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What's with the US dollar?!

  • #161
  • Apr 3, 2011 1:19pm Apr 3, 2011 1:19pm
Quoting Custos
yeah, investors obviously can already smell the rotten fish. I think it just takes a trigger event to catapulte the dollar lower. But let's see, just assumptions at this point.
Thursday could be the day. 1.4720 next station.
  • #162
  • Apr 3, 2011 1:23pm Apr 3, 2011 1:23pm
http://www.federalreserve.gov/releas...st/h6hist1.txt
According to the website, the M2 supply on 1959 was 287.7 and on Feb 2011 was 8871, so it was an increase of about 30 times.
US population in 1959 was about 177.8 mil and on 2011 : 310.5, an increase of 0.74 times. That means the money supply increased much faster than the increased in population --> Inflation and the dollar loses its value.
  • #163
  • Apr 3, 2011 1:38pm Apr 3, 2011 1:38pm
Quoting medici
The writing is on the wall. If the strongest NFP report since the crisis and slews of Euro-negative news can't give the dollar a boost, what could?
I have no explanation for your question but remember that what we think that the market should behave sometimes does not matter. What matter was that other investors long the EUR and GBP against the dollar, and that was the direction that we should follow.

I think an possible explanation for your question is that investors are looking for short term gain in the EUR and GBP while ignoring the good news from the US. We still don't know whether the fed would stop QE2 early or even raise rate at the end of the year, but market has been expecting EUR and England to raise rate for a few month. So, when it comes to decide which currencies should raise in the next few month, I think that investors decide to focus their resources on the EUR and GBP. Dollar may gain strength in the near future, but right now the focus is on the EUR and GBP. So, when investors long the other currencies, the dollar had to come down.
  • #164
  • Apr 3, 2011 1:44pm Apr 3, 2011 1:44pm
Quoting medici
Do you mean to say that the Coinage Act - reducing money supply - was unwise policy, but that today's Fed policy is sounder?
Good lord no.

Just merely pointing out that the lessons are right there in history, but in terms of boom/bust cycles, the lessons are never learned.
No way I'll wreck this... It's a beer truck!
  • #165
  • Apr 3, 2011 1:49pm Apr 3, 2011 1:49pm
Quoting medici
The writing is on the wall. If the strongest NFP report since the crisis and slews of Euro-negative news can't give the dollar a boost, what could?

The ECB passing another month without raising rates would.

And the buck was actually coming up nicely until Dudley decided enough was enough.

I guess he needed to save GS's latest "buy" on the euro before he throws his hat into the fed hawk camp.
No way I'll wreck this... It's a beer truck!
  • #166
  • Apr 3, 2011 2:04pm Apr 3, 2011 2:04pm
Quoting Bruce Flea
The ECB passing another month without raising rates would.
They have a good track-record of being transparent about things, so that would a major surprise. The question seems to be "how much" not "if". Which doesn't exclude a negative surprise.

Quote
And the buck was actually coming up nicely until Dudley decided enough was enough.

That would be the short-term observation, but I don't think that the central banks and macro funds buying base, or change, their strategies on news snippets such as Dudley's on Friday. Not unlikely, the same kind of buying would have ensued without Dudley.
  • #167
  • Apr 3, 2011 2:11pm Apr 3, 2011 2:11pm
Quoting Bruce Flea
Good lord no.

Just merely pointing out that the lessons are right there in history, but in terms of boom/bust cycles, the lessons are never learned.
Could it be that the share-holders of the Federal Reserve know these lessons well, but that boom and bust are too profitable to resist when you run both the central bank and the treasury department?
  • #168
  • Edited 2:22pm Apr 3, 2011 2:18pm | Edited 2:22pm
Quoting medici
Could it be that the share-holders of the Federal Reserve know these lessons well, but that boom and bust are too profitable to resist when you run both the central bank and the treasury department?
  • #169
  • Apr 3, 2011 2:20pm Apr 3, 2011 2:20pm
Quoting medici
Could it be that the share-holders of the Federal Reserve know these lessons well, but that boom and bust are too profitable to resist when you run both the central bank and the treasury department?

Absolutely.

It's not the fed going broke

And they are by far the biggest US debt holder. It's not in a central bank's nature to write some down.
No way I'll wreck this... It's a beer truck!
  • #170
  • Apr 3, 2011 3:41pm Apr 3, 2011 3:41pm
Quoting Custos
Humility would be good for americans, since every major war they fought ended in a catastrophe for the military itself.......
You mean every war since we kicked Germany' azz ........... for the second time, huh?
  • #171
  • Apr 3, 2011 3:51pm Apr 3, 2011 3:51pm
Quoting Bruce Flea
Absolutely.

It's not the fed going broke

And they are by far the biggest US debt holder. It's not in a central bank's nature to write some down.
Well technically the FED can never be in debt since it can always print more money.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #172
  • Apr 3, 2011 4:12pm Apr 3, 2011 4:12pm
Quoting LasVahGoose
Well technically the FED can never be in debt since it can always print more money.
I'm confused now. Isn't it the Treasury who's in debt?
  • #173
  • Apr 3, 2011 5:13pm Apr 3, 2011 5:13pm
Quoting seagreen
I'm confused now. Isn't it the Treasury who's in debt?
The U.S. goberment is in debt, the treasury is part of the gobernment.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #174
  • Apr 3, 2011 6:45pm Apr 3, 2011 6:45pm
Quoting medici
I still think that what you are saying is questionable. Gold standards have worked well during long periods of history. But I don't think that is the interesting question here. The thread started with the question "What's with the US dollar?!" and it would be more interesting to discuss that than to speculate about gold standards or Austrian economics.

After all, the idea of a global currency backed by gold is likely to remain a distant vision. In the near future, fragmentation and chaos is more likely than anything else. And what could...
That is true but it is growing with the discussion of currencies. I am not a believer, at least not at this point, that hyperinflation is going to happen. Historically 100% debt to GNP is not the cause. The volume must be much greater than that so inflation yes but hyper NO. The USA economy is so big that is can handle 100% for long periods of time. However, uncontrolled federal spending is a serious problem. Heck England has been doing that on and off for centuries without destruction of the pound. I dont know if you read John Maudin or not but he speculated that the money being poured out is not going into the USA economy but into emerging markets, see Asia and elsewhere, instead. This is going to cause these markets to overheat because they cannot handle this type of market inflows of cash. For example here in China food prices are rising around 10% a month and other products also are going out of control. They are passing regulations limiting inflow of outside capital because they see the danger. Other markets may not do this. So the inflation people are expecting may not happen in the USA because it will be exported to other markets. An interesting phenomenon if it happens that way. Which means the US will face a similar problem that Japan has faced. Unable to get their markets going again. Permanent stagnation for an extended period of time.
  • #175
  • Apr 3, 2011 10:25pm Apr 3, 2011 10:25pm
Quoting six gun
If China and the Arabs said no more USD's the end game would be here instantly.

LOL they wouldn't do that... why woudl they do that? OIL is backed by USD... OIL would crash so would Arab's.

China wouldn't want that either... they probably have more USD holdings than US itself. Why would they want that? I see EU doing it first. It won't be something that happens overnight.
  • #176
  • Apr 3, 2011 10:56pm Apr 3, 2011 10:56pm
The US is really in a pickle... they will either have to transform themselves into an export driven economy (not likely goin to happen unless an all out war against US)... or they continue to pay more for their imports by increasing level of debt.

What is debt? It is the claim on future human labor, today.

All the Treasury dept does it create bonds and hosts auctions so foreign banks can buy T-Bills which are a promise to pay more than the face value of the bond at a later time by the US government. The US then pays off its own interest to its own debt. T-Bills will always be bought aslong as it is the reserve currency.

When it can't pay off its interest it will create a hyperinflationary environment.

There are two types of money creation... bank lending and federal reserve printing.

Bank lending is the ponzi scheme that ensures anyone needing to borrow captial from the bank must pay a higher interest on future claimed labor(debt) than the bank is borrowing from the central bank.. essentially it is a tax on top of your loan that keeps the ponzi scheme alive (this is why a banks make so much profit). It is allowed to borrow on a 10:1 leverage basis on what the value of its holdings are. So if you deposit $100 at your bank then the bank will now have $1000.. and it intends to loan out all $1000. If everyone wants their money back (bank run) then the bank will do a run around claim bankruptcy because it will only be able to pay off a 10th of the investors at the best of times.

Fed creation is when the US gov't needs to borrow money because they need it for services or pay off its own debt obligations.

Jag
  • #177
  • Apr 4, 2011 1:20am Apr 4, 2011 1:20am
Quoting SunTrader
You mean every war since we kicked Germany' azz ........... for the second time, huh?
And Britain beat the French at both Trafalgar and Waterloo, but neither the British nor the US won those wars alone. In Russian schools children learn that it was they who beat the Germans, and there's a point to that.

It's interesting that Americans, like the British, increasingly are deriving their pride from glory days of the past.

No wonder as our modern feats give us less reason for pride. In the Iraq war more than 80% of the almost 1 million dead were civilians. Not since Genghis Khan have innocent civilians been slaughtered in such proportions.

And, in the context of this thread, these modern feats are likely to have created enough enemies so that the "Islamist front" could become for the US what the Marcomannic wars were for Rome.
  • #178
  • Apr 4, 2011 1:24am Apr 4, 2011 1:24am
Quoting nanningbob
That is true but it is growing with the discussion of currencies. I am not a believer, at least not at this point, that hyperinflation is going to happen. Historically 100% debt to GNP is not the cause. The volume must be much greater than that so inflation yes but hyper NO. The USA economy is so big that is can handle 100% for long periods of time. However, uncontrolled federal spending is a serious problem. Heck England has been doing that on and off for centuries without destruction of the pound. I dont know if you read John Maudin or not but...
Quite remarkable that the banks' use of bailout funds and QE money to speculate in emerging markets isn't given more media attention. Says something about the media, doesn't it?

I don't think inflation is the imminent problem either, but the US public debt might be. And it isn't the 100% figure that makes it a problem - it is that it's grown from 60% to 100% in five years without any new wars or disasters. To turn that rate of change around will have drastic consequences.
  • #179
  • Apr 4, 2011 1:28am Apr 4, 2011 1:28am
Quoting medici
Quite remarkable that the banks' use of bailout funds and QE money to speculate in emerging markets isn't given more media attention. Says something about the media, doesn't it?

I don't think inflation is the imminent problem either, but the US public debt might be. And it isn't the 100% figure that makes it a problem - it is that it's grown from 60% to 100% in five years without any new wars or disasters.
Inflation is about to be a huge problem in the U.S. Walmart CEO just announced that everything in the store is going rise in price and consumers need to brace themselves for the shock.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #180
  • Apr 4, 2011 1:31am Apr 4, 2011 1:31am
Quoting LasVahGoose
Inflation is about to be a huge problem in the U.S. Walmart CEO just announced that everything in the store is going rise in price and consumers need to brace themselves for the shock.
OK, but could that be inflation from rising commodity prices rather than from Fed policy?
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