Stunning flight from the dollar.

[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

[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.

[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.

 

[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.

[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.

[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.

[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.

[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.

[Author]

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