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Dollar may be done here - Be careful

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Don't get me wrong, I own gold and silver, and I m not USD bullish in the longrun. My view is that a USD rally is coming in the short/medium term, assets will move down, and the FED will print more money. The facts are that the banks are holding reseves on their balance sheets, and consumer and commercial credit has fallen. It would take banks and a willing borrower to spend this money, hence increasing money velocity to bid up prices to the levels we have seen before. Right now the money multiplier has plunged, and all measures that were positive and correlated with the inflation between 2003-2007 are now negative. Namely, commercial lending, consumer credit, and the money velocity. Also, what do you know that the bond market does not. The USD is in a downtrend for sure, however a rally in the USD would not be a surprise, and it would actually correlate with the fundamentals. I prefer these days to look at what the market is doing, not what we think it should be doing.

 

We hear all these USD bears right now, central bank officials and nations saying the USD will decline. There is alot of USD bearishness out there. If you believe that markets are in anyway half efficient, then this should be priced into the USD and in many ways this should cause a collapse in the USD...so one ask does the market really believe this?

 

I also agree with the USD carry trade...however caveat emptor number 1. We had the JPY carry trade...when carry trades unwind the carry funding currency can becomes incredibly strong as asset markets reverse course.

 

Again, the USD is going to be weak in the future, and all this printing will lead to global inflation...however, if that was imminent bond yields would be rising and not falling.

Hyper-Inflation happens when there is a loss in confidence in a currency, not just because there is increased borrowing by consumers.

 

As Jim Sinclair says "23 Days to go".

 

 

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Hyper-Inflation happens when there is a loss in confidence in a currency, not just because there is increased borrowing by consumers.

 

As Jim Sinclair says "23 Days to go".

 

 

With all due respect to Jim Sinclair in January 2008 he was saying gold will trade at $1650 within a matter of days...

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With all due respect to Jim Sinclair in January 2008 he was saying gold will trade at $1650 within a matter of days...

Can you show a reference? He has said for years that $1650 will be reached by January 14th 2011.

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Can you show a reference? He has said for years that $1650 will be reached by January 14th 2011.

 

Gold will go to $1650 as Dow drops

 

Whilst I don't disagree with him about price in the future, he has been known to come out and make some very bold predictions that things will happen in the very short term...I remember the markets were dropping just after Christmas and he said that in the panic gold would go to $1650.

 

Writing in his weekly column of the Chairman's Corner, Sinclair says unless the equity markets can be calmed, gold will trade at US$1650 as an almost immediate effect of what will be done to fend off the total panic that is starting to take place in general equities. This, he says, will also send a black mood on credit markets of all kinds.

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Gold will go to $1650 as Dow drops

 

Whilst I don't disagree with him about price in the future, he has been known to come out and make some very bold predictions that things will happen in the very short term...I remember the markets were dropping just after Christmas and he said that in the panic gold would go to $1650.

 

Writing in his weekly column of the Chairman's Corner, Sinclair says unless the equity markets can be calmed, gold will trade at US$1650 as an almost immediate effect of what will be done to fend off the total panic that is starting to take place in general equities. This, he says, will also send a black mood on credit markets of all kinds.

That is a misrepresentation of Jim Sinclair's thinking by Frank Jomo. Jim has always stuck with saying $1650 by Jan 14th 2011.

 

 

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Thanks to those who have been reposting old classic cgnao posts.

I am beginning to see why cgnao got worn down after years of trying to educate folks.

I can now begin to see why he only writes infrequent short sharp posts.

People are so obsessed with the short term and with utter irrelevancies.

There is only so much you can do.

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With all due respect to Jim Sinclair in January 2008 he was saying gold will trade at $1650 within a matter of days...

We only have 23 odd days to go now before some world changing event... perhaps the destruction of the dollar? :rolleyes:

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Thanks to those who have been reposting old classic cgnao posts.

I am beginning to see why cgnao got worn down after years of trying to educate folks.

I can now begin to see why he only writes infrequent short sharp posts.

People are so obsessed with the short term and with utter irrelevancies.

There is only so much you can do.

I believe Cgnao stopped posting because things didn't work out in the way he expected.... in a hyper-inflationary holocaust. I imagine he is either in a dusty attic or an ivory tower going over the game plan again.

 

[Edit... posted to provoke Cgnao into posting again. :) ]

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Abandoning the USS Dollar

by Jennifer Barry, GlobalAssetStrategist.com | October 14, 2009

 

Robert Fisk's article in The Independent on October 6, “The Demise of the Dollar,” has created many shock waves in the currency markets. Fisk reported that major Arab nations are secretly planning to dump the current petrodollar scheme in favor of pricing oil in a basket of currencies. Included in this basket will be the yen, yuan, euro, a new, pan-Arab currency, and gold bullion. Co-conspirators include Saudi Arabia, Russia, Brazil, China, France, and the formerly compliant Japanese. This validated my July prediction that the Persian Gulf states will eventually accept yuan in exchange for oil.

 

It's no accident that three of the four BRIC nations are active participants in this plan. The leaders of these nations have moved beyond BRIC being a theoretical construct invented by Goldman Sachs in 2001. They have formed an actual alliance based on common goals, cooperating both politically and economically.

 

The BRIC governments also share a distrust of American motives. Asserting their growing independence, Brazil, Russia, India and China held their first formal conference this June in Yekaterinburg, and the United States was not permitted to attend as an observer. They understandably didn't want to share the details of their tactics to lessen their exposure to dollar depreciation. The leaders of the BRIC countries have already publicly discussed purchasing each other’s bonds and engaging in intra-group currency swaps. Two of the nations – Russia and China – are members of the Shanghai Cooperation Organization (SCO) who have agreed in principle to using regional currencies in trade.

 

Every member but Russia has committed to purchasing IMF bonds denominated in Special Drawing Rights, which includes such non-dollar currencies such as the yen, euro, and pound. The nations have a combined holding of $2.8 trillion in USD reserves, so any commitment to sell dollar instruments or even lessen the scale of purchases is a serious threat to the currency.

 

While many of the governments involved have denied oil plan, it fits in with the alternative currency initiatives already announced. In addition, the Gulf Cooperation Council's move toward monetary union is far from unique. Just two years ago, former Mexican President Vincente Fox mentioned on Larry King Live that he had discussed a single currency for the Americas with President Bush, but this was part of a “very long term” plan. In April 2008, the 10 ASEAN countries (Association of Southeast Asian Nations) met to discuss “monetary integration” and cooperation with regional non-members China, South Korea and Japan. Even the Bank for International Settlements called for eliminating national currencies and forming regional currency blocs “based on the dollar, euro and renminbi or yen” in 2006. It makes sense that nations would collaborate to form currency life rafts to survive the eventual sinking of the U.S. dollar, now listing badly to starboard.

 

Gold Shines Again

 

Despite the fact that most Western financial advisors and economists perceive gold as an oddly fetishized commodity, the global majority understands this metal is the king of currencies. I view this inclusion of gold in a monetary basket as a transitional state to a gold backed currency.

 

After all, this possibility was broached a few months ago at the July G8 meeting. Gold coins imprinted with the slogan “Future World Currency” were presented to each of the world leaders. Originally designed to unite Europe with the United States, Russian President Medvedev expanded its scope and touted it as the new “supranational currency.” While China was not present at this meeting, its steady drumbeat of complaints about U.S. monetary policy suggests it was behind this initiative.

 

Nevertheless, I don’t believe either President Medvedev or President Hu of China actually wants to unite the globe under one monetary standard, even if it uses gold coins. Instead, they are clearly trying to move from the current dollar hegemony to a system of competing reserve currencies without crashing the global economy.

 

Each country has ambitions to supplant the U.S. dollar with its own money. Medvedev hasn't been shy about expressing his desire to convert the ruble into an international medium of exchange. China is now selling yuan-denominated bonds outside its borders as an intermediate step toward forming a globally traded currency.

 

Many nations from South Africa to Argentina have purchased bullion for their reserves, but China has the inside track when it comes to replacing the USD with an alternative hard currency. China has much larger forex reserves with which it can acquire assets, and it didn’t suffer a depression at the turn of the century as Russia did.

 

As I explained in my July article, “Gold, the U.S. Dollar and the Chinese Yuan,” the Chinese have a long term goal to become the pre-eminent reserve currency. The government allowed the private ownership and sale of gold by their citizens in 2002 in order to re-monetize the metal, and now they are promoting silver purchases as well. The Chinese know they must step in to facilitate the move back to hard money.

 

Chinese officials are aware of the significance of the bailouts I discussed last fall in my essay, “US Dollar Doomed as Credit Crisis Turning into a Currency Crisis.” Despite rhetoric to the contrary, the situation has only worsened over the past year. The potential liabilities have increased to $23.7 trillion, according to the TARP's special inspector general, Neil Barofsky. The tremendous inflation of the money supply was billed as a necessary rescue of the global financial system, but in reality, the U.S. will effectively default on its obligations through hyperinflation.

 

In the meantime, China is scouring the world, securing gold and hard assets in exchange for its dollar promises. The Chinese will swap this paper for bullion as long as counterparties are willing to make the trade. Fortunately for them, Western central banks continue to unload gold both openly and surreptitiously in order to make their currencies look solid. Nonetheless, if these nations don’t curb their reckless spending, they will find their global influence draining away even faster than the metal China is actively acquiring.

 

 

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Russia ready to drop dollar in energy trade with China, Putin says

 

Submitted by cpowell on Thu, 2009-10-15 13:23. Section: Daily Dispatches

From RIA Novosti, Moscow

Wednesday, October 14, 2009

 

http://en.rian.ru/russia/20091014/156468599.html

 

BEIJING -- Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday.

 

The premier, currently on a visit to Beijing, said a final decision on the issue can be made only after a thorough, expert analysis.

 

"Yesterday energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.

 

He stressed that "there should be a balance here."

 

On Tuesday Russia and China agreed terms for Russian gas deliveries at a level of up to 70 billion cubic meters a year. China also imports oil from Russia.

 

The Russian prime minister said the issue would be addressed among others at a meeting of Shanghai Cooperation Organization finance ministers, who are to convene before the end of the year in Kazakhstan.

 

Britain's Independent newspaper reported last Tuesday that Russian officials had held "secret meetings" with Arab states, China and France on ending the use of the U.S. dollar in international oil trade.

 

The countries are reportedly seeking to switch from the dollar to a basket of currencies including the euro, Japanese yen, Chinese yuan, gold, and a new unified currency of leading Arab oil producing countries.

 

The Independent said the meetings have been confirmed by Chinese and Arab banking sources.

 

 

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Futures intraday USD Index DXZ9...

 

The chart is a 20 pip range candle chart...We have what appears to be a falling wedge, however, lets see what sort of volume accompanys any breakout of the resistance. I watched the area yesterday with interest around the support line. A very tight range yesterday, volume is not shown, however, this area was an area of very high volume, and the USD didnt move lower. The volume was very high on the last lowest down candle...Also if you look at many of the USD crosses individually, they are around some support areas and have moved up from those today. Interesting times.

 

Also forgot to mention...A nice divergence has also occured between the RSI and the price...

 

 

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Copied here from Goldfingers gold thread.

 

It's a currency Jim, but not as we know it:

 

http://news.goldseek.com/GoldenJackass/1255640400.php

 

10-15gj.jpg

 

Quote:

 

COMPLETED LOOP: FINANCIAL & COMMERCIAL

The swirling motion of the above loop is powerful. With the crude oil sales no longer taking US$ payments, the loop is completed. The financial engine in the Dollar Carry Trade now will have a commercial engine to further its momentum, to add power to the cycle, and force powerful lethal feedback reactions. Only when the financial and commercial sides fit like two giant interlocking pieces does the power take hold, much like a toilet assembled. The Fisk report on a 2018 timeframe for the phase out of US$ petro sales is more politically massaged information. The timetable will be just a couple years, doubtful more. The reactions from systems will force the timing to be much sooner, out of desire, out of necessity, due to broken systems that accelerate the breakdown process due to the announcement itself in feedback loops. By the way, the swirling motion in the vicious loop should remind people of a toilet being flushed.

 

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One for RH;

 

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

 

Oct. 15 (Bloomberg) -- The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

 

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

 

The dollar last week dropped to the lowest in almost a year against the yen as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, has fallen 15 percent from its peak this year to as low as 75.211 today, the lowest since August 2008.

 

The gauge is about five points away from its record low in March 2008, and the dollar is 2.5 percent away from a 14-year low against the yen.

 

“We can no longer stop the big wave of dollar weakness,” said Uno, who correctly predicted the dollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7,000 after the bankruptcy of Lehman Brothers Holdings Inc. last year. If the U.S. currency breaks through record levels, “there will be no downside limit, and even coordinated intervention won’t work,” he said.

 

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency. Hossein Ghazavi, Iran’s deputy central bank chief, said on Sept. 13 the euro has overtaken the dollar as the main currency of Iran’s foreign reserves.

 

Elliott Wave

 

The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back.

 

The dollar is now at wave five of the 40-year cycle, Uno said. It dropped to 92 yen during wave one that ended in March 1973. The dollar will target 50 yen during the current wave, based on multiplying 92 with 0.764, a number in the Fibonacci sequence, and subtracting from the 123.17 yen level seen in the second quarter of 2007, according to Uno.

 

The Elliot Wave was developed by accountant Ralph Nelson Elliott during the Great Depression. Wave sizes are often related by a series of numbers known as the Fibonacci sequence, pioneered by 13th century mathematician Leonardo Pisano, who discerned them from proportions found in nature.

 

Uno said after the dollar loses its reserve currency status, the U.S., Europe and Asia will form separate economic blocs. The International Monetary Fund’s special drawing rights may be used as a temporary measure, and global currency trading will shrink in the long run, he said.

 

 

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One for RH;

Nice. Bought a good stash of Yen when it was cheaper. Will only swap for silver when it is in turn cheaper.

 

I doubt very much if the dollar will go to 50... I will be buying dollars shortly with a peripheral currency which is strong at the moment.

 

100% uncertain and hedged.

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Here's a thought:

 

As long as the Yuan is fixed to the dollar, the dollar is quite literally supported by China. Do you think China will "de-peg" anytime soon? I don't.

 

If there is to be some dollar demise, it looks to be well off in the future, and then would only happen with a revamping of the international monetary system.... a new Bretton Woods. I think this will in the end have to happen due to continued currency instability and damage to international trade. In the new system, though the dollar will lose its current central position, it will most likely remain a major currency.

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Comment from Mish's Blog

 

black swan says:

HOLY CRAP!!!!

 

Oct. 15 (Bloomberg) --

The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

 

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

 

But, but the US has a strong dollar policy. What can this guy be smoking? He obviously doesn't believe that the U.S. is in for a deflationary future. Hey, Mish, is he crazy?

 

http://www.bloomberg.com/apps/news?pid=206...id=a_A5nqmw9Dq8

 

(in edit: I find the same link has already been posted here on the previous page.)

 

Note: You often get these sorts of wild forecasts near turning points.

Remember when oil was $146, and many were saying it was "headed to $200"?

(I said: "$400, but only after a fall to $100 or so first", and think my forecast would have made money.)

Similarly, we could see a big rally in the dollar soon, BEFORE a collapse.

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Roman's BHD go back to your straightjacket and stop infecting this forum with your idiocy.

 

Insults like this have no place on this forum. You can disagree and state your reasons but ending your posts with insults like this make you look insecure about the arguments you put forward.

 

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Math = right now = yen = 90 going to go to 50...

 

40/90 = 44% more devaluation...

 

Puts the current dollar at 75.50, and pushing it down to 33.50...

 

Means Gold in dollar terms goes to $1500+++ plus, on devaluation alone...

 

Right, Roman's BadHairDay?

Hahaha.

 

Well, I haven't bought the dollar yet... reading the article I might delay the decision a bit longer... if the dollar went through 70 and then slumped to 60, I'd be a buyer for sure. It would just be a hedge though, besides Yen, for a massive bullion position. And then buying a currency when it is VERY cheap. There is a very real chance that, for one reason or another, everything might turn on a dime dollar here.

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Insults like this have no place on this forum. You can disagree and state your reasons but ending your posts with insults like this make you look insecure about the arguments you put forward.

 

Oh ow...you know who is back. CDSwamp is that you?

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Oh ow...you know who is back. CDSwamp is that you?

Oh dear... please not "groundhog day" again. :lol:

 

I suspected the same after reading the second post. Mods! :lol:

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Roman's BHD go back to your straightjacket and stop infecting this forum with your idiocy.

 

totally unnecessary comment

 

if you cannot debate without making personal insults, please find another forum because you will not be welcome here

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Just plonk'em. No use wasting your breath on such characters.

 

I find the yesterday's Treasury talk interesting regarding China Renminbi and the Dollar:

 

http://ftalphaville.ft.com/blog/2009/10/16...ncerned-on-chin

 

"In its semi-annual report on exchange rate policies, the US Treasury toughened its language on China, saying that while Beijing had helped steady the global economy, its recent moves to accumulate more forex reserves “risk unwinding some of the progress made in reducing imbalances”.

 

So, what they are saying is: stop pegging you fools, or we'll never be able to climb out of this hole.

 

Guess what, China's not going to de-peg. Not any time soon. So the dollar continues to slide, JPY and EUR areas continue to hurt at these levels and beyond.

 

 

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Found some classic Roman Holiday speak in this article re the dollar...

 

But the reality is not so much that the US is inflating, so much as that the rest of the world is deflating relative to the dollar. Import prices are still generally falling, inflation remains quiescent and private credit growth is now contracting. These are hallmarks of deflation, not inflation.

 

It doesn't fit the prevailing view here but hey ho...

 

Don't just do something, stand there!

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Here's a thought:

 

As long as the Yuan is fixed to the dollar, the dollar is quite literally supported by China. Do you think China will "de-peg" anytime soon? I don't.

 

 

 

China has stated they will default on the US derivatives they own. They in fact have already been defaulting on them since November of 2008. They view these derivatives as contracts that they were fooled into buying and also look at these derivatives as a form of "economic warfare." If they wanted to dramatically reduce their liabilities for these derivatives, letting the yuan float against the dollar, would increase the value of the yuan, making these outstanding derivatives less onerous. It would also strike back at the US as the next step in this economic war they perceive, rightly, to exist.

 

If the Chinese feel that the US is trying to inflate their way out of debt by printing money, then they have likely already concluded and priced in (gold/silver) that the US dollars and US Treasury debt they hold will soon be worthless anyway. Once you logically reach that conclusion, letting the yuan float against the dollar makes more sense.

 

Roman's BHD go back to your straightjacket and stop infecting this forum with your idiocy.

 

The first two paragraphs of your post are excellent.

 

China have given their response to the "Our currency, your problem" statement by saying "Your contracts, your problem". They are also obviously causing the US administration discomfort by helping gold retain it's rightful place as the rightful, reserve currency. I see this as warning shots over the USS Dollar, warning them that there is a lot of pain to go around.

 

The last line was completely unnecessary - why spoil a good post? I don't 100% agree with RH's deflation theory but he is in our 'Golden Team'. We all need to work together because I am certain all the central banks are 'teaming' up against us.

 

 

 

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