Skip to comments.U.S. Dollar Crash Is Not Going To Happen
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
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 cant 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.
Hope and Change.... Hope and Change....
More like wishful thinking from the Obamabots.
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.
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).
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?
The real value of the dollar decline.
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.
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
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.
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.
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.
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.
It prolly won’t crash ... just do a slow steady decline.
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”).
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.
One of Murphy’s Laws....
.........if you think it can’t happen...it will happen!
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 couldnt 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.