them out into the open for the first time since their unfortunate creation in 1913, we'll have to pay for the actions of the FED for a long time, as will our children and grandchildren.

U.S. Dollar Drops Against Euro

U.S. Dollar drops to lowest level against Euro in a year

If your one of those that might have made investing decisions based upon the hapless Federal Reserve Chairman Ben Bernanke and his announcement that the recession is probably over, better take a step back and think things through.

With the drop of the U.S. dollar to its lowest level against the euro in a year, it means that a number of investors may have entered into riskier investments based on nothing but Bernanke's unsupportable conclusion. That's why he said it might be over, or it's "technically" over, i.e. from a technical perspective, which sounds to be me like he's covering his rearend for when it's discovered it's a fake recovery and not a real one.

“The dollar will come under further pressure,” said Ian Stannard, a senior currency strategist at BNP Paribas SA in London. “This continuation of the quantitative-easing program will provide further asset-market support. That’s going to lead to dollar weakness as funds flow out of the U.S., seeking higher returns elsewhere.”

The point is, if you're going to make riskier investments, never do it based upon something a Federal Reserve Chairman like Ben Bernanke asserts, as he and others like him are attempting to shore up their reputations and make themselves feel important; a very poor reason to invest in something riskier.

U.S. Dollar drops to lowest level against Euro in a year

Dollar Plunges on Inflation Fears

Weakening Dollar

The U.S. dollar plunged against the Euro, pound, and numerous other currencies today, as renewed concerns about inflation drove up the prices of commodities, with many investors adding raw materials like soybeans, copper and oil to their portfolios.

Investors fled government bonds and the dollar looking for a hedge against inflation, as many are expecting the outrageous spending of the Obama administration to devastate the greenback, bringing enormous inflation for the years ahead.

"A falling dollar is viewed as inflationary," said Richard Feltes, senior vice president and director of commodity research for MF Global in Chicago. "The best inflationary hedge is typically to increase one's exposure to commodities."

Another positive thing for foreign investors is the weakening dollar allows them to buy the dollar-denominated commodities at bargain prices as their currencies strengthen against the U.S. dollar.

While the weather looks like it's cooperating with grains in the U.S., that won't matter for some, as while supply is increasing with wheat, for example, global demand is falling, which has caused wheat future prices to drop over the last couple of months, while being down by 33 percent from last year.

Along with gold, silver, oil and gas, many other precious metals also increased in value, including copper, aluminum and platinum. Heating oil also rose to $1.8713 a gallon.

Among the metals, copper continues to be a huge winner, as it has closed at a 10-month high, gaining 4.4 percent, much of that coming from increased demand from China, whose manufacturing sector has started to rebound a little, promising potentially even more demand.

Some are trying to twist this into some type of recovery, but in general, it's not huge demand driving these prices up, but the expected inflation coming from the weakening U.S. dollar; that, more than anything, will continue to spur foreign investment in commodities which is a bargain for them.

Weakening Dollar

U.S. Dollar | Monetary Policy China

U.S. Dollar Monetary Policy

With the outrageous policies of Barack Hussein Obama who is pretending he can spend money at will and not suffer any consequences, this has rightfully caused American trading partners, especially the Chinese, to be concerned over the eventual collapse in value of the U.S. dollar, which could devastate China because of their continual and misguided buying up of Treasury debt.

It is assumed that China must do this to continue prospering, (and to a slight degree that may be true), but this has went way beyond that, and American consumers aren't spending, so China is extremely exposed to devastating harm if they don't do something about it.

As a result, the U.S. dollar should be the major focus of Chinese-U.S. talks starting in Washington today as China pushes the Obama administration on how it will manage the fiscal deficit and protect the U.S. currency’s value. Of course the answer is they can't, and any student of the markets and honest economist will acknowledge that.

Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton will host two days of meetings talking on topics from the economic crisis to North Korea. The Strategic and Economic Dialogue is the first by the Obama administration with China.

The global recession has underscored the common interests of the economies, ranked first and third largest in the world, as Vice Premier Wang Qishan seeks to preserve the value of the world’s biggest Treasury holdings, while U.S. pushes China to rely more on domestic demand and not exports for growth.

Bizarrely, clueless Timothy Geither and equally clueless Hillary Clinton are pressing the Chinese on becoming even more socialist by providing more social safety in order to combat the wonderful habits of the Chinese for saving rather than spending. These wackos need to step down out of office for even bringing up such rot. They don't belong in a U.S. government position when they seek to export socialism to the Chinese. They're getting wackier and wackier by the moment.

China’s exchange-rate policy will be talked about. The U.S. wants a more flexible yuan, though Geithner has avoided a showdown on the issue, declining to repeat more ignorant comments he made in written communication to lawmakers after his Senate confirmation hearing in January that China was “manipulating” its currency.

Both nations are pumping cash into their economies to revive growth. Though Premier Wen Jiabao said in March he was worried about the safety of the nation’s U.S. assets, China bought $38 billion of U.S. notes and bonds in May, taking its holdings to $801.5 billion. The Chinese should never have done this, and they still be pay in the face of the horrid and inexperience displayed by the Obama administration.

The U.S. deficit could go as high as a record $1.85 trillion for the fiscal year ending Sept. 30, almost four times the previous fiscal year’s $455 billion shortfall, according to the Congressional Budget Office.

Federal Reserve Chairman Ben S. Bernanke will brief Chinese officials about how the U.S. plans to keep inflation in check over the next few years, people advised of the plan said this month. In June, Geithner told China that the U.S. wants to shrink its budget gap as soon as an economic recovery takes hold.

Unfortunately, Ben Bernanke is as clueless about monetary policy as they come, and along with the Federal Reserve, is largely responsible for the continued and lengthening recession, which should have been allowed to work its way out without government interference.

The U.S. dollar will continue to suffer under these tortuous and horrible monetary policies until the Keynesian way of managment is completely abandoned and recognized as outrageously deficient and unable to work, as decades of failure have already proven.

U.S. Dollar Monetary Policy

U.S. Dollar in First Quarterly Loss since 2008

... U.S. dollar drops against Euro for quarter



The dollar rose versus the euro on Tuesday amid renewed risk aversion after a report showed an unexpected drop in U.S. consumer confidence in June.
The weak confidence report sent U.S. stocks lower and put a halt to an early sell-off in the greenback. Analysts also said the simultaneous end to the month, quarter and half-year led to increased volatility in foreign exchange trading, exacerbating intraday moves in currencies.
The decline in consumer confidence "was a big shocker," said Kathy Lien, a director for currency research at GFT Forex in New York. "The weaker confidence number should help the dollar recovery for the rest of the day."
The Conference Board's U.S. consumer confidence index fell in June to 49.3 from a downwardly revised 54.8 in May, the private business research group reported on Tuesday. Economists polled by Reuters had forecast a reading of 55.0.
The confidence index followed a report showing a smaller-than-expected dip in U.S. home prices in April and a report on business activity in the U.S. Midwest.
In midday trading in New York, the euro was last down 0.4 percent at $1.4010 after trading as high as $1.4152 earlier, according to Reuters data.
Despite Tuesday's gains versus the euro, the dollar was still on track for its first quarterly decline against the single currency since the first quarter of 2008.
At the same time, an index measuring the value of the greenback against a basket of major currencies declined about 6 percent for the quarter, its first quarterly drop since the first three months of 2008. The index was last up 0.5 percent at 80.235.
"The greenback has clearly become oversold," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon, in New York. "It appears that the consumer confidence report provided players with an opportunity to take profit on short dollar-positions."
UPBEAT VIEWS
Investors have sold U.S. dollars recently as stock markets and oil prices rose on an upbeat view for prospects of a global economic recovery and hurt demand for the greenback as a safe haven.
The MSCI global stocks index was on course for its best quarter since its launch in 1988, up 20.9 percent at current prices, while oil earlier hit an eight-month high of $73.38 a barrel.
"The second quarter was great for stocks and there have been signs things are getting better in the financial system," said Meg Browne, a currency strategist at Brown Brothers Harriman in New York. "Altogether, this is encouraging news and the reaction to the positive outlook in the markets has been to sell the dollar and buy foreign currencies."
Some currencies, such as the Australian dollar, soared during the second quarter. The Australian dollar gained 16.5 percent versus the U.S. dollar in the past three months, its best quarterly performance since it became freely floated in 1983. The Australian dollar was last down 0.1 percent at $0.8058.
The expectation of global economic improvement gained support from the CBOE Volatility Index, Wall Street's so-called fear gauge, which dipped to its lowest level since just before Lehman Brothers collapsed last September.
"The move back in the Vix levels pre-Lehman is a result, a by-product of the overall improvement in outlook," Browne said

US Dollar: Imminent Collapse?

The forces that have allowed the US dollar to remain strong seem to be coming to an end, and it could be any time that it collapses under the weight of its inherent weakness.

A number of dollar experts, including Peter Schiff and Jim Rogers, agree with the sentiment that the US currency has nowhere to go but down.

Forced liquidation and deleveraging have kept the currency artificially high, but now those positions are unwinding, and so they won't prop up the US dollar any longer.

This will have a significant impact on dollar related investment vehicles like US Treasuries and bonds.

With the Federal Reserve running the money printing presses non stop to pay off its promises, there's nowhere for the US currency to go but down. Inflation is just around the corner, and it's a matter of when, not if, it comes.

Commodities have already started to rise, especially the metals, as gold and silver enjoyed a big jump recently, and that will continue throughout 2009. Some think platinum prices will also rise in 2009, even though the demand from the auto industry has slowed.

As far as the future of the US dollar, it's going to plummet in value in the near term for sure, while some are even beginning to think the unthinkable, that there will emerge an alternative currency the world favors, just as the pound was dropped for the US dollar long ago.

China is even beginning to experiment internally with using its own currency for transactions within its more successful economic regions, rather than the US dollar. We know the reason that experiment is going on, as the China currency could sometime emerge as the favorite to use in global transactions.

Any investment connected to the US dollar will suffer going ahead, and the dollar will not continue to retain its strength or go up over the long term. It will of course have its small seasons of upward movement, but overall the chart will go down.

This will get even worse because of the US government interfering in the free market and bailing out tons of poorly managed companies and sectors, all in the name that they're "too big to fail." Too bad, as the economy always cleans and flushes out the poorly run companies and emerges stronger than in the past.

That won't happen now as taxpayer money will be used to support the badly run companies and allow them to last in the face of the quality companies that would have taken over the bad.

In the short run, the US dollar will remain the currency of choice, but I don't see how going ahead, and the failed big government policies that are destroying the dollar, will allow the currency to remain as its been. It won't happen right away, but it will happen unless we get people in the government that understand monetary policy.

The future of the US dollar is bleak, and it will buy less and less going forward.

For the Treasury bond, the reason it's in a bubble and will collapse, is nations are starting to cut back on buying it, and speculators have entered the market giving it the illusion of strength. In reality, the US government will be the final holder of the bonds, and nobody will be there to buy them. Then what will they do?

The US dollar is heading for a fall, get out of them while you still can.

Peter Schiff on Coming Collapse of U.S. Dollar

In talking about the current global economic crisis, Peter Schiff says if you think things are bad now, wait until the misguided policies of Barack Obama are implemented, which will cause the U.S. dollar to crash.

Schiff says Obama hasn't a clue as to the cause of the problem, and so will continue on and exasperate it, by putting into effect the huge domestic spending program which focuses on public works.

Essentially, what Obama is doing is asking the world to finance his programs on behalf of the American worker and consumer.

As Schiff says, the government has no wealth, it can only take money from the private sector and redistribute it to those they choose.

How this weakens the U.S. dollar, is somebody has to pay for that money. With foreign governments experiencing getting burned from the reckless spending of American consumers, which was encouraged by lenders who thought the party would go on and on, they won't be willing to continue to finance the silly policies of the American goverment, or the undisciplined habits of its consumers.

The solution to that, from the government's perspective, will be to print more money, which will put enormous downward pressure on the value of the U.S. dollar, as well as produce significant inflationary trends.

This in turn will cause trading partners to quit exporting goods to the country, as they won't want to trade in U.S. dollars, which will increasingly weaken.

American consumers will also stop buying, as the dollar won't buy much anymore. In response, Obama could foolishly attempt to put price controls in place, which will create shortages, along with a thriving black market in goods. That would also create an alternative form of currency or currencies.

Schiff's advice is to get out of anything related to the U.S. dollar.

For one of the best video presentations on the origin of the fall of the global economy, watch Peter Schiff being interviewed below.

US Dollar Fears Could Drive More Investors to Gold

Concerns about the US economy look set to ensure the dollar remains relatively weak, paving the way for further investment in gold.

In an interview with Bloomberg, Shaun Osborne, chief currency strategist at TD Securities in Toronto, said that the chances of the dollar gaining strength were slim given the current position of the US Federal Reserve.

This could prompt more people to buy gold as a weak dollar increases the appeal of bullion as an alternative investment vehicle.

"With the Fed reverting to non-conventional monetary policy, the whole notion of a strong dollar goes out the window," Mr. Osbourne confirmed to the news provider.

"The risks are skewed to dollar weakness."

Prior to the Fed's latest rate cut, Afshin Nabavi, head of trading for MKS Finance, noted that any fall in the value of the dollar would naturally have a positive impact on the price of gold.

"Everyone is banking on a lower interest rate in the US," he told Reuters.

"If the dollar continues to lose value, of course it will benefit gold."

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Goldbug, 31 Dec '08

Increased Investor Risk Appetite Pummels U.S. Dollar

Although the bailout for the auto industry seems to have given some investors an increasing risk appetite, and thus has weakened the U.S. dollar, it is far from a done deal, and Republicans are rightly threatening to vote the corporate welfare bill down.

The fickleness of investors and the market makes this the type of story that can change from day to day, and has.

Both the euro and British pound were up against the U.S. dollar today, with the euro rising 0.7 percent against the dollar to $1.3016, and the pound gaining 0.2 percent to $1.4788.

In the afternoon, the dollar index (DXY) fell by 0.5 percent to 85.48.

With the yen also being considered valuable to wary traders, it also suffered today, even falling against the U.S. dollar to 92.59, a drop of 0.3 percent. The dollar isn't far off a 13-year low against the yen; if it goes below 90.90 yen it'll reach that level.

There is considerable risk the dollar will plunge further if the Federal Reserve cuts its benchmark fed funds rate next week from the current 1 percent. Many think it'll cut the rate to 0.5 percent at that time, putting downward pressure on the greenback.

Ron Paul in Houston Calling to "End The Fed" - Part Four