Comments on: Possible Endgames for the Dollar Slide http://www.nakedcapitalism.com/2007/11/possible-endgames-for-dollar-slide.html Mon, 23 Nov 2009 00:03:24 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2007/11/possible-endgames-for-dollar-slide.html#comment-1590 Anonymous Mon, 12 Nov 2007 04:07:00 +0000 http://www.nakedcapitalism.com/2007/11/possible-endgames-for-the-dollar-slide/#comment-1590 The USD's role as a value-storage is put in question because of the big debt the USA is own to Japan and China, and the looming crisis in the US credit market.<br/><br/>When Chinese & other nation using the USD (cash and non-cash) as invoice value, debt/credit given outside the electronic banking system, it suppose to be the standard of value of money over time - ie inflation low and stable of the USD. When the USD loose value of 1% in a day just over a comment of a Chinese official not even entitled to make such comment, business people starting to question the stability of the US economy and its currency. The USD’s role as a value-storage is put in question because of the big debt the USA is own to Japan and China, and the looming crisis in the US credit market.

When Chinese & other nation using the USD (cash and non-cash) as invoice value, debt/credit given outside the electronic banking system, it suppose to be the standard of value of money over time – ie inflation low and stable of the USD. When the USD loose value of 1% in a day just over a comment of a Chinese official not even entitled to make such comment, business people starting to question the stability of the US economy and its currency.

]]> By: Michael Fang http://www.nakedcapitalism.com/2007/11/possible-endgames-for-dollar-slide.html#comment-1561 Michael Fang Sun, 11 Nov 2007 16:10:00 +0000 http://www.nakedcapitalism.com/2007/11/possible-endgames-for-the-dollar-slide/#comment-1561 Yves, you should take your piece to the logical conclusion: the central banks of the world will be forced to coordinate their rate action go forward if they want to reduce the chance of a disorderly fx market. The Fed needs to ease and inflate, but they can't do it w/ the other CB's standing pat. I would not be surprised if the next ease or in the near future all CB's will synchronize their rate reduction -- once they realize the whole Decoupling Thesis is hogwash.<br/><br/>If there's rate reduction synchronization, that means inflation will show up mainly in -- gold. While CB's dislike a rising gold, but considering the issues they have to deal with, a rising gold price is the least of their problem. Besides, there's no political pressure from a gold constituency that screams their currency is "too strong". Yves, you should take your piece to the logical conclusion: the central banks of the world will be forced to coordinate their rate action go forward if they want to reduce the chance of a disorderly fx market. The Fed needs to ease and inflate, but they can’t do it w/ the other CB’s standing pat. I would not be surprised if the next ease or in the near future all CB’s will synchronize their rate reduction — once they realize the whole Decoupling Thesis is hogwash.

If there’s rate reduction synchronization, that means inflation will show up mainly in — gold. While CB’s dislike a rising gold, but considering the issues they have to deal with, a rising gold price is the least of their problem. Besides, there’s no political pressure from a gold constituency that screams their currency is “too strong”.

]]> By: a http://www.nakedcapitalism.com/2007/11/possible-endgames-for-dollar-slide.html#comment-1525 a Sat, 10 Nov 2007 14:57:00 +0000 http://www.nakedcapitalism.com/2007/11/possible-endgames-for-the-dollar-slide/#comment-1525 Agh! Comments on the U.S. dollar weakness should only be taken seriously if they make it clear which is the counterpart currency. In Usd/Jpy it's the yen which is fantastically weak and by rights the dollar should be far south of 100. In Usd/Eur okay the dollar is weak, but that happens from time to time with free-floating currencies (won't be many new planes sold by Eads, except if they sell them at a loss, which is looks like they will try to do). In Usd/Cad and Usd/Gbp the dollar is back at the level it was in the 1970s - so maybe the dollar was just too strong in the past few decades.<br/><br/>With that said the WSJ had an article on Friday about the movement of the dollar being evidence of capital flight, and IMHO I think it's correct to identify capital flight as the primary mover in the weeks and months ahead. If the Fed continues to lower rates, capital flight will accentuate. And if the Fed tries to hold the fort and keep rates steady, capital flight will still accentuate (because the U.S. will be pushed into a severe recession). It's the same type of speculative attack that worked with Argentina, and IMHO I don't think the U.S. will be immune. The only joker is whether the world economy can survive the U.S. problems; I think not, but then I don't really have a handle on the Chinese and Indian economies. Agh! Comments on the U.S. dollar weakness should only be taken seriously if they make it clear which is the counterpart currency. In Usd/Jpy it’s the yen which is fantastically weak and by rights the dollar should be far south of 100. In Usd/Eur okay the dollar is weak, but that happens from time to time with free-floating currencies (won’t be many new planes sold by Eads, except if they sell them at a loss, which is looks like they will try to do). In Usd/Cad and Usd/Gbp the dollar is back at the level it was in the 1970s – so maybe the dollar was just too strong in the past few decades.

With that said the WSJ had an article on Friday about the movement of the dollar being evidence of capital flight, and IMHO I think it’s correct to identify capital flight as the primary mover in the weeks and months ahead. If the Fed continues to lower rates, capital flight will accentuate. And if the Fed tries to hold the fort and keep rates steady, capital flight will still accentuate (because the U.S. will be pushed into a severe recession). It’s the same type of speculative attack that worked with Argentina, and IMHO I don’t think the U.S. will be immune. The only joker is whether the world economy can survive the U.S. problems; I think not, but then I don’t really have a handle on the Chinese and Indian economies.

]]>