Where's The Us$ Heading To ?

[britmaveric]

It will soon be time to go long on the $.

[lannarebirth]

I'm not sure how the discussion got around to China/India, unless the topic title means where are $'s physically heading to. If so, yes, a good portion of foreign direct investment in those two countries came in the form of dollars. Even the HK and Taiwan Chinese I imagine converted dollars for their investments in China. Investments in India were initially driven, largely by US compnies .

One thing that's interesting about China and India to me. as relates to the dollar is, up till now, with dollar hegemony, it's always been the dollars fate vs. every other nation. That is to say, if the dollar fell, it's a good bet every other nations currency was rising and vice versa. If China and India ever have currencies worth holding, it's possible that whole groups of currencies mat be going in different directions, or even nowhere. That's the thing about globalization, it forces you to "be in" or risk being left behind. I'm not sure that's a great development for the worlds people, as it will create "shocks" in some places.Mitigating thoseshocks will probably entail adoption of a global currency faster than might have happened otherwise.

[sonicdragon]

Ok you don't have a ton of cash, your retirement is paid in Dollars and you can't change that. What a can you do to offset this somewhat?

If you mean that you have an income stream in US$ (pension or something similar) but you don't have investments (cash or otherwise) that you can sell/convert/use, then you don't really have any options unless you can save some of your pension and divert it.

[sonicdragon]

It will soon be time to go long on the $.

Please let us know when it is time !!

[sonicdragon]

I'm not sure how the discussion got around to China/India, unless the topic title means where are $'s physically heading to. If so, yes, a good portion of foreign direct investment in those two countries came in the form of dollars. Even the HK and Taiwan Chinese I imagine converted dollars for their investments in China. Investments in India were initially driven, largely by US compnies .

One thing that's interesting about China and India to me. as relates to the dollar is, up till now, with dollar hegemony, it's always been the dollars fate vs. every other nation. That is to say, if the dollar fell, it's a good bet every other nations currency was rising and vice versa. If China and India ever have currencies worth holding, it's possible that whole groups of currencies mat be going in different directions, or even nowhere. That's the thing about globalization, it forces you to "be in" or risk being left behind. I'm not sure that's a great development for the worlds people, as it will create "shocks" in some places.Mitigating thoseshocks will probably entail adoption of a global currency faster than might have happened otherwise.

I think a discussion of where the dollar is heading would be incomplete without a lot of discussion of india and (especially) china because what happens there is going to be one of the majot drivers of what happens to the dollar.

This has become a very interesting thread - I tend to agree pretty much completely with MightyMouse and Laopo made some very notable points - in particular the lack of national savings in the USA. The time is rapidly approaching where all the chickens might come home to roost at the same time. The optimists are pointing to the export industry in the USA - but it's clear from history that a country cannot devalue it's way to prosperity. The optimists also point to the efficiency/resilience of the economy, but at some point a straw will break the camel's back - and of course the bears are trying to guess what that straw will be.

I read earlier in this thread, or maybe another on TV that the worlds CB reserves are around 65% US$ with the pound sterling around 4%. There was a time not so long ago when the pound was 90%+ and the dollar less than 10%. I'm not saying that the dollar will go back to 10% or less but I'm pretty confident that it won't be the leading reserve currency by the time my children enter the workforce.

It's true that the US has a very efficient and resilient economy and my best guess is that it will weather the storm, and by that I mean that a financial catastrophe will be averted.

I have been out of the US$ for quite a while now and I don't expect I will be back in it again for a while longer. In the meantime it is hard to know which paper currencies to favour. Right now I favour CNY, AUD, CHF, SGD and at least for the short term EUR and GBP. I'm trying to get my head around CAD but can't form an opinion one way or the other just now.

And let me finish this post with yet another recommendation for all to at least have some exposure to precious metals and soft commodities.

[LaoPo]

"Paulson Defends Dollar's Status..."

Nov. 10 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson defended the U.S. dollar's status as the world's main currency after European Central Bank President Jean-Claude Trichet and Canadian Finance Minister Jim Flaherty decried its slide.

With the dollar reaching record lows this week against the euro and Canadian dollar, Trichet called ``brutal'' shifts in exchange rates unwelcome, and Flaherty said he's ``concerned.'' Yesterday, Paulson broke new ground in saying ``there's a reason'' the U.S. dollar has been the world's reserve currency for decades.

``There was a clear change in policy maker rhetoric this week,'' said Rebecca Patterson, a currency strategist at JPMorgan Chase & Co. in New York.

Protests may escalate as European finance ministers convene in Brussels and the Group of 20 meets near Cape Town next week. Without a greater shift from Paulson, who has repeatedly endorsed a ``strong'' currency while hailing the stimulus to American growth from exports, the dollar is unlikely to react, analysts said.

Paulson reiterated yesterday that a ``strong dollar is in our nation's interest'' and that markets are the best judge of currency values, during an unscheduled session with reporters. At the same time, he fleshed out his standard statement to reject suggestions that the dollar's international standing is under threat.

``The dollar has been the world's reserve currency since World War II and there's a reason,'' he said. ``I put the U.S. economy up against any in the world in terms of competitiveness.''

China's Reserves

The dollar's standing as the principle holding of central banks was undermined after Xu Jian, a vice director of the People's Bank of China, said this week the dollar is ``losing its status as the world currency.'' China has the world's largest foreign-exchange reserves, totaling $1.4 trillion.

``There's a question in the market about reserve diversification,'' said Marc Chandler, head of currency strategy at Brown Brothers Harriman in New York. ``Paulson is trying to remind people that the dollar has a history and that he thinks its role is secure.''

Still, Paulson's comments don't match the shift in communication of former Treasury Secretary Robert Rubin, when he softened the ``strong-dollar'' policy in 1997.

Trichet on Nov. 8 revived language he last used during the euro's 2004 rally. The currency's moves ``were undoubtedly sharp and abrupt,'' he said.

Hours later, Flaherty said exchange rates are having a ``serious effect on Canada.'' Government figures yesterday showed Canada's trade surplus narrowed to the smallest since 1998 as exports slumped.

Decline Accelerates

The dollar has stoked American exports amid the worst housing recession since 1991 and threats to consumer spending. The trade deficit unexpectedly narrowed to the smallest since May 2005 in September, the Commerce Department said yesterday.

Adam Cole, head of currency strategy at RBC Capital Markets in London, said officials are unlikely to intervene in the market and buy dollars because its decline hasn't yet become ``disorderly.''

``The market will still assume it has the green light to sell dollars,'' said Cole, who noted the U.S. currency kept falling against the euro even after Trichet's comments.

The weakening dollar does pose risks for the U.S., adding to inflation pressures at a time when the Federal Reserve has been lowering interest rates to safeguard economic growth.

Bernanke Optimistic

``We're going to make sure that the inflationary impact that may come from the weakening dollar is not passed into broader prices,'' Fed Chairman Ben S. Bernanke said at a congressional hearing two days ago.

He added that he was optimistic there will be ``a sound dollar in the medium term.''

The rhetoric from Trichet and Flaherty is a change from when Group of Seven finance ministers and central bankers met Oct. 19 in Washington and repeated past language on currencies in their statement. ``Disorderly movements in exchange rates are undesirable,'' they said, without mentioning the dollar.

Officials altered their language after the dollar's dive accelerated, increasing concern about the outlook for the global economy as the U.S. slows and the cost of credit rises.

``The Canadians and the Europeans will push increasingly for a clear U.S. stance on these issues, especially since there is evidence that the price action has now started to have increasing momentum,'' said Jens Nordvig, a currency strategist at Goldman Sachs Group Inc. based in New York.

Sarkozy Speaks

French President Nicholas Sarkozy told American lawmakers Nov. 7 the U.S. must support the dollar or risk triggering a trade war. Canadian Prime Minister Stephen Harper said the same day the Canadian currency's climb has been rapid and unprecedented ``by any standard.''

The G-7 hasn't intervened to buy or sell currencies as a group since September 2000, when it came to the rescue of a weakening euro.

``It may take coordinated interventions to halt the current slide in the dollar,'' though ``the G-7 aren't yet likely to be in a position to consider this,'' said Stephen Jen, head of currency research in London at Morgan Stanley. He predicts the euro will reach $1.51 by year-end from $1.4678 late yesterday, the highest close since its 1999 introduction.

http://www.bloomberg.com/apps/news?pid=206...ow&refer=us

Note:

For the US a weak Dollar is good for their debts, bad for imports (oil) and outbound tourism, but very good for exports and weekend shoppers to NY from European tourists. But the latter won't send the $ up.

But it's strange the US play dummy in stopping the fall of the Greenback and at the same time they're screaming China has to speed up the valuation of the Yuan.

Ah well...Politics.

LaoPo

[LaoPo]

I'm not sure how the discussion got around to China/India, unless the topic title means where are $'s physically heading to. If so, yes, a good portion of foreign direct investment in those two countries came in the form of dollars. Even the HK and Taiwan Chinese I imagine converted dollars for their investments in China. Investments in India were initially driven, largely by US compnies .

One thing that's interesting about China and India to me. as relates to the dollar is, up till now, with dollar hegemony, it's always been the dollars fate vs. every other nation. That is to say, if the dollar fell, it's a good bet every other nations currency was rising and vice versa. If China and India ever have currencies worth holding, it's possible that whole groups of currencies mat be going in different directions, or even nowhere. That's the thing about globalization, it forces you to "be in" or risk being left behind. I'm not sure that's a great development for the worlds people, as it will create "shocks" in some places.Mitigating thoseshocks will probably entail adoption of a global currency faster than might have happened otherwise.

I think a discussion of where the dollar is heading would be incomplete without a lot of discussion of india and (especially) china because what happens there is going to be one of the majot drivers of what happens to the dollar.

This has become a very interesting thread - I tend to agree pretty much completely with MightyMouse and Laopo made some very notable points - in particular the lack of national savings in the USA. The time is rapidly approaching where all the chickens might come home to roost at the same time. The optimists are pointing to the export industry in the USA - but it's clear from history that a country cannot devalue it's way to prosperity. The optimists also point to the efficiency/resilience of the economy, but at some point a straw will break the camel's back - and of course the bears are trying to guess what that straw will be.

I read earlier in this thread, or maybe another on TV that the worlds CB reserves are around 65% US$ with the pound sterling around 4%. There was a time not so long ago when the pound was 90%+ and the dollar less than 10%. I'm not saying that the dollar will go back to 10% or less but I'm pretty confident that it won't be the leading reserve currency by the time my children enter the workforce.

It's true that the US has a very efficient and resilient economy and my best guess is that it will weather the storm, and by that I mean that a financial catastrophe will be averted.

I have been out of the US$ for quite a while now and I don't expect I will be back in it again for a while longer. In the meantime it is hard to know which paper currencies to favour. Right now I favour CNY, AUD, CHF, SGD and at least for the short term EUR and GBP. I'm trying to get my head around CAD but can't form an opinion one way or the other just now.

And let me finish this post with yet another recommendation for all to at least have some exposure to precious metals and soft commodities.

Good post Sonicdragon.

Back to the US$:

Personally I think that in the not too far future, and I'm talking around 1-3 years from now, a 'strong' basket of currencies -not just one single currency- will float to the surface, apart, and next to, from the US $.

That basket will become stronger and stronger and will be used for international payments, also in Oil, thus leaving the Greenback although it will still be used of course, but of a much less importance than it is now.

Currencies in the basket ? I think EUR, GBP, CNY, CHF, SGD and to a lesser extent the AUD and CAD. We shouldn't forget about the Yen, as that currency will rise in the next 2-3 years also. The HK Dollar is not in sight as that will be 'melted' with the mainland Yuan, in time.

Countries, carrying those currencies will demand -and get- goods, commodities like Oil and minerals and pay for them in their own currency. Think of it.

The hegemony of the US $ in international trade and payments has seen it's longest period and will not be longer as dominant as it is now.

UNLESS, the US changes rapidly from a spending Nation into a Saving Nation and throw all sick financial systems (I described them before) overboard; including the Trillions-wasting-wars; and thus 'safe' the Dollar.

If not, the Greenback will stay low.

LaoPo

[lannarebirth]

I'm not sure how the discussion got around to China/India, unless the topic title means where are $'s physically heading to. If so, yes, a good portion of foreign direct investment in those two countries came in the form of dollars. Even the HK and Taiwan Chinese I imagine converted dollars for their investments in China. Investments in India were initially driven, largely by US compnies .

One thing that's interesting about China and India to me. as relates to the dollar is, up till now, with dollar hegemony, it's always been the dollars fate vs. every other nation. That is to say, if the dollar fell, it's a good bet every other nations currency was rising and vice versa. If China and India ever have currencies worth holding, it's possible that whole groups of currencies mat be going in different directions, or even nowhere. That's the thing about globalization, it forces you to "be in" or risk being left behind. I'm not sure that's a great development for the worlds people, as it will create "shocks" in some places.Mitigating thoseshocks will probably entail adoption of a global currency faster than might have happened otherwise.

I think a discussion of where the dollar is heading would be incomplete without a lot of discussion of india and (especially) china because what happens there is going to be one of the majot drivers of what happens to the dollar.

This has become a very interesting thread - I tend to agree pretty much completely with MightyMouse and Laopo made some very notable points - in particular the lack of national savings in the USA. The time is rapidly approaching where all the chickens might come home to roost at the same time. The optimists are pointing to the export industry in the USA - but it's clear from history that a country cannot devalue it's way to prosperity. The optimists also point to the efficiency/resilience of the economy, but at some point a straw will break the camel's back - and of course the bears are trying to guess what that straw will be.

I read earlier in this thread, or maybe another on TV that the worlds CB reserves are around 65% US$ with the pound sterling around 4%. There was a time not so long ago when the pound was 90%+ and the dollar less than 10%. I'm not saying that the dollar will go back to 10% or less but I'm pretty confident that it won't be the leading reserve currency by the time my children enter the workforce.

It's true that the US has a very efficient and resilient economy and my best guess is that it will weather the storm, and by that I mean that a financial catastrophe will be averted.

I have been out of the US$ for quite a while now and I don't expect I will be back in it again for a while longer. In the meantime it is hard to know which paper currencies to favour. Right now I favour CNY, AUD, CHF, SGD and at least for the short term EUR and GBP. I'm trying to get my head around CAD but can't form an opinion one way or the other just now.

And let me finish this post with yet another recommendation for all to at least have some exposure to precious metals and soft commodities.

I agree with all you say and I'm certainly not defending the $USD. I wouldn't say it's under or over valued, and there's certainly no compelling reason to be in it a present. If one were a cycles follower, they'd say there's no reason to be in it till 2012ish.

I too am apalled at the savings rates of the average American and even more so at the cowboy antics and lack of transparency and regulation of the central bank, hedge funds and financial institutions which practice "off balance sheet" accounting.

Personally, the reason 40% (1/2 that since mid July) of my networth remains in dollars is because I've never seen anywhere else that it was easier to make money than in America.

I'll follow up by PM. Interesting discussion.

[ray23]

Ok you don't have a ton of cash, your retirement is paid in Dollars and you can't change that. What a can you do to offset this somewhat?

If you mean that you have an income stream in US$ (pension or something similar) but you don't have investments (cash or otherwise) that you can sell/convert/use, then you don't really have any options unless you can save some of your pension and divert it.

Yep thats it but where to devert? I'm in Thailand so that aspect would be eay but I have no idea if effective.

Paulson I don't think he has ever been honest about his stance on the dollar and I think it is going just as he wanted it to.

Edited November 10, 2007 by ray23

[lannarebirth]

I'm not sure how the discussion got around to China/India, unless the topic title means where are $'s physically heading to. If so, yes, a good portion of foreign direct investment in those two countries came in the form of dollars. Even the HK and Taiwan Chinese I imagine converted dollars for their investments in China. Investments in India were initially driven, largely by US compnies .

One thing that's interesting about China and India to me. as relates to the dollar is, up till now, with dollar hegemony, it's always been the dollars fate vs. every other nation. That is to say, if the dollar fell, it's a good bet every other nations currency was rising and vice versa. If China and India ever have currencies worth holding, it's possible that whole groups of currencies mat be going in different directions, or even nowhere. That's the thing about globalization, it forces you to "be in" or risk being left behind. I'm not sure that's a great development for the worlds people, as it will create "shocks" in some places.Mitigating thoseshocks will probably entail adoption of a global currency faster than might have happened otherwise.

I think a discussion of where the dollar is heading would be incomplete without a lot of discussion of india and (especially) china because what happens there is going to be one of the majot drivers of what happens to the dollar.

This has become a very interesting thread - I tend to agree pretty much completely with MightyMouse and Laopo made some very notable points - in particular the lack of national savings in the USA. The time is rapidly approaching where all the chickens might come home to roost at the same time. The optimists are pointing to the export industry in the USA - but it's clear from history that a country cannot devalue it's way to prosperity. The optimists also point to the efficiency/resilience of the economy, but at some point a straw will break the camel's back - and of course the bears are trying to guess what that straw will be.

I read earlier in this thread, or maybe another on TV that the worlds CB reserves are around 65% US$ with the pound sterling around 4%. There was a time not so long ago when the pound was 90%+ and the dollar less than 10%. I'm not saying that the dollar will go back to 10% or less but I'm pretty confident that it won't be the leading reserve currency by the time my children enter the workforce.

It's true that the US has a very efficient and resilient economy and my best guess is that it will weather the storm, and by that I mean that a financial catastrophe will be averted.

I have been out of the US$ for quite a while now and I don't expect I will be back in it again for a while longer. In the meantime it is hard to know which paper currencies to favour. Right now I favour CNY, AUD, CHF, SGD and at least for the short term EUR and GBP. I'm trying to get my head around CAD but can't form an opinion one way or the other just now.

And let me finish this post with yet another recommendation for all to at least have some exposure to precious metals and soft commodities.

Good post Sonicdragon.

Back to the US$:

Personally I think that in the not too far future, and I'm talking around 1-3 years from now, a 'strong' basket of currencies -not just one single currency- will float to the surface, apart, and next to, from the US $.

That basket will become stronger and stronger and will be used for international payments, also in Oil, thus leaving the Greenback although it will still be used of course, but of a much less importance than it is now.

Currencies in the basket ? I think EUR, GBP, CNY, CHF, SGD and to a lesser extent the AUD and CAD. We shouldn't forget about the Yen, as that currency will rise in the next 2-3 years also. The HK Dollar is not in sight as that will be 'melted' with the mainland Yuan, in time.

Countries, carrying those currencies will demand -and get- goods, commodities like Oil and minerals and pay for them in their own currency. Think of it.

The hegemony of the US $ in international trade and payments has seen it's longest period and will not be longer as dominant as it is now.

UNLESS, the US changes rapidly from a spending Nation into a Saving Nation and throw all sick financial systems (I described them before) overboard; including the Trillions-wasting-wars; and thus 'safe' the Dollar.

If not, the Greenback will stay low.

LaoPo

I think the trend will be toward economic blocks and common currencies. That clearly was a very good move by the European nations, with only Germany probably coming out on the short end. Will North American nations group together? Will Australia become an Asian currency? It will be interesting to see.

[pointofview]

I was laughed at on these boards some time ago when i nocked the US$. After reading many articles and a book called 'Empire of Debt' i bought into gold - Krugerrands at £220 (1 ounce). I can sell them all day long now for £400+.

Simple fact that most people dont understand - dont want to understand - is that the FED is a private orginization (outside of US government control) and they print money from nothing (yeah, i know paper and ink) and then loan it to the US banks/people at what ever interest rate they decide.

Every time they print a few more billion, the dollars held by otheres lose some of their value. The US has currently (under Bush) ran up a 9 trillion dollar deficit. No problem though the fed will just print some more - but agian devaluing the dollar. ITS AS SIMPLE AS THAT.

However the average Joe would much rather talk about - and knows more about - their favourite baseball or football team.

Edited November 10, 2007 by pointofview

[naklang]

I was laughed at on these boards some time ago when i nocked the US$. After reading many articles and a book called 'Empire of Debt' i bought into gold - Krugerrands at £220 (1 ounce). I can sell them all day long now for £400+.

Simple fact that most people dont understand - dont want to understand - is that the FED is a private orginization (outside of US government control) and they print money from nothing (yeah, i know paper and ink) and then loan it to the US banks/people at what ever interest rate they decide.

Every time they print a few more billion, the dollars held by otheres lose some of their value. The US has currently (under Bush) ran up a 9 trillion dollar deficit. No problem though the fed will just print some more - but agian devaluing the dollar. ITS AS SIMPLE AS THAT.

However the average Joe would much rather talk about - and knows more about - their favourite baseball or football team.

The Euro is also printed at will and backed by absolutely nothing. Its all fiat paper. It is unfortunate that the US feels it necessary to maintain such an expensive military and fund it with off-balance sheet debt. But if it didn't exist, it's interesting to think how the world would work without the "heavy" on the block to keep things in check.

Britain has been there and got tossed out of the role after WWII (loss of many colonies). Just couldn't afford or control the unruly kids anymore. I wonder when the US will get sick of the chore and just let China and Russia go at it for the spoils. Should be quite a show.

[bmanly]

However the average Joe would much rather talk about - and knows more about - their favourite baseball or football team.

The other day I was in a travel forum where an American person was complaining that her bus tour in UK went up by $1,000 USD this year. She said how come in the British and Aussie brochures it didn't go up anywhere near as much. I said to her, 2 years ago the USD was buying nearly 60 pence now today it is buying only 48 pence, that is a 20% depreciation. Your tours and anything else you buy from UK has to go up 20% to compensate for this, she still didn't think it was the cause. The first step to solving a problem is to admit you actually have one.

[JimsKnight]

Yeah, I missed the boat on the cheap gold days, I was too young and too poor back then.

I'll have to wait until the next opportunity comes along.

Britain tried to get its clout back in the Suez Crisis but ended up bankrupting the country and getting our hands slapped by the US.

The US is on the slide, for how long depends on the next government/administration.

[steffi]

Right now American's have their head in the sand about everything and are only interested in whatever crap the media feeds to them. American's don't seem to question much or be that interested in the world outside themselves.

However the average Joe would much rather talk about - and knows more about - their favourite baseball or football team.

The other day I was in a travel forum where an American person was complaining that her bus tour in UK went up by $1,000 USD this year. She said how come in the British and Aussie brochures it didn't go up anywhere near as much. I said to her, 2 years ago the USD was buying nearly 60 pence now today it is buying only 48 pence, that is a 20% depreciation. Your tours and anything else you buy from UK has to go up 20% to compensate for this, she still didn't think it was the cause. The first step to solving a problem is to admit you actually have one.

[cm-happy]

Don't know a lot about economics or really understand currency fluctuations. Horribly boring & barely passed Eco at Uni.

If it means anything saw in paper the other day the BOT (Bank Of Thailand) is continuing to buy $ so that currently their total reserves total over 100 billion US $. Do they know something I don't?

Buy $ cheaply 33-34:1, now, with the expectation of a $ stengthening later going back to 40-45:1 and then selling their reserves. Tidy profit to be had if this happens. Hopefully this is a sign of an expected more favorable rate.

[NovaBlue05]

Right now American's have their head in the sand about everything and are only interested in whatever crap the media feeds to them. American's don't seem to question much or be that interested in the world outside themselves.

There's over 300 million of them. Can you accurately paint them all with the same broad brush?

[Naam]

If it means anything saw in paper the other day the BOT (Bank Of Thailand) is continuing to buy $ so that currently their total reserves total over 100 billion US $. Do they know something I don't?

obviously you are not aware that the BOT is buying Dollars and selling Baht to check the Baht's appreciation and not for a 'tidy' profit in the future.

[Naam]

This following is from a newsletter from a leader Stockbroker and Financial Advisory Firm in Australia.

China announced that it would plan to diversify the country’s USD1.43trillion foreign currency

reserves.

your stockbroker quotes what some journ@sslists misquoted. there was never any talk and especially no announcement that China's present holdings would be diversified but some "loud thinking" that future reserves resulting from trade imbalances might be diversified.

[Naam]

Ok you don't have a ton of cash, your retirement is paid in Dollars and you can't change that. What a can you do to offset this somewhat?

not much.

[Naam]

I will diversify out just like the Chinese.

a bit late my friend. you missed several years.

[naklang]

I would agree with this for the 50+ crowd. They are biased due to being raised during the golden age when America was the only game in town and Europe was still recovering from the horrors of war, and Britian had it's own troubles with the IRA etc. The American "Baby Boom" generation will go to their graves filled with American idealism.

I would not agree that younger Americans have their head in the sand and disinterested in world affairs. They are, however, realists. They know there is only so much they can do beyond the vote and remain law abiding citizens. Most of the younger people I know help in their own way by direct volunteering or charitable giving out of reach of the government or organized religion.

It's a big, big country. To label all Americans based on the comments of blue-haired ladies taking UK bus tours is silly stuff.

Right now American's have their head in the sand about everything and are only interested in whatever crap the media feeds to them. American's don't seem to question much or be that interested in the world outside themselves.

However the average Joe would much rather talk about - and knows more about - their favourite baseball or football team.

The other day I was in a travel forum where an American person was complaining that her bus tour in UK went up by $1,000 USD this year. She said how come in the British and Aussie brochures it didn't go up anywhere near as much. I said to her, 2 years ago the USD was buying nearly 60 pence now today it is buying only 48 pence, that is a 20% depreciation. Your tours and anything else you buy from UK has to go up 20% to compensate for this, she still didn't think it was the cause. The first step to solving a problem is to admit you actually have one.

[OneFarang]

Mighty Mouse

You are correct. Being a proud Aussie I want to see Australia prosper and grow. If that means taking over other companies then so be it, but when overseas companies try to buy Aussie companies, I shudder.

Look what happened to our Vegemite. All of the profits from these sales now go overseas.

I know, I want to have my cake and eat it too.

I have a small internet based export business here in Oz and I can't wait to get out! This small entrepreneur can get not one razu of assistance from any tier of gov't except that the AUD is now worth something! A reloc to, say, the Philippines will nett AU$= 40PHP and I can set up with low mfg cost for the next level. I have a product that China and the world will want but I need to mfg it at low cost.

Rest assured I won't look back after Oz bears the reloc costs. My Quid pro quo. If only I could sell my PP for what it owes me.

Edited November 11, 2007 by OneFarang

[chiang mai]

This following is from a newsletter from a leader Stockbroker and Financial Advisory Firm in Australia.

China announced that it would plan to diversify the country’s USD1.43trillion foreign currency

reserves.

your stockbroker quotes what some journ@sslists misquoted. there was never any talk and especially no announcement that China's present holdings would be diversified but some "loud thinking" that future reserves resulting from trade imbalances might be diversified.

In all fairness Dr Naam the "loud thinking" was verbalized at two different press conferences on two separate occasions, as I recall. Granted though it's not policy and the statements not made by key policy makers, more like a warning shot.

[ray23]

It's funny sometimes you don't want to be right. I came up wiht not much either.

Forunately it's a pretty decent retirment, I have enough but certianly can't save like I was now I will just ride it out.

[sonicdragon]

Ok you don't have a ton of cash, your retirement is paid in Dollars and you can't change that. What a can you do to offset this somewhat?

If you mean that you have an income stream in US$ (pension or something similar) but you don't have investments (cash or otherwise) that you can sell/convert/use, then you don't really have any options unless you can save some of your pension and divert it.

Yep thats it but where to devert? I'm in Thailand so that aspect would be eay but I have no idea if effective.

Paulson I don't think he has ever been honest about his stance on the dollar and I think it is going just as he wanted it to.

If you are saying that you can save some of your pension, then, it depends a lot on the amount of risk you want to take but I would consider putting into some combination of

- Gold

- CNY

- a thai mutual fund

- a THB bank account

[sonicdragon]

I'm not sure how the discussion got around to China/India, unless the topic title means where are $'s physically heading to. If so, yes, a good portion of foreign direct investment in those two countries came in the form of dollars. Even the HK and Taiwan Chinese I imagine converted dollars for their investments in China. Investments in India were initially driven, largely by US compnies .

One thing that's interesting about China and India to me. as relates to the dollar is, up till now, with dollar hegemony, it's always been the dollars fate vs. every other nation. That is to say, if the dollar fell, it's a good bet every other nations currency was rising and vice versa. If China and India ever have currencies worth holding, it's possible that whole groups of currencies mat be going in different directions, or even nowhere. That's the thing about globalization, it forces you to "be in" or risk being left behind. I'm not sure that's a great development for the worlds people, as it will create "shocks" in some places.Mitigating thoseshocks will probably entail adoption of a global currency faster than might have happened otherwise.

I think a discussion of where the dollar is heading would be incomplete without a lot of discussion of india and (especially) china because what happens there is going to be one of the majot drivers of what happens to the dollar.

This has become a very interesting thread - I tend to agree pretty much completely with MightyMouse and Laopo made some very notable points - in particular the lack of national savings in the USA. The time is rapidly approaching where all the chickens might come home to roost at the same time. The optimists are pointing to the export industry in the USA - but it's clear from history that a country cannot devalue it's way to prosperity. The optimists also point to the efficiency/resilience of the economy, but at some point a straw will break the camel's back - and of course the bears are trying to guess what that straw will be.

I read earlier in this thread, or maybe another on TV that the worlds CB reserves are around 65% US$ with the pound sterling around 4%. There was a time not so long ago when the pound was 90%+ and the dollar less than 10%. I'm not saying that the dollar will go back to 10% or less but I'm pretty confident that it won't be the leading reserve currency by the time my children enter the workforce.

It's true that the US has a very efficient and resilient economy and my best guess is that it will weather the storm, and by that I mean that a financial catastrophe will be averted.

I have been out of the US$ for quite a while now and I don't expect I will be back in it again for a while longer. In the meantime it is hard to know which paper currencies to favour. Right now I favour CNY, AUD, CHF, SGD and at least for the short term EUR and GBP. I'm trying to get my head around CAD but can't form an opinion one way or the other just now.

And let me finish this post with yet another recommendation for all to at least have some exposure to precious metals and soft commodities.

Good post Sonicdragon.

Back to the US$:

Personally I think that in the not too far future, and I'm talking around 1-3 years from now, a 'strong' basket of currencies -not just one single currency- will float to the surface, apart, and next to, from the US $.

That basket will become stronger and stronger and will be used for international payments, also in Oil, thus leaving the Greenback although it will still be used of course, but of a much less importance than it is now.

Currencies in the basket ? I think EUR, GBP, CNY, CHF, SGD and to a lesser extent the AUD and CAD. We shouldn't forget about the Yen, as that currency will rise in the next 2-3 years also. The HK Dollar is not in sight as that will be 'melted' with the mainland Yuan, in time.

Countries, carrying those currencies will demand -and get- goods, commodities like Oil and minerals and pay for them in their own currency. Think of it.

The hegemony of the US $ in international trade and payments has seen it's longest period and will not be longer as dominant as it is now.

UNLESS, the US changes rapidly from a spending Nation into a Saving Nation and throw all sick financial systems (I described them before) overboard; including the Trillions-wasting-wars; and thus 'safe' the Dollar.

If not, the Greenback will stay low.

LaoPo

Yeah, I should have mentioned the Yen in the short term - I have a tiny exposure in my own portfolio, but my company's clients are 65% japanese so I have quite a big exposure that way. The thing that bothers me about the yen is that the economic news coming out of japan is horrible. Risk reduction is going to keep a bid under the yen though. However, the big corporates will favour a weaker yen, and the likes of Toyota have a much bigger influence on japanese policy makers and the BOJ than the likes of EADS does on merkel, sarkozy etc and the ECB.

[sonicdragon]

I was laughed at on these boards some time ago when i nocked the US$. After reading many articles and a book called 'Empire of Debt' i bought into gold - Krugerrands at £220 (1 ounce). I can sell them all day long now for £400+.

Simple fact that most people dont understand - dont want to understand - is that the FED is a private orginization (outside of US government control) and they print money from nothing (yeah, i know paper and ink) and then loan it to the US banks/people at what ever interest rate they decide.

Every time they print a few more billion, the dollars held by otheres lose some of their value. The US has currently (under Bush) ran up a 9 trillion dollar deficit. No problem though the fed will just print some more - but agian devaluing the dollar. ITS AS SIMPLE AS THAT.

However the average Joe would much rather talk about - and knows more about - their favourite baseball or football team.

You were not laughed at by me. I fully understand the Fed's ownership (in fact I mentioned it on a thread here within the last few days) and it's history.

Well done for buying gold. I wouldn't be a seller yet though

[ray23]

Thanks I appreciate it yes I have about 20k a month to work with, not much I know but a start.

I have been really surprised that you can get into mutual finds here with as little as 10K.

It was time to get serious about this a long time ago, but I will try to learn as much about this as I can, take what risks that I feel comfortable with.

I think the dollar will come back but not in the next day or two. The main goal is to leave the wife in a good position financially by Thai standards . No bills, house taken care of and she will have 30K Baht a month coming in for life, so a little more would certainly help.

I have been very fortunate here all the major items are taken care all the needs taken care of and most of the wants. So I think it's time to think a little differently

.

Thanks again.

[Naam]

In all fairness Dr Naam the "loud thinking" was verbalized at two different press conferences on two separate occasions, as I recall. Granted though it's not policy and the statements not made by key policy makers, more like a warning shot.

that is correct CM but the existing reserves were never mentioned. the fact remains that China's USD reserves (UST and cash) are still going up considerably every month although Treasuries have dropped a tiny 0.5% in the reporting period from january 2007 till august 2007.

i also don't see a valid reason why China should fire warning shots as the U.S. can't do too much to strengthen the dollar. if China really acts and puts live ammunition in the gun all what is hit (by dumping treasuries or cash dollars) are their own feet.

as the old proverb says, they are riding a tiger and getting off is simply too dangerous. anyway, interesting times ahead. by the way, CNY appreciation since "stiff peg" until today is quite disappointing.