Doom’s informant V went ballistic on this one, and I don’t think they’re over-reacting. I’m enjoying my par loonies over the weekend, because I figure Canada’s currency will be the Amero by about Monday close-of-business.
Yeah Bugs, this is what I have been worrying about in the past several months. I made the wrong call on the Fed protecting the dollar and now have something else to be concerned with…how to protect my money in light of the fact that I earn compensation denominated in USD. House Prices are the least of my concerns right now…the very least.
Well, there goes the dollar. So in a few months the dollar will only be worth 50% of the euro? wow, just wow. The US dollar was worth 1.15 times the euro when Clinton was in office.
This Saudi change also means higher gas prices. But, we already knew that.
Though US $ has nowhere to go but down in the long run, this Ambrose Evans-Pritchard guy is a professional alarmist. He wrote a few weeks back about China dumping $ (“nuclear option”). I expect an orderly devaluation of around 5% per year till net capital inflow starts subsiding. That will probably happen in, may be, 10 to 12 years, after $ is down by about 50%. But it is not next weeks problem.
Cenbanks aren’t buying treasuries; net buys have been mostly negative for two months, but few have noticed. The next weekly report is due out tomorrow, but on Monday the Fed “improved” their web site, so heaven knows if the data series will still be visible.
“I expect an orderly devaluation of around 5% per year till net capital inflow starts subsiding.”
Um…I am REALLY curious how you arrived at a 5% devaluation per year. The dollar has dropped from appx 87 to 79 on the USD index in the past 52 weeks! By my estimate, that’s NINE percent. Oh, and that was BEFORE the whack-ass rate cut yesterday. If the dollar has had that kind of decline when the rates were held steady for four years, you are smoking the finest crack known to man if you think for one minute that the dollar is going to dive at a leisurely 5% per year. Hold on to your hat, fella.
China invades Taiwan. Dollars shoot back up as long as we stay back and watch. 🙂 The vote to join UN is next March? Taiwan also hold fair amount of US T-bonds, and it could all be gone due to war.
The reason there will be increasing resistance to fast devaluation is exactly because of what you have said. The sweet part of it is over. Every one will hurt more (both exporters and importers) with further drops. That will force them to put up some safety net to slow the fall. Definitely, I think we won’t see real loss of value of 50% in just a couple years (like for e.g. $1600 for gold, $200 for oil, $8 for milk, $6 for gas etc.,) unless we go through a Soviet style revolution – which I am not expecting.
I think the reality lies somewhere in the middle of the two extremes…or at least I hope so. That being said, I’m still proceeding with diversifying all cash between USD and foreign currency holdings. Now if Everbank would just hurry the F up already and get my accounts fully functioning!!!
The ECB might cut rates, so that would certainly change the current course a bit.
Still, right now, Kudlow’s contrarian thesis that a rate cut would actually help the dollar seems a smidge inaccurate. The Euro just blasted through 1.40, currently at 1.4093 according to Bloomberg.
Sounds like the perfect storm, the fall or Rome is coming. Hm, what can we do at this point to save our own economy. I am as american as it gets and not ready to sneak into Mexico through a tunnel.
