There has been some confusion among those interested in the U.S. monetary policy and why the U.S. dollar has remained strong even as the Federal Reserve created enormous amounts of money out of thin air. Under normal conditions that would have put downward pressure on the value of the greenback.
Since economics are no longer operating under normal conditions, neither will the usual performance of the U.S. dollar; and it hasn't.
When the Federal Reserve launched its money-creation spree, it changed the currency and economic dynamic around the world, as other central banks were forced to enter a currency war if their particular economy relied heavily on exports.
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Showing posts with label Federal Reserve. Show all posts
Showing posts with label Federal Reserve. Show all posts
Tuesday, August 4, 2015
Monday, June 15, 2015
Asian Currencies and the Export Wars
There are a number of reason Asian currencies have been falling recently, with the most obvious being expectations the Federal Reserve will raise interest rates in the latter part of 2015.
Other factors attributed to weaker Asian currencies include pressure from local businesses, demand for electronics gadgets fell, MERS, funds pulling money from emerging markets, Japanese yen, and a potential Greek default. I'll break down how these are having an effect country-by-country in a moment.
What's important is with the backdrop of rising interest rates in the U.S., Asia has several other factors to look at to get a view of the macro and micro elements causing the drop in currency value.
Combined they represent a trend that is likely to continue, unless the Federal Reserve surprises most and decides to hold off on raising interest rates.
read more ...
Other factors attributed to weaker Asian currencies include pressure from local businesses, demand for electronics gadgets fell, MERS, funds pulling money from emerging markets, Japanese yen, and a potential Greek default. I'll break down how these are having an effect country-by-country in a moment.
What's important is with the backdrop of rising interest rates in the U.S., Asia has several other factors to look at to get a view of the macro and micro elements causing the drop in currency value.
Combined they represent a trend that is likely to continue, unless the Federal Reserve surprises most and decides to hold off on raising interest rates.
read more ...
Wednesday, July 11, 2012
U.S. Dollar Rallies on Nothing
The US Dollar Index jumped 30 points right after the release of the minutes of the last FOMC meeting, based upon nothing but the confirmation of what had already been communicated by the FOMC after its latest meeting.
Apparently the market was looking for something that was said in the meeting regarding the implementing of more stimulus measures, even though it has already been stated that in the near term it's not likely to happen, although the Federal Reserve stands ready if the economy continues to weaken.
That also suggests investors believe the economy is approaching that point, and are looking for some clue as to when quantitative easing will resume.
There is no doubt there will be a QE3, it's just a matter of when, not if. But leery investors are wanting a more definitive statement and time frame than is currently being offered by the FOMC.
At the meeting the Federal Reserve announced interesting rates would remain at 0.25 percent into 2014, and that Operation Twist would be extended. Investors were hoping for more, but didn't get it, and apparently were hoping to find clues in the minutes that would suggest more is in the wings.
But I'm not sure what more can be said than it stands ready to do what it needs if the economy doesn't recover.
It appears investors and the Fed have two different views as to the health of the economy, with some investors thinking it's past time for more intervention, even though it has done nothing to help in the past.
More than likely the consequence of all of this will be for investors to remain skittish and on the sidelines until hints toward further stimulus are offered, or until true economic growth returns.
That's good news - at least temporarily - for the strength of the U.S. dollar.
Apparently the market was looking for something that was said in the meeting regarding the implementing of more stimulus measures, even though it has already been stated that in the near term it's not likely to happen, although the Federal Reserve stands ready if the economy continues to weaken.
That also suggests investors believe the economy is approaching that point, and are looking for some clue as to when quantitative easing will resume.
There is no doubt there will be a QE3, it's just a matter of when, not if. But leery investors are wanting a more definitive statement and time frame than is currently being offered by the FOMC.
At the meeting the Federal Reserve announced interesting rates would remain at 0.25 percent into 2014, and that Operation Twist would be extended. Investors were hoping for more, but didn't get it, and apparently were hoping to find clues in the minutes that would suggest more is in the wings.
But I'm not sure what more can be said than it stands ready to do what it needs if the economy doesn't recover.
It appears investors and the Fed have two different views as to the health of the economy, with some investors thinking it's past time for more intervention, even though it has done nothing to help in the past.
More than likely the consequence of all of this will be for investors to remain skittish and on the sidelines until hints toward further stimulus are offered, or until true economic growth returns.
That's good news - at least temporarily - for the strength of the U.S. dollar.
Friday, February 17, 2012
Jim Rogers Sees More Currency Turmoil
In an interview with CNBC today, billionaire commodity bull and expert Jim Rogers said he sees continual turmoil in the currency markets, although in the short term he has positions in U.S. dollars, renminbi and euros.
This is the result of the horrendous decisions of the Federal Reserve and other central banks around the world to continue to "stimulate" the economy with money created out of thin air, which is extremely disruptive to the market over time.
Rogers says he sees the renminbi possibly tripling over the next ten to twenty years. He said, "I own the renminbi. Every time I can, I buy more renminbi. I expect the renminbi to double or triple in the next decade or two." He did say he doesn't have a position in the British pound at this time. Rogers added he owns no U.S. stocks either.
As for his positions in gold, silver and other precious metals, Rogers continues to say he won't be selling any of those. "The way to protect yourself at a time like that, historically anyway, has been to own real assets. Those are my longs, and currencies," said Rogers.
Rogers recommends for investors to monitor the currencies of the world. When quantitative easy results in increasing currency turmoil, he says that's the time to buy commodities.
He concludes that as the near the latter part of this decade it's doubtful very many investors will hold paper money, as it's increasingly falling out of favor as debasement pushes the value down.
This is the result of the horrendous decisions of the Federal Reserve and other central banks around the world to continue to "stimulate" the economy with money created out of thin air, which is extremely disruptive to the market over time.
Rogers says he sees the renminbi possibly tripling over the next ten to twenty years. He said, "I own the renminbi. Every time I can, I buy more renminbi. I expect the renminbi to double or triple in the next decade or two." He did say he doesn't have a position in the British pound at this time. Rogers added he owns no U.S. stocks either.
As for his positions in gold, silver and other precious metals, Rogers continues to say he won't be selling any of those. "The way to protect yourself at a time like that, historically anyway, has been to own real assets. Those are my longs, and currencies," said Rogers.
Rogers recommends for investors to monitor the currencies of the world. When quantitative easy results in increasing currency turmoil, he says that's the time to buy commodities.
He concludes that as the near the latter part of this decade it's doubtful very many investors will hold paper money, as it's increasingly falling out of favor as debasement pushes the value down.
Friday, March 4, 2011
U.S. Dollar to Continue to Fall in Value
The U.S. dollar is likely to fall in the week ahead as investors continue to bet that interest rates in the euro zone will rise ahead of those in the world's largest economy.
U.S. February jobs data came in a touch better than expected on Friday but disappointed investors who had hoped for an even stronger report. For details see
Investors see strong U.S. jobs growth as necessary for the Federal Reserve to end its second round of quantitative easing and instead tighten monetary policy by raising rates.
The U.S. situation is in sharp contrast with that of the euro zone, where the zone's common currency is likely to remain supported after European Central Bank President Jean-Claude Trichet strongly hinted at an interest rate rise in April, bolstering the view the ECB will tighten monetary policy before the Fed.
"We had Trichet warning Thursday that the ECB is considering a rate hike and perhaps the start of a rate hike cycle," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey. "The U.S. job number came in as expected and provided little direction to the market other than it did not disappoint and that will support risk appetite."
Full Story
U.S. February jobs data came in a touch better than expected on Friday but disappointed investors who had hoped for an even stronger report. For details see
Investors see strong U.S. jobs growth as necessary for the Federal Reserve to end its second round of quantitative easing and instead tighten monetary policy by raising rates.
The U.S. situation is in sharp contrast with that of the euro zone, where the zone's common currency is likely to remain supported after European Central Bank President Jean-Claude Trichet strongly hinted at an interest rate rise in April, bolstering the view the ECB will tighten monetary policy before the Fed.
"We had Trichet warning Thursday that the ECB is considering a rate hike and perhaps the start of a rate hike cycle," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey. "The U.S. job number came in as expected and provided little direction to the market other than it did not disappoint and that will support risk appetite."
Full Story
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.
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.
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.
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.
Thursday, October 1, 2009
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
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
Tuesday, September 29, 2009
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.
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.
Friday, September 25, 2009
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.
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.
Thursday, September 24, 2009
Julian Robertson: Betting on Inflation
One of the greatest hedge fund managers that has ever lived - Julian Robertson, said in a recent interview on CNBC that he was just about betting everything on the inevitable inflation, which will decimate the U.S. dollar.
He stated one of the key problems with the U.S. financial policy, and that is that it has led to complete dependence on China and Japan buying our debt if we are to economically survive, or at minimum, we'll face "severe economic problems."
"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in the interview.
Concerning inflation, Robertson stated, “If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent. It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.”
Roberston added that while the Chinese probably won't stop buying US bonds, it's quite possible the Japanese will, and sell their long-term bonds, which he said would be worse than someone not buying at all.
"The U.S. has to quit spending, cut back, start saving, and scale backward Robertson said. "Until that happens, I don't think we're anywhere near out of the woods.”
While Robertson said he thinks the recession is in a temporary lull, because so many of the financial problems haven't been dealt with, and the Federal Reserve hasn't stopped printing money, that could readily change.
He said it's impossible to pay back what we've borrowed, and the only change of that remotely happening is if the Chinese and Japanese continue to buy bonds from the U.S.
As a result, Robertson is betting a lot of his fortune on the fact that inflation will eventually come and soar, something all of us at minimum need to be financially defensive about.
He stated one of the key problems with the U.S. financial policy, and that is that it has led to complete dependence on China and Japan buying our debt if we are to economically survive, or at minimum, we'll face "severe economic problems."
"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in the interview.
Concerning inflation, Robertson stated, “If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent. It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.”
Roberston added that while the Chinese probably won't stop buying US bonds, it's quite possible the Japanese will, and sell their long-term bonds, which he said would be worse than someone not buying at all.
"The U.S. has to quit spending, cut back, start saving, and scale backward Robertson said. "Until that happens, I don't think we're anywhere near out of the woods.”
While Robertson said he thinks the recession is in a temporary lull, because so many of the financial problems haven't been dealt with, and the Federal Reserve hasn't stopped printing money, that could readily change.
He said it's impossible to pay back what we've borrowed, and the only change of that remotely happening is if the Chinese and Japanese continue to buy bonds from the U.S.
As a result, Robertson is betting a lot of his fortune on the fact that inflation will eventually come and soar, something all of us at minimum need to be financially defensive about.
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
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
Wednesday, September 23, 2009
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.
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.
Monday, September 21, 2009
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.
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.
Sunday, September 20, 2009
FDIC Chairman Tapping Treasury Credit Line?
FDIC - Deposit Insurance Fund
Just three weeks after FDIC Chairman Sheila Bair said "Not at this point in time," when asked if she would need to tap into a Treasury credit line, she has changed her thinking and now says pretty much all options are on the table, implying a real crisis, which most of us probably know about.
At this time, the FDIC estimates that the agency will need somewhere around $70 billion through 2013 to be able to insure bank customers' deposits. The Deposit Insurance Fund now is at its lowest level since 1992.
The Deposit Insurance Fund has plunged to 0.22 percent of all insured deposits, below the mandated minimum level of 1.15 required by Congress. So far 94 banks have fallen in 2009 as of this writing.
Alt-A and commercial loans pretty much guarantee that 100s of more banks could collapse before it's over.
In May, Congress increased the FDIC credit line at the Treasury from $30 billion to $100 billion.
While Bair rightly said that the existing financial regulatory system should be changed in order to keep large banks from becoming too big to fail, she ignores that those provisions are already in place: it's called going out of business or declaring bankruptcy. This is why the Federal Reserve needs to be shut down so it can't pour taxpayers' money into the market to shore up banks and other businesses that are run poorly and can't compete.
FDIC - Deposit Insurance Fund
Just three weeks after FDIC Chairman Sheila Bair said "Not at this point in time," when asked if she would need to tap into a Treasury credit line, she has changed her thinking and now says pretty much all options are on the table, implying a real crisis, which most of us probably know about.
At this time, the FDIC estimates that the agency will need somewhere around $70 billion through 2013 to be able to insure bank customers' deposits. The Deposit Insurance Fund now is at its lowest level since 1992.
The Deposit Insurance Fund has plunged to 0.22 percent of all insured deposits, below the mandated minimum level of 1.15 required by Congress. So far 94 banks have fallen in 2009 as of this writing.
Alt-A and commercial loans pretty much guarantee that 100s of more banks could collapse before it's over.
In May, Congress increased the FDIC credit line at the Treasury from $30 billion to $100 billion.
While Bair rightly said that the existing financial regulatory system should be changed in order to keep large banks from becoming too big to fail, she ignores that those provisions are already in place: it's called going out of business or declaring bankruptcy. This is why the Federal Reserve needs to be shut down so it can't pour taxpayers' money into the market to shore up banks and other businesses that are run poorly and can't compete.
FDIC - Deposit Insurance Fund
Thursday, February 5, 2009
U.S. Dollar: Falls Against Yen
Although the U.S. dollar was the strongest against the Japanese yen in a month earlier on Thursday, later in the day it dropped slightly as investors wait for key jobs data which should confirm the U.S. labor market is under extreme stress.
FOREX trade had the dollar declining against the yen later on Thursday, in anticipation of the expected weak jobs report. It fell from its high to drop by 0.2 percent to 90.94 yen on FOREX trading.
I'm not sure why currency traders are looking to the stimulus plan as a measure of what the U.S. dollar is going to do, as it will make little difference. Socialism isn't going to strengthen the U.S. dollar whatever way you look at it.
As a matter of fact, it'll hasten the collapse of the U.S. dollar as the Federal Reserve will have to print out its fiat money in order to pay for the outrageous sum of debt. That will eventually result in inflation and the dollar plunging in value.
Even the goofy idea that changing an accounting rule would make investors be more adverse to risk is a ridiculous assertion. Playing with numbers won't change the dollar in any way, or the current recession.
The so-called accounting fix could keep banks from generally marking down all assets to prices a badly run nationalized bank could have to pay. Welcome to the new socialist United States.
Tinkering and playing with accounting rules changes nothing, and the value of the U.S. dollar or yen, or any other currency always relates to the underlying fundamentals and nothing else, even when things temporarily get mixed up like in the recent forced liquidation period which made the dollar seem to be strengthening, even though there was no reason it should have been.
Sources say that neither the U.S. Securities and Exchange Commission or Treasury Department were talking about suspending the fair value accounting rule.
Nations and investors will slowly back out of investing in the U.S. dollar through buying Treasuries, as exports no longer make sense when consumers aren't buying products any longer. The motivation is thus no longer there to buy up U.S. debt to finance consumers' purchases.
As far as currencies go, the yen should perform as a place of safety again, along with gold and silver. The U.S. dollar will continue to weaken and collapse, leaving the usual havens of safety the place to go.
The euro also dropped slightly against the yen, while sterling made a slight gain.
Currency trading will be extremely important going forward, and the FOREX market a place to make a lot of money for those who understand what they're doing and that the U.S. dollar is set for a long term plunge in value, collapsing to low levels.
The yen should remain strong during the time the dollar falls.
FOREX trade had the dollar declining against the yen later on Thursday, in anticipation of the expected weak jobs report. It fell from its high to drop by 0.2 percent to 90.94 yen on FOREX trading.
I'm not sure why currency traders are looking to the stimulus plan as a measure of what the U.S. dollar is going to do, as it will make little difference. Socialism isn't going to strengthen the U.S. dollar whatever way you look at it.
As a matter of fact, it'll hasten the collapse of the U.S. dollar as the Federal Reserve will have to print out its fiat money in order to pay for the outrageous sum of debt. That will eventually result in inflation and the dollar plunging in value.
Even the goofy idea that changing an accounting rule would make investors be more adverse to risk is a ridiculous assertion. Playing with numbers won't change the dollar in any way, or the current recession.
The so-called accounting fix could keep banks from generally marking down all assets to prices a badly run nationalized bank could have to pay. Welcome to the new socialist United States.
Tinkering and playing with accounting rules changes nothing, and the value of the U.S. dollar or yen, or any other currency always relates to the underlying fundamentals and nothing else, even when things temporarily get mixed up like in the recent forced liquidation period which made the dollar seem to be strengthening, even though there was no reason it should have been.
Sources say that neither the U.S. Securities and Exchange Commission or Treasury Department were talking about suspending the fair value accounting rule.
Nations and investors will slowly back out of investing in the U.S. dollar through buying Treasuries, as exports no longer make sense when consumers aren't buying products any longer. The motivation is thus no longer there to buy up U.S. debt to finance consumers' purchases.
As far as currencies go, the yen should perform as a place of safety again, along with gold and silver. The U.S. dollar will continue to weaken and collapse, leaving the usual havens of safety the place to go.
The euro also dropped slightly against the yen, while sterling made a slight gain.
Currency trading will be extremely important going forward, and the FOREX market a place to make a lot of money for those who understand what they're doing and that the U.S. dollar is set for a long term plunge in value, collapsing to low levels.
The yen should remain strong during the time the dollar falls.
Tuesday, February 3, 2009
U.S. Dollar: Haven No More?
The idea that refuses to die is that the strength of the U.S. dollar over the last several months has been because investors are seeking it as a haven. I think that couldn't be a more wrong assessment of the reality happening.
What has happened is the shortage of access to cash put hedge funds and companies into positions of forced liquidation, which made them sell off their gold and other commodity positions in order to temporarily halt the bleeding and get some access to cash.
It was never a trust in the US dollar that made that happen, but the absolute need of cash that drove the actions.
The ICE's Dollar Index, which tracks the U.S. dollar against the yen, euro, British pound, Swiss franc, Canadian dollar and the Swedish krona, fell today as cash becomes more readily available, and Americans start to buy up available homes that have been abandoned. People feel safer putting their dollars there than in the greenback itself.
Pending home resales have risen by 6.3 percent to 87.7, the first growth since August 2008. In November pending home resales stood at 82.5.
As far as a haven of safety for investors, we'll see gold take up the usual role, as forced liquidation unwinds and investors put their money into what performs well in difficult economic times.
As I mentioned, investment funds and large companies had to sell off their gold in order to raise cash, that is why gold performed in an abnormal way. It's also why some of the projections of the collapse of the U.S. dollar have been put on hold for a period of time. Even so, it will collapse, along with the bond market collapse. It's only a matter of when, not if.
What all of this says about the U.S. dollar, is it's immediate and long term future is connected to the sentiment of people and their economic concerns. We've seen gold start to rise, as expected, because fear and concerns over the health of the economy are pushing people to invest in gold as the real safety outlet.
Gold will be the real haven going forward, not the U.S. dollar, which never can or should be. Caution is ruling the day, and it will for some time. That means gold will surge in 2009, while the U.S. dollar continues to fall.
The question must be put forth on why the financial press, especially in the U.S. continues to make it look like the U.S. dollar has some type of fundamental that makes it a place of safety. Everything that can happen to make the dollar weak is the underlying reality, not the opposite.
So the idea that it is a haven is bizarre at minimum, and reckless at best, as far as making it look like people should be investing in the dollar rather than running from it as fast as they can.
Against every currency the greenback has fallen today in the ICE Dollar Index, dropping against the yen, euro, British pound, Swiss franc, Canadian dollar and the Swedish krona by mid-afternoon.
In other dollar-related news, the Federal Reserve announced it would extend its currency swaps with 13 other central banks through October 30. That extends the currency swaps from the end of April.
Now that the artificial propping up of the dollar has come to an end with cash and credit flowing stronger, the days of the U.S. dollar being considered a haven or place of safety are over. It never was that, but people misinterpreted, and continue to misinterpret the period of forced liquidation which propped up the dollar because of the sell off of dollar denominated commodities.
What has happened is the shortage of access to cash put hedge funds and companies into positions of forced liquidation, which made them sell off their gold and other commodity positions in order to temporarily halt the bleeding and get some access to cash.
It was never a trust in the US dollar that made that happen, but the absolute need of cash that drove the actions.
The ICE's Dollar Index, which tracks the U.S. dollar against the yen, euro, British pound, Swiss franc, Canadian dollar and the Swedish krona, fell today as cash becomes more readily available, and Americans start to buy up available homes that have been abandoned. People feel safer putting their dollars there than in the greenback itself.
Pending home resales have risen by 6.3 percent to 87.7, the first growth since August 2008. In November pending home resales stood at 82.5.
As far as a haven of safety for investors, we'll see gold take up the usual role, as forced liquidation unwinds and investors put their money into what performs well in difficult economic times.
As I mentioned, investment funds and large companies had to sell off their gold in order to raise cash, that is why gold performed in an abnormal way. It's also why some of the projections of the collapse of the U.S. dollar have been put on hold for a period of time. Even so, it will collapse, along with the bond market collapse. It's only a matter of when, not if.
What all of this says about the U.S. dollar, is it's immediate and long term future is connected to the sentiment of people and their economic concerns. We've seen gold start to rise, as expected, because fear and concerns over the health of the economy are pushing people to invest in gold as the real safety outlet.
Gold will be the real haven going forward, not the U.S. dollar, which never can or should be. Caution is ruling the day, and it will for some time. That means gold will surge in 2009, while the U.S. dollar continues to fall.
The question must be put forth on why the financial press, especially in the U.S. continues to make it look like the U.S. dollar has some type of fundamental that makes it a place of safety. Everything that can happen to make the dollar weak is the underlying reality, not the opposite.
So the idea that it is a haven is bizarre at minimum, and reckless at best, as far as making it look like people should be investing in the dollar rather than running from it as fast as they can.
Against every currency the greenback has fallen today in the ICE Dollar Index, dropping against the yen, euro, British pound, Swiss franc, Canadian dollar and the Swedish krona by mid-afternoon.
In other dollar-related news, the Federal Reserve announced it would extend its currency swaps with 13 other central banks through October 30. That extends the currency swaps from the end of April.
Now that the artificial propping up of the dollar has come to an end with cash and credit flowing stronger, the days of the U.S. dollar being considered a haven or place of safety are over. It never was that, but people misinterpreted, and continue to misinterpret the period of forced liquidation which propped up the dollar because of the sell off of dollar denominated commodities.
Sunday, January 25, 2009
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.
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.
Tuesday, January 20, 2009
U.S. Dollar Collapse 2009 | The Perfect Storm?
The idea of the U.S. dollar collapsing in the way it's being thought of today, would have been unheard of in times past. Sure, we've had times of steep inflation where it was dollar was devalued, but nothing like the perfect storm approaching us now.
We have everything from the many variables connected to the economy, foreign governments eyeing the dollar suspiciously for the first time, low interest rates, U.S. Treasury bonds about to burst, China slowly moving out of U.S. dollars (selling bonds), out of control government bailouts, more government bailouts, increased socialization of American economy, and finally, the misguided idea of the dollar printing presses running day and night to provide the money to deal with all of this.
This doesn't include the bloated budgets needed to handle the ongoing policies of FDR - which President Barack Obama foolishly has asserted he's going to continue and expand - like social security and medicare, which will skyrocket even more on a yearly basis as baby boomers swarm into their retirement years.
We have to understand the U.S. dollar can collapse in a number of ways, and it's not always obvious that it has, especially with its ultimate enemy: inflation. But there's no way inflation isn't going to come, as the promises and misguided policies of politicians hoping to hold on to their government positions, ensures the printing presses will continue to run, and also ensures the dollar will buy much less. This is the type of collapse that hides what's really happening and the cause, as most people don't understand the direct correlation between printing hoards of money and the consequential devaluing of the dollar ... or any currency for that matter.
The reason America's been able to get away with pushing the limits with this has primarily been the acquisition of U.S. Treasury bonds by China. China is now abandoning that strategy and moving its money elsewhere. That means with China no longer financing the U.S. economy, America will have to look for financing elsewhere. Where would that be, as no other country is going to buy up an asset like the U.S. dollar when it could be on the verge of collapse.
There is no other recourse for the Federal Reserve (in their minds) but to keep the printing presses running. It doesn't occur to government leaders that they have no power in these affairs, and the real answer should be to downsize government, along with its unrealistic programs it offers citizens to buy their votes and generate dependence upon them.
One unfortunate side effect of this is people could remain in the dark if they don't understand that printing money will weaken the dollar and push the prices of goods and services up. If they don't understand this, we'll be doomed to repeat the fiasco again and again, as we continue to follow the same strategies and make the same mistakes.
China Using Yuan instead of Dollars in Transactions
China has already said it will allow its yuan to be used internally for settlement in some of its riches provinces:
"China will allow the yuan to be used for settlement between Guangdong Province and the Yangtze River Delta, China's two economic powerhouses, and the special administrative regions of Hong Kong and Macau, according to the central bank.
"Meanwhile, exporters in the Guangxi Zhuang Autonomous Region and Yunnan Province in southwestern China will be allowed to use the yuan to settle trade payments with members of the Association of Southeast Asian Nations.
"Those moves are expected to facilitate overseas trade, as Chinese exporters might face losses if they continue to be paid in US dollars..."
Putting the inevitable inflation scenario aside (which will happen, it's only a matter of degree) we could have a more robust slaughter of the dollar, based on the other numerous factors we've mentioned above.
If China decided to take drasic measures and sell a lot of their Treasurys, that would put tremendous downward pressure on the value of the dollar, while there's also the real possibility of OPEC, and others, deciding to get out of US securities as well, again, making America's only choice to print more money to pay off its debts and faulty social programs.
Another important part of the economic puzzle is that China has obviously been the primary provider of inexpensive goods to American consumers. So even though the U.S. has pressured China to increase the value of the yuan, the result would be higher prices of goods for Americans, which would end up causing even more pain. A perfect storm ending with the collapse of the U.S dollar?
Many financial and economic experts have told government officials they needed to stay out of the economy and just let things run their course. Past experience has shown that government interference makes things worse, not better, for the economy.
So will the U.S dollar collapse in 2009? It's a very real possibility. We have a perfect storm of variables that could together bring the dollar down to emerging markets status.
We have everything from the many variables connected to the economy, foreign governments eyeing the dollar suspiciously for the first time, low interest rates, U.S. Treasury bonds about to burst, China slowly moving out of U.S. dollars (selling bonds), out of control government bailouts, more government bailouts, increased socialization of American economy, and finally, the misguided idea of the dollar printing presses running day and night to provide the money to deal with all of this.
This doesn't include the bloated budgets needed to handle the ongoing policies of FDR - which President Barack Obama foolishly has asserted he's going to continue and expand - like social security and medicare, which will skyrocket even more on a yearly basis as baby boomers swarm into their retirement years.
We have to understand the U.S. dollar can collapse in a number of ways, and it's not always obvious that it has, especially with its ultimate enemy: inflation. But there's no way inflation isn't going to come, as the promises and misguided policies of politicians hoping to hold on to their government positions, ensures the printing presses will continue to run, and also ensures the dollar will buy much less. This is the type of collapse that hides what's really happening and the cause, as most people don't understand the direct correlation between printing hoards of money and the consequential devaluing of the dollar ... or any currency for that matter.
The reason America's been able to get away with pushing the limits with this has primarily been the acquisition of U.S. Treasury bonds by China. China is now abandoning that strategy and moving its money elsewhere. That means with China no longer financing the U.S. economy, America will have to look for financing elsewhere. Where would that be, as no other country is going to buy up an asset like the U.S. dollar when it could be on the verge of collapse.
There is no other recourse for the Federal Reserve (in their minds) but to keep the printing presses running. It doesn't occur to government leaders that they have no power in these affairs, and the real answer should be to downsize government, along with its unrealistic programs it offers citizens to buy their votes and generate dependence upon them.
One unfortunate side effect of this is people could remain in the dark if they don't understand that printing money will weaken the dollar and push the prices of goods and services up. If they don't understand this, we'll be doomed to repeat the fiasco again and again, as we continue to follow the same strategies and make the same mistakes.
China Using Yuan instead of Dollars in Transactions
China has already said it will allow its yuan to be used internally for settlement in some of its riches provinces:
"China will allow the yuan to be used for settlement between Guangdong Province and the Yangtze River Delta, China's two economic powerhouses, and the special administrative regions of Hong Kong and Macau, according to the central bank.
"Meanwhile, exporters in the Guangxi Zhuang Autonomous Region and Yunnan Province in southwestern China will be allowed to use the yuan to settle trade payments with members of the Association of Southeast Asian Nations.
"Those moves are expected to facilitate overseas trade, as Chinese exporters might face losses if they continue to be paid in US dollars..."
Putting the inevitable inflation scenario aside (which will happen, it's only a matter of degree) we could have a more robust slaughter of the dollar, based on the other numerous factors we've mentioned above.
If China decided to take drasic measures and sell a lot of their Treasurys, that would put tremendous downward pressure on the value of the dollar, while there's also the real possibility of OPEC, and others, deciding to get out of US securities as well, again, making America's only choice to print more money to pay off its debts and faulty social programs.
Another important part of the economic puzzle is that China has obviously been the primary provider of inexpensive goods to American consumers. So even though the U.S. has pressured China to increase the value of the yuan, the result would be higher prices of goods for Americans, which would end up causing even more pain. A perfect storm ending with the collapse of the U.S dollar?
Many financial and economic experts have told government officials they needed to stay out of the economy and just let things run their course. Past experience has shown that government interference makes things worse, not better, for the economy.
So will the U.S dollar collapse in 2009? It's a very real possibility. We have a perfect storm of variables that could together bring the dollar down to emerging markets status.
Wednesday, January 7, 2009
Loss Of Confidence in U.S. Dollar Will Generate Huge Crisis
Ron Paul talking about the challenges we'll face when confidence in the U.S. dollar becomes a larger issue. The crisis at that time will be "huge" says Paul
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