Saturday, January 31, 2009

Do Not Be Fooled By The US Dollar's Strength

The US dollar's strength is because many financial entities are doing the desperation samba, scrambling to sell US dollar denominated assets, get out of Us dollar denominated debt, deleverage, and repatriate "capital". US dollar strength is a sign of how bad things really are out there in the world.

Maybe it's double top will be a little wider.

From Bill Buckler:

" ... The US Dollar is still the world's RESERVE currency. The US is the only nation in the world which can buy valuable goods and services anywhere WITHOUT having first to buy the currency of the nation from which it is buying. The US Dollar is an INTERNATIONAL trading currency as well as being a RESERVE currency. Finally, there is the simple fact that the rest of the world holds predominantly US Dollars as the "reserves" which form the foundation of their own monetary system. Without these "reserves", they haven't got a system.

It is, of course, a fact that the US Dollar is rapidly losing its reserve currency status. The planned debt issuance of the US Treasury over this calendar year - estimates range from $US 2.5 to well over $US 3 TRILLION - are not supportable. The rest of the world doesn't have that kind of money to lend. If the Obama Administration carries forward its "stimulus" (and other) policies, the stark prospect of a simple "monetisation" of the debt - by means of literal US Federal Reserve purchases of it - is a certainty. The status of the US Dollar, as an international trading and reserve currency, will not survive that. The end result is that the US Dollar will plummet, if not against all other global currencies then certainly against the one form of MONEY which is no-one else's liability - Gold."

Now for a Privateer opinion:

"If you want a signal of the approaching demise of the entire global fiat debt-based money debacle, look for the point at which Gold sets new all time highs against the US Dollar and/or the Yen. At that point, the push will start in earnest for the return to a rational global monetary system. Gold will be resisted, but it cannot be overcome. It is the only rational global form of money which has ever been discovered."


A little bit from LeMetropoleCafe:

"The money

To all; while having dinner last night with my lovely wife, she mentioned us taking a trip or cruise to South America in October or November. I made the comment that "it is not likely tourism, or for that matter much of anything else will be running by then". [*****] is sharp and understands what is happening currently, but she missed the core when she said "why, the world didn't stop during the Great Depression?". The world is 180 degrees of what it was back then, this depression will be worse in many respects from the 1930's. Back then, at least money was trusted. The current debacle is all about confidence being lost in nearly everything, currencies standing front and center.

Today there is no money! Really there is not, every nation on earth uses an unbacked fiat currency that is supposedly "backed" by unbacked U.S. Dollars.

Back in the 30's, most every currency was backed by Gold, while banks went under and nations did eventually devalue their currency to Gold, Sovereign nations did not fail. Today the problem is systemic to every corner of the earth because the U.S. convinced the world that the Dollar was "as good as Gold", it clearly is not. Every central bank, every bank, business, all the way to every individual on earth is touched or affected by the "Dollar system" in some manner.

This is about a currency collapse, yes it is about too much debt, bubbles, etc., but it all boils down to the money. The money is bad and a new system must come forth because mathematically the old system cannot succeed. The current system cannot reflate without destroying the currency because the amount of "paper", ie bonds, mortgages, derivatives, etc., so dwarfs the amount of REAL goods on the planet. If enough credit was [or could be] generated into the system to reflate paper assets, then the cost of real products will explode in price. It will be interesting to watch this play out because the scale and size of the "Dollar hole" that has been dug is staggering to say the least.

So it is now different and we need a new currency system in my opinion, why does everything stop? Simple, when confidence in the Dollar is finally broken, what will the world trade with? Euro's...Yen... Swiss Francs...Roubles...Yuan? How? These all use Dollars as their primary reserves. THEY ARE ALL BROKE WHEN THE U.S. HITS THE WALL! Commerce, production, distribution, travel, etc., etc., all grind to a halt because the world runs on credit and no one wants to take on more credit when everything is deflating around them. As for investors, who wants to lend to a bankrupt entity? Hyper deflation/inflation, what a cocktail to serve at the end of this party! The system will eventually begin moving again, once and only once, the world starts to use a "money" that people can trust!

An off shoot of this topic is the current circus in Washington D.C.. How humorous, good bank bad bank, what a joke! The Federal Reserve has already taken well over $1 trillion onto their books on their way to a $ bazillion, and we are not supposed to call them a "bad bank"? Simulus package? Another $ trillion shot in the arm? Chicken feed for the size of this problem. The Fed and Treasury dept. have become the "dumping ground" of "impaired investments" for the entire world, and we are not supposed to come to the 2nd grade logic that they are broke? We can get this plan or that plan, whatever, the system is broke and nothing can change this. We must have a new global currency system to go forward, very simple. It's the transition that is not so simple! Regards, Bill H."


Because of the purposeful dumbing down of minds in at least the Anglo Saxon world (historically a new endarkenment coming possibly, it's that bad), plenty of people, 8 years into this bull market in gold and silver, still do not fundamentally get it. They lack critical basic knowledge.

Another little bit from the Cafe:

How clueless are most people today? On Monday a friend of my father's, who is quite successful in business, asked me where he could buy $100,000 of gold coins. I recommended either Tulving or APMEX to him. Last night my father reports that his friend bought Bank of America stock instead. I was speechless.
Best wishes,"


BUSINESS / WORLD BUSINESS | January 30, 2009
Global Worries Over U.S. Stimulus Spending
The long-term fallout from increased borrowing by the U.S. government seems to be getting more attention in Davos than in Washington.


The good ship USS dollar.

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