More Pressure On the Dollar

[Annie]

Dollar Reaches Breaking Point as Banks Shift Reserves (Update3) - Bloomberg.com

Dollar Reaches Breaking Point as Banks Shift Reserves (Update3)

By Ye Xie and Anchalee Worrachate


Oct. 12 (Bloomberg) -- Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades.

Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.

World leaders are acting on threats to dump the dollar while the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors. The diversification signals that the currency won’t rebound anytime soon after losing 10.3 percent on a trade-weighted basis the past six months, the biggest drop since 1991.

“Global central banks are getting more serious about diversification, whereas in the past they used to just talk about it,” said Steven Englander, a former Federal Reserve researcher who is now the chief U.S. currency strategist at Barclays in New York. “It looks like they are really backing away from the dollar.”

...

 

[The Rabbi]

Moral of the story: buy stocks in companies with big overseas investments.

 

[editec]

Moral of the story?

Stop sending our industries overseas.

 

[Annie]

James Pethokoukis » Blog Archive » The next big political issue? The U.S. dollar | Blogs |

October 12th, 2009
The next big political issue? The U.S. dollar
Posted by: James Pethokoukis

The state of the dollar probably hasn’t been a first-tier political issue in the United States since, say, the presidential election of 1896. Back then, it manifested as whether or not America would stay on the gold standard or switch to a bimetallic one. (The William Jennings Bryan “cross of gold” speech and all that.)

The aftershocks of the global financial crisis may now be propelling the dollar back to the political forefront. The greenback’s continuing slide makes it a handy metric that neatly encapsulates America’s current economic troubles and possible long-term decline. House Republicans for instance, have been using the weaker dollar as a weapon in their attacks on the Bernanke-led Federal Reserve.

For more evidence of the dollar’s return to political salience, look no further than the Facebook page of Sarah Palin. The 2008 GOP vice presidential nominee — and possible 2012 presidential candidate — has shown a knack for identifying hot-button political issues, such as the purported “death panels” she claims to have found in Democratic healthcare reform plans. In a recent Facebook posting, Palin expressed deep concern over the dollar’s “continued viability as an international reserve currency” in light of huge U.S. budget deficits....

 

[The Rabbi]

Moral of the story?

Stop sending our industries overseas.

How do you propose to do that?
And keep in mind, the US is a net importer of jobs from overseas, not the other way around.

 

[CrusaderFrank]

Why are Obama and the Dems trying to kill the Dollar?

 

[Annie]

Spending our way to insignificance:

Obama Dollar Retreats Most Against Commodities in Wealth Shift - Bloomberg.com

Obama Dollar Retreats Most Against Commodities in Wealth Shift
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By Brendan Murray


Oct. 13 (Bloomberg) -- President Barack Obama’s effort to lead the world economic recovery by spending the U.S. out of its recession is undermining the dollar, triggering record commodities rallies as investors scour the globe for hard assets.

As threats of a financial meltdown fade, the currency is falling victim to an unprecedented budget deficit, near-zero interest rates and slow growth. The dollar is down 10 percent against six trading partners’ legal tender in Treasury Secretary Timothy Geithner’s first eight-and-a-half months, the sharpest drop for a new occupant of that office since the Reagan administration’s James Baker persuaded world leaders to boost the deutsche mark and yen by debasing the dollar in 1985. This year’s drop followed its best two quarters in 16 years.

“The dollar had been strong because the U.S. was a haven in the storm, and now that the storm is abating, who needs the dollar?” said Edmund Phelps, who won the 2006 Nobel Prize in economics and teaches at Columbia University in New York. “People got exasperated with the tiny returns on safe assets.”

Investors are sating their renewed risk appetites with developing nations’ stocks, currencies and the commodities some of them produce. Gold is up 19 percent this year, touching an all-time high $1,062.70 an ounce on Oct. 8. Copper has rallied 103 percent with the biggest three-quarter rise in at least 21 years. Crude oil, up 64 percent, just finished its steepest eight-month climb since 1999. Aluminum has gained 24 percent, propelled by its best two quarters in a dozen years or more.

Worst Since 1991

The MSCI Emerging Markets Index yesterday reached 950.34, the highest since August 2008, after the 22-year-old gauge’s biggest seven-month rally. The Dollar Index, which measures the currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, dropped to its lowest level since August 2008 on Oct. 8 after its worst two quarters since 1991.

The nonpartisan Congressional Budget Office estimates that the budget deficit for the fiscal year that ended Sept. 30, which included some of Obama’s $787 billion stimulus package and the lowest tax revenue in more than 50 years, was $1.4 trillion, more than India’s gross domestic product. The administration will announce the final figure by mid-October.

Faced with administration projections of shortfalls totaling $9.1 trillion over the next decade, Obama and Congress have pledged to restore discipline. Fed officials have discussed how -- but not when -- they plan to reduce the central bank’s balance sheet, which has doubled to $2.1 trillion under emergency lending programs to unfreeze the credit markets.

...

 

[The Rabbi]

And recall that exactly this kind of behavior was responsible for triggering the recent recession: low real interest rates led to booms in commodities and real estate which then tanked.
What is the definition of insanity again?

 

[Mike Mitrosky]

And recall that exactly this kind of behavior was responsible for triggering the recent recession: low real interest rates led to booms in commodities and real estate which then tanked.
What is the definition of insanity again?

And who can we thank for those low interest rates? Why the federal reserve. Just another reason to get rid of the fed.

 

[Big Black Dog]

Mrs. BBD puts plenty of pressure on my dollars. No need for any other pressure from other sources.

 

[Toro]

The dollar is likely to retest its lows of March 2008. Whether or not it breaks below those lows remains to be seen.

The dollar can only fall so far against other fiat currencies without doing serious structural damage to foreign economies. Thus, there is a floor underneath the dollar relative to other currencies. It is likely, therefore, that if the dollar keeps depreciating, other currencies will have to do so as well, increasing the value of real assets.

 

[The Rabbi]

And recall that exactly this kind of behavior was responsible for triggering the recent recession: low real interest rates led to booms in commodities and real estate which then tanked.
What is the definition of insanity again?

And who can we thank for those low interest rates? Why the federal reserve. Just another reason to get rid of the fed.

Actually you can thank Congress. Why not get rid of them?

 

[Paulie]

Why are Obama and the Dems trying to kill the Dollar?

Why are you ignorant enough to think it's got anything to do with a particular party?

In retrospect though, talk of dumping the Dollar has been going on for over a decade now. It was around during Reagan, and started really heating up under Bush. Obama just happens to be the guy in place when it all seems to have gotten to the worst point.

True control over the Dollar's value lies with no specific party. You'll have to look more towards the central bank for that.

Remember when Paulson promised the banks 700 billion, and then the Fed promised them another 800?

It was pretty fucking horrible before any specific democrat got involved.

 

[Elutherian]

We're about to have a world of hurt when the dollar become worthless. You ever heard of the Wiemar Republic? Those poor SOB's were using money as fuel for the fires... then, BAM!, along comes Uncle Adolph with his "Jews are the cause of all our troubles" Bullsh*t.

So what I'm trying to say, basically, is that we better stop printing our paper and pretending it means something. I'm about to buy some more Gold...

 

[brewerboy]

We're about to have a world of hurt when the dollar become worthless. You ever heard of the Wiemar Republic? Those poor SOB's were using money as fuel for the fires... then, BAM!, along comes Uncle Adolph with his "Jews are the cause of all our troubles" Bullsh*t.

So what I'm trying to say, basically, is that we better stop printing our paper and pretending it means something. I'm about to buy some more Gold...

Wish I had your kind of $.

I'm stuck with silver

 

[Elutherian]

We're about to have a world of hurt when the dollar become worthless. You ever heard of the Wiemar Republic? Those poor SOB's were using money as fuel for the fires... then, BAM!, along comes Uncle Adolph with his "Jews are the cause of all our troubles" Bullsh*t.

So what I'm trying to say, basically, is that we better stop printing our paper and pretending it means something. I'm about to buy some more Gold...

Wish I had your kind of $.

I'm stuck with silver

Well, to be completely honest, I don't have no Gold. I was just making a point. If I could afford the stuff, I would. But alas, I am a poor man...

 

[Paulie]

We're about to have a world of hurt when the dollar become worthless. You ever heard of the Wiemar Republic? Those poor SOB's were using money as fuel for the fires... then, BAM!, along comes Uncle Adolph with his "Jews are the cause of all our troubles" Bullsh*t.

So what I'm trying to say, basically, is that we better stop printing our paper and pretending it means something. I'm about to buy some more Gold...

Wish I had your kind of $.

I'm stuck with silver

Silver will grow in proportion to gold. There's nothing wrong with protecting currency with silver as compared to gold. If you can afford it, do it.

 

[Toro]

Silver has more upside if the economy recovers.

Plus, it is a thinner, less liquid market, and easier to squeeze.

I've thought about investing in silver but thought the technical picture was not as clear as gold.

 

[Paulie]

Silver performed more in lockstep with gold back in early '08 when Gold tested the high, but since they both corrected after the financial collapse, silver hasn't been keeping the same even pace.

I think it will, though. There's no reason to believe silver can't touch its all time high if gold does.

Regardless, I'd much rather have my wealth in silver than dollars when the inflation ensues.