Posted on 05/18/2011 7:32:10 AM PDT by SeekAndFind
Could the long dollar slide be over?
For the better part of the past decade, and particularly in the last few months, the American dollar has been the 98-pound weakling of the foreign exchange world. It has lost value against almost every other global currency — not just the euro, pound and yen but even the Romanian new leu and the Latvian lats.
Driven largely by the Federal Reserve’s policy of printing dollars to help spur a healthy economic recovery that remains stubbornly elusive, the dollar, weighed against a basket of other currencies, hit a 40-year low this month.
But betting against the dollar may no longer be such a safe play — not necessarily because of any sudden macroeconomic shifts but because of a sense that the long dollar sell-off may have finally gone too far.
Since May 4, the dollar is up 4 percent against the euro and 2 percent against the pound, while rallying against the Romanian and Latvian currencies as well.
The dollar’s bounce, though too brief to be called a trend, has not been driven by any noticeable improvement in America’s economic fundamentals. Indeed, the faint but real risk that Congress will fail to reach agreement on raising the legal ceiling on government borrowing only underscores the still parlous state of the American economy.
(Excerpt) Read more at nytimes.com ...
Not if Turbotaxcheat Timmy gets his way.
I really don’t understand this strong dollar thing.
Sure would not mind if we actually took real action to strengthen our currency long-term. That would involve a real trade policy, tariffs and bringing back manufacturing.
Since nothing is being done about any of that, what possible reason is there for our dollar to strengthen fundamentally?
Even one.
Everything we are doing, is wrong.
NONE of these things have been fixed or even addressed and they are expecting the dollar to INCREASE in value?
The US dollar is DOOMED.
And I forgot to mention:
44 MILLION on foodstamps
Brings to mind a painting I saw one time of the Titanic - the one where the bow is under water, and the fantail has risen way up in the air....
There are three big currencies, four at most.
1. The Yen - Printing money even faster due to Fugushima, and they are in their second lost decade.
2. The Euro has soverign debt crisis and is unravelling.
3. Chinese Yaun, massive inflation as it tries to keep up with QE Bernanke.
4. The dollar, and we all know its problems.
I see four terminal cancer patients but the dollar might outlive the other three by a few weeks.
There was an article on here yesterday detailing how companies are bring manufacturing BACK to the United States. It was good reading.
This is bound to happen. Just the way oil and other commodities over-reached so has the hedging against the dollar. It will break and when it does oil will fall through the floor.
Bring it on.
Could the Euro be counterfeited faster that the Dollar?
Seems unlikely to me. We need to find $1.5 Trillion in the next year or so. If The Fed isn't the source of most of that I don't know who is.
Do the Europeans need that much?
>> I see four terminal cancer patients but the dollar might outlive the other three by a few weeks.
Yeah, you hit the nail right on the thumb there. :-)
It’s not that the dollar is strong, it’s that the rest-of-world currencies are really, really sick, too.
I’m STILL trying to wrap my head around the implications of the whole WORLD explicitly or implicitly defaulting on their massive sovereign debt, more or less at the same time.
I've wondered the same thing. If everyone is a debtor who is the creditor? If every (major) nation is in debt, to whom do they owe?
The denial is strong.
Think.
If true, start dumping Gold.
This is classic liberal dribble, displaying for all the world to see the unmitigated bias of the NYT. The piece begins with the question “is the slide over?” - basically stating that the reporter is clueless; so when it turns out that he is wrong in the future, no one can hold him accountable.
Next provides some fact showing how the dollar has been falling even among third world money.
He explains why the dollar is falling and then explains why the Feds started printing money. He states that the economy is still struggling, but does not denounce the actions as an abject failure (which would have happened if the demonic-rats were not in charge.
He admits that there is no logical reason to back the dollars surge, but it is good news so he will report it. He may have asked an economist for the reason and did not like the answer so he left it a mystery.
Of course the reason is the Feds stated that they would stop printing money in June. This would lead to higher interest rates in the USA which would make US bonds more attractive. World financial markets look forward and the dollar has increased in anticipation of higher interest rates.
A surge in the dollar is expected in the short run.
What is not mentioned is the current interest paid on US debt chews up 16% of the budget. As interest rates rise the portion of the budget supporting interest payments will rise accordingly. Since the current long term bond rate is about have of its historic average, it would not be a surprise to see the rate double. As the rate moves up and larger portions of the budget are used to service it; great pressure will be put on the Feds to start printing money again. If they do inflation will sky rocket. If they do not government spending will see unprecedented cuts and we are likely to see Greece style protests.
But the NYT reports blue skies.
Is it any wonder why almost every economic development is “Unexpected” or as in this case inexplicable.
Would a stronger dollar, in comparison to the other currencies, slow down Asian and European buying of gold and silver? I doubt it.
I look at from the angle of; Which currency would you want as a reserve currency? Looking at the other three, I’ll take the US Dollar, thank you.
As the markets slide, pressure will increase on the Fed until they are more or less forced to start QE3, at which time it will finally dawn on some of the big market players that the dollar is undeniably doomed to become worthless because the Fed has made it clear that they will print more money to keep the vicious circe going until no one will accept a dollar as payment anymore in their attempt to keep all the economic balls juggling up in the air.
The Fed's actions remind me of the guy on the Ed Sullivan Show that use to twirl a dozen plates at one time up on individual tall slender poles. Sometimes some of the plates would twirl so slowly you'd wait for the crash, but the guy would always jump from another plate to that plate to twirl it faster to keep it going. One of these days the Fed is going to have too many slow twirling plates at one time and when one falls, I fear the others will soon follow as the Fed fails to keep them all twirling on the poles.
The NY Times, doing what it can to help Ubama.
Thank goodness it’s no longer 2003 when we had “the worst economy since the Great Depression”.
Excellent post.
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