Monday, November 21, 2005


Forex Markets Engage In 'Financial Fantasy'

The Mail and Guardian has this editorial on the rising US dollar. "If you were using logic to play the forex markets in the past few weeks, you would have lost money. All sorts of reasons have been trotted out to explain why the dollar has been going up, none convincing."

"When you get down to it, there are only two reasons for an appreciating dollar. One is that it is going up because it is going up; the herd mentality of markets means that you do what everybody else is doing even if you think they are wrong. The second is that the markets have deluded themselves into thinking that a country that is spending one dollar and six cents for every dollar that it is earning doesn’t have a problem."

"As a new book by Bill Bonner and Addison Wiggin notes, 'They [the Asians] have enough Treasury bonds have enough Treasury bonds to destroy the US economy on a whim.' One day China may want to do just that, but not yet. For the time being, it does not have any incentive to halt a process that allows it to grow at three times the pace of the US economy, and is prepared to take the risk that the symbiotic relationship will fall apart. Whether it is in the interests of Americans to sit back and do nothing is another matter."

"Bonner and Wiggins argue that the US can’t stop itself. Drawing parallels with the last days of Rome, they argue that Americans believe they can go on spending more than they make indefinitely. Washington would undoubtedly prefer to see the trade deficit cut by rejigging currencies and rebalancing global demand. Indeed, it may use the threat of protectionism to seek a third way out of the current predicament."

"Let’s not delude ourselves, it’s not going to happen this side of an almighty crisis that brings everyone to their senses. At some point, the shopkeeper who keeps extending credit to a customer having problems paying the bills in the hope that he will eventually straighten himself out can end up sharing the pain. Until the crunch comes, however, it’s easy to keep believing the fantasy."

That was a fabulous article...thanks for the link.
We Americans collectively need to wake up...fiscally, politically, and morally. Although I am fiscally pretty responsible, I have so much more to learn about the complexity of currency.
Ben, I'm considering purchasing a very large amount of gold. It would be my first foray into metal. Now? Or wait? BTW, I live in Prescott. The market is cooling off faster than the temperatures here. MLS price changes are almost outpacing the "new listings". Amazing how fast the worm turned.
I have seen gold go up and down for twenty years, and I think it will again. You should check around to find a good source first. Then it is probably best to average in. If you are trying to hedge against your US dollars, think about foreign currencies. Write me an email and I'll tell you who I use.

Thanks for the tip on Prescott! If you have any websites with local data, please send them to me. Things are slowing down in Sedona, too.
The market is up and nearing 11,000. Gold is up and zeroing in on $500.00. Silver is up over $8.00. The dollar is up... It would appear this time the disconnect may have occured...P.S. I have always thought of Gold as a "wealth preserver" as do many people I know. I think Sliver (poor mans gold) is going to start it's long overdue journey up, and it has a long way to go in my opinion...
wmbz : Like you I have my blue chips on silver, due to it's low ratio to gold, relative deficit, and potential.
look at that those Metals go. Just may hit $500 by tomorrow at this rate. !

Here's why....

500 tonnes, equal to the combined allowable sales by a group of major central banks under the Washington accord. It would also absorb all of Russia's gold production for three years.
Eastofwest...As the PM's rise they will get more and more media attention and then all of the sudden the "experts" will pop up. The next few years are going to be very interesting in my opinion. I like you, have been loading up on silver. I think we placed the right bet.
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