The Dollar Is Losing More Than a Penny A Month In Value!
DriftingByTheStorm
Posts: 8,684
Man oh man.
I just saw the dollar index,
it's at 72.4 today.
Last August it was 78, and it was 76 by December.
Since that time the slide has really picked up in speed.
Jim Rogers is going to be on CNBC at 4pm today (in 15 minutes) ... i recommend anyone who can tune in.
Maria will probably ask him some more questions about the dollar.
Keep in mind that the value of 72.4 (out of 100 cents) is actualy an "inflation adjusted" value, whatever sense that makes, because the number is actually measured against other inflationary currencies ... so saying that the dollar is already missing 26 cents, means that the US currency has slid 26 cents WORSE than OTHER currencies!
Not to be alarmist, but at some point this is going to be a BIG problem.
Treasury bond sales are already starting to taper off, which means that investors (especialy foreign) are getting weary of lousy returns due to currency devaluation.
At some point, this will not only stop the Fed from being able to pump liquidity in to the markets, but it will also cause a cycle where investors start dumping bonds back on to the markets. Investors dumping will cause more investors dumping. It will also cause bond yield rates to spike, putting more pressure on the government to meet higher payment obligations, and causing an imbalance between bond rates and fed funds rates.
All that generally is problematic.
The question is, when and how will the Fed stop the dollars decline?
Unfortunately, with goggles-of-realism on, this is not going to happen anytime soon. The Fed is being "forced' to continue "easing" (inflating) because with the continued deterioration of the credit & stock markets, that is the only real tool they have. Witness the $200billion in liquidity they provided through that mortgage\tbill swap yesterday. That dropped the value of the dollar a penny overnight.
:(
I called dollar index at 69 by summer, and again we are still on track for that. When it gets in to the 60s we are going to start treading on very thin ice.
:(
I just saw the dollar index,
it's at 72.4 today.
Last August it was 78, and it was 76 by December.
Since that time the slide has really picked up in speed.
Jim Rogers is going to be on CNBC at 4pm today (in 15 minutes) ... i recommend anyone who can tune in.
Maria will probably ask him some more questions about the dollar.
Keep in mind that the value of 72.4 (out of 100 cents) is actualy an "inflation adjusted" value, whatever sense that makes, because the number is actually measured against other inflationary currencies ... so saying that the dollar is already missing 26 cents, means that the US currency has slid 26 cents WORSE than OTHER currencies!
Not to be alarmist, but at some point this is going to be a BIG problem.
Treasury bond sales are already starting to taper off, which means that investors (especialy foreign) are getting weary of lousy returns due to currency devaluation.
At some point, this will not only stop the Fed from being able to pump liquidity in to the markets, but it will also cause a cycle where investors start dumping bonds back on to the markets. Investors dumping will cause more investors dumping. It will also cause bond yield rates to spike, putting more pressure on the government to meet higher payment obligations, and causing an imbalance between bond rates and fed funds rates.
All that generally is problematic.
The question is, when and how will the Fed stop the dollars decline?
Unfortunately, with goggles-of-realism on, this is not going to happen anytime soon. The Fed is being "forced' to continue "easing" (inflating) because with the continued deterioration of the credit & stock markets, that is the only real tool they have. Witness the $200billion in liquidity they provided through that mortgage\tbill swap yesterday. That dropped the value of the dollar a penny overnight.
:(
I called dollar index at 69 by summer, and again we are still on track for that. When it gets in to the 60s we are going to start treading on very thin ice.
:(
If I was to smile and I held out my hand
If I opened it now would you not understand?
If I opened it now would you not understand?
Post edited by Unknown User on
0
Comments
Chilean Peso per dollar in 03/12/2008: 429.50
it's time to buy a plane ticket to the US
Railing against Bernanke.
Says "hes better off to resign now."
Says "INFLATION HAS NEVER WORKERD"
Wow!
he is RAILING!
He just said, "it is not going to prevent a recession, it will just delay it temporarily. And we are going to have a WORSE recession."
Of course, this is generaly common knowledge to those who have half a brain, but its good to hear a man as distinguished as Jim come out and flat say it.
If I opened it now would you not understand?
This definitely is a situation. My only rebuke: Since Greenspan, the stated goal of the Fed has been controlling inflation. The relative value of the dollar was not a top priority. Obviously we didn't see devaluation like this under him (or if we did it was in times of such high interest rates that it didn't matter). Bernanke basically said he would be on the same path as Greenspan.
Now, I am not saying that we don't need to focus on the relative value of the dollar. However, if the dictum regarding Fed policy has not been about dollar strength for the last two decades (at least) how do we go about changing the entire course of the Fed? Where Greenspan was all about controlling inflation through open market operations, what can Bernanke do to curb the decline of the dollar? Most Americans don't understand what it means for the Fed to lower or raise rates, how about if the Fed start using all of the methods available for economic manipulation?
And I know, you want to get rid of the Fed... I'm not necessarily against that. But let's start with the assumption that we're in today's market. What can we do?
"Sometimes I think I'd be better off dead. No, wait, not me, you." -Deep Toughts, Jack Handy
Well i'm with you on 50% of that, i think.
At least, i mean i understand where you are coming from.
Like Bernanke himself has testifed to congress multiple times recently (particularly while being grilled by Ron Paul), the Fed was given a DUAL mandate by congress,
1. price stability
2. full employment
ironicaly these are rather contradictory goals,
since price stability is (more or less) a direct measure of inflation, and full employment is a market variable to which the Feds only ability to control really is inflation (which affects price stability).
Anyhow, at the heart of your post is the question, "What can the Fed better do to 'help' America right now?"
And unfortunately the real answer is, nothing.
I know that is a tough line to swallow, but Jim Rogers was just up on the idiot box saying it, "You can't stop a recession. Inflation doesn't work. History has proven that. You can delay a recession through inflation, but you just make it worse when it does hit". He continued further with, "Recessions aren't bad. They are good. A recession is a purging, a cleansing of bad investments and unrealistic (inflated) prices out of a system."
That is truth.
Unfortunately, the real sick reality is that we were already due for a massive recession ... okay, i think it would be fair to say depression ... back in 2000. One need only go look at a 100 year graph of the Dow to get a feel for that.
Instead we got a rather minor recession, which the fed staved off with massive inflation, and then we got another peak ... a double peak ... which means a TOP, an upper limit on prices ... right around the exact same levels we had hit in 2000 ... and now we are sliding back down the hill.
What the fed wants to do is try to get us out of this now massively overdue mega-recession and push us back up the hill 1 more time for a theoretical "triple top" ... well triple tops aren't even a normal trading term for a reason ... they rarely happen.
To be blunt, the best thing the fed could do is keep its guns in its pocket, and draw them out very occasionaly to just ease us down the slope.
What it is doing now is wrecklessly destroying the dollar with MASSIVE inflation in a very short time span.
When the shit really hits the fan, they will then start actualy triggering the undoing of the dollar itself by throwing even more money at the unavoidable problem.
Beyond that, you also said, "other methods" at the Feds disposal.
Unfortunately, the problem there is that they have no other methods.
The Fed is a monitary policy institution, and its only power IS to manipulate the currency. Anything else that you may be hearing about is just some concealed method of doing just that. This $200 billion in mortgage for treasury bill swaps is more of the same. It is giving banks short term liquidity for long term debts -- making money out of mortgages, monitizing debt. That is ALL they can do. Just come up with more ways to add dollars to the system, and they need to stop.
:(
I'm sorry to say it, but there is no real good answer to your question.
America is headed for a very tough row to hoe.
:sigh:
That was a good point too.
I almost forgot about the Moody's problem.
However i guarantee you that Moody's has received very confidential phone calls from places like the Treasury Dept, The Fed, some large Banks, or maybe even some executive agency, the CIA who knows ... telling them, "You Will NOT downgrade T-bills" ... because you are right. The effects of that alone would be catastrophic.
If I opened it now would you not understand?
DING! DING! DING! DING!
The title of this thread is misleading, because while the dollar was only slipping .5 to .75 of a penny a month on average, it has lost 2.5 pennies in just the last 3 or 4 weeks.
It lost another .5 penny just overnight here.
We are now at 72, even.
:eek:
If I opened it now would you not understand?
http://news.yahoo.com/s/ap/20080313/ap_on_bi_ge/diving_dollar
:(
EV- 08/09,10/2008.06/08,09/2009
Even a few months back the CAN$ dollar was worth 10 cents more was sweet everytime I'd shop on EBAY..