Is The Us$ Destined To Collapse?

[flying]

Sorry America haters, we will be around for you to hate for a very long time still.

I don't hate America, I never have. I am worried that the US books are so fuct that Canada will lose the US as its army. I don't want to lose the US army. Get your head out of the sand, take it as a friendly warning from your neibours to the north.

Exactly !

I feel the same way. It is in fact patriots that live here in the USA that see & feel the problems. The problems caused by greed on Wall Street & in the Government.

So I would hardly call WE THE PEOPLE America Haters. We are America

[el jefe]

I was the one who earlier said "China won't let it happen." Neither will the rest of the world. Too many countries are holding too many dollars for them to allow it to collapse. And has been pointed out, half the world depends on the US military. (That's not necessarily good, but it appears to be the case.)

There's a big difference between "collapse" and "depreciate". I agree with those who say the dollar will weaken, but "collapse", no.

I also agree with the post commenting that inflation -- worldwide, not just in the US -- is a much bigger concern.

[midas]

I was the one who earlier said "China won't let it happen." Neither will the rest of the world. Too many countries are holding too many dollars for them to allow it to collapse. And has been pointed out, half the world depends on the US military. (That's not necessarily good, but it appears to be the case.)

There's a big difference between "collapse" and "depreciate". I agree with those who say the dollar will weaken, but "collapse", no.

I also agree with the post commenting that inflation -- worldwide, not just in the US -- is a much bigger concern.

but when...............? waiting..waiting............

[badge]

So according to the header Poll, a majority 44% of TV inhabitants believe the US$ wont collapse, compared to 38% that think it will.

After reading the numerous Gold related topics I am surprised by this. In the current environment it would difficult to foresee a sustainable, simultaneous rally in US$ and Gold.

This may be down to 'phrasing'.

Perhaps if the Poll asked 'Is the US$ destined to continue weakening' there would be far more 'Yes' results?

There hasnt been much of an argument laid out - by either side - as far as I can see?

But I think theres talk of inflation, and the incessant printing of US$'s diluting the stock of US$ and therefore lowering their value, right?

As I understand it, the 'printing of US$' is not a printing of US$, but a creation of credit; an offering of debt, which has to be taken up by someone to get into the system. If people dont take on this debt, theres no 'printing of US$'. More importantly, these are just numbers on computers for the most part.

I agree that eventually there will have to come a day that the US govt. addresses this. This will almost certainly cause an implosion of US$ credit, and an enorumous, global financial meltdown, the type of which was 'just averted' earlier this year apparently.

Once this US$ credit is essentially deleted, theres going to be far less US$ around than people thought - imagine if all the US$ 'printed' in the last 5yrs were 'taken out' of the system. This, after some initial reaction, would be strongly US$ positive in my opinion?

Its just an idea. I voted 'who knows' as I can only guess

[badge]

[...]

I also agree with the post commenting that inflation -- worldwide, not just in the US -- is a much bigger concern.

but when...............? waiting..waiting............

In case you havent noticed, many asset classes have seen huge inflation over the last 6 months.

This is a natural phenomena in light of the budget-busting stimulus we've seen in the last 12 months, and largely in anticipation of the stimulus filtering through I imagine.

Personally I dont think we'll see inflation as a problem, let alone hyper inflation. It seems so obvious doesnt it; record blank-central bank-cheques, governments spending as much as possible and the guy sitting atop of the pile thinks dropping money from helicopters is a credible answer. In a quote brought to my attention from EWI, by Joe Granville I believe, "anything obvious is obviously wrong"

http://www.bloomberg.com/apps/news?pid=206...id=af_INsf33y5Y

I note today Japans jobless hits a record high, household spending moves lower and consumer prices continue to deflate.

[thailandlover]

So, are we then going to see the crash of both the dollar and the euro? Or is it just more punditry looking for attention grabbing headlines?

http://www.thaivisa.com/forum/Crash-t29286...50#entry2972119

[Lopburi99]

Well Sibeymai has his own reasoning(?) for thinking US$ will appreciate(?), or at least remain bouyant whilst credit is continually created. Thats a view at least.

There hasnt been many others suggesting US$ will move in either direction?

Naam, Abrak, anyone else wish to offer a sensible opinion?

my personal opinion is that the dollar will per se not "collapse". i am however rather bearish and reduced the dollar denominated holdings in my portfolio to a ridiculously small percentage (and that for the first time in many years). i would still hold many more dollars if there hadn't been the chance and alternative reaping in fat profits in €UR.

i'm not a currency trader but i have never hesitated to go (BIG) long or short any currency through forwards depending how the pendulum swings and i am keeping an eye on the dollar.

Not exactly ringing optimism from Herr Naam, but I'll take it....at least it's far from doom and gloom.

Edited August 28, 2009 by Lopburi99

[flying]

This may be down to 'phrasing'.

There hasnt been much of an argument laid out - by either side - as far as I can see?

But I think theres talk of inflation, and the incessant printing of US s diluting the stock of US$ and therefore lowering their value, right?

Yes it is hard to understand when someone says collapse. Did you mean to zero worth? Did you mean removed as the world currency reserve ? Did you mean an introduction of a new American currency so the US can default on outstanding debts?

Again due to a wide open question me thinks....

As for inflation again which type? Monetary inflation? Tons of it obviously...

Inflation of rising interest rates? yes big time on credit cards.

Mortgage Loans not so much yet but I have a high credit rating. Those who do not cannot borrow period.

Inflation of prices? Food is going nuts here as I write.

Housing? Of course not yet as inventory is bulging with unsold new homes & tons of foreclosures.

As I understand it, the 'printing of US is not a printing of US$, but a creation of credit; an offering of debt, which has to be taken up by someone to get into the system. If people don't take on this debt, there's no 'printing of US . More importantly, these are just numbers on computers for the most part.

Yes but so is your savings account or brokerage account. If they were wiped clean would you be upset?

I agree that eventually there will have to come a day that the US govt. addresses this. This will almost certainly cause an implosion of US$ credit, and an enormous, global financial meltdown, the type of which was 'just averted' earlier this year apparently.

Once this US$ credit is essentially deleted, theres going to be far less US$ around than people thought - imagine if all the US$ 'printed' in the last 5yrs were 'taken out' of the system. This, after some initial reaction, would be strongly US$ positive in my opinion?

There in lies the rub...It will need to be addressed sooner than later. They have done nothing to help. They have only slowed the extinguishing of the asset fire. They do that by throwing another log on the dieing embers. What you said about strongly positive USD remains to be seen...If & when they start to address the cause. You know the abyss they are talking about that they were staring into was more to do with Trillions being pulled from banks on that day that they came running crying emergency. All they have done so far is shore up but not addressed what caused the runs. A congressman here was duely scolded for letting that info out in an interview.

[badge]

"i would still hold many more dollars if there hadn't been the chance and alternative reaping in fat profits in €UR. "

Without any further elaboration, a meaningless comment - for example EURUSD is down -2% in the last 12 months.

[badge]

This may be down to 'phrasing'.

There hasnt been much of an argument laid out - by either side - as far as I can see?

But I think theres talk of inflation, and the incessant printing of US s diluting the stock of US$ and therefore lowering their value, right?

Yes it is hard to understand when someone says collapse. Did you mean to zero worth? Did you mean removed as the world currency reserve ? Did you mean an introduction of a new American currency so the US can default on outstanding debts?

Again due to a wide open question me thinks....

As for inflation again which type? Monetary inflation? Tons of it obviously...

Inflation of rising interest rates? yes big time on credit cards.

Mortgage Loans not so much yet but I have a high credit rating. Those who do not cannot borrow period.

Inflation of prices? Food is going nuts here as I write.

Housing? Of course not yet as inventory is bulging with unsold new homes & tons of foreclosures.

I accept its perhaps not worded comfortably As for inflation, it was offered as a reason by the board, ask them. Presumably CPI though my thorough friend.

As I understand it, the 'printing of US is not a printing of US$, but a creation of credit; an offering of debt, which has to be taken up by someone to get into the system. If people don't take on this debt, there's no 'printing of US . More importantly, these are just numbers on computers for the most part.

Yes but so is your savings account or brokerage account. If they were wiped clean would you be upset?

This is a sensible, and very complex question. Using the highest quality counterparts, using 'insured' and ring-fenced accounts and limiting balances by using funds on deposit is the only way.

[...]

[Naam]

"i would still hold many more dollars if there hadn't been the chance and alternative reaping in fat profits in €UR. "

Without any further elaboration, a meaningless comment - for example EURUSD is down -2% in the last 12 months.

a meaningless comment as EURUSD is UP 68% in the last 96 months the hedging of my dollar holdings by nearly continously forward selling which went on for several years is (in my case) finally over and i can concentrate on more important things like telling the cook what i would like to have for dinner and prepare lunch for my dogs.

[toptuan]

Excuse me, did I read the thread title correctly? Jobs, economy, banking, business, investment in Thailand. Oh, it's because some of you still have a sizable kitty in a US bank?

So are we really open to discussing the financial affairs of virtually any country here? I've got an expat friend from Zimbabwe living here. Can I open a new thread about the recent news of the Zimbabwe dollar (from which they just removed 12 zeros?).

I still fail to understand the logic of non-Thailand-related threads on ThaiVisa.

Edited August 28, 2009 by toptuan

[sokal]

[...]

I also agree with the post commenting that inflation -- worldwide, not just in the US -- is a much bigger concern.

but when...............? waiting..waiting............

In case you havent noticed, many asset classes have seen huge inflation over the last 6 months.

This is a natural phenomena in light of the budget-busting stimulus we've seen in the last 12 months, and largely in anticipation of the stimulus filtering through I imagine.

Personally I dont think we'll see inflation as a problem, let alone hyper inflation. It seems so obvious doesnt it; record blank-central bank-cheques, governments spending as much as possible and the guy sitting atop of the pile thinks dropping money from helicopters is a credible answer. In a quote brought to my attention from EWI, by Joe Granville I believe, "anything obvious is obviously wrong"

http://www.bloomberg.com/apps/news?pid=206...id=af_INsf33y5Y

I note today Japans jobless hits a record high, household spending moves lower and consumer prices continue to deflate.

1+1= what ? Its obvious.

[sokal]

Excuse me, did I read the thread title correctly? Jobs, economy, banking, business, investment in Thailand. Oh, it's because some of you still have a sizable kitty in a US bank?

So are we really open to discussing the financial affairs of virtually any country here? I've got an expat friend from Zimbabwe living here. Can I open a new thread about the recent news of the Zimbabwe dollar (from which they just removed 12 zeros?).

I still fail to understand the logic of non-Thailand-related threads on ThaiVisa.

Yeah do that. What is the price of an ounce of Gold in Zimbabwe dollars BTW ?

[toptuan]

Excuse me, did I read the thread title correctly? Jobs, economy, banking, business, investment in Thailand. Oh, it's because some of you still have a sizable kitty in a US bank?

So are we really open to discussing the financial affairs of virtually any country here? I've got an expat friend from Zimbabwe living here. Can I open a new thread about the recent news of the Zimbabwe dollar (from which they just removed 12 zeros?).

I still fail to understand the logic of non-Thailand-related threads on ThaiVisa.

Yeah do that. What is the price of an ounce of Gold in Zimbabwe dollars BTW ?

I'll get back to you . . .on another non-Thailand-related thread . . .

[Kf6vci]

Well, I can answer the WHY. The U.S. is binging on debt, with huge liabilities being kept "off budget".

The outlook is negative, meaning the need to keep adding more debt will continue.

While interest rates at the long end remain surprisingly low (10 years T-Bonds yielding less than 3.7%), at some point the market will demand higher rates. Then all those who bought bonds now will start hurting.

Furthermore, rates cannot remain that low for the short end.

Given the choice, I would prefer the Australian government. Because there is always a price to pay for overindulging.

The FED, a semi private bank is buying up government debt. This shows the extremes the FED goes to. Future generations are likely to curse us for these excesses.

Edited August 28, 2009 by Kf6vci

[sibeymai]

The US will keep borrowing which will tend to keep the dollar strong.

Paying back the debt will tend to weaken the dollar.

How to keep the dollar strong ? Keep borrowing and don't repay debt.

If the US were to start repaying debt who would the world's creditors lend to ?

when was your last medical check-up Sibey?

Bananas, dollars. What's the difference ?

The logic goes like this: The US borrowing dollars requires lenders to hold dollars to lend. Lender's actions to acquire dollars increases demand for dollars thereby strengthening the dollar. US repaying dollars causes a surplus of dollars weakening the dollar.

what exactly did the doctor say Sibey? is it serious or is there a cure?

Unfortunately the doctor said it is terminal, much like the US$.

[midas]

[...]

I also agree with the post commenting that inflation -- worldwide, not just in the US -- is a much bigger concern.

but when...............? waiting..waiting............

In case you havent noticed, many asset classes have seen huge inflation over the last 6 months.

I note today Japans jobless hits a record high, household spending moves lower and consumer prices continue to deflate.

California also

State taxes going up because of deflation

http://www.sfgate.com/cgi-bin/article.cgi?...iness&tsp=1

[InterestedObserver]

592 trillion dollars in OTC derivatives........(BIS. org OTC table) what happens when those dollars come home to roost ?

The words default, bankruptcy, and repudiation of debt come to mind. After all, we couldn't possibly print that many dollars ............. or could we?

[BEENTHEREDONETHAT]

Perhaps if the FED got Madoff to assist them they could keep their ponzi going longer.

[cloudhopper]

I voted no. Along fundamental lines anyway, the fx market could do <deleted> anything. Consider:

1) ~65% of all the currency in the world is denominated in USD and ~80% of world trade has it on 1 side. That's a HUGE incentive for maintaing the value of the USD.

2) Japan has been printing money like crazy for 2 decades and has a much larger debt/GDP than the US, yet it's currency is still strong.

3) Should China, Japan et al decide to sell all the USTs they have accumulated due to mercantilist trade policies one must ask who the buyers for these instruments will be, and in exchange for what?

4) The amount of new money being created is dwarfed by the unpayable debt overhang, and as $-denominated debt is liquidated the demand for $ will rise.

[churchill]

I voted Yes - but over the next year or so .

Dollar Is Funny Money in Push for World Currency: Kevin Hassett

http://www.bloomberg.com/apps/news?pid=206...id=adiwJJwwge88

[cloudhopper]

I voted Yes - but over the next year or so .

Dollar Is Funny Money in Push for World Currency: Kevin Hassett

http://www.bloomberg.com/apps/news?pid=206...id=adiwJJwwge88

This article appears to be arguing for a global currency. not a dollar collapse.

Mish just came out with an analysis of some current thinking re this topic-

http://globaleconomicanalysis.blogspot.com...on-madness.html

[flying]

I voted no. Along fundamental lines anyway, the fx market could do <deleted> anything. Consider:

1) ~65% of all the currency in the world is denominated in USD and ~80% of world trade has it on 1 side. That's a HUGE incentive for maintaing the value of the USD.

2) Japan has been printing money like crazy for 2 decades and has a much larger debt/GDP than the US, yet it's currency is still strong.

3) Should China, Japan et al decide to sell all the USTs they have accumulated due to mercantilist trade policies one must ask who the buyers for these instruments will be, and in exchange for what?

4) The amount of new money being created is dwarfed by the unpayable debt overhang, and as $-denominated debt is liquidated the demand for $ will rise.

1) But if all the world has is a bunch of Federal Reserve Notes/ IOU's (backed by a promise based on future income of a country with unemployment really in the 16% range today) & they see clearly that the borrower/issuer of these IOU's is gong further & further into debt. Is it still a good idea to keep accepting IOU's from someone you see is going into bankruptcy? Would you as a business man allow that to continue unabated?

2) Japan still produces a hel_l of a lot of products. Does the USA?

Also Japan is still a net-creditor (worlds largest) Not that calling in these debts today would guarantee them getting paid

But the USA has not really been a creditor since the 70's?

3) Who would the buyers be? Anyone who will still sell real goods will accept the notes for now.

What will they buy? Well we have seen China buying all kinds of farmland this year as well as Gold & now it seems Canadian Oil Fields...

http://www.bloomberg.com/apps/news?pid=206...id=anEnefa1Nklg

Japan.... "So far, only Japan has made some low-level noises about denominating their loans to the US in Yen instead of dollars, but you can be sure other countries are quietly considering it as well."

http://www.chrismartenson.com/blog/five-horsemen/26258

Would not be surprised if Japan formed a currency settlement agreement with China linking Yen to Yuan. Nor would it be surprising to see them stop buying treasuries soon.

Then more reliance on China to buy more & they may just give it up too. Based on reason #1

As the interest rates rise as they must on USD won't that be bullish for Yen?

4) How many decades will pass before ...."as $-denominated debt is liquidated the demand for $ will rise" ?

Edited August 31, 2009 by flying

[Naam]

1. Along fundamental lines anyway, the fx market could do <deleted> anything. Consider:

2. ~65% of all the currency in the world is denominated in USD and

3. ~80% of world trade has it on 1 side.

4.That's a HUGE incentive for maintaing the value of the USD.

1. correct

2. partly correct

3. correct

4. completely wrong assumption without any basis.

[cloudhopper]

1) But if all the world has is a bunch of Federal Reserve Notes/ IOU's (backed by a promise based on future income of a country with unemployment really in the 16% range today) & they see clearly that the borrower/issuer of these IOU's is gong further & further into debt. Is it still a good idea to keep accepting IOU's from someone you see is going into bankruptcy? Would you as a business man allow that to continue unabated?

The other major currencies that the $ could collapse against don't seem to be any different.

2) Japan still produces a hel_l of a lot of products. Does the USA?

The US is still the world's biggest manufacturer AFAIK.

Also Japan is still a net-creditor (worlds largest) Not that calling in these debts today would guarantee them getting paid

But the USA has not really been a creditor since the 70's?

The creditor nations (as was the US in the great depression) are the most vulnerable.

3) Who would the buyers be? Anyone who will still sell real goods will accept the notes for now.

What will they buy? Well we have seen China buying all kinds of farmland this year as well as Gold & now it seems Canadian Oil Fields...

Good point; I agree.

http://www.bloomberg.com/apps/news?pid=206...id=anEnefa1Nklg

Japan.... "So far, only Japan has made some low-level noises about denominating their loans to the US in Yen instead of dollars, but you can be sure other countries are quietly considering it as well."

http://www.chrismartenson.com/blog/five-horsemen/26258

Would not be surprised if Japan formed a currency settlement agreement with China linking Yen to Yuan. Nor would it be surprising to see them stop buying treasuries soon.

Then more reliance on China to buy more & they may just give it up too. Based on reason #1

As the interest rates rise as they must on USD won't that be bullish for Yen?

4) How many decades will pass before ...."as $-denominated debt is liquidated the demand for $ will rise" ?

As many as possible if the government has it's way. Japan has been "successful" for 2 so far...

Hey did you see I got 75% from Prof. Naam? Possibly the highest grade he's ever awarded on TV. I'm chuffed!

[flying]

The other major currencies that the $ could collapse against don't seem to be any different.

The creditor nations (as was the US in the great depression) are the most vulnerable.

The US is still the world's biggest manufacturer AFAIK.

The creditor nations (as was the US in the great depression) are the most vulnerable.

Hey did you see I got 75% from Prof. Naam? Possibly the highest grade he's ever awarded on TV. I'm chuffed!

Correct that the other major currencies will have nill if/when the US defaults.

Which is why it is a smart move for China to spend like drunken sailors their USD as fast as possible. Also smart for Japan to push for the currency settlement with China

This US being the largest manufacturer in the world of what? Where is this production taking place?

Yes the creditors always take the biggest risk. But unlike a mortgage foreclosure screwing over certain countries is probably not the best idea available.

Yes congrats on the test score

Edited September 1, 2009 by flying

[cloudhopper]

This US being the largest manufacturer in the world of what? Where is this production taking place?

Don't know either answer. The chart I used to make that statement can be found here- http://www.bls.gov/fls/chartbook2009/chart5.9.pdf

However I notice first-world countries are not shown so maybe Germany or Japan has an even greater share than 20%

-edit here's a better chart-

http://www.bls.gov/fls/chartbook2009/chart3.7.pdf

Edited September 1, 2009 by cloudhopper

[Naam]

This US being the largest manufacturer in the world of what? Where is this production taking place?

[siamamerican]

So to those 45% who think 'yes - the dollar is going to collapse', how many of you have moved your assets out of dollars

Probably the Chinese would vote yes too - and do nothing about it!

As for doing nothing about it......Events of the past year would suggest the opposite.

I think the USA is facing some very uncertain times but not quite sure most countries are really in much better shape ( alot of debt out there and too many countries with weak balance sheets) I'm living in Asia and might start hedging a little and buy Asian currencies or equities. Currently though I invested almost all my free cash in US real estate about 3 months ago. For better or worse, I'm dollar long for the next 4-8 months.

In the end, the dollar will still be around for the next 20 years. I don't see a collapse and I think we are just in a weakening dollar phase. Maybe in a few years I'll look back and wonder how I just didn't see the sky falling and the laugh will be on me.