U.S. Dollar Revaluation

While the Fed's announcement on 3/18 that they would buy long-term US Treasuries was, for all intents and purposes, a devaluation of the dollar, the market seems to want no part of it. After an initial two-day selloff, the US Dollar Index has already regained 80% of the decline.

click to enlarge

Comments

[morph366:]

The large recovery increases the suspicion that the big sell-off may have been orchestrated by a couple of foreign central banks - no prizes for guessing which was one of them.

Apr 02 07:00 AM

[kelm:]

The move looked like short covering after so many said "sell the dollar" in response to the QE announcement. It is going to go lower, probably substantially given our fiscal position but it is sure clinging on by the fingernails.

Apr 02 10:30 AM

[eieinli:]

Let's be real! The long term prospect of the dollar is bleak. You cannot print or create money out of thin air and not pay for it. Does anyone know what the exact money supply is? Do you wonder why the Fed stopped publishing it? Does anyone know?

Apr 02 12:43 PM

[capt Brian:]

Dollar is fineo, that is why I just bought more silver eagles

Apr 02 01:51 PM

[Bad Dog:]

In relationship to what? Actually, you can create money out of thin air, although paper is preferred. Right now, lots of people want our dollars, obviously. At some point, they may not and the Fed can start reducing the supply of dollars. That's the most likely scenario.


On Apr 02 12:43 PM eieinli wrote:

> Let's be real! The long term prospect of the dollar is bleak. You
> cannot print or create money out of thin air and not pay for it.
> Does anyone know what the exact money supply is? Do you wonder why
> the Fed stopped publishing it? Does anyone know?

Apr 02 03:39 PM

[lastboyscout:]

I don't know, Bad Dog.... the only way to reducing the supply of dollars is to purchase dollars. What will the US purchase dollars with?? More dollars?? surely not US dollars. You can't buy paper with the same paper. You'll have to buy dollars with gold, silver, other currencies...Right? But then it would be insane to buy worthless paper with anything in value. Read your history. The country will have to abandon the US dollar with a new currency, like the military does with script (sp?). Then you will need to start from the beginning and do not participate in inflationary activities again. The US Gonvt. will have to behave and act like a responsible govt. What do you think folks, those smarter than me, am I right?

"In relationship to what? Actually, you can create money out of thin air, although paper is preferred. Right now, lots of people want our dollars, obviously. At some point, they may not and the Fed can start reducing the supply of dollars. That's the most likely scenario."

Apr 02 07:19 PM

[Blackeyebart:]

There are other ways of reducing the dollar supply. One is for the US to run a surplus as many countries have done over the last ten years.
Doesn't seem likely this year.

Apr 02 08:29 PM

[Chris Uhlir:]

As our labor rates vis a vis Asia balance out, our trade deficits will balance out (eventually) and return to some normalcy is possible. American standard of living is in jeopardy though as this plays out.

Apr 03 01:33 AM

[Bad Dog:]

Foreigners are buying USD. The USD is still regarded as the lowest risk currency to hold. That's going to stay that way for a long time.


On Apr 02 07:19 PM lastboyscout wrote:

> I don't know, Bad Dog.... the only way to reducing the supply of
> dollars is to purchase dollars. What will the US purchase dollars
> with?? More dollars?? surely not US dollars. You can't buy paper
> with the same paper. You'll have to buy dollars with gold, silver,
> other currencies...Right? But then it would be insane to buy worthless
> paper with anything in value. Read your history. The country will
> have to abandon the US dollar with a new currency, like the military
> does with script (sp?). Then you will need to start from the beginning
> and do not participate in inflationary activities again. The US Gonvt.
> will have to behave and act like a responsible govt. What do you
> think folks, those smarter than me, am I right?
>
> "In relationship to what? Actually, you can create money out of thin
> air, although paper is preferred. Right now, lots of people want
> our dollars, obviously. At some point, they may not and the Fed can
> start reducing the supply of dollars. That's the most likely scenario."
>

Apr 03 11:13 AM

[dybydx:]

Bad Dog,

thats not going to last a long time. we are already seeing the beginning of the end. vast majority of creditble researchers placed negative outlook on the long term economic forecast of the US. the USD is safe... for now, not for long. Note that foreigners are not holding USD because they think its a strong investment. they just think its a safe parking lot.

btw when i say "negative outlook", i don't mean GDP will shrink, i mean 1% real gdp growth - which is supported by population growth.

Apr 03 10:28 PM

[tadpole76:]

Who in the hell would want to maintain long USD positions with the current interest rate near zero right now? That's why investors are currently shorting USD. Currencies that have higher yield return like the euro, will be favored until the going gets tough. With the tough just around the corner, the euro will be selling off, here's why: ECB is considering further reducing their interest rate to 1% and introducing their own version of quantitative easing to devalue the euro because Europe (specifically Germany) has mounting unemployment and is generally refusing to take action on their trade imbalances. Some European companies (Volkswagen, Thyssenkrupp and Airbus) have already made plans to close up shop and move to the US because the lower value of the US dollar makes operations more cost effective. How does Europe prevent further erosion? Devaluing the Euro. Now some will say, "Didn't the G-20 just agree to no competitive currency devaluations?" Yes they did. But what they didn't agree to is leveling the playing field with all major economies. The euro devaluation only becomes competitive if the currency goes below dollar parity.

Apr 04 01:20 PM