Stunning flight from the dollar.

[GoUSC]

These are some really stunning numbers. On one hand this will help make our products much more competitive. On the other hand, how are we going to finance our deficit?

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/16/bcnchina116.xml

[patientlywaiting]

Do you guys think this will lead to higher mortgage rates which will futher tank real estate?

[HereWeGo]

Actually, the dollar is fairly stable against most currencies at this time, except the Loonie. It now 1.02 or so to buy a Loonie.

[GoUSC]

There will be pressure on the dollar if this continues. The fact is that the return on US investments isn’t in line with the quality. There are cracks in our economy and investors see it. The FED cannot lower rates further…or the market will continue to dump dollars.

A lot of us knew this was coming but this amount is pretty staggering for one month.

[GoUSC]

There will be pressure on the dollar if this continues. The fact is that the return on US investments isn’t in line with the quality. There are cracks in our economy and investors see it. The FED cannot lower rates further…or the market will continue to dump dollars.

A lot of us knew this was coming but this amount is pretty staggering for one month.

[nostradamus]

Yes, the dollar is very stable, nicely maintaining a record low against the euro, dinar, pound, rupee, shekel… oh yes the loonie.

[GoUSC]

Regarding raising interest rates to 18 or 20%, how could we do this? We have so much debt outstanding would this create a balance of payments risk (ie we don’t take in enough revenue to pay our debt service)?

[patientlywaiting]

That is the big question radelow. I read an article by an economist who calculated that our current income stream is not enough to service the debt as it is. Appreciation is what we are counting on and we are pushing the debt service further into the future.

[Arraya]

“Appreciation is what we are counting on and we are pushing the debt service further into the future.”

So basically the RE market is/was a microcosm of the larger economy. Banking of infinite growth to pay for todays bills.

[4plexowner]

“banking on infinite growth to pay for today’s bills”

can you say, “Ponzi Scheme?”

[lonestar2000]

“can you say, “Ponzi Scheme?””

It already has been said, by some Church of God or some such. 😛

[lonestar2000]

“can you say, “Ponzi Scheme?””

It already has been said, by some Church of God or some such. 😛

[4plexowner]

“banking on infinite growth to pay for today’s bills”

can you say, “Ponzi Scheme?”

[Arraya]

“Appreciation is what we are counting on and we are pushing the debt service further into the future.”

So basically the RE market is/was a microcosm of the larger economy. Banking of infinite growth to pay for todays bills.

[patientlywaiting]

That is the big question radelow. I read an article by an economist who calculated that our current income stream is not enough to service the debt as it is. Appreciation is what we are counting on and we are pushing the debt service further into the future.

[ucodegen]

@redelow

Regarding raising interest rates to 18 or 20%, how could we do this? We have so much debt outstanding would this create a balance of payments risk (ie we don’t take in enough revenue to pay our debt service)?

Yes and no. Basically the treasuries yield a ‘fixed’ rate of return upon issue. This is done by discounting the face value by the rate of return and the time over which the return applies. If after issue, the yield on new issues goes up, the existing outstanding issues will still yield the same amount. What happens is that the face value of existing treasuries will now drop to compensate for the change in yields. An Q&D(quick and dirty) example. We purchase 2 10 year Tbills, one day apart. The first Tbill is at 5%. The rates jumped the next day and it was issued at 7%. The price for the first $10K Tbill will be about $6139. The second will be about $5083. After the rate jump, you will not be able to resell the first treasury for its initial purchase price. If you wanted to sell both treasuries on the third day, they would both go for about $5083 each, meaning that you would take a $1056 capital loss on the first treasury. (I am not going to get into yield curves at this point.)

What the increase does mean, is that further deficit spending will be more expensive, but it does not adversely affect existing payments. If Congress can get its act together and control spending (ha, ha.. yeah right), the shift in interest rates would allow the fed to buy back treasuries at a face value less than what they were issued at. Of course, deficit spending would have to cease to do this.. Or the fed could increase the Money Supply(M0) to fund the repurchase (which has other nasty repercussions).

[GoUSC]

ucodegen,

That’s my point. Not about the debt we have outstanding, but debt retires everyday and we sell new debt everyday. Slowly but steadily this new debt will increase our daily debt service. That could eventually result in a balance of payments problem. Back in Volkers time they increased the interest rate but our debt wasn’t nearly the level today. I don’t know if that is even possible anymore.

[GoUSC]

ucodegen,

That’s my point. Not about the debt we have outstanding, but debt retires everyday and we sell new debt everyday. Slowly but steadily this new debt will increase our daily debt service. That could eventually result in a balance of payments problem. Back in Volkers time they increased the interest rate but our debt wasn’t nearly the level today. I don’t know if that is even possible anymore.

[ucodegen]

@redelow

Regarding raising interest rates to 18 or 20%, how could we do this? We have so much debt outstanding would this create a balance of payments risk (ie we don’t take in enough revenue to pay our debt service)?

Yes and no. Basically the treasuries yield a ‘fixed’ rate of return upon issue. This is done by discounting the face value by the rate of return and the time over which the return applies. If after issue, the yield on new issues goes up, the existing outstanding issues will still yield the same amount. What happens is that the face value of existing treasuries will now drop to compensate for the change in yields. An Q&D(quick and dirty) example. We purchase 2 10 year Tbills, one day apart. The first Tbill is at 5%. The rates jumped the next day and it was issued at 7%. The price for the first $10K Tbill will be about $6139. The second will be about $5083. After the rate jump, you will not be able to resell the first treasury for its initial purchase price. If you wanted to sell both treasuries on the third day, they would both go for about $5083 each, meaning that you would take a $1056 capital loss on the first treasury. (I am not going to get into yield curves at this point.)

What the increase does mean, is that further deficit spending will be more expensive, but it does not adversely affect existing payments. If Congress can get its act together and control spending (ha, ha.. yeah right), the shift in interest rates would allow the fed to buy back treasuries at a face value less than what they were issued at. Of course, deficit spending would have to cease to do this.. Or the fed could increase the Money Supply(M0) to fund the repurchase (which has other nasty repercussions).

[GoUSC]

Regarding raising interest rates to 18 or 20%, how could we do this? We have so much debt outstanding would this create a balance of payments risk (ie we don’t take in enough revenue to pay our debt service)?

[nostradamus]

Yes, the dollar is very stable, nicely maintaining a record low against the euro, dinar, pound, rupee, shekel… oh yes the loonie.

[partypup]

Come on, are you kidding? The dollar is now hitting another new low every other week! It’s losing ground at an astonishing pace against every major currency, including the Mexican peso.

“Fairly stable against most major currencies”? Let’s see… I opened up an offshore account in early Sept. In a mere 30 days, I’ve earned almost USD $2000 on $50K invested in Euros and Swiss francs. That’s money earned in another currency, NOT paying any interest, just simply going up as the dollar tanks.

If you think that’s “stable”, then you probably won’t mind the hair-raising hyper-inflation that is clearly just around the corner.

[bsrsharma]

Since US has the largest public and private debt denominated in US $, it helps when $ devalues and lowers effective debt burden. If $ goes down by 50%, all debts are reduced by half. FED is managing a well orchestrated debt reduction by devaluation. If that helps with balance of trade, profits for global corporations etc, that is an added bonus in getting political support. As long as inflation is kept reasonable, say about 6%, it may not be all bad. The important thing is keeping the drop orderly.

[Arraya]

“I don’t buy it. If they cut them again oil will go over $100 and the relatively few companies that benefit from a low dollar will be faced with higher cost everything else as will the American public.”

Oil will go up regardless. The dollar is only a fraction of the problem, it has more to do with supply. EIA estimates demand at 88 million bbl per day 4th qtr and they can’t seem to pump out more than 85.5, besides exports are declining because the are cannabalizing their exports.

http://video.google.com/videoplay?docid=5773842306522871033&q=boone+pickens&total=45&start=0&num=10&so=1&type=search&plindex=0

[bsrsharma]

Greenspan Says Demand for U.S. Debt May Be at `Limit’

Former Federal Reserve Chairman Alan Greenspan said the dollar’s depreciation may reflect growing unwillingness among foreigners to buy U.S. debt.

“Obviously there is a limit to the extent that obligations to foreigners can reach,” Greenspan said in a speech in Washington today. The dollar’s decline to its lowest since 1997 may be “an indication America is approaching this limit.”

Greenspan’s warning came after the U.S. Treasury reported last week that international investors sold a record amount of U.S. financial assets in August. Total holdings of equities, notes and bonds fell a net $69.3 billion after an increase of $19.2 billion in July.

The dollar has declined about 8 percent against the euro this year and 4 percent against the yen.

The former Fed chief, who published a 531-page memoir last month, spoke for about 35 minutes before taking questions for another half hour on the sidelines of the meetings this weekend of the International Monetary Fund and World Bank. The lecture was hosted by the Per Jacobsson Foundation.

Greenspan also said that the August surge in the cost of credit after a jump in U.S. mortgage defaults was an “accident waiting to happen,” given that investors were pricing risk too low.

“Something had to give,” he said. “Had the crisis not been trigged by subprime mortgages it would have erupted in another sector or market.”

SuperSiv Fund

Greenspan, 81, was critical last week of a plan by some of the U.S.’s biggest banks to help revive the asset-backed commercial paper market, which seized up because of investor concern that too much of the paper was backed by securities containing subprime loans.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. announced a plan last week to raise money for a so-called SuperSiv that would buy assets from distressed structured investment vehicles.

Investor uncertainty about the value of complex assets held by the vehicles has damped willingness to lend to the funds in the commercial paper market, stoking concern they’ll have to dump holdings at fire-sale prices.

U.S. Treasury Secretary Henry Paulson, the former head of Goldman Sachs Group Inc., helped broker the agreement.

In an interview with Emerging Markets magazine published on Oct. 19, Greenspan was quoted as saying that he was unsure “the benefits” of the plan “exceed the risks.”

`Best Assets’

Paulson assembled a group of reporters later that day to discuss the SIV rescue, emphasizing that the initiative was led by banks, that he had consulted the Fed and other regulators as the deal was put together, and that he was confident the initiative would work.

“The concept is not to buy bad assets or assets that have credit problems,” Paulson said after hosting a meeting of Group of Seven finance ministers and central bank governors.

Investors will buy “assets that aren’t credit-impaired and don’t have credit issues — the very best assets,” Paulson said. “That will accelerate the return of liquidity to parts of this market.”

Today, Greenspan questioned whether there was any longer a market for such “peculiar” assets.

While he praised “innovation” in securitized markets as “positive,” he noted that demand for sales of debt backed by subprime mortgages has dried up.

`Peculiar Financial Structures’

“These peculiar financial structures that have become very prominent in the past four or five years are about to disappear from the scene,” Greenspan said, citing “various variations” of collateralized debt obligations and “special” investment vehicles as examples.

“They have been tried and they have failed,” Greenspan said. “The failure is the basic way that investors have been misled as to what the value of these products is.”

The former Fed chief said central banks also increasingly appeared to have “lost control” of market interest rates beyond three to five years of maturity.

Much of the speech was dedicated to explaining why he doesn’t view the U.S. current-account deficit with “undue concern.”

The current-account gap, a measure of trade that includes investment flows, is now about 5.5 percent of U.S. gross domestic product, compared with 6.75 percent in 2005.

A reduction in “home bias” by international investors has channeled more money to the U.S., helping the country to finance its current-account deficit, Greenspan said.

He said he may become more concerned about the trade gap if “the pernicious drift toward” U.S. government budget deficits “isn’t arrested and compounded by protectionist reversal of globalization.”

Such a reversal would deal a “major blow to world economic prosperity,” he said.

To contact the reporters on this story: Kevin Carmichael in Washington at [email protected]
Last Updated: October 21, 2007 21:02 EDT

http://www.bloomberg.com/apps/news?pid=20601103&sid=aG3NEynW7ik8&refer=news

[bsrsharma]

Greenspan Says Demand for U.S. Debt May Be at `Limit’

Former Federal Reserve Chairman Alan Greenspan said the dollar’s depreciation may reflect growing unwillingness among foreigners to buy U.S. debt.

“Obviously there is a limit to the extent that obligations to foreigners can reach,” Greenspan said in a speech in Washington today. The dollar’s decline to its lowest since 1997 may be “an indication America is approaching this limit.”

Greenspan’s warning came after the U.S. Treasury reported last week that international investors sold a record amount of U.S. financial assets in August. Total holdings of equities, notes and bonds fell a net $69.3 billion after an increase of $19.2 billion in July.

The dollar has declined about 8 percent against the euro this year and 4 percent against the yen.

The former Fed chief, who published a 531-page memoir last month, spoke for about 35 minutes before taking questions for another half hour on the sidelines of the meetings this weekend of the International Monetary Fund and World Bank. The lecture was hosted by the Per Jacobsson Foundation.

Greenspan also said that the August surge in the cost of credit after a jump in U.S. mortgage defaults was an “accident waiting to happen,” given that investors were pricing risk too low.

“Something had to give,” he said. “Had the crisis not been trigged by subprime mortgages it would have erupted in another sector or market.”

SuperSiv Fund

Greenspan, 81, was critical last week of a plan by some of the U.S.’s biggest banks to help revive the asset-backed commercial paper market, which seized up because of investor concern that too much of the paper was backed by securities containing subprime loans.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. announced a plan last week to raise money for a so-called SuperSiv that would buy assets from distressed structured investment vehicles.

Investor uncertainty about the value of complex assets held by the vehicles has damped willingness to lend to the funds in the commercial paper market, stoking concern they’ll have to dump holdings at fire-sale prices.

U.S. Treasury Secretary Henry Paulson, the former head of Goldman Sachs Group Inc., helped broker the agreement.

In an interview with Emerging Markets magazine published on Oct. 19, Greenspan was quoted as saying that he was unsure “the benefits” of the plan “exceed the risks.”

`Best Assets’

Paulson assembled a group of reporters later that day to discuss the SIV rescue, emphasizing that the initiative was led by banks, that he had consulted the Fed and other regulators as the deal was put together, and that he was confident the initiative would work.

“The concept is not to buy bad assets or assets that have credit problems,” Paulson said after hosting a meeting of Group of Seven finance ministers and central bank governors.

Investors will buy “assets that aren’t credit-impaired and don’t have credit issues — the very best assets,” Paulson said. “That will accelerate the return of liquidity to parts of this market.”

Today, Greenspan questioned whether there was any longer a market for such “peculiar” assets.

While he praised “innovation” in securitized markets as “positive,” he noted that demand for sales of debt backed by subprime mortgages has dried up.

`Peculiar Financial Structures’

“These peculiar financial structures that have become very prominent in the past four or five years are about to disappear from the scene,” Greenspan said, citing “various variations” of collateralized debt obligations and “special” investment vehicles as examples.

“They have been tried and they have failed,” Greenspan said. “The failure is the basic way that investors have been misled as to what the value of these products is.”

The former Fed chief said central banks also increasingly appeared to have “lost control” of market interest rates beyond three to five years of maturity.

Much of the speech was dedicated to explaining why he doesn’t view the U.S. current-account deficit with “undue concern.”

The current-account gap, a measure of trade that includes investment flows, is now about 5.5 percent of U.S. gross domestic product, compared with 6.75 percent in 2005.

A reduction in “home bias” by international investors has channeled more money to the U.S., helping the country to finance its current-account deficit, Greenspan said.

He said he may become more concerned about the trade gap if “the pernicious drift toward” U.S. government budget deficits “isn’t arrested and compounded by protectionist reversal of globalization.”

Such a reversal would deal a “major blow to world economic prosperity,” he said.

To contact the reporters on this story: Kevin Carmichael in Washington at [email protected]
Last Updated: October 21, 2007 21:02 EDT

http://www.bloomberg.com/apps/news?pid=20601103&sid=aG3NEynW7ik8&refer=news

[Arraya]

“I don’t buy it. If they cut them again oil will go over $100 and the relatively few companies that benefit from a low dollar will be faced with higher cost everything else as will the American public.”

Oil will go up regardless. The dollar is only a fraction of the problem, it has more to do with supply. EIA estimates demand at 88 million bbl per day 4th qtr and they can’t seem to pump out more than 85.5, besides exports are declining because the are cannabalizing their exports.

http://video.google.com/videoplay?docid=5773842306522871033&q=boone+pickens&total=45&start=0&num=10&so=1&type=search&plindex=0

[bsrsharma]

Since US has the largest public and private debt denominated in US $, it helps when $ devalues and lowers effective debt burden. If $ goes down by 50%, all debts are reduced by half. FED is managing a well orchestrated debt reduction by devaluation. If that helps with balance of trade, profits for global corporations etc, that is an added bonus in getting political support. As long as inflation is kept reasonable, say about 6%, it may not be all bad. The important thing is keeping the drop orderly.

[partypup]

Come on, are you kidding? The dollar is now hitting another new low every other week! It’s losing ground at an astonishing pace against every major currency, including the Mexican peso.

“Fairly stable against most major currencies”? Let’s see… I opened up an offshore account in early Sept. In a mere 30 days, I’ve earned almost USD $2000 on $50K invested in Euros and Swiss francs. That’s money earned in another currency, NOT paying any interest, just simply going up as the dollar tanks.

If you think that’s “stable”, then you probably won’t mind the hair-raising hyper-inflation that is clearly just around the corner.

[HereWeGo]

Actually, the dollar is fairly stable against most currencies at this time, except the Loonie. It now 1.02 or so to buy a Loonie.

[4plexowner]

the Fed and its banking cartel are caught in a box canyon

they need to raise interest rates so foreigners continue to invest in US debt (oops, I mean securities) but raising rates drives a silver stake through the heart of the real estate market, American consumer and American economy

lowering rates to support the real estate market increases the speed at which foreigners say ‘sayonara, baby!’ to the US dollar, US treasuries and any investment priced in US dollars

the best strategy for the cartel to employ in this situation is to use talk (also known as bullshit), subterfuge, delay tactics and distractions but NOT to actually change rates in either direction – the recent cut of 50 basis points indicates how weak the Fed’s position is at this point

~

Paul Volker raised interest rates to 18 or 20% in the late 1980s – that is what is needed now but isn’t likely to happen

[4plexowner]

the Fed and its banking cartel are caught in a box canyon

they need to raise interest rates so foreigners continue to invest in US debt (oops, I mean securities) but raising rates drives a silver stake through the heart of the real estate market, American consumer and American economy

lowering rates to support the real estate market increases the speed at which foreigners say ‘sayonara, baby!’ to the US dollar, US treasuries and any investment priced in US dollars

the best strategy for the cartel to employ in this situation is to use talk (also known as bullshit), subterfuge, delay tactics and distractions but NOT to actually change rates in either direction – the recent cut of 50 basis points indicates how weak the Fed’s position is at this point

~

Paul Volker raised interest rates to 18 or 20% in the late 1980s – that is what is needed now but isn’t likely to happen

[cr]

Some on Wall Street are expecting another 50pt cut next FED meeting, under the premise that it is needed to stimulate the stock market, and the justification that it will help exports.

I don’t buy it. If they cut them again oil will go over $100 and the relatively few companies that benefit from a low dollar will be faced with higher cost everything else as will the American public.

Just look around your home or office and ask yourself how much of the stuff you see is made in the US or somewhere else? Even US grown or produced food will go up with gas.

The FED has become the rich uncle who spoils Wall Street at the expense of John Q Customer. All John has to do is stop spending money, and he may soon have no choice.

[cr]

Some on Wall Street are expecting another 50pt cut next FED meeting, under the premise that it is needed to stimulate the stock market, and the justification that it will help exports.

I don’t buy it. If they cut them again oil will go over $100 and the relatively few companies that benefit from a low dollar will be faced with higher cost everything else as will the American public.

Just look around your home or office and ask yourself how much of the stuff you see is made in the US or somewhere else? Even US grown or produced food will go up with gas.

The FED has become the rich uncle who spoils Wall Street at the expense of John Q Customer. All John has to do is stop spending money, and he may soon have no choice.

[patientlywaiting]

Do you guys think this will lead to higher mortgage rates which will futher tank real estate?

[34f3f3f]

The grumbles from Europe have been that a weak dollar makes their exports harder. The flip side is that not everyone is grumbling. Foreign firms have been buying up high tech companies. Nothing new or wrong in that, but foreign owners are not always as humanitarian in their treatment of those new businesses. Real estate is also being snapped up in New York at dollar discounted prices.

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

My Two cents,

The Fed will cut until the pain stops period …

inflation be damned I think will be the rallying call.

just my two cents, If you find a bargain, and you can afford it. go for it .. My feelings (no expert, just my gut) somewhere around 2003 prices would meet bargain status.

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

My Two cents,

The Fed will cut until the pain stops period …

inflation be damned I think will be the rallying call.

just my two cents, If you find a bargain, and you can afford it. go for it .. My feelings (no expert, just my gut) somewhere around 2003 prices would meet bargain status.

[34f3f3f]

The grumbles from Europe have been that a weak dollar makes their exports harder. The flip side is that not everyone is grumbling. Foreign firms have been buying up high tech companies. Nothing new or wrong in that, but foreign owners are not always as humanitarian in their treatment of those new businesses. Real estate is also being snapped up in New York at dollar discounted prices.

[gold_dredger_phd]

The future has no lobbyist in Washington.

Therefore, the dollar is dead, your children and grandchildren will be sharecroppers to foreign bosses and by the time anyone realizes this, the politicians will have left office.

Look how Joe and Jane consumer treat their household finances. Live for today and screw tomorrow. Same thing in Washington. If people cared about the future, then they would not spend like this.

[bsrsharma]

IMF says dollar ‘overvalued’

Currency traders were given a green light to continue selling the US dollar on Wednesday, as the International Monetary Fund said the greenback “remains overvalued” and rejected claims the euro had risen too far.

Contradicting Rodrigo Rato, the outgoing IMF managing director, who last week said “right now the dollar is undervalued”, the fund’s staff conclude the dollar is still too high. The multilateral lender also forecast slower growth in 2008 at 4.75 per cent, compared with 5.2 per cent expected this year.

The IMF’s new stance on the dollar will counter the arguments to the contrary made by France and some other eurozone members at this weekend’s meetings of the Group of Seven leading economies and the IMF’s governing body. They have been urging a change in language to temper the fall in the dollar, which dropped by more than 4 per cent against the euro in September alone.

The IMF, however, has little sympathy for struggling eurozone exporters hit by the currency’s rise. It says that even after its recent rise, the euro “continues to trade in a range broadly consistent with medium-term fundamentals”.

Apart from the dollar, the IMF’s economists also think sterling is overvalued, while the Japanese yen and the Chinese renmimbi remain too cheap compared with other currencies.

In some of its strongest language to date, the fund’s officials call on China to let its currency appreciate. Repeating its demand for “greater flexibility” of China’s managed currency, the IMF added that such action was in China’s best interests.

“Further upward flexibility of the renminbi, along with measures to reform the exchange rate regime and boost consumption, would also contribute to a necessary rebalancing of demand and to an orderly unwinding of global imbalances,” the World Economic Outlook argued.

Even with slower growth forecast for the US and a weaker dollar, the IMF sees little improvement in the world’s huge trade imbalances, embodied in the US trade deficit and corresponding surpluses in Asia and in oil exporters.

The Fund thinks that the US current account deficit will remain close to 1.5 per cent of world output until 2012, raising the likelihood of a disorderly plunge in the dollar and protectionism growing over the next few years.

http://www.ft.com/cms/s/0/e87f070e-7c96-11dc-aee2-0000779fd2ac.html

[SD Transplant]

This is definately a subject matter dear to me because I travel annually outside of the US. This year, 2007, I felt more poor, specially coming from the richest country in the World (at least I’d like to think that still).

There are some great observations/notes by our daily pig contributors vis-a-vis the $ devaluation. In fact there was another trend a few days ago with respect to cashing out out of the foreign markets & preparing a position/cash for down payment to buy/invest in the US real estate based on the devaluation of the mighty buck. I have contemplated this option, as my family has some RE assets in EU, but I can’t imagine this is still the perfect timing. Moreover, I doubt that the RE bottom is near (I feel we’re a couple of years off..or so…I think 2010 or 2011).

I also remember that our current VP (Dick C.) has moved a significant lump sum of $ (around $20 mil or so) about 2 years ago into banks in Switzerland and away from the $. This was definately a great signal to all at the time that political pressure on our FREE economic system is a standard. The small club of Washington DC folk with lots of cash have someone always protecting them.

Having said that, I don’t think the $ will stop depreciating, in fact there are almost weekly announcements by various countries (China, Quatar etc) that will no longer hold $ as a state of valuation & they will go to the Euro or some other currency (swiss frank or BP). This will continously devalue our US $ since there will be less holders of it in worldwide.

Yes, a devalued US $ makes exports cheaper & allow us to deal w/ the trade deficit, but we are dealing with bigger issues and the US Economy is big time in debt. I wonder what the next move from the FED will be at the next meeting (holding the Fed rate the same or dropping it?). This will tell you the current shape of our political pressure (lower rates) and reality for dealing with attracting more $ to cover our national debt.

I guess the brownie Empire is slowly crambling, and the corporate lobby group is relentless because the big cash cow is now offshore outsourcing rather than US internal interests. With more US corporations having global positions,I will assume that they are fairly well protected (their stock), because most of their new markets are not based on the mighty $ and the earnings reported translated to against a weaker $ always beats some estimates. Hence, I say stock of global organizations have the most stability in this hard to read market…..and of course…there is always risk.

[patientlywaiting]

My feelings (no expert, just my gut) somewhere around 2003 prices would meet bargain status.

Don't think that 2003 was anywhere near bargain status. When my friends were buying back then, I was shaking my head.

The way I see it, the people who bought in 2003 were far from getting bargains. If you add up all the ownership premiums, they are probably facing a big loss. 

Like Patrick said, you can buy at 7% or your can rent at 3%.  Take away appreciation and renting is the clear winner.  Appreciation has disappeared and some markets are already at 2003 prices.

2000 prices will meet equilibrium and 1998 would be bargain IMH0.

 

[Anonymous]

I was in Europe recently for a couple weeks and it was amazing to see just how much anti-dollar sentiment there was. What I found very interesting was this was with regular people, not economists or anything. If I ask the average person in the US what they think about $ depreciation they give me a blank look; not so in Europe. The mainstream media was more open about it as well.

This flight from the dollar has been discussed for quite a while now. Maybe I’m just more aware of it now, but it seems to come up in the news much more. This last bit of news about the vast amount of foreign funds leaving the US, coupled with statements by Saudis and other countries about their interest rates and reserves, seems like the flight has picked up the pace at an alarming rate.

While I don’t worry about how this affects me, in that I’m young and have time to recoup losses in wealth and I’m not afraid to try to hedge against dollar depreciation, I do worry about family and friends who are older and are close to retirement. It would be terrible to find that your retirement money is worth 1/2 of what you originally thought a mere 5 years ago.

[Anonymous]

I was in Europe recently for a couple weeks and it was amazing to see just how much anti-dollar sentiment there was. What I found very interesting was this was with regular people, not economists or anything. If I ask the average person in the US what they think about $ depreciation they give me a blank look; not so in Europe. The mainstream media was more open about it as well.

This flight from the dollar has been discussed for quite a while now. Maybe I’m just more aware of it now, but it seems to come up in the news much more. This last bit of news about the vast amount of foreign funds leaving the US, coupled with statements by Saudis and other countries about their interest rates and reserves, seems like the flight has picked up the pace at an alarming rate.

While I don’t worry about how this affects me, in that I’m young and have time to recoup losses in wealth and I’m not afraid to try to hedge against dollar depreciation, I do worry about family and friends who are older and are close to retirement. It would be terrible to find that your retirement money is worth 1/2 of what you originally thought a mere 5 years ago.

[patientlywaiting]

My feelings (no expert, just my gut) somewhere around 2003 prices would meet bargain status.

Don't think that 2003 was anywhere near bargain status. When my friends were buying back then, I was shaking my head.

The way I see it, the people who bought in 2003 were far from getting bargains. If you add up all the ownership premiums, they are probably facing a big loss. 

Like Patrick said, you can buy at 7% or your can rent at 3%.  Take away appreciation and renting is the clear winner.  Appreciation has disappeared and some markets are already at 2003 prices.

2000 prices will meet equilibrium and 1998 would be bargain IMH0.

 

[SD Transplant]

This is definately a subject matter dear to me because I travel annually outside of the US. This year, 2007, I felt more poor, specially coming from the richest country in the World (at least I’d like to think that still).

There are some great observations/notes by our daily pig contributors vis-a-vis the $ devaluation. In fact there was another trend a few days ago with respect to cashing out out of the foreign markets & preparing a position/cash for down payment to buy/invest in the US real estate based on the devaluation of the mighty buck. I have contemplated this option, as my family has some RE assets in EU, but I can’t imagine this is still the perfect timing. Moreover, I doubt that the RE bottom is near (I feel we’re a couple of years off..or so…I think 2010 or 2011).

I also remember that our current VP (Dick C.) has moved a significant lump sum of $ (around $20 mil or so) about 2 years ago into banks in Switzerland and away from the $. This was definately a great signal to all at the time that political pressure on our FREE economic system is a standard. The small club of Washington DC folk with lots of cash have someone always protecting them.

Having said that, I don’t think the $ will stop depreciating, in fact there are almost weekly announcements by various countries (China, Quatar etc) that will no longer hold $ as a state of valuation & they will go to the Euro or some other currency (swiss frank or BP). This will continously devalue our US $ since there will be less holders of it in worldwide.

Yes, a devalued US $ makes exports cheaper & allow us to deal w/ the trade deficit, but we are dealing with bigger issues and the US Economy is big time in debt. I wonder what the next move from the FED will be at the next meeting (holding the Fed rate the same or dropping it?). This will tell you the current shape of our political pressure (lower rates) and reality for dealing with attracting more $ to cover our national debt.

I guess the brownie Empire is slowly crambling, and the corporate lobby group is relentless because the big cash cow is now offshore outsourcing rather than US internal interests. With more US corporations having global positions,I will assume that they are fairly well protected (their stock), because most of their new markets are not based on the mighty $ and the earnings reported translated to against a weaker $ always beats some estimates. Hence, I say stock of global organizations have the most stability in this hard to read market…..and of course…there is always risk.

[bsrsharma]

IMF says dollar ‘overvalued’

Currency traders were given a green light to continue selling the US dollar on Wednesday, as the International Monetary Fund said the greenback “remains overvalued” and rejected claims the euro had risen too far.

Contradicting Rodrigo Rato, the outgoing IMF managing director, who last week said “right now the dollar is undervalued”, the fund’s staff conclude the dollar is still too high. The multilateral lender also forecast slower growth in 2008 at 4.75 per cent, compared with 5.2 per cent expected this year.

The IMF’s new stance on the dollar will counter the arguments to the contrary made by France and some other eurozone members at this weekend’s meetings of the Group of Seven leading economies and the IMF’s governing body. They have been urging a change in language to temper the fall in the dollar, which dropped by more than 4 per cent against the euro in September alone.

The IMF, however, has little sympathy for struggling eurozone exporters hit by the currency’s rise. It says that even after its recent rise, the euro “continues to trade in a range broadly consistent with medium-term fundamentals”.

Apart from the dollar, the IMF’s economists also think sterling is overvalued, while the Japanese yen and the Chinese renmimbi remain too cheap compared with other currencies.

In some of its strongest language to date, the fund’s officials call on China to let its currency appreciate. Repeating its demand for “greater flexibility” of China’s managed currency, the IMF added that such action was in China’s best interests.

“Further upward flexibility of the renminbi, along with measures to reform the exchange rate regime and boost consumption, would also contribute to a necessary rebalancing of demand and to an orderly unwinding of global imbalances,” the World Economic Outlook argued.

Even with slower growth forecast for the US and a weaker dollar, the IMF sees little improvement in the world’s huge trade imbalances, embodied in the US trade deficit and corresponding surpluses in Asia and in oil exporters.

The Fund thinks that the US current account deficit will remain close to 1.5 per cent of world output until 2012, raising the likelihood of a disorderly plunge in the dollar and protectionism growing over the next few years.

http://www.ft.com/cms/s/0/e87f070e-7c96-11dc-aee2-0000779fd2ac.html

[gold_dredger_phd]

The future has no lobbyist in Washington.

Therefore, the dollar is dead, your children and grandchildren will be sharecroppers to foreign bosses and by the time anyone realizes this, the politicians will have left office.

Look how Joe and Jane consumer treat their household finances. Live for today and screw tomorrow. Same thing in Washington. If people cared about the future, then they would not spend like this.

[Author]

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