Get Out Of $dollars$ Now!

[Soju]

I think as far as Canada goes you have to look back at the “great depression” and see what the affect was. I somehow think Canada would remain a bit more stable than the US mostly because the crime rate is lower and the current agricultural community is stronger. This is not a fact it is my opinion from living in this region of the world for a very long time and having family in both countries, just a personal observation.

I'd personally prefer to weather a serious recession in Thailand before Canada if I didn't have a job. Those cold Canadian winters would be a bit harse if you didn't have money. Of course, I'm married to a Thai woman and we're soon going to be buying some farm land (put in her name of course), which we plan to rent out for a while. But if the worst came, we could always move there and live on next to nothing, with her parents and a few relatives coming to work the fields to put food on the table. I don't think it will ever come to that, as I have plenty of reserves to last for a long time, but it's nice to know that option is there should you ever need it.

When things get really bad, the people who grew up in and continue to live in an urban environment are the ones who get hit the hardest. People who live in, or grew up in an agricultural setting typically know how to take care of themselves without any outside help.

Edited July 16, 2006 by Soju

[DrFisher]

No doubt, and I never plan on going back to the cold either I'm happy right here in CM.

[LoveDaBlues]

The sky is falling! The sky is falling!

LOL if gas prices DOUBLE overnight Americans would quickly adapt and adjust. The Americans who would be hit the hardest would be those living in rural areas. The city folk and burb dwellers would start car-pooling on a massive scale (and not just to work) and many would buy small motorbikes.

Remember this quote: "I fear that we have awakened a sleeping giant

and filled him with a terrible resolve" Japanese Admiral Isoroku Yamamoto

America quickly geared up after the attack on Pearl Harbor; Yamamoto was right.......no people have shown more resolve than Americans when faced with any kind of adversity.

I'm proud to be an American but don't consider myself a 'Nationalist'. Sure the near term looks bad for the American economy but the sky is only a little cloudy AND NOT FALLING!

America is STILL the country where people from all over the world are dying (sometimes literally) to get in because opportunity, hope, and freedom still exist.

I don't plan on going back to America for various reasons but America is STILL THE BIG DOG..........get used to it LOL.........

ALL my money is in US Dollars and US Dirt.....I sleep very well at night.

Okay my 'pro' American rant is over.........flame on!!!.........peace out.

Heck, this is a troll post anyway!

LDB

[Tywais]

The sky is falling! The sky is falling!

Heck, this is a troll post anyway!

I've seen these alarmist statements off and on for the last 30-40 years. Also remember gold reaching ~ $800.00/ounce (got burned on options by getting in at the peak before the floor fell out on gold). How many times has the account deficit been stated to be tantamount to fiscal armagedon only to recover? In my case I'm 50%/50% in dollars/others but for convenience and not fear.

[TRIPxCORE]

Just wondering if you have any statistics to back up that statement. I found this report on consumer debt in the UK...

http://www.grant-thornton.co.uk/pages/pres...bt+research.pdf

which states, "Consumer debt is at an historical high. After breaking the trillion pounds barrier for the first time, consumers in the UK now have the dubious honour of being among the biggest borrowers in the world. To put things into perspective, the UK’s consumer borrowing is now more than the whole external debt of Africa and South America combined."

It goes on to show a table fo % of debt to income as of 2003:

UK - 138%

Japan - 121%

USA - 142%

Germany - 102%

Netherlands - 185%

Australia - 141%

It doesn't seem to me that Americans are really significantly more in debt than other developed countries. If you can provide some concrete evidence of your claim, then I'll accept it.

Edit: I found another report, which is two years old, which also shows similar data...

http://www.marubeni.co.jp/research/eindex/.../index.html#ch6

From a currency newsletter:

The Mid East troubles are really heating up... And tonight I saw oil trade over $78 per barrel! This is really gotten out of hand, and I can see a run to Gold and Swiss francs!"

Lehman Brothers Holdings Inc. agrees with Chuck's last statement. They advised clients to reduce bets on emerging market currencies and also told their investors to increase wagers on the Japanese yen after the BOJ move. James McCormick, Lehman's London-based head of global currency research, said in a report yesterday "The combination of a rate increase in Japan, anticipated hawkish comments from Federal Reserve officials and faster US inflation seem too high a risk to be running large exposures in riskier currencies in the coming week."

Then from a CNN report:

Growth in personal income also slowed, rising 0.4 percent last month, ahead of economists' forecasts for a 0.2 percent rise but a slowing from a 0.7 percent April increase.

The rise in income reflected gains stemming from interest earnings and an increase in the income of partnerships and business owners. Wages and salaries, which shot up a steep 0.8 percent in April, were flat.

In order to keep up their spending in the face of high energy prices, consumers dug deeper into their savings.

The personal saving rate - saving as a percentage of disposable income - slipped to a negative 1.7 percent, the lowest since a hurricane-related record low in August.

Economists said consumers eventually would capitulate and cut their spending.

"We can't keep on spending and not saving. That's going to be a problem going forward," said David Wyss, chief economist at Standard & Poor's Ratings Services in New York.

[malcolminthemiddle]

Another point and I'm no expert is that the US$ offers the best opportunity for diversification since there are many more investment tools such as mutual funds denominated in US$ than other major currencies such as the Yen, EURO & UK pound.

What to do?

[Soju]

Just wondering if you have any statistics to back up that statement. I found this report on consumer debt in the UK...

http://www.grant-thornton.co.uk/pages/pres...bt+research.pdf

which states, "Consumer debt is at an historical high. After breaking the trillion pounds barrier for the first time, consumers in the UK now have the dubious honour of being among the biggest borrowers in the world. To put things into perspective, the UK’s consumer borrowing is now more than the whole external debt of Africa and South America combined."

It goes on to show a table fo % of debt to income as of 2003:

UK - 138%

Japan - 121%

USA - 142%

Germany - 102%

Netherlands - 185%

Australia - 141%

It doesn't seem to me that Americans are really significantly more in debt than other developed countries. If you can provide some concrete evidence of your claim, then I'll accept it.

Edit: I found another report, which is two years old, which also shows similar data...

http://www.marubeni.co.jp/research/eindex/.../index.html#ch6

From a currency newsletter:

The Mid East troubles are really heating up... And tonight I saw oil trade over $78 per barrel! This is really gotten out of hand, and I can see a run to Gold and Swiss francs!"

Lehman Brothers Holdings Inc. agrees with Chuck's last statement. They advised clients to reduce bets on emerging market currencies and also told their investors to increase wagers on the Japanese yen after the BOJ move. James McCormick, Lehman's London-based head of global currency research, said in a report yesterday "The combination of a rate increase in Japan, anticipated hawkish comments from Federal Reserve officials and faster US inflation seem too high a risk to be running large exposures in riskier currencies in the coming week."

Then from a CNN report:

Growth in personal income also slowed, rising 0.4 percent last month, ahead of economists' forecasts for a 0.2 percent rise but a slowing from a 0.7 percent April increase.

The rise in income reflected gains stemming from interest earnings and an increase in the income of partnerships and business owners. Wages and salaries, which shot up a steep 0.8 percent in April, were flat.

In order to keep up their spending in the face of high energy prices, consumers dug deeper into their savings.

The personal saving rate - saving as a percentage of disposable income - slipped to a negative 1.7 percent, the lowest since a hurricane-related record low in August.

Economists said consumers eventually would capitulate and cut their spending.

"We can't keep on spending and not saving. That's going to be a problem going forward," said David Wyss, chief economist at Standard & Poor's Ratings Services in New York.

Okaaaay....where's the data showing that US consumer debt is worse than other countries? That was what I requested, but absolutely no information in that post comparing the US with other countries. I agrree that American consumers have too much debt. But the same thing is happening in many countries around the world.

Back to your previous post, "Yes, it does affect every nations people but with the US consumer in such big trouble already because of the huge debt pile most of them have dug themselves into, it will hit much harder on Americans." You say that Americans will be hit harder because of their consumer debt. I provided data that indicates your statement doesn't hold water and being you can't provide any proof to support your argument, I rest my case.

[TRIPxCORE]

Just wondering if you have any statistics to back up that statement. I found this report on consumer debt in the UK...

http://www.grant-thornton.co.uk/pages/pres...bt+research.pdf

which states, "Consumer debt is at an historical high. After breaking the trillion pounds barrier for the first time, consumers in the UK now have the dubious honour of being among the biggest borrowers in the world. To put things into perspective, the UK’s consumer borrowing is now more than the whole external debt of Africa and South America combined."

It goes on to show a table fo % of debt to income as of 2003:

UK - 138%

Japan - 121%

USA - 142%

Germany - 102%

Netherlands - 185%

Australia - 141%

It doesn't seem to me that Americans are really significantly more in debt than other developed countries. If you can provide some concrete evidence of your claim, then I'll accept it.

Edit: I found another report, which is two years old, which also shows similar data...

http://www.marubeni.co.jp/research/eindex/.../index.html#ch6

From a currency newsletter:

The Mid East troubles are really heating up... And tonight I saw oil trade over $78 per barrel! This is really gotten out of hand, and I can see a run to Gold and Swiss francs!"

Lehman Brothers Holdings Inc. agrees with Chuck's last statement. They advised clients to reduce bets on emerging market currencies and also told their investors to increase wagers on the Japanese yen after the BOJ move. James McCormick, Lehman's London-based head of global currency research, said in a report yesterday "The combination of a rate increase in Japan, anticipated hawkish comments from Federal Reserve officials and faster US inflation seem too high a risk to be running large exposures in riskier currencies in the coming week."

Then from a CNN report:

Growth in personal income also slowed, rising 0.4 percent last month, ahead of economists' forecasts for a 0.2 percent rise but a slowing from a 0.7 percent April increase.

The rise in income reflected gains stemming from interest earnings and an increase in the income of partnerships and business owners. Wages and salaries, which shot up a steep 0.8 percent in April, were flat.

In order to keep up their spending in the face of high energy prices, consumers dug deeper into their savings.

The personal saving rate - saving as a percentage of disposable income - slipped to a negative 1.7 percent, the lowest since a hurricane-related record low in August.

Economists said consumers eventually would capitulate and cut their spending.

"We can't keep on spending and not saving. That's going to be a problem going forward," said David Wyss, chief economist at Standard & Poor's Ratings Services in New York.

Okaaaay....where's the data showing that US consumer debt is worse than other countries? That was what I requested, but absolutely no information in that post comparing the US with other countries. I agrree that American consumers have too much debt. But the same thing is happening in many countries around the world.

Back to your previous post, "Yes, it does affect every nations people but with the US consumer in such big trouble already because of the huge debt pile most of them have dug themselves into, it will hit much harder on Americans." You say that Americans will be hit harder because of their consumer debt. I provided data that indicates your statement doesn't hold water and being you can't provide any proof to support your argument, I rest my case.

I never said that US consumers were in the worst position in the entire world. I said they are in a bad position because they spend a lot more than they make and run up lots of debt. Eventually it will come around and bite them in the a**.

[Soju]

I never said that US consumers were in the worst position in the entire world. I said they are in a bad position because they spend a lot more than they make and run up lots of debt. Eventually it will come around and bite them in the a**.

It may very well come around and bite them, but chances are it will bite consumers in other countries as well. You and several others on this forum are predicting bad times for the US Dollar. I agree a recession is imminent, it's only a matter of time. That's just the natural way economic cycles work. I'm not in any postition to say when it will happen. When the recession does hit, I predict it will hit most countries in the world, including almost all of Europe. If all countries get hit by it equally, there likely won't be a declining dollar. You can't have a situation where all the currencies go down. For every currency that goes down, another currency (or currencies) go up to balance it out. That's just the definition of currency rates. It's a complete impossibility for all currencies to go down. So I don't understand why so many of you are making such dire predictions for the US Dollar, and then try to justify your conclusions based on what you interpret as troubling signs that are present not only in the US, but also in many other countries as well.

If you were predicting a recession in all countries that have too high of consumer debt, then I could see your point, even though I might not agree with it. But to predict a falling US Dollar based on factors that are not unique to the US just doesn't make the slightest bit of logical sense to me. Please tell me if I have a hole in my logic.

[Martin]

I see no hole in your logic, 'soju'.

In fact, there is an old saying that: "When the American economy sneezes, the whole world catches the cold".

I think that we will see wild fluctations in currencies relative to each other, though, when the bubble bursts.

Looking back to 1997, with hindsight, a devaluation of the baht relative to the pound from 40 to 65-70 was what was needed. But, when the bubble burst, the rate went all over the place. Even up to 88 at one point a few months after.

Logic and what the speculators do are not closely linked!

'ray23' points out that, for many of us, it is the monthly sums of income which are paramount.

My approach, for a couple of years now, has been to assume that the purchasing power of my pensions (which are paid to me in pounds) will halve.

So I have kept our lifestyle to cope with that, and treated the extra as a 'bonus' that allowed for some 'special one-off extras' and for some saving, in the form of physical gold.

Like 'soju', we have some farmland.

The part that is in rice paddies, we farm the 'easy way'.

A family of landless peasants do all the work in return for half the crop. That is enough rice for them to eat, and some to sell for a bit of cash.

And our half is enough for us to eat, and a bit to sell to cover the fertilizer bill.

The land that is growing sugarcane is rented out for two years at a time.

The renters would like to buy it, but we say :"Sorry. It is not for sale. In fact, we would buy more ourselves, if there was some for sale that adjoins".

I expect that, if the recession hits, a lot from the village, who are working away, will come back.

We plan to convert the sugarcane land back to rice paddies then, and it will feed some more families and, hopefully, our share will sell for enough to counterbalance the fall in purchasing power of my pensions.

As always--hopes and fears, fears and hopes.

Edited July 16, 2006 by Martin

[NovaBlue05]

In this thread and similar threads (regarding the future of the USD) that I have read in this forum and others, there are usually two distinct poster types. The first is the poster with a knowledge of global economics and finance and offer their opinions objectively with no apparent rooting interest. The other is the poster who has the deep desire to see the USD.....and the US in general...fail and attempts to veil that desire with quotes from misc "experts". I am neither of these types but I do know which ones are more useful.

Here's another great quote:

"...You can line all the Economists in the world up...end to end...and they would reach no conclusion." - Unknown

[TRIPxCORE]

I never said that US consumers were in the worst position in the entire world. I said they are in a bad position because they spend a lot more than they make and run up lots of debt. Eventually it will come around and bite them in the a**.

It may very well come around and bite them, but chances are it will bite consumers in other countries as well. You and several others on this forum are predicting bad times for the US Dollar. I agree a recession is imminent, it's only a matter of time. That's just the natural way economic cycles work. I'm not in any postition to say when it will happen. When the recession does hit, I predict it will hit most countries in the world, including almost all of Europe. If all countries get hit by it equally, there likely won't be a declining dollar. You can't have a situation where all the currencies go down. For every currency that goes down, another currency (or currencies) go up to balance it out. That's just the definition of currency rates. It's a complete impossibility for all currencies to go down. So I don't understand why so many of you are making such dire predictions for the US Dollar, and then try to justify your conclusions based on what you interpret as troubling signs that are present not only in the US, but also in many other countries as well.

If you were predicting a recession in all countries that have too high of consumer debt, then I could see your point, even though I might not agree with it. But to predict a falling US Dollar based on factors that are not unique to the US just doesn't make the slightest bit of logical sense to me. Please tell me if I have a hole in my logic.

Where are you getting this stuff? All I have said is that the US economy is going to suffer and USD will depreciate. I never mentioned anything else about other economies or nations. Personally, I am invested in JPY and believe against USD, JPY will appreciate. This is where I am coming from.

You're assigning words and ideas to me that I never said!

[Soju]

Where are you getting this stuff? All I have said is that the US economy is going to suffer and USD will depreciate. I never mentioned anything else about other economies or nations. Personally, I am invested in JPY and believe against USD, JPY will appreciate. This is where I am coming from.

You're assigning words and ideas to me that I never said!

Ok, now we're clear. Thank you for finally specifiying exactly what you were saying. You think the USD will depreciate against the Yen. My main focus was that it is very unlikely that the USD will depreciate against all or even most currencies because many countries are in the same situation as the US and their economies and thus currencies will pretty much follow the US. But because you were so focused on America's problems and the USD in this thread and in other recent threads, I got the impression that you felt the US economy and USD were in trouble but all of Europe and the other major players were safe. If someone were to believe what you said, but without you specifiying exactly your position, they might think getting out of USD and putting their money into Euros was a wise move. But IMHO that would be a foolish move, and evidently you also would feel the same.

BTW, I personally like the Yen as do you. It's very weak right now and I feel will improve significantly over the coming years against other currencies. The Euro vs. JPY chart for the past several years is very telling and I think a major adjustment is in order. My personal investment portfolio is denominated mostly in USD, JPY, THB. I also have some in KRW because I live in Korea but I'm certainly not bullish on the Korean Won at the moment and will likely try to cash in on those investments and reinvest, likely in JPY. I don't think anyone can accurately predict the economic future, so my advice is to spread your investment around some to limit your losses in any one currency. And spread it around in currencies that aren't tightly linked together, or to countries which have different economic fundamentals and aren't likely to follow each other down. Doing so limits your growth potential, but also minimizes your risk. But if you like to gamble, then put it all into the currency that you think will do best.

[ray23]

OK I have seen some doom and gloom, not really anything new, what I didn't see was advice on my question. As one poster pointed it out wishing to be to doesn't make it that way. The original poster I believe had us in civil war and anarchy in the streets, sorry sounds a lot like the movies made in the past.

Did anyone watch the BBC Asia business report today, did I misunderstand the commentator when he said monies were being funneled back into the dollar because it was considered a safe haven.

If I did understand correctly that statement seems very contrary to the original post.

[Martin]

For 'ray 23'.

I take it that you are referring to post #60, where you ask:

"Now here is the real question if your retirement is tied to dollars and you are paid in dollars and can't change that, what approach do you take?"

Although my retirement is paid in pounds, I think I would still do the same if it were paid in dollars.

That is, I change it all to bahts and use half of it for our 'basic lifestyle spending'. The rest I treat as being available for, partly, spending on inessentials and, partly, for saving.

The savings part, I convert into physical gold.

If some conveniently-located land, that was suitable for growing rice, came on the market, I would sell some of our gold to pay for it.

[kerryk]

Odd timing of this thread just as the US dollar is going higher. I have a small amount of money in US dollars and after reading this thread decided to do some checking to make sure my money was not at risk. I went to Bloomberg because they usually have good financial news and this is what I found.

Dollar Reaches Three Month-High Against Yen as Israel Steps Up Attacks

July 17 (Bloomberg) -- The dollar surged to the highest in almost three months against the yen and gained versus the euro on speculation increased violence in the Middle East will stoke demand for assets denominated in the U.S. currency.

Israel stepped up attacks against Beirut today in its biggest military campaign against Lebanon since 1982. Investors typically seek safety by buying U.S. Treasuries and gold during political upheaval. The dollar extended gains after breaking through key levels that triggered automatic orders to buy the currency.

``The situation in the Middle East is worrying financial markets and we're seeing a resurgence of the dollar as a safe- haven currency,'' said Simon Derrick, chief currency strategist at Bank of New York in London. ``As long as this political uncertainty is clouding things the dollar will do well.''

The dollar rose to 116.82 yen at 9:48 a.m. in London from 116.12 in New York on July 14, after earlier reaching the strongest since April 21. The U.S. currency climbed to $1.2564 against the euro from $1.2652, the highest since June 29.

Japanese financial markets were shut for a public holiday.

The U.S. currency may be further boosted by anticipation Federal Reserve Chairman Ben S. Bernanke will tell Congress this week that inflation is accelerating fast enough to warrant further interest-rate increases, increasing the yield attraction of dollar assets.

The dollar extended gains after strengthening beyond 116.50 yen and $1.2620 against the euro, levels at which some traders had placed orders to buy the currency, said Stuart Ritson, a currency strategist at Rabobank Groep in London.

We're seeing a lot of interest in U.S. Treasuries and that will support the U.S. dollar,'' said Michael Thomas, head of economics and strategy in Sydney at ICAP Australia Ltd., a unit of the world's largest interbank broker. ``The Middle East situation hasn't calmed down.''

The case for further rate increases by the Fed may be increased this week by speculation a government report on July 19 will show consumer price inflation accelerated to the fastest pace in eight months in June.

[ray23]

For 'ray 23'.

I take it that you are referring to post #60, where you ask:

"Now here is the real question if your retirement is tied to dollars and you are paid in dollars and can't change that, what approach do you take?"

Although my retirement is paid in pounds, I think I would still do the same if it were paid in dollars.

That is, I change it all to bahts and use half of it for our 'basic lifestyle spending'. The rest I treat as being available for, partly, spending on inessentials and, partly, for saving.

The savings part, I convert into physical gold.

If some conveniently-located land, that was suitable for growing rice, came on the market, I would sell some of our gold to pay for it.

Thanks that was exactly the question sounds like I'm 50% there, I have put money into a home here and got lucky on that one bought at 400K below the market price. My money is converted to baht each month adn 50% as of this month can be allocated to savings. It has taken about three years and the major purchases are done, so serious saving can be done now because there is no debt load and at the same time not change my living standard. This is truly the best position I have ever been in financially.

The rest of the plan seems sound to me no matter what the dollar is doing, land in my area is outrageous Udon Thani, but other areas may be very good investments for the wifes future .

Thanks seem I might have been on the right track, but knowing very little about finance, your input was truly appreciated.

[lannarebirth]

Odd timing of this thread just as the US dollar is going higher. I have a small amount of money in US dollars and after reading this thread decided to do some checking to make sure my money was not at risk. I went to Bloomberg because they usually have good financial news and this is what I found.

Dollar Reaches Three Month-High Against Yen as Israel Steps Up Attacks

July 17 (Bloomberg) -- The dollar surged to the highest in almost three months against the yen and gained versus the euro on speculation increased violence in the Middle East will stoke demand for assets denominated in the U.S. currency.

Israel stepped up attacks against Beirut today in its biggest military campaign against Lebanon since 1982. Investors typically seek safety by buying U.S. Treasuries and gold during political upheaval. The dollar extended gains after breaking through key levels that triggered automatic orders to buy the currency.

``The situation in the Middle East is worrying financial markets and we're seeing a resurgence of the dollar as a safe- haven currency,'' said Simon Derrick, chief currency strategist at Bank of New York in London. ``As long as this political uncertainty is clouding things the dollar will do well.''

The dollar rose to 116.82 yen at 9:48 a.m. in London from 116.12 in New York on July 14, after earlier reaching the strongest since April 21. The U.S. currency climbed to $1.2564 against the euro from $1.2652, the highest since June 29.

Japanese financial markets were shut for a public holiday.

The U.S. currency may be further boosted by anticipation Federal Reserve Chairman Ben S. Bernanke will tell Congress this week that inflation is accelerating fast enough to warrant further interest-rate increases, increasing the yield attraction of dollar assets.

The dollar extended gains after strengthening beyond 116.50 yen and $1.2620 against the euro, levels at which some traders had placed orders to buy the currency, said Stuart Ritson, a currency strategist at Rabobank Groep in London.

We're seeing a lot of interest in U.S. Treasuries and that will support the U.S. dollar,'' said Michael Thomas, head of economics and strategy in Sydney at ICAP Australia Ltd., a unit of the world's largest interbank broker. ``The Middle East situation hasn't calmed down.''

The case for further rate increases by the Fed may be increased this week by speculation a government report on July 19 will show consumer price inflation accelerated to the fastest pace in eight months in June.

Not odd timing at all. In fact these sentiments are ESSENTIAL to move the dollar higher. The conventional wisdom is almost always wrong, and for awhile at least, it eill be wrong again.. I posted earlier where the $USD is in it's various cycles and no one seemed to take note. Cycles are everything and news is for suckers. I would also mention that holders of Euros and the GBP might want to pull up weekly charts of their currency against the $USD and google "gap theory" and "head and shoulders patterns."

[tutsiwarrior]

I would hate to think that my dollars are improving based upon Israeli aggression in the Middle East...

but...<deleted>?...if we are here to make money, who cares...?

make love, not war...live in poverty...

[TRIPxCORE]

From what I saw going on in the currency market on Friday, I'm not that surprised at what I see as I turn on the screens today. The dollar has really moved higher, on the news of the Middle East fighting. Traders have forgotten about the awful data that came out on Friday... They have forgotten about the Fed's words of how the next rate move would be data dependent... They are focusing on the heated Tensions and fighting in the Middle East.

On Friday, Retail Sales printed an unexpected decline of .1%... It was forecast to increase .4%... June sales were held back by slower sales of motor vehicles and parts, department store merchandise, building/garden equipment and electronics. Increased purchases at gasoline service stations and at furniture and food stores limited the June decline. The thing that caught my eye, as I reviewed the report is how much 2nd QTR Retail Sales fell from the 1st QTR... The 1st QTR Retail Sales grew at a mighty 13.3% annualized pace... While the 2nd QTR grew at only 3.6% annual pace

The other piece of data last Friday that should have knocked the stuffing out of the dollar was the U. of Michigan Consumer Confidence for the first part of this month... While this data was expected to increase... It too fell to an 83 reading from 84.9 the previous month. So... Just to get my data scorecard up to date so I can keep track of what the Fed's watching... Last week, we saw Consumer Credit soar, The Trade Deficit widen by almost 1%, Initial Jobless Claims pushing higher, Retail Sales falling, along with Consumer Confidence... Hmmm... I wonder what Big Ben thinks about all this?

Today, we'll see that dumb Empire Manufacturing report that's all over the board each month, Industrial Production and Capacity Utilization for June. Later this week, we'll see CPI inflation data for June, and that's the Big Kahuna for the week... Right now, the "experts" have forecast Jun CPI to be weaker than May's.... I'll believe that one when I see it... No wait, I don't believe anything that CPI has to offer, so I have no idea why I said that! But seriously... CPI is expected to weaken... Somehow!

Not trying to bore you with data... But, since the dollar is soaring because of Middle East tensions... I thought it to be important to show why it shouldn't be! Oh, and there's one more thing... Big Ben Bernanke is going to give us a report on the Economy and Fed Policy on Wednesday... That ought to be interesting!

As one might expect, Gold has been well bid during the Middle East fighting, and Swiss francs has retained more of their value than other currencies... (that's currency parlance for it hasn't lost as much ground as other currencies!)

Japanese yen has really taken some huge losses since the Bank of Japan removed the zero interest rate policy. Chris told you on Friday that there is a clear distinction between a currency's knee jerk reaction and the long term consequences for the currency... Yen is going to be the currency that is now shown whenever, someone looks up that thought! I really think that yen is cheap, cheap, fun, fun.

[Gary A]

You can buy all the Yen you want. I'll keep my Dollars.

[Martin]

Yes, the water actually recedes before the big wave comes.

Good luck to you brave men, who are staying in the bay and carrying on fishing.

Me? I have headed as fast as I can for the hills. (Hoping that I don't break a leg).

[Mr_Dave]

You can buy all the Yen you want. I'll keep my Dollars.

For those intent on keeping their government fiat money -- such as US Dollars -- perhaps the following will provide some food for thought.

Notes: I have added bold emphasis. I have no business interest whatsoever in the following newsletter. It is freely available on the web.

--------------- Quote Begin ---------------------------

From "Paul van Eeden" <[email protected]>

Subject Trouble brewing

Gold's 5% increase last week was generally attributed to escalating tension in the Middle East yet at the same time the Gold Fields Mineral Services (GFMS) Base Metal Index rose 7.8%. Base metals should not respond positively to war since wars destroy capital and cause misallocation of available capital, both of which in the end are detrimental to economic growth and prosperity. What gold and base metals are doing is signaling weakness in paper money. Gold is a monetary asset and protects its owners against the devaluations of fiat currencies only, and massive amounts of institutional money have been allocated to hard assets as a hedge against a decline in the dollar.

Between January and May this year the GFMS Base Metal Index rose 51% and gold rose 38% as institutional investors lay big bets that the US dollar is going to tumble. Those bets were placed on the premise of Japan ending its policies of quantitative easing and zero interest rates, which have been widely expected for almost a year now. With the Bank of Japan's new policy of transparency, the changes were announced well in advance of taking effect.

What is busy happening in Japan is far more important to the price of gold, the value of your house, interest rates, your job, and the value of the money in your bank account than what is happening in the Middle East.

Don't get me wrong; I am not downplaying the current Middle East violence. Personally I believe that the Third World War has already begun and that our lives are going to change dramatically over the course of the next several years as the War spreads and gains momentum. For starters you can expect further confiscation of your personal liberties, whatever is left of them.

This commentary, however, is not about liberty or war; it is about markets, money and gold. During previous wars and skirmishes the gold price seldom responded positively for very long. Any rally in the gold price due to conflict was usually (very) short-lived. So if the current rally in the gold price is merely due to Israel and Lebanon bombing each other, and fear that the violence will spread, then we should all sell into the rally for it will soon end.

On the other hand, if it has more to do with Japan raising interest rates for the first time in five years, marking the end of an era of yen-stimulated liquidity, then the rally could have legs (see last week's commentary for more on the yen and the yen-carry trade). The weakness of the dollar against the yen (one of the few currencies that the dollar was weaker against last week) can be directly attributed to Japan raising interest rates and not Middle East turmoil.

As I said, base metals have rallied spectacularly during the past six months and the sell-off that commenced in May has essentially been erased. Base metals are rallying again. Now, if war is in our future you can bet economic growth is going to suffer. Also, with the US, Europe and Japan raising rates we don't even need a war to take the wind out of the economy's sails.

But if the base metal bets were made on the premise that the dollar will weaken, what about traditional base metal demand? Slower economic growth and the end of the real estate boom will cause reduced demand for base metals and weakness in base metals prices. Copper has no business trading where it is. Neither do zinc, lead, nickel or many other metals. They became over-bought as institutional investors tried to find hedges against dollar weakness. Perhaps there is still so much institutional money out there looking for a hedge against the dollar that base metals prices will double again, but, being a contrarian, I would not want to bet on that.

Base metals prices are so far ahead of themselves that I believe there is substantial risk of a meltdown in that sector. Because institutional money seems to have been allocated across the spectrum of metals, I fear that a severe correction in base metals could drag the gold price down as well.

So what will happen first? Will the dollar collapse causing more money to be allocated to metals thus pushing metals prices even higher, or will base metals correct dragging gold down with them?

Paul van Eeden

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[lannarebirth]

From what I saw going on in the currency market on Friday, I'm not that surprised at what I see as I turn on the screens today. The dollar has really moved higher, on the news of the Middle East fighting. Traders have forgotten about the awful data that came out on Friday... They have forgotten about the Fed's words of how the next rate move would be data dependent... They are focusing on the heated Tensions and fighting in the Middle East.

On Friday, Retail Sales printed an unexpected decline of .1%... It was forecast to increase .4%... June sales were held back by slower sales of motor vehicles and parts, department store merchandise, building/garden equipment and electronics. Increased purchases at gasoline service stations and at furniture and food stores limited the June decline. The thing that caught my eye, as I reviewed the report is how much 2nd QTR Retail Sales fell from the 1st QTR... The 1st QTR Retail Sales grew at a mighty 13.3% annualized pace... While the 2nd QTR grew at only 3.6% annual pace

The other piece of data last Friday that should have knocked the stuffing out of the dollar was the U. of Michigan Consumer Confidence for the first part of this month... While this data was expected to increase... It too fell to an 83 reading from 84.9 the previous month. So... Just to get my data scorecard up to date so I can keep track of what the Fed's watching... Last week, we saw Consumer Credit soar, The Trade Deficit widen by almost 1%, Initial Jobless Claims pushing higher, Retail Sales falling, along with Consumer Confidence... Hmmm... I wonder what Big Ben thinks about all this?

Today, we'll see that dumb Empire Manufacturing report that's all over the board each month, Industrial Production and Capacity Utilization for June. Later this week, we'll see CPI inflation data for June, and that's the Big Kahuna for the week... Right now, the "experts" have forecast Jun CPI to be weaker than May's.... I'll believe that one when I see it... No wait, I don't believe anything that CPI has to offer, so I have no idea why I said that! But seriously... CPI is expected to weaken... Somehow!

Not trying to bore you with data... But, since the dollar is soaring because of Middle East tensions... I thought it to be important to show why it shouldn't be! Oh, and there's one more thing... Big Ben Bernanke is going to give us a report on the Economy and Fed Policy on Wednesday... That ought to be interesting!

As one might expect, Gold has been well bid during the Middle East fighting, and Swiss francs has retained more of their value than other currencies... (that's currency parlance for it hasn't lost as much ground as other currencies!)

Japanese yen has really taken some huge losses since the Bank of Japan removed the zero interest rate policy. Chris told you on Friday that there is a clear distinction between a currency's knee jerk reaction and the long term consequences for the currency... Yen is going to be the currency that is now shown whenever, someone looks up that thought! I really think that yen is cheap, cheap, fun, fun.

The dollar is not soaring due to Middle East tensions. It is rising due to the fact it is in an up cycle. All financial instruments / land / commodities go through up and down cycles. Currently the Dollar is in a short and intermediate term up cycle, in the context of a long term down cycle. How much it can rise in this up cycle will be a strong indication of how far it wil fall when it's short and longer term cycles turn down in sync in a year or two. It's not rocket science and reading doomsday newsletters is, as always, risky to one's financial health.

Follow the money:

http://www.freecotcharts.com/charts/EU.htm

The blue line Commercial Traders are the so called "smart money". They are often early, but seldom wrong. As ever, past results are no indication of furure results, blah, blah.

[Martin]

I notice the dollar is gradually easing down.

But the thing that struck me was that Ford and General Motors are both cutting back their plants significantly, with heavy loss of jobs. And even Toyota is reporting lower sales in Thailand this year than last.

It does look as if industrialisation is moving from the long era of positive growth to no growth. Will negative growth follow?

Something else that has struck me is that the automobile manufacturing industry may be becoming the victim of its own success. Vehicles are lasting much longer than they used to do, so the market for replacement seems to be shrinking.

It is the August 'silly season', but I am going to watch the topic of this thread carefully during the rest of the year.

[MartinBKK]

I have 75% of my money in US $ and i sleep really well at night.

For those that think the $ is going to dive perhaps they could tell us where the Dollar/Pound, Dollar/Euro and Dollar/Baht rates will be in 6 months from now, 1 year from now and 5 years from now. I will be very interested to keep a record of these predictions.

I am from the UK but own a home in the USA. I travel to both countries frequently and IMHO the £ is already overvalued.

[NovaBlue05]

For those that think the $ is going to dive perhaps they could tell us where the Dollar/Pound, Dollar/Euro and Dollar/Baht rates will be in 6 months from now, 1 year from now and 5 years from now. I will be very interested to keep a record of these predictions.

.

Well....The OP has already said that US will be a warzone with open warfare in the streets this October as the USD collapses. I guess I'll be upping my homeowners insurance and stocking up on ammo and vienna sausage to get ready for the octoberfest.

[britmaveric]

Well the OP is ting tong, so anything he says can well be IGNORED!!

[Martin]

This thread seems to be coming true.

From its start in July, we are now half way to Christmas, and what are we seeing?

Dollar slipped 10% relative to the pound and baht (which are my income and expenditure currencies), US housing market stalled, corn futures up 30% and wheat futures up 40%.

Presumably, next comes a lot of Americans realising they are in negative equity on their houses, and higher food prices pushing up the true inflation rate.

What will the reactions be?

I am staying to watch the second half of this performance, and meanwhile buying all the gold that I can afford whilst it is so cheap.

Looks like we are in for bumper rice and sugarcane harvests here.

Bangkok floods, but our crops thrive, and we have been getting fish for free just by picking them up from where the overflow from the storm drain comes along the side of the soi.

Corn and wheat going up should help to raise the demand for rice and its price. But I have no faith in the sugar price holding up if times turn hard, as 60% of it goes into fizzy drinks and people can cut those out of their purchasing very easily.

[Gary A]

I certainly wouldn't bet on sugar or the price of sugar cane going down. The reason they went up is because of all the sugar cane being diverted to ethanol production. New ethanol plants are still being built which will cause sugar prices to continue upward.

This thread seems to be coming true.

From its start in July, we are now half way to Christmas, and what are we seeing?

Dollar slipped 10% relative to the pound and baht (which are my income and expenditure currencies), US housing market stalled, corn futures up 30% and wheat futures up 40%.

Presumably, next comes a lot of Americans realising they are in negative equity on their houses, and higher food prices pushing up the true inflation rate.

What will the reactions be?

I am staying to watch the second half of this performance, and meanwhile buying all the gold that I can afford whilst it is so cheap.

Looks like we are in for bumper rice and sugarcane harvests here.

Bangkok floods, but our crops thrive, and we have been getting fish for free just by picking them up from where the overflow from the storm drain comes along the side of the soi.

Corn and wheat going up should help to raise the demand for rice and its price. But I have no faith in the sugar price holding up if times turn hard, as 60% of it goes into fizzy drinks and people can cut those out of their purchasing very easily.