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U.S. Dollar Crash Is Not Going To Happen
The Market Oracle ^ | 10-22-2009 | Mike Whitney

Posted on 10/22/2009 10:47:47 AM PDT by blam

U.S. Dollar Crash Is Not Going To Happen

Currencies / US Dollar
Oct 22, 2009 - 01:26 AM
By: Mike_Whitney

The dollar is not going to crash. In fact, many economists believe that the dollar will rally when the Fed ends its quantitative easing program (QE) sometime in early 2010. The Fed is on track to buy nearly $2 trillion dollars of mortgage-backed securities, US Treasuries and agency debt. In other words, the Fed is printing money and pumping it into the housing market to keep the market from collapsing. This keeps interest rates low, but it also weakens the dollar. When the program ends, long-term interest rates will rise and the dollar will strengthen.

There is also a correlation between stock prices and the dollar which should be considered. As equities have soared, the dollar has plunged. That's because investors have become less risk-adverse than they were after Lehman Bros. collapsed. Now they have resumed speculation. Still, the S&P 500 is up over 60 percent since March 9, (which prices in a full three year recovery) which is "too much too fast." According to John Hussman, "90% of stocks (are) suspended above their 50- and 200-day moving averages for as sustained a period as we have now observed." (Hussman Funds Weekly Market Comment) That suggests that stocks are wildly overbought and that the market will soon correct, perhaps, violently.

Also, there is no shortage of investors and central banks willing to buy US debt which supports the greenback. Consider this report in last week's Bloomberg:

"Investors can’t get enough Treasuries even as the U.S. budget deficit climbs beyond $1 trillion, the government sells a record amount of debt and the dollar declines to the weakest level since August 2008.

[snip]


TOPICS: News/Current Events
KEYWORDS: currency; dollar; gold; goldbug; peakoil; treasuries

1 posted on 10/22/2009 10:47:48 AM PDT by blam
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To: blam
Go For Gold: If The Fed Keeps Printing, The Dollar Will Keep Falling


2 posted on 10/22/2009 10:49:05 AM PDT by blam
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To: blam

Hope and Change.... Hope and Change....

More like wishful thinking from the Obamabots.


3 posted on 10/22/2009 10:52:24 AM PDT by Thunder90 (Fighting for truth and the American way... http://citizensfortruthandtheamericanway.blogspot.com/)
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To: blam

I think’s Obama/Axelrod/Emanuel’s secret mantra is “Bring it all down” then “Seize permanent power in the chaos that ensues”

The Dollar will crash and it will be a crisis that isn’t wasted by them.


4 posted on 10/22/2009 10:54:14 AM PDT by GraceG
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To: blam

Yeah sure. The obama admin is just going to let interest rates go up and the stock market go down in mid-late 2010 (election year).


5 posted on 10/22/2009 10:58:47 AM PDT by 2banana (My common ground with terrorists - they want to die for islam and we want to kill them)
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To: blam
The “Market Oracle” and the Delphi Oracle seem to have one commonality — huffing gas, before prognosticating.
6 posted on 10/22/2009 11:00:00 AM PDT by USFRIENDINVICTORIA
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To: blam

I have heard it said that the market is rising because the banks are buying equities instead of lending. Is that so? Is there any way to tell?


7 posted on 10/22/2009 11:05:24 AM PDT by Mamzelle (Who is Kenneth Gladney? (Don't forget to bring your cameras))
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To: blam
I wanted hope, but all that I had after it was over was this change:

The real value of the dollar decline.

8 posted on 10/22/2009 11:07:01 AM PDT by LuxMaker (The Constitution is a mere thing of wax in the hands of the judiciary, Thomas J 1819)
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To: blam
Moody's Warns US To Slash Debt Or Risk AAA Rating
9 posted on 10/22/2009 11:08:15 AM PDT by blam
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To: Mamzelle
I'm not sure banks can even buy equities at all.

My guess is that the rise in the stock market is tied to genuine profitability at big U.S. companies -- mainly because in the face of declining sales figures these companies have actually been able to slash their costs to levels that more than make up for the lower sales figures.

10 posted on 10/22/2009 11:08:24 AM PDT by Alberta's Child (God is great, beer is good . . . and people are crazy.)
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To: blam

If you invest in a dot.com company and it goes bankrupt
and fed prints money to make you whole again

Everything is just papered over and the collapse masked. Whats collapse is the value of your money


11 posted on 10/22/2009 11:08:52 AM PDT by 4rcane
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To: blam
In other words, the Fed is printing money and pumping it into the housing market to keep the market from collapsing.

The housing market is backed up by houses and land, which have a real value even if it is no longer what was paid in 2007. It may fall, but it won't collapse.

The dollar, on the other hand, is backed by nothing. No gold, no silver, no houses, no land hold up the value of the dollar. It can certainly collapse, and if it does it will happen quickly as all the foreign holders of the dollar hear the music stop in their game of musical chairs and scramble to not be the one left standing with dollars when everyone else is sitting down after dumping their reserves.

12 posted on 10/22/2009 11:13:10 AM PDT by KarlInOhio (Soon everyone will win a Nobel Peace Prize for not being George Bush...well, except for George Bush.)
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To: blam

The dollar can only “crash” in value against other currencies. The article is incomplete but basically correct.

Despite all the caterwauling there is no currency as dependable as the dollar. Not the Euro and certainly not the Yuan. And after those two, there is no currency worth talking about. The value of the dollar has actually been inflated for years due to being the reserve currency of the world.

We are currently hearing a lot of sound and fury, signifying nothing.


13 posted on 10/22/2009 11:14:16 AM PDT by SaxxonWoods (Charter Member, 58 Million Club)
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To: blam
Currency Rally Reversal


14 posted on 10/22/2009 11:16:29 AM PDT by blam
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To: blam
Sounds good, but when you print more money that has nothing to back it up, like gold, doesn't that make each dollar worth less? Pun intended.
15 posted on 10/22/2009 11:20:36 AM PDT by ANGGAPO (Leyte Gulf Beach Club)
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To: ANGGAPO; SaxxonWoods
"Investors can’t get enough Treasuries even as the U.S. budget deficit climbs beyond $1 trillion, the government sells a record amount of debt and the dollar declines to the weakest level since August 2008.

**********************************************

The "pay czars" pronouncement today that he wants to punish bank executives (all banks not just tarp recipients) that engage in risky ventures is just another way for the Obama admin to acknowledge (in a backhanded way) that they aren't selling enough treasuries. The "Chicago Style" message is unmistakable.

16 posted on 10/22/2009 11:26:33 AM PDT by Neidermeyer
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To: blam

BS! You wanta believe these clowns in the media and organizations who have either been bought off or been intimidated by the Othuggo administration.

Case in point — the American Cancer Society suddenly yesterday reports that too much preventative testing for cancer is going on, after years and years of encouraging it. Gosh, what a coinkidinky for Obamacare plans!

The Othuggo adm has intimidated or bought off so many now that it’s scary. I see Newt has endorse that beotch with an R after her name that is really a Dim in NY state. Of course, Newt hasn’t been trustworthy for a long time, but perhaps he has been threatened and/or bought off as well.


17 posted on 10/22/2009 11:33:17 AM PDT by webschooner
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To: blam

It prolly won’t crash ... just do a slow steady decline.


18 posted on 10/22/2009 11:35:13 AM PDT by webschooner
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To: blam

I’m just trying to get my arms around this for the sake of my 401K. This guy is saying that the near term danger is deflation, not hyperinflation.

Because since the long term decline of the dollar seems to be inevitable, (due to irresponsible fiscal policy) the writer recommends that the dollar be abandoned as the world reserve currency. “King Dollar” Kudlow, on the other hand says that this would be a disaster.

Question: What would be the consequences for investments? (Note that the writer implies that he’s not a “gold bug”).


19 posted on 10/22/2009 12:03:06 PM PDT by haroldeveryman
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To: haroldeveryman

In my opinion, investing is a “process”, not a “product”.

I feel you first need to decide the process you will use (assett allocation, momentum trading, etc.) before you decide when to buy or sell, etc.

No one can get tomorrows news today, so all of these people predicting the future are worthless.

Case in point, NONE of them saw the meltdown coming until after it occurred.

Look at Bear Sterns and Lehman...they were some of the biggest brokerage firms in the country and they went BANKRUPT!

If they couldn’t manage their own money, why would you trust them to manage yours?

I’d look at history, see which approach has worked and then apply it.


20 posted on 10/22/2009 12:17:33 PM PDT by OhhTee5
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To: OhhTee5

One of Murphy’s Laws....

.........if you think it can’t happen...it will happen!


21 posted on 10/22/2009 12:20:56 PM PDT by Bullfrogg
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To: OhhTee5

Thanks for your excellent reply.

“Case in point, NONE of them saw the meltdown coming until after it occurred.”
Exactly. The housing bust was foreseen by housing experts, but the consensus opinion seemed to be that it was going to be a “soft landing.” Gary Schilling thought that it would be bad enough to cause a recession, and Joe Battipaglia and others foresaw the relentless stock market decline early on. But I didn’t see anyone predict the banking collapse that savaged most of our 401K’s (although an acquaintance of mine said that the guy that runs Pimco did). I guess that most that good analysts can hope for is to foresee the relative likelihood of various outcomes. Investors have to develop a strategy by obtaining some understanding of the fiscal and monetary forces upon which possible outcomes are premised.

“If they couldn’t manage their own money, why would you trust them to manage yours?”
Well, in their defense, even under the most idealized conditions, market analysis depends on the predictability of human behavior, and that is way too complex to be quantified. Having said that, none of thee guys should even pretend to have a foolproof system.
Furthermore, when into our intricate market machinery a monkey wrench is thrown, in the form of crooked politicians, community organizers, banking queens and whatever other manner of megalomaniac, we have a cesspool that not even Larry Kudlow or Bob Brinker could fathom.

“I feel you first need to decide the process you will use (asset allocation, momentum trading, etc.) before you decide when to buy or sell, etc”
Mostly asset allocation. Have something in this sucker stock market but look for a way out. Hedge against hyperinflation, catastrophic deflation, and whatever else might happen. Don’t be overly pessimistic, but buy a gun and keep your passport current. So here I am swatting flies and ducking rocks to preserve what I saved from my honest job.


22 posted on 10/22/2009 9:59:01 PM PDT by haroldeveryman
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To: AdmSmith; Berosus; bigheadfred; Convert from ECUSA; dervish; Ernest_at_the_Beach; Fred Nerks; ...

Note: this topic is from 10/22/2009. Thanks blam.
23 posted on 05/26/2010 5:57:21 PM PDT by SunkenCiv ("Fools learn from experience. I prefer to learn from the experience of others." -- Otto von Bismarck)
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