Tuesday, November 28, 2006

 

Talk Alone Not Enough To Help US$

The Associated Press reports on currency markets. "The dollar fell to a new 20-month low against the euro Tuesday, as a spate of disappointing U.S. economic data further dimmed the prospect of higher interest rates. The 12-nation euro rose as high as $1.3203 - its highest point since March 2005, in midday New York trading, up from $1.3128 late Monday. In later afternoon trading, the euro traded at $1.3177."

"'We have a marketplace that has been somewhat concerned about a narrowing yield advantage,' said Lisa Finstrom, senior futures analyst at Smith Barney. She noted that Asia and Europe are anticipating ongoing economic recovery, 'which will likely be met with higher interest rates.'"

"By afternoon trading Tuesday, the British pound rose to $1.9500 from $1.9371 late Monday. The dollar was steady at 116.08 Japanese yen, the same as late Monday in New York. The euro, created in 1999, is about 5 cents away from its all-time high of $1.3667, reached in December 2004."

From Bloomberg. "'The economy in the euro zone will persistently outperform that in the U.S., which will give the euro more upside,' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto."

"The dollar briefly pared some of its losses versus the euro after Fed Chairman Ben S. Bernanke said inflation risks are 'to the upside.' He also said 'economic growth will be modestly below trend in the near term.' Federal Reserve Bank of Philadelphia President Charles Plosser said today interest rates may not be high enough to slow inflation to an acceptable level."

"'They are balanced with some slight hawkish overtones,' said Steven Butler, director of foreign exchange trading at Scotia Capital Inc. in Toronto. 'But the market knows the Fed is on hold. No matter what the overtones are, I think the next move from the Fed is a cut. The talk isn't enough to help the dollar alone.'"

From MarketWatch. "After a precipitous slide in the last week that caught many traders off guard, the dollar is vulnerable to further losses and may continue to weaken against major rivals heading into 2007, analysts said Tuesday. 'Sentiment for the dollar has been deteriorating steadily over recent weeks,' said Mitul Kotecha, head of global foreign-exchange strategy at French bank Calyon. The decline was not prompted by a particular piece of news or data release, 'but rather a general worsening in sentiment that saw long held technical levels breached,' he said."

"'We expect the dollar to weaken further into year end, and retain this tone in the early months of 2007,' he said."

"'The next major objective you have to look for is the record high in the euro versus the dollar' at above the $1.36 reached at the end of 2004, said David Gilmore, a partner at Foreign Exchange Analytics. 'It's reasonable to look for that in the next couple of quarters.'"

"The Chinese yuan fell against the U.S. dollar, and investors cashed in on recent gains. One dollar was trading for about 7.84 Chinese yuan Tuesday. The declines followed a sell-off on the Chinese markets, which analyst Yu Yang of Guotai Junan Securities earlier Tuesday attributed to profit taking."

"Gold fell more than one percent on Tuesday from 15-week highs scored the previous day as investors took profits ahead of the release of key U.S. data, dealers said. Platinum slipped to a three-week low before rebounding, while silver and palladium were little changed."

"'Unless the dollar starts to weaken significantly again, the market does seem to have done enough for the time being,' said Simon Weeks, director of precious metals at ScotiaMocatta. If gold failed to get back above $640-$642, prices might drop to around $630, the level in the middle of last week when U.S. traders left the market ahead of the Thanksgiving holiday, he said."

"Spot gold hit a high of $641.70 an ounce before falling to $632.80/633.45 by 1528 GMT, against $640.60/641.60 in New York late on Monday. Profit-taking might persist, but prices were unlikely to drop sharply in the coming days, dealers said."

"In other metals, platinum dropped as low as $1,130 an ounce before rising to $1,155/1,165, compared with $1,140/1,150 in the U.S. market. Prices have fallen 19 percent since touching a record high of $1,395 last week."

"Silver edged down to $13.42/13.49 an ounce from $13.46/13.53, while palladium was down $1 at $322/327."

Comments:
Replying to John Law from previous,

You're right. The dollar is a reference to Spanish Gold that was called a dollar and used as an unofficial currency during colonial times (according to Fed Reserve website). A dollar is what many bank notes during that time referred to in their claim to gold.

Well, over time, we still think of it as a dollar. It is a Federal Reserve Note, nothing more. It is a claim to simply another one exactly the same. Nonetheless, you can use them to exchange for other goods and services on the open market.

When you realize that it is a bank note, and nothing more, it takes on a different meaning. The Federal Reserve Bank could just as well be called the American Bank much like American airlines. The airlines are regulated in much the same way as banks are, but airlines aren't required to testify before Congress which gave them the charter for existence. Plus, airlines don't have to give any profit to the Treasury like the Fed (according to their website).

The Fed Reserve creates Fed Reserve Notes to buy the Treasury's debt. That debt(notes, bills, bonds) is then used as collateral to create loans to other institutions in the form of Fed Reserve Notes. What limits the supply is the demand for debt. In theory, it should work perfectly, but then again, so should a lot of other things. That is the crux of the problem: How do you get people to take on more debt to keep the whole thing solvent?

I guess the only question is how much faith do you have in the Central Bank?
 
Indian banker recommends Indian CB to diversify out of currencies, and into gold.

http://tinyurl.com/uoxoq
 
"That is the crux of the problem: How do you get people to take on more debt to keep the whole thing solvent?"

Short answer: Add more people to the system.

Long answer:

Debt must increase in order to service the compound interest formula inherent in our fractional reserve banking system. Ever wonder where all the money comes from? Invest $100 per month at 7% interest for 30 years, and it will grow to $122,708, yet only $36,000 was invested. The other $86,708 must be created via fractional reserve banking magic and serviced by interest paid from debtors or from corporate profits in the form of dividends.

At some point, the collective ability of the requestors of debt to pay interest and principal on their debts will reach a "maximum" debt threshold. I've recently heard this called "peak debt". In essence, the market for debt "seizes up", the US consumer is "maxed out". The ability or willingness of the borrower to borrow, even at ZERO interest, has been reached.

Is the US bankrupt? The Present Value of US debts are estimated to be over $65 Trillion!

Laurence J. Kotlikoff is a professor of economics at Boston University and a research associate at the National Bureau of Economic Research. This was recently published by the Federal Reserve Bank of St. Louis Review:

http://tinyurl.com/yxduhb

"Is the United States bankrupt? Many would scoff at this notion. Others would argue that financial implosion is just around the corner. This paper explores these views from both partial and general equilibrium perspectives. It concludes that countries can go broke, that the United States is going broke, that remaining open to foreign investment can help stave off bankruptcy, but that radical reform of U.S. fiscal institutions is essential to secure the nation’s economic future."

The solution is to hyper-inflate the dollar through massive deficit spending and reduction of the cost of borrowing, along with additional reduction in the banking system's Reserve Required Ratio.

Additionally, more potential debt requestors must be added to keep the ponzi banking system lubricated. New debt slaves are currently being added to the "system", i.e. Mexicans, Chinese, Indians and others are the new debtors needed to service the global fractional reserve banking system. 20 to 30 million Mexicans and others from South America that have entered the US illegally are HERE TO STAY. They must be added to the debt servicing pool of the banking system. In addition, these low cost workers will be needed to provide vital services to the boomers.

For the first time today, I heard CNBC do a piece on the "Amero", the new currency planned for the "North American Union". This is also part of the solution, and it has been in the works for many, many years: www.spp.gov

This is the future of our country, a union of the US, Canada and Mexico, and a currency called the "Amero". It is already happening, and there will be no vote by we the people.
 
Bond shennanigans....

http://tinyurl.com/yxe43z
 
After watching Bernanke speak the only thing that comes to mind is that line about the Titanic; 'and the band played on'. The Fed isn't fooling anyone, any more.
 
I haven't been to spp.gov in awhile and I noticed the new section entitled "myth vs. fact" They mention all the criticisms I've heard of the iniative and counter with the negative: "nope, not true" but offers very little meat
to the rebuttals. interesting
 
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