Why the U.S. Dollar Drop Might Be Significant 28 comments
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In early morning trade today, we see the U.S. dollar break to new lows against the euro (top chart), on the heels of the earlier downside break vs. the Aussie dollar (bottom chart). That has contributed to a lift in oil and gold prices, a rally in global stock markets, and particular strength among the shares of raw materials companies (see here).
Why is this potentially important?
The passing of Labor Day has traditionally signaled the end of summer and the slow summer trade. Institutional traders are back from their holidays and are looking to put money to work to finish their years with a flourish. Money managers that have underperformed market averages feel particular press to put their capital to work.
The intermarket themes and trends that we see coming out of this post-holiday week might give a clue as to *how* this capital will be deployed. So far, it's not bullish for the U.S. dollar.
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On Sep 08 03:10 PM danepol wrote:
> Nothing is a one way bet. When it appears to be, know that you must
> avoid it. Dollar players are 97% bear now.
Use it or lose it seems to be the motivation.
On Sep 08 04:12 PM lavalamp wrote:
> The dollar is just replacing the yen as the carry trade source, given
> it's zero interest rate. Just look at the AusUsd on tear today, even
> with the Chinese in the process of popping their latest bubble.
> However this trend could turn on a dime, given we are in a short
> deflationary environment, watch the risk bid return as we enter into
> second leg down later in the fall.
USD still the best .
nothing is a one way bet, agree and even more true short term.
myabe buying usd is a decent short term bet.
now technically, if players are 97% bear, in the real world, real buyers and sellers of Usd are massively long Usd: foreign Central Banks are $5trillion long Us$$, and Chinese exporters & others can't take more of the sinking green note, not to talk about Oil countries or Sovereign funds.
So buy Usd, ok, but who will, apart from short term players?
On Sep 08 03:10 PM danepol wrote:
> Nothing is a one way bet. When it appears to be, know that you must
> avoid it. Dollar players are 97% bear now.
Things nevertheless, eventually turn around, no matter how dire circumstances may appear. Growth turns positive, consumer confidence improves, and people start buying US dollars again. The world survived an enormous depression, followed by a world war toward the beginning of this century; Subsequently, it slowly began to rebuild its resolve, coming out at the other end even stronger than before. The same thing will inevitably happen again.
If there is no delivery in the derivatives markets then there is no set price point which brings us back full circle to September of last year..... What is anything worth? What are derivatives of those anythings worth? ZERO.
On Sep 09 01:01 AM Chuckols wrote:
> Rick-keeping it simple..the Dollar has had sentiment for whatever
> reason against it since the 77.69 low of Dec 2008. It is bottoming
> again and ready for a pretty nice bounce that is purely technically
> driven. It offers a trade for a bit that can be profitable for a
> short term buy and hold when that bottom of 75.90-77.70 is clearly
> established. I have been long a small position for week or so and
> still waiting for it to establish itself firmly before adding to
> the long position via Rydex long dollar x2. Any sense that I am
> barking jup a tree?
Subject: Please read this ; The Road to Socialism USA www.cpusa.org/article/.../
Please read this , and ask if America would have built all that we have consumed over the past 15 years of Tariff Free Imports , the very Tariffs that would have been paid to offset the losses to Medicare and Social Security , for the loss of wage deductions that by relocating jobs out of the USA has caused , which everyone keeps forgetting to talk about , that maybe we wouldn't need Socialism ???
The High Cost of the China-WTO Deal
Administration's own analysis suggests spiraling deficits, job losses
by Robert E. Scott www.epi.org/publicatio.../
I remember when the FTC would bust up the consolidation of a Corporate consolidation in the USA every now the then when they applied to take over a business , so that the MOM and POP stores would not be over ran , so that wealth redistribution was more equal , but ever scene the WTO and the Free Trade era of the 1994-5 , we been going down hill faster than the shuttle reentering earth atmosphere
I believe the Change of Tariff Law back in 1994-95 was the brining of this demise we see today , and the Giant Sucking Sound Ross Perot talked about in the 1992 Presidential Campaign , www.thenation.com/doc/... , has come home to roost , and its not just the USA its every country that cannot compete with the way that Asian Countries manipulate their currencies lower than the Trade partners that are Higher , which is a direct example of " Gresham's Law of the 14 th Century , www.statemaster.com/en... , which you should argue with economic gurus that , without a counter balancing measure to deal with different valued currencies like how tariff law revalues a product par to the post of calls currency value , so the currency is not undermined of its value , and defeats its support of its working peoples ability to be competitive , " When 2 different valued currencies trade in the same markets , the Lower valued currency will drive the higher down and out of circulation " , so by what is said in that valuing currencies in terms of Commodity values , the currencies of China and the USA should be way closer in value than they have been over the past 15 years of WTO trade , because Commodities are traded in par valued international markets .
So to consider that before we had the WTO trade agreement of 1994-5 , we had Balanced Trade deficits and a sound dollar , and a healthy Manufacturing base in the USA , the very support structure for wealth creation , that then feeds the secondary markets and infrastructures , a debate on how we can use a Bid Concept for all forms of Imported goods , like if we take the effective cost of what it would cost to manufacture a product in a given nation , and the price of raw materials is based off the international Commodities price indexes , so that the value to produce in one country is equal to or is reflective in what kinds of trade agreements can be made to keep all trade nations currencies sound should be the way in which a price for a product should be arrived at , as well as our domestic needs should be the new economy fundamental we seek in our Country , to go with this health care renovation .
Maybe the re-establishment of the old Bretton Woods would be a direction all International trade partners could debate as a direction of Re structure , www.statemaster.com/en... .
The Current Trade agreement is lacking sound currency terms so our living wages can maintain cost of living increases to keep up with the inflation , which is just the way its been since the beginning of economic societies so this needs to be debated .
Then you have the G-20 calling for a new global currency and whether it is soon or years, just the call for an abandonment of the dollar is enough to keep the pressure on.
Then add that we can't grow or tax out of this crisis and the rising debt and worse, the coming rising interest on debt that the CBO says will quadruple it to more than we took in from corporate and individual tax receipts in the last year, and you have even more reason to leave the dollar if you are a foreign nation and foreign lender.
We have done absolutely nothing to change the policies that got us into this crisis. The decades of using debt to grow GDP has caught up with us. Remember, it was 1968 that we first started borrowing $1 for each $1 of GDP growth and now it is infinity where no matter how much we borrow, we can't grow real GDP without massive spending of those loans by government.
On Sep 08 01:09 PM Moon Kil Woong wrote:
> The dollars slide is constant and predictable. The current depreciation
> looks like the constant and predictable slide has gotten a bit steeper.
> There is no one really holding the line save a few fearing another
> market collapse, in which the Fed says, no need to fear, we can support
> the market by even more debasement.
short term - dollar will go up. instead of asking yourself how lower USD can go, ask how high can OIL go. then you will have an answer
will an imminent pullback to happen, oil suppy easily surpassing demand and by consequence falling, dollar will go up.
long term - even though "the g-20 and bric countries asking for a new currency" it wont happen overnight. even them (the brics and g20) dont want it to happen overnight. the land needs to be plowed for that. everybody got tons of dollars in reserve, its stupid to think they wish a new currency to be created out of nowhere.
a transition will be made, as it is already being made. china investing in petrobras and several other "state"-owned co. over the world. india building gold stockpile, gold itself hitting 1k, those are all "light effects" that clearly show USD will be replaced some day.
now, once again.
some day, it is not tomorrow, neither it is next year, or the year after that.. things will change, US does not sustain to be the uni-polarized super power it once became in the past century, and eventually, things will change. how they will change ? wars ? trade deals? i dont know.
i also dont believe in those "apocaliptical economic preachers" that get out of their cave every fucking crisis, saying the world is coming to an end and US is doomed, and so on..
no
this wont happen.
but its foolish, for those, even the more patriotics, that blindly believe, the world cannot live without america.
believe me, 1.3 billion chinese citzens can consume a lot.. A LOT.
Thank you for your longer version of "Don't Believe the Hype," which I say as a patriotic member of a currently faltering country.
On the fall of the Spanish Empire, someone once summed it up as something like "Everybody knew what was wrong (gov't spending!), but nobody would do what was needed to stop it (I'll lose my job/votes/freebies!)." Perhaps America's time has come, but I don't see any ready replacement for gross economic power, although China seems to be doing its best; my question is whether its best is good enough with the manifold problems China faces (and I hope the Chinese _people_ overcome them all).
On Sep 08 05:40 PM Dave Wrixon wrote:
> Even the Fed cannot fight fundamentals forever. This is a one way
> bet.