28 September 2007

Dollar's Fall Starts To Stir Worry

Greenback's Value May Drop to 800th of an Ounce of Gold
By A. BALLA, Special to the Sun | September 28, 2007
Concern is growing in New York, in the wake of last week's meeting of the Federal Reserve Board, over the quickening collapse of the value of the dollar, as foreign investors proclaim that a "for sale" sign has been hung on the city and economists and analysts warn that a collapsing currency bodes ill for the economy.
In the week since the Fed's meeting, the soundness of the dollar has been ebbing rapidly, with the greenback's value plunging to a 732nd of an ounce of gold from a 708th of an ounce when the Fed moved to ease the money supply in hopes of preventing a collapse of the credit markets. It was the dollar's lowest level since 1980, with some analysts expecting it to drop even further, to 800th of an ounce in the next six months.
For the first time in three decades, the dollar is now equal in value to the Canadian loonie, and the euro, which is trading at a high of $1.41 this week, is the strongest it has ever been against the dollar in its eight-year history. This is not good news for America's economy, experts say. "No country in the world has ever fought itself to prosperity by weakening its currency," the manager of the Merk Hard Currency Fund, Axel Merk, said. "The Fed decision to cut rates last week was wrong."
Some economists argue that a weak dollar, particularly against other currencies, helps American exporters, at least in the short term. "But on the whole, a cheap, and cheapening, dollar exchange rate is bad medicine. It's bad medicine for Americans," the editor of Grant's Interest Rate Observer and author of four books on finance, James Grant, said. "It reduces the value of American wealth in terms of other currencies, and of the nations that print them. It tends to mean a rise in the cost of imported goods and services — that is, it's inflationary."
The Federal Reserve chairman, Ben Bernanke, has not shied away from talking about an increased risk of inflation, but has argued that this risk will be kept in check, and that the Fed first must tackle the current liquidity crisis.
"The inflation rate is something we pay close attention to," Mr. Bernanke said last week. "An economy cannot grow in a healthy, stable way when inflation is out of control, and we will certainly make sure that that doesn't happen."
Despite these assurances, a number of analysts argue a weak dollar is already hurting Americans by curtailing their purchasing power. "Among the big losers are American households that buy imports as part of their everyday shopping," the director of the Center of Trade and Policy Studies at the CATO Institute, Daniel Griswold, said. "All things being equal, we are better off with a stronger dollar."
The image of the dollar as the benchmark currency for the world is also taking a bashing. Several large central banks — such as those in Russia, China, and some Middle East countries — hold billions of dollars in cash in their reserves. Since the greenback has been falling in value, however, many of these institutions are starting to diversify their holdings, dumping the dollars for other, stronger currencies, such as the euro.
Russia, for example, now holds only about 40% of its reserves in dollars; at one point it held more than 70%. The United Arab Emirates converted 8% of its dollar reserves to euros in December. China, which doesn't release data on its foreign currency holdings, has said it is slowly diversifying its dollar-dominated reserves.
"Reserve diversification is a inevitable gradual process, and the world economy can no longer be dependent on America as the only reserve economy," a senior economist for Moody's Economy.com, Tu Packard, said.
This diversification process acts like a sell-off, because by holding dollars in their reserves, these central banks are in essence buying shares in the American economy. As they sell the dollars, they are selling their interest in our economy, Ms. Packard said.
"The dollar is the world's currency — most greenbacks circulate outside the 50 states — but America's monetary policy is designed for America and no other country. That is certainly a nice convenience for us. But it will tend to weaken foreigners' confidence in our Fed and our Treasury," Mr. Grant said. "You've got to remember that this country produces much less than it consumes. It finances the difference with dollars. Here is one of the sweetest arrangements on the face of the earth, but it will last only so long as non-Americans willingly accept our dollars, these green pieces of paper of no intrinsic value."
Still, the administration in Washington is exuding confidence. "I think I've been pretty clear on this — a strong dollar is in our nation's interest," the treasury secretary, Henry Paulson, said in a press briefing Friday. "And our currency values are always determined — and I believe they should be determined — in a fair, competitive marketplace based upon underlying economic fundamentals. And so what we do in the United States and what I very much advocate is policies that are going to increase confidence, maintain confidence in the U.S. dollar and in our economy."
The Day After the Dollar Crashes: A Survival Guide for the Rise of the New World OrderThe Day After the Dollar Crashes: A Survival Guide for the Rise of the New World Order 

20 September 2007

Saudi's Exit from the Dollar could spell Collapse for the Dollar

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.
"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.
"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.
The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.
As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy.

 The Day After the Dollar Crashes: A Survival Guide for the Rise of the New World Order
The Fed's dramatic half point cut to 4.75pc yesterday has already caused a plunge in the world dollar index to a fifteen year low, touching with weakest level ever against the mighty euro at just under $1.40.
There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.
The danger is that this could now accelerate as the yield gap between the United States and the rest of the world narrows rapidly, leaving America starved of foreign capital flows needed to cover its current account deficit - expected to reach $850bn this year, or 6.5pc of GDP.
Mr Redeker said foreign investors have been gradually pulling out of the long-term US debt markets, leaving the dollar dependent on short-term funding. Foreigners have funded 25pc to 30pc of America's credit and short-term paper markets over the last two years.
"They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008," he said.
"This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem," he said.
Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen "carry trade", causing massive flows from the US back to Japan.
Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.
The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.
"If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," he said.
The Federal Reserve, however, clearly calculates the risk of a sudden downturn is now so great that the it outweighs dangers of a dollar slide.
Former Fed chief Alan Greenspan said this week that house prices may fall by "double digits" as the subprime crisis bites harder, prompting households to cut back sharply on spending.
For Saudi Arabia, the dollar peg has clearly become a liability. Inflation has risen to 4pc and the M3 broad money supply is surging at 22pc.
The pressures are even worse in other parts of the Gulf. The United Arab Emirates now faces inflation of 9.3pc, a 20-year high. In Qatar it has reached 13pc.
Kuwait became the first of the oil sheikhdoms to break its dollar peg in May, a move that has begun to rein in rampant money supply growth.
 Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books)
Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books)

19 September 2007

Why No Socialism

Hi, my name is Juan Fermin, I've been thinking about starting up a political website for quite some time but just haven't done it, mostly because of time constraints, both personally and business wise. What has really motivated me to speak out however, is all of the postering going on in the political scene, especially by the Democrat party and thier insistance that we, as Americans, can't do ANYTHING without them. We can't succeed, we can't pay our bills, we can't move forward, we can't reconcile our differences. The list just goes on and on, and I've been silent too long.
Maybe I'm wrong, and maybe I'm way off base, but I think that most Americans think the way I do, they're just not heard. I also believe that there's a lot of young people out there that have been misled and straight out lied to by the establishment, and simply don't know any better because it sounds so good. Hopefully, and with God's help, I'll be able to put together some insightfull and hard driving articles that will expose and inform. We will soon see.

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