Asbytec

Dollar Worm May Be Turning

I have been a dollar bear for the last year, despite the severe chastening here in SA. The latest developments do make one (re) think. But, we gotta remember, though, deflation is still afoot. So, who knows, really. Just gotta remember we're in a rally, not yet a recovery.

Of course this says the dollar should recover based on any flight to safety. But, as a fundamental, being a safe haven currency doesn't say much for the green back. It should have it's own intrinsic value.

It's not comforting to know our (fiat) store of wealth (and I use that term loosely) maintains its value based on fear of everything else. But, with near zero interest rates, fears of (hyper) inflation, and huge trade deficits...what else does it have? <sigh>

I'd be curious to know how the new global financial regulations affect global liquidity. I hope it tends to strengthen the dollar based on a smaller supply. That would be sweet.

The Dollar and the Carry Trade, Simplified

One development that really concerns me is the dollar carry trade. Damn!

Fight Club: Will the Rally Last?

As long as stimulus money is flowing, it will probably last.

I assert there is a difference between a rally and a recovery. Unemployment is still very high. We are in the midst of a serious financial crisis, the likes of which barely make the evening news. Government debt is soaring, the Fed is not tightening, the dollar still has life as a safe haven. Furthermore, lending and consumer propensity to borrow is down, and the G20 still haven't formulated new global financial rules.

I'll call a recovery when employment starts to rise (as opposed to falling less), the dollar has value outside of it's safe haven status, the Fed begins tightening monetary policy, production is sustained by domestic consumption and exports. Until then, enjoy this rally, and maybe the next...while they last.

Good News: Dollar Headed Down

No nation has ever devalued it's way to prosperity...except China, I guess. By the way, isn't a falling dollar akin to inflation? I don't see the Fed tightening anytime soon.

Couple continued Fed easing and an assortment of other factors, like huge government debt, unemployment, etc., and one can see we haven't recovered. The markets are rallying, but a recovery? Ah, not yet.

I'll call a recovery when the dollar does...and does so not as a safe haven.

Not So Fast on That Recovery, Bernanke

Yea, I gotta say when I saw the title, I came here to argue the very points the author used...silly me.

The stock market may be rallying, and may for a while, while the dollar continues it's slide. All signs of a recovery, I guess?

With QE still en vogue and interest rates still way too low...naaa...we might be rallying, but we're a long way from recovering.

The Yuan Remains the Source of Friction for the U.S. as Well as for Europe

Nice article, right on. I am pleased the Obama administration decided to take some action. It's not enough, just a warning shot across the bow, but that's okay for now. Our current account balance must improve. Period. I wonder how the EU will cope, if they can or will support huge trade deficits for decades as the US has done. And I wonder if that will threaten the euro's status as a reserve currency in the decades to come.

The Danger of Cheap Dollars

Yea, the dollar carry trade is scary.

Tire Trade War Escalates

Well, if one believes in decoupling then it might be true we need them more than they need us if only to buy our debt. I don't buy the decoupling theory just yet and suspect China's middle class is still too small to pick up slack demand.

Still, we have run serious trade deficits with China for decades, due in part to their devalued trade currency. They have been importing our inflation all that time. We might dump on them, but they are doing the same thing to us and the rest of the world. It's about time someone got tough with them.

U.S. Dollar Still Center Stage

I haven't had my coffee yet this morning, but yes...once property prices start rising, again, they will become good investments, especially if each acre has a gold mine on it. LOL. I guess that's the idea, to induce inflation so everything offers a higher price down the road, except a savings account.

If this amero thing is real and kicks off, the loony will be rolled into it along with the Mexican peso. I don't know about you, but I cannot see the Mexican peso doing either currency any good. The loony has some good fundamentals to help an amero retain some value.

But, as for the dollar, yea, it may fluctuate downward a bit, then maybe back up. If inflation is a monetary policy, and I believe it is, then this stubborn deflation cycle should work wonders reducing the number of dollars floating around the globe. It already has, actually, despite the Fed's printing. It will also reduce the amount of other currencies, but the dollar is most plentiful and used to settle almost all contracts. It should benefit most from deflation.

Okay, coffee is here...

U.S. Dollar Still Center Stage

Al, the same pressures are apparently true for all currencies relying on US imports. Stronger currencies, less imports. (Also, less consumer credit and high unemployment, less imports.) So, exporting nations might feel the need to inflate their currency to keep export prices competitive. This is the currency war that might cause a collapse of all fiats if the US dollar fails. I assert the world's major currencies are linked through US consumption and trade and a weak dollar is not good for anyone, including the venerable euro.

U.S. Dollar Still Center Stage

Sound production and fundamentals, by the way, it appears Obama is in favor of by pushing to train scientist and engineers beginning in a better equiped public school system. For some reason, he meets with a lot of resistance to that push. It dumbfounds me, sort of.

U.S. Dollar Still Center Stage

I'd argue metals are a good investment, too. But, I am counting on deflation to revive the dollar (as it will other currencies in excess, too.) But more importantly, I am praying sound economic fundamentals will return and give the dollar meaning, again. I am not giving up on the dollar, it may be the one currency laying at the top of the heap of collapsed currencies. What hurts is the dollar carry trade, for now and for some time to come. That's scary.

The Coming Consequences of Banking Fraud

Warm Paw, I'd argue the housing crisis was the trigger, not necessarily the root cause or the problem, setting our over extended financial system into a tail spin. Being over extended, making too much money than can be supported by our economy or consumer debt, is the problem.

Too much synthetic liquidity floating around the globe fueling unsustainable growth, especially in China. Now that the liquidity bubble has burst, we are in real trouble. The central banks simply cannot reinflate to keep up with the deflation.

I am not really a conspiracy theorist, but there does seem to be some collusion between the powerful people in the world to save the banking system. It is a source of great wealth for the oligarchs, as long as folks are employed and pay off their debt. Now that the worker can't pay off debt because of high interest rates or unemployment, the money well dries up fast, doesn't it? That's because the wealth effect is nothing like real wealth. With real wealth, the consumer doesn't need to borrow from those who really are wealthy.

Right on, Jason...I am proud of our constitution and declaration of independence. The Federal reserve act is unconstitutional, in my view. So is a fiat dollar.

U.S. Dollar Still Center Stage

Debasing the dollar to such an extent to prop up equities is a sure sign we're in a lot of trouble. When equities are not worth a given value of their own merit, putting them at 'fire sale' (dollar devalued) prices is the solution? Maybe a share in AIG will buy a big mac soon enough.

I have a fear this recovery is tenuous at best and will likely be short lived, especially with unemployment still very high and consumer credit tight. I fear our crisis is, really, far from over. I also realize I could be wrong, I am not clairvoyant, but I just don't believe we're back to sound fundamentals.

The dollar may well be doomed as a reserve currency, and SDR may be the future. If that happens, remember all currencies are fiat and all fiat currencies fail. And to some extent, all are dependent on the (doomed) dollar and will likely be affected adversely, too. Some may not even survive a dollar collapse.

So, is the euro or the pound ready to meet the challenge of playing a larger role as a reserve? Can they sustain the pending trade deficits with China and inflationary pressures as well as the dollar does, or did?

Come on deflation, work your magic on the dollar...rid us of the excessive debt and revive our propensity to save.

If a Boom Is Coming, Will a Bust Follow?

Good points, one and all...