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Dollar Bust?

  • #1
  • First Post: Nov 24, 2006 9:52pm Nov 24, 2006 9:52pm
Will the market now finally start concentrating on the ever increasing current account deficit of the US? The last time I checked, it was at about $8 trillion, which is about 70% of the GDP. I definitely think this is going to come into play pretty soon. This could cause a huge downward spiral, where foreign investors start pulling out of the US, which would in turn, negatively affect the economy creating a dangerous cycle. (a textbook example of reflexivity at work) Or am I crazy?
  • #2
  • Nov 25, 2006 12:27am Nov 25, 2006 12:27am
Obviously, Blueshift, with what China did this past Friday, you're not crazy at all. If more countries start selling off their US Dollars, we'll definitely see a downswing, if not a complete fall out, of the US Dollar. From my little experience at least, that's the way it looks to me.

Being a Die-Hard US fan, born and raised here, served in the Military and all that, seeing this happen to the US Dollar really hurts. But, hey, trading is trading and, keeping my mind set the way it should, I've been able - so far - to keep all the "emotional" stuff out and just trade what I see. Seems to be working!! Friday was a jam up, slam dunk day for profits!! Not too good for the US Dollar. But, like I said, trading is trading.
  • #3
  • Nov 25, 2006 12:59am Nov 25, 2006 12:59am
Quoting mtcdavs
Obviously, Blueshift, with what China did this past Friday, you're not crazy at all. If more countries start selling off their US Dollars, we'll definitely see a downswing, if not a complete fall out, of the US Dollar. From my little experience at least, that's the way it looks to me.

Being a Die-Hard US fan, born and raised here, served in the Military and all that, seeing this happen to the US Dollar really hurts. But, hey, trading is trading and, keeping my mind set the way it should, I've been able - so far - to keep all the "emotional" stuff out and just trade what I see. Seems to be working!! Friday was a jam up, slam dunk day for profits!! Not too good for the US Dollar. But, like I said, trading is trading.
But the money you profitted is worth less! Perhaps we should start looking into opening account with the pound as our base currency so it can hold its value better. Plus, it would be like going Long on GBP as you build you account!
  • #4
  • Nov 25, 2006 1:24am Nov 25, 2006 1:24am
Quoting nitman
But the money you profitted is worth less! Perhaps we should start looking into opening account with the pound as our base currency so it can hold its value better. Plus, it would be like going Long on GBP as you build you account!
I don't think dollars are worthless when that's what the grocery store and my landlord require me to pay them with. I think the cashier might balk when I try to hand them ten quid instead of a Jackson. Sure the value of the dollar may be bunk, but I need said bunk to function here in the U.S.A. I'll just take solace in the fact that I know that my soda has more purchasing power than the money that I paid for it with.
  • #5
  • Nov 25, 2006 10:04am Nov 25, 2006 10:04am
Quote

But the money you profitted is worth less! Perhaps we should start looking into opening account with the pound as our base currency so it can hold its value better. Plus, it would be like going Long on GBP as you build you account!

Worthless? Please enlighten.
"Its not where your at, but where your coming from"
  • #6
  • Nov 25, 2006 10:11am Nov 25, 2006 10:11am
IMO, the rise in gold is indicating either a bust in the dollar, or it is being caused by investor frenzy. We WILL either see a bust in the precious metals market, or in the dollar.
  • #7
  • Nov 25, 2006 10:17am Nov 25, 2006 10:17am
Not worthless. I was trying to say the value of the dollar is less...
  • #8
  • Nov 25, 2006 10:29am Nov 25, 2006 10:29am
Quoting athalon7
Worthless? Please enlighten.
I dont think he was saying worthless


I believe he was saying Worth Less, as in not worth as much as it was worth before.
Nothing is hard, some things just take more time and discipline.
  • #9
  • Nov 25, 2006 10:32am Nov 25, 2006 10:32am
The US-Dollar will become almost worthless. Perhaps next year. Perhaps a bit later. So better hedge now and buy GOLD ...
  • #10
  • Nov 25, 2006 10:36am Nov 25, 2006 10:36am
Quoting Geldschlucker
The US-Dollar will become almost worthless. Perhaps next year. Perhaps a bit later. So better hedge now and buy GOLD ...
or perhaps we could see a bust in the precious metals market. I think we'd have to wait another month to see what happens to gold. Gold probably rose this month due to demand from India, and is currently at a huge resistance level.
  • #11
  • Edited 1:16pm Nov 25, 2006 1:06pm | Edited 1:16pm
Quoting Geldschlucker
The US-Dollar will become almost worthless. Perhaps next year. Perhaps a bit later. So better hedge now and buy GOLD ...
How do you figure?

The EUR USD was trading at 2.0140 in the summer of 1994 before it plummeted and 1.9465 in late 2004 before it plummeted. These are not unprecidented numbers. Do you really think the largest economy in the world will have a worthless currency next year?

GDP figures: http://education.yahoo.com/reference...re/gdp/1a.html
"Its not where your at, but where your coming from"
  • #12
  • Nov 25, 2006 1:25pm Nov 25, 2006 1:25pm
athalon7,

one day the largest economy in the world won't be able to pay its debts back to the world. That's the simple truth. How many trillions of debt is it right now? The US debt sum is so huge that I always forget the correct number. I have serious problems to imagine this sum. Sorry.
  • #13
  • Edited 3:56pm Nov 25, 2006 3:08pm | Edited 3:56pm
Quoting Geldschlucker
athalon7,

one day the largest economy in the world won't be able to pay its debts back to the world. That's the simple truth. How many trillions of debt is it right now? The US debt sum is so huge that I always forget the correct number. I have serious problems to imagine this sum. Sorry.
I don't want to get personal here, but I respectfully disagree. Yes, a lot of debt. But our output is the highest also. It's relative.

Also, do you live in the U.S,? If not, why the serious problems with a country you have nothing to do with? Or is there something else here other than just currency?


I'm not saying the size of our debt is not important or high right now. But the U.S. has had to spend a lot on a war, and in peacetime our GDP is so robust we can gain ground back.
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"Its not where your at, but where your coming from"
  • #14
  • Nov 25, 2006 7:45pm Nov 25, 2006 7:45pm
USA dollar will not go bust, people have been saying this for years, bla bla bla how the us deficit etc bla bla bla, gold will be $6000 etc etc etc, it never happens, in a year pound will be way down and so will euro, it's just normal ranging if you look at monthly charts.

Im not personaly attacking anyone here, so don't take offense, all in good humor ok.

I just find it funny when I hear so called experts talk about this subject, usually a week after they rave on, USA makes huge gains, I call them crack heads, the economists that constantly are predicting where the dollar will be, how gold will be 6000 etc.
  • #15
  • Edited 2:47am Nov 26, 2006 2:34am | Edited 2:47am
Quoting athalon7
Also, do you live in the U.S,? If not, why the serious problems with a country you have nothing to do with?
@ athalon7

Because the world economy is deeply affiliated with the US economy. When you can't pay your debts back this will hurt the whole world badly. The US economy is not an isolated story (perhaps in the 19th century).

It's absolutely unimportant where I come from and where I live. Don't suspect people to be against the U.S., just because they mention your trillions of debt. The contrary is right. No need for nationalistic passion here.
  • #16
  • Nov 26, 2006 2:51am Nov 26, 2006 2:51am
Short term:

US Dollar will not lose much purchasing power against other currencies in the near future. Neither EUR nor GBP is a better alternative than the US dollar for the financial world today. EUR has nothing more special to burden a 1.40 EUR/USD. It simply can't, and wouldn't like to. Nobody wants a weak dollar; UNTIL a better alternative is present. The next range for the pair could be 1.28-1.38 though; for sometime, like 12 months or so. However, gold/oil could cost more in about 12 months, against all fiat currencies.

to summarize; eur is looking like establishing a new equilibrium against USd (which started from low 0.8s), and that looks like 1.24-1.36/1.38. EUR can't carry a higher rate than that. Its as simple as that. something has to happen; just because US has huge deficit doesn't mean USD has to burn. It also can't! because countries who lend money to US have notes/bills in return, and they also can't afford to lose most of assets' value. in addition, there is no other economy that could be held as a reserve currency currently. might be EUR in the future, but doubt that.


PS. just be careful during trading; let profits run, NOT losses. and like current times, be vary that NO SINGLE TREND could last forever, and the turns could be brutal.
  • #17
  • Nov 26, 2006 4:45am Nov 26, 2006 4:45am
Quoting athalon7
How do you figure?

The EUR USD was trading at 2.0140 in the summer of 1994 before it plummeted and 1.9465 in late 2004 before it plummeted. These are not unprecidented numbers. Do you really think the largest economy in the world will have a worthless currency next year?
First Of all I want to say hello to everyone. I am new here but I read a lot about this forum and people around here. So I am glad to join the forum

A bit on euro history:

Actually, before 1999, the Euro didnt even exist. We had ECU (or XCU) before 1999. The euro was formally launched on 1 January 1999 but the currency has only been used for non-cash transactions such as cheques and bank transfers. The euro notes and coins were officially launched on 1 January 2002 with the new currency becoming the sole legal tender of the twelve-country euro zone on 1 March 2002.

 Euro is not just the same thing as the former European Currency Unit (or "ECU"). The ECU was a theoretical "basket" of currencies rather than a currency in and of itself, and no "ECU" bank notes or coins never existed.

When the Euro was formally launched in 1999, its rate started at the ECU rate = 1.1789. From the point of its formal launch and to actual moment when euro notes and coins were officially launched, the EURUSD rate fell from 1.1789 to al low as 0.82 by the end of 2001. Note that in Jan 2002, Euro notes and coins were introduced, and almost immidiately Euro started its climb from its lowest points to where we are today - > 1.3 plus.

So, what I wanted to say after small course of history is, that EURUSD never was at 1:2 rate, and I dont think we will get there in a year or two (that is, of course unless there is a world war 3 or some other factor which is hard to foresee, which can drastically affect US as a country. 1:2 cannot be reached by markets going as they are now).

Best Regards,

Rezo
  • #18
  • Nov 26, 2006 12:07pm Nov 26, 2006 12:07pm
A lot of well considered thought on this thread.

Here's a litlle more background:
Eurozone economy started to pick up when Germany finally got its head around the re-patriation of all the 'east germans', imho. There is also a greater mobility of labour in Europe and that is keeping down labour costs and which is helping the Eurozone economy generally.

China holds a great many USD bonds. This is not the first time that they have expressd the view that perhaps they hold too many. Last May, iirc, they said a similar thing and drove the USD down. It is greatly in the interests of the Chinese for this to happen because it relieves the pressure from US diplomats who are trying to get the Renminbi floated properly against other currencies. The Chinese do not want this because it keeps imports prohibitively expensive and ensures that the money flow remains one-way, i.e. inbound to China.

Oil. The greatest currency perhaps. Middle-eastern countries have created their own market with Iran particularly interested in quoting their prices in Euros. China is sitting on some huge reserves and have a developing interest in non-dollar affiliations. It would take only a stated commitment by China to price oil in Euros and the dollar would be in serious trouble. This does not mean 'no more dollars' for the valid reasons before mentioned. However that could drive cable to something like 4.0 over a period of years, with EurUsd maybe hitting 3.0 at the same time.

Anybody got a Renminbi broker ?

( must find an avatar )
Minesweeper target: 284
  • #19
  • Nov 26, 2006 12:40pm Nov 26, 2006 12:40pm
well guys be nice, dont make wars and u will get dolar back in 1.0 range

cheap dollar may be good to the usa economy (cheaper export) but not my account,...but its true,...you have active deficit (oil in Irak) and that is good for ur currency...just to many sabotage on oil things, and domestic war just doesnt benefit as predicted

... i was wondering,...where can i see thuesday Bernarke speech ?
its just money
  • #20
  • Nov 26, 2006 2:48pm Nov 26, 2006 2:48pm
Quoting Primate
A lot of well considered thought on this thread.

Here's a litlle more background:
Eurozone economy started to pick up when Germany finally got its head around the re-patriation of all the 'east germans', imho. There is also a greater mobility of labour in Europe and that is keeping down labour costs and which is helping the Eurozone economy generally.

China holds a great many USD bonds. This is not the first time that they have expressd the view that perhaps they hold too many. Last May, iirc, they said a similar thing and drove the USD down. It is greatly in the interests of the Chinese for this to happen because it relieves the pressure from US diplomats who are trying to get the Renminbi floated properly against other currencies. The Chinese do not want this because it keeps imports prohibitively expensive and ensures that the money flow remains one-way, i.e. inbound to China.

Oil. The greatest currency perhaps. Middle-eastern countries have created their own market with Iran particularly interested in quoting their prices in Euros. China is sitting on some huge reserves and have a developing interest in non-dollar affiliations. It would take only a stated commitment by China to price oil in Euros and the dollar would be in serious trouble. This does not mean 'no more dollars' for the valid reasons before mentioned. However that could drive cable to something like 4.0 over a period of years, with EurUsd maybe hitting 3.0 at the same time.

Anybody got a Renminbi broker ?

( must find an avatar )
good point(s)!
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