Tuesday, January 24, 2006

 

'Cannot Discount A Run On The Dollar': IMF, Fed

The Financial Times had some comments by a Fed official. "Timothy Geithner, president of the New York Federal Reserve, on Monday dismissed the view that the US current account deficit was sustainable, suggesting the risk of a sudden fall in the dollar would grow the longer the trade gap widened. Mr Geith-ner said the problem could not necessarily be expected to solve itself."

"'Time does not necessarily help. The longer these gaps continue to build, the greater the ultimate adjustment required, and the greater the risks that accompany that process,' he said. 'The plausible outcomes range from the gradual and benign to the more precipitous and damaging,' he said. 'The size and duration of these [global] imbalances, perhaps the most visible of which is the US current account deficit, present challenges, and risks, for the world economy.'"

"His warning came as Raghuram Rajan, chief economist at the International Monetary Fund, repeated his concern over the risk of a run on the dollar. 'You cannot discount a run on the dollar. But you cannot fully quantify that risk at the moment,' he said at the same meeting."

"Mr Geithner has long focused in public speeches on the risks associated with the current account deficit. But he does not see a role for monetary policy in responding to the current account by raising interest rates. Many economists have argued that the risks to the dollar from the bloated current account deficit are mitigated by support for the currency from Asian central banks, which wish to prevent an appreciation of China’s yuan undermining export growth. However, Mr Geithner said this should provide little comfort over the long term."

"'A prolonged continuation of the exchange rate arrangements that have given rise to the large increase in foreign official investments in US financial assets is unlikely to be consistent with the domestic requirements of those economies and for this reason many are already in the process of change,' he said."

"'Even if we could be confident that the world would be comfortable financing the US on these terms for some time, that fact alone does not mean that it is prudent for the US to continue borrowing on this scale.'"

Comments:
sorry to make this post so long, but I've noticed in the last two weeks there have been more palladium(and a platinum) articles than in the previous 2 months it seems.

Make Sure You Have Some Platinum Stocks in that Gold Portfolio

Currently, palladium is trading at under US $300 an ounce in comparison to platinum that is over US $1,000 an ounce. These two metals historically traded in a 2:1 range (Pt:Pd) prior to a market disruption in late 2000, when palladium surpassed platinum and spiked at over US $1,000 only to reach a low of US $140 an ounce a few years later. In specific applications these metals are virtually interchangeable. The realized cost savings is a key driver for manufacturers to begin substituting palladium for platinum in order to reduce and/or maintain costs.

http://www.kitco.com/ind/Muhr/jan192006.html

Or, if you want more proof of inflation, how about Jeff Clark in the Rude Awakening column? He writes that "palladium and platinum are becoming so valuable, the St. Louis Post Dispatch reports, that they are become the target of thieves, who are stealing cars in order to extract these precious metals from catalytic converters."

The Perfect Time to Buy Palladium

platinum/palladium ratio

WHAT ABOUT PALLADIUM?
 
What about rhodium- current price about $3k/oz. The stuff is techically more versatile and useful than palladium, yet nobody talks about it.
 
John,
What was that Canadian fund you were interested in.

Chicken Little,
What is a good play on rhodium?
 
How about CEF or FDG for Canada? Also, please give us some info on palladium/rhodium. I was skeptical enough about gold/sivler in the beginning but those are left field for most people.
 
ben- it was CEF I was interested in.

SD CDL- sup bro?
 
I came across a brand new euro currency exchange traded fund offered by Rydex (FXE) - Sounds VERY interesting. Share price is equal to 100 euros. Holdings are backed by actual physical currency at a bank in London (v.s. futures). Expense ratio is .4% - I was reading another blog entry and it mentioned Everbank charges a .75% conversion fee. I'm assuming this is in & out. So that pretty much negates the interest you'd recieve by holding euros in an Everbank CD. The article I read about this new ETF mentioned the shares somehow accumulate interest. I couldn't find a prospectus on Rydex's web site to get more details.
 
Ben,
Sorry I don't have have a good play on rhodium. I'm a technical person who knows about future uses and applications. The stuff is mined in Russia and Canada as by product of nickel mining.
Low sulfur diesel is slowly being mandated nationwide. This will open the way to catalytic converter technology for diesel, especially to get after nitrogen oxides, the bane of diesel motors. Rhodium is a superior catalyst for this application.
O/T: Biodiesel is being tested as a lubricity additive to replace sulfur in diesel. America cannot fuel its trucks with biodiesel (volume constraints), but there is enough to be an additive in every gallon.
 
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