Asbytec

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.

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.

Dollar to Lose Reserve Status - But Is There an Alternative Currency?

I meant the little guy flips burgers (in our service economy), not wall street suits flipping them for us to eat...LOL

Ah, supporting the dollar always earns a few thumbs down. :-/

Dollar to Lose Reserve Status - But Is There an Alternative Currency?

Economy? Who said we have an economy? We make a few aircraft, some tractors, and have a failing auto industry. Most of the wealth today is made by wall street suits trading derivative paper and flipping burgers for the little guy. We have no real productivity, compared to decades past.

It's those deflating synthetic wealth dollars that are drying up and creating deflation, thank goodness. This alone should strengthen the dollar since the Fed can never print the 10's of trillions needed to plug the hole in the dam. If inflation is a monetary phenomenon, then we're a long way from inflation and a doomed dollar.

And folks think the recession is over. Not by a long shot.

Dollar to Lose Reserve Status - But Is There an Alternative Currency?

The euro? Not a chance, aging demographics and inability to support severe trade deficits preclude the euro as a major contender for the world reserve currency. Now, it might (and is) be a significant basket of reserve currencies, as manya asserts. But, the dollar will remain the major reserve note.

The RMB/Yuan is a joke as a reserve alternative. The Yuan is severely undervalued and worthless.

As for devaluing the dollar to such levels, you'd be begging for a collapse. It's isn't gonna happen, in my view. The only rational I can see for devaluing the dollar is to pay off debt. But, it might be hard to devalue the dollar when global liquidity has been falling off dramatically.

Revisiting Gold's Valuation

I was being facetious on fiat currencies and gold.

It's interesting the dollar didn't suffer during this rally, but gold seemed to suffer on demand for equities. Bond yields are in the green, that outta make China happy.

That's the kind of rally I like.

Revisiting Gold's Valuation

Fiat currency is the new world, get with it. Gold looks good on watches...

The Dollar Is Dead

Shaunak, great question and arguably a dilemma for China. As you said earlier, they are focusing on domestic demand, something they can control, at the expense of export demand, which they can't control.

And I do not know the answer to your question. The bottom line is, this crisis is one giant, nasty sandwich we are all taking a bite from, China included.

It might be best if China just held treasuries in hopes of future relative strength against other instruments (despite the arguments for a burst treasury bubble which may or may not happen.) And maybe ease their purchases a bit and took it on the chin like the rest of us. But, even as yields fall, the US treasuries may still be the best thing going as other nations enter QE.

Good, interesting question.

The Dollar Is Dead

Speaking of back room "pressure" deals, it's the same thing that kept oil priced in dollars...back room deals. Remember that argument? There was talk OPEC, urged on by Venezuela and Iran, would price dollars in euros. If the dollar was truly gonna tank, those deals would be dead in the water, first. China, OPEC...all understand the value of the dollar will fluctuate.

The Dollar Is Dead

I have to agree with TexER. Let the currency wars begin. What? They already have?

China has a 2 decade head start? They'll need to buy more bonds. Eitehr that or buy American dairy exports, cat food, untainted milk, Christmas ornaments, fishing poles, and cheap jeans. Naaa...it'll be bonds.

The G20 declared in principle not to engage in protectionism. While not technically protectionism, debasing one's currency certainly reeks of it.

Caught a glimpse of a report in Bloomberg China intends to keep buying US bonds. (Still need to confirm that...but I suspect it's right.) Look, when all this is said and done, those bonds will hold more value in the long term.

The dollar is not dead, it's just out in front...like a reserve currency and an administration bent on taming this crisis (rightly or wrongly) should be. The euro will follow in a few months, most likely.

The thing that is hurting the dollar in the past week and today is fear and risk appetite, respectively...

The Dollar Is Dead

If China doesn't buy, then how in the heck to they expect to export? The RMB/Yuan is highly undervalued. If market forces were allowed to reign, China would be an importing nation. There is more at stake for China: it's own production.

The dollar will take a hit for a while until the next round of bad news out of the EU. Sit back, relax...and let it happen.

Dollar Concerns Are Real

WOW! If we're gonna pull Mexico into the north American union, well, there goes our dollar. LOL What does Mexico have to offer a strong currency? A huge auto industry?

Okay, again, what will the UN choose to replace the dollar as the world reserve currency? The Yuan, that devalued fiat currency under the control of a communist regime? The Euro? The euro and the EZ cannot support being the world currency on so many fronts: demographics, trade imbalances, and more.

Ain't gonna happen. Look, the dollar is both the savior and the whipping boy of this global economy. It's gonna stay that was into the foreseeable future.