[gego]

$this->bbcode_second_pass_quote('MrBill', '
')

What are the reasons behind your argument? AUD, CAD, ZAR could be commodity plays, if your view is that prices are headed much lower? But why the GBP? I/R differentials still support the GBP over the USD or EUR and the BOE is still tightening? Why the JPY? Their ZIRP policy is still in effect and the BOJ/Min Fin would not like the JPY to appreciate against the dollar and hurt exports, while the JPY is already at record lows against the EUR, so I am not sure why you're bullish on the JPY? I can see the CHF as a safe haven investment, but then interest rates there are also very low, so I am not sure it is a natural play unless you're thinking about global problems, but then it seems to me that those kinds of conditions would support commodities, so again the AUD, CAD, ZAR would be also supported? Just trying to get inside your though process? Thanks.

[threadbear]

$this->bbcode_second_pass_quote('evilgenius', 'R')ight now I think the danger for the dollar lies in the trend around the rest of the world to raise interest rates. If the Bank of England and the European Central Bank along with the Chinese raise rates by more than a quarter point in the near term the Federal Reserve will be forced to raise US rates in order to offer a competing investment. Ordinarily this wouldn't hurt the US economy, but as it happens housing is hanging by a thread. Another rate adjustment upward and the US could look like Britain under Nigel Lawson.

Demand destruction is coming.

[MOCKBA]

I was in Montreal over Canadian thanksgivings and just around this time some company closed down couple mills and issued pink slips to about 700 people. It was a sad thanksgivings for those 700 and about 700 more in support industries and couple towns would be pretty much done in the next year or so, but what surprised me that the 2 main reasons they were citing were

1. strong Canadian dollar
2. slow down in US housing market

and not a word about soft lumber dispute, nothing of what was so common just half a year ago... what was surprising to me even more was that give or take thousand and a half jobs made Quebec goverment issue statements, pledge support and so on. Compare that to layoffs Ford and GM did last year - did anybody really noticed that? Not to mention that it time of big busts and pink slips bonanzas at iXLs, Enrons, WorldComs and such did the Government pledged anything to get those people employed again? Did the USD move because of the 2 biggest bankrupcies (and associated layoffs) in the history of the mankind that happened to be in US?

Now look at CAD vs. USD over last month and mind it was just 700 jobs in Quebec created by excess in US.

On another note, Bank of Canada sets their rates a week prior to FED. I think the two are reading from the same scrip, so BoC is a good proxy for what would FED do. Still this time I was pretty certain BoC would rest (since Canada is and will not be selling much to US) and FED just might break "one person opposing" ("one person opposing" never happened under Greenspan). I would break even or moderately loose on the trade, but the moral of the story still is... excesses would have to be worked out sooner then later. Sooner then later ex-Enron employees would have no credit to pay for Nokia cell phones, VW rabits and LG flat screen TVs and they would switch to Moto cell-phone, Ford Escapes and ... Koreans would still be making our LCDs, but 700+ of the mill-workers in Quebec together with Finns, ze Germans and Koreans would continue to pay twice as much for the benefits their un-employed Enron friends are having.

[MrBill]

Given the shortage of energy traders, and the recruitment drive to hire them, I am sure that most if not almost all Enron employees have successfully landed on their feet again?

I am less sure about unemployed professionals in Germany/European* where many over the age of 45 are simply unemployable due to an age bias and structural unemployment where older, skilled workers are shunned in favor of younger, cheaper workers.

While German/European factories are relocating abroad or not being built in the first place because of the German/European death spiral where protecting workers rights and a generous welfare state are actually causing more unemployment due to high costs making firms uncompetitive.

I would sooner be unemployed in Canada where there is a chance to find a new job sooner rather than later than forced into quasi-early retirement at age 45 with no prospects except to start collecting my reduced pension at age 65 soon to be 67. Better to be in a dynamic labor market like London where anyone can get a job anytime by walking across the street. That is real job security.

*European as in Old Europe/core EU countries/not CEE

[evilgenius]

The Bank of England should be raising rates by 1/4 point at the beginning of November. They need to slow down the rate of housing price increases and they also are worried about wage inflation. If that is the only increase things will be fine for the dollar given that there are currently huge in-flows into dollars so that foreign investors can take advantage of DOW 12,000 and up. We know that is a shell game however since those same investors aren't going to stay in those stocks just to wait for whatever meager dividends. They will either repatriate their money at the end of the run or, and this is being telegraphed by the run up in energy stocks, sink it into US treasuries so that it is comfortably in dollars which can easily buy oil.

It will be interesting to see if the OPEC cuts are genuine price control measures or a cover for depletion. If next years high prices aren't characterized by severe OPEC quota cheating we will know.

God help us. The only trouble for the dollar in all of this peak term crisis is that the flow of dollars out of treasuries and back into oil is blocked in an annoying way from coming back to treasuries by the ever increasing costs of exploration.

[Kingcoal]

I’ve come to the conclusion that focusing on currencies is barking up the wrong tree. The thing to focus on is the economy. The US economy is so big that not only can it keep its own citizens occupied, but also the citizens of other countries. It really is all about keeping workers around the world occupied. Systemic unemployment is a huge problem for countries. Unemployed people are potential troublemakers. The world economy is a cure for world war. Wars keep citizens occupied, but are nonproductive and destructive and need I say more? The world economy is a solution to world war. The little spats we call wars these days are nothing compared to WW2, WW1, etc.

Fiat currencies work, all you need is a steady supply of cheap oil and we’re all set for the future.

[threadbear]

$this->bbcode_second_pass_quote('Kingcoal', 'I')’ve come to the conclusion that focusing on currencies is barking up the wrong tree. The thing to focus on is the economy. The US economy is so big that not only can it keep its own citizens occupied, but also the citizens of other countries. It really is all about keeping workers around the world occupied. Systemic unemployment is a huge problem for countries. Unemployed people are potential troublemakers. The world economy is a cure for world war. Wars keep citizens occupied, but are nonproductive and destructive and need I say more? The world economy is a solution to world war. The little spats we call wars these days are nothing compared to WW2, WW1, etc.

Fiat currencies work, all you need is a steady supply of cheap oil and we’re all set for the future.

[Kingcoal]

$this->bbcode_second_pass_quote('threadbear', '')$this->bbcode_second_pass_quote('Kingcoal', 'I')’ve come to the conclusion that focusing on currencies is barking up the wrong tree. The thing to focus on is the economy. The US economy is so big that not only can it keep its own citizens occupied, but also the citizens of other countries. It really is all about keeping workers around the world occupied. Systemic unemployment is a huge problem for countries. Unemployed people are potential troublemakers. The world economy is a cure for world war. Wars keep citizens occupied, but are nonproductive and destructive and need I say more? The world economy is a solution to world war. The little spats we call wars these days are nothing compared to WW2, WW1, etc.

Fiat currencies work, all you need is a steady supply of cheap oil and we’re all set for the future.

[threadbear]

$this->bbcode_second_pass_quote('Kingcoal', '')$this->bbcode_second_pass_quote('threadbear', '')$this->bbcode_second_pass_quote('Kingcoal', 'I')’ve come to the conclusion that focusing on currencies is barking up the wrong tree. The thing to focus on is the economy. The US economy is so big that not only can it keep its own citizens occupied, but also the citizens of other countries. It really is all about keeping workers around the world occupied. Systemic unemployment is a huge problem for countries. Unemployed people are potential troublemakers. The world economy is a cure for world war. Wars keep citizens occupied, but are nonproductive and destructive and need I say more? The world economy is a solution to world war. The little spats we call wars these days are nothing compared to WW2, WW1, etc.

Fiat currencies work, all you need is a steady supply of cheap oil and we’re all set for the future.

[Revi]

I read the Spiegel article. Scary! After reading that I realized that the whole thing is very delicate. The thing that keeps it all from falling down is the fact that nobody wants to start a run on dollars because everyone has so many of them. Somebody is going to sell soon, though. It's irresistable to cash out early When they do, the value will go down, and then everybody will dump their dollars, driving the price still lower. Who will move first? Is some little country dumping their dollars on the market now? It makes me nervous...

[threadbear]

$this->bbcode_second_pass_quote('Revi', 'I') read the Spiegel article. Scary! After reading that I realized that the whole thing is very delicate. The thing that keeps it all from falling down is the fact that nobody wants to start a run on dollars because everyone has so many of them. Somebody is going to sell soon, though. It's irresistable to cash out early When they do, the value will go down, and then everybody will dump their dollars, driving the price still lower. Who will move first? Is some little country dumping their dollars on the market now? It makes me nervous...

[RdSnt]

$this->bbcode_second_pass_quote('threadbear', '
')
Other than the obligatory peak oil trigger, are there anymore potential triggers that you can see unfolding fairly soon?

[Revi]

Thanks! Seems like my little dollar selloff scenario was just the tip of the iceberg. I agree, almost anything could set it off. I'm stocking up on dry beans and rice. It's not so bad with a little tabasco...

[MrBill]

RE Iraq pullout causing the collapse of the dollar

To who's benefit? I assume the dollar must fall against one or more or a basket of currencies. Which countries are going to step-up and fill a security void in the ME that is slipping into sectarian violence and civil war? How will this benefit their own currencies?

As an aside, Germany is pulling back their foreign based troops after some losses here and a scandal there. They have just 10.000 troops scattered around various conflict zones in the world. Mostly performing policing activities. Who will replace these troops?

The EU's much vaulted 60.000 strong rapid response force still has not made it from policy paper to reality, and the EU lacks the hardware without NATO to even get those troops into and out of danger.

I assume any pullback of American troops would trigger a) more sectarian violence and civil war; b) embolden local war lords and terrorists; c) prompt unstable local governments to spend more of their own financial resources on security and the ability to make war on their own people; or d) out source those security needs to someone else. All that costs oil and money.

[tugboat]

Here's one scenario that ties together other recent (not widely known) government dirty deeds.

http://www.informationclearinghouse.inf ... e15440.htm

[Revi]

$this->bbcode_second_pass_quote('tugboat', 'H')ere's one scenario that ties together other recent (not widely known) government dirty deeds.

http://www.informationclearinghouse.inf ... e15440.htm

[FoxV]

btw, been noticing some strange behaviour in foreign exchange rates the last week and continuing today.

at around 3pm GMT all major currencies spike up in unison (by different percentages) and then stay there, or dirft down slightly till the end of the day. This spike appears to happen with out any FED drivle (which usually causes these spikes when their press release is announced)

it also appears as the spikes are getting larger. Starting with the Fed's meeting last week (24th) we have
0.2% 0.2% 0.3% 0.5% 0.0% 0.5%
These are just the spikes, it appears that most currencies (except our loonie ) have risen a total of 1.5% - 2% over this time

ultimately it looks like some large player(s) is dumping the USD at the same time every day (market open/close?). However the effect is so large and predicatble that if somebody has started dumping the dollar in such large amounts the race for the exits will begin any minute now

any thoughts?

[Scactha]

As the Mike Whitney points out it´s almost irrelevant that the dollar plummets as long as it´s the reserve currency. If the IOB and RTS variant kicks off it´ll be a difference. I seriously doubt anyone but the neocons will entertain the notion of that scenario continuing come a dollar collapse. Supposing this theory holds it will be a dual attack of dumping the dollar and switching to another petro-currency or more likely a basket of them.

[threadbear]

$this->bbcode_second_pass_quote('RdSnt', '')$this->bbcode_second_pass_quote('threadbear', '
')
Other than the obligatory peak oil trigger, are there anymore potential triggers that you can see unfolding fairly soon?

[evilgenius]

I think the current fall in the dollar is due to the world wide interest rate environment. Foreign central banks are in a tightening mode. The BOE is projected to go up a quarter of a point in a few days, we'll see. Anyway, I think the smart money is saying that the Fed will not raise rates in response because of what is happening in housing.

More than a quarter point and the Fed might be forced to act no matter what is going on in housing. I think they are leaving themselves room for acting in their policy statements. Maybe because of that and maybe because of the unpredictable speed of change in other areas.

Things could get even worse if the Chinese accelerate their timeline for floating the yuan. Imagine if the stuff at Walmart got that much more expensive not because the dollar went down per se, but because the yuan went up. Yeah, imagine that relationship vis a vis the dollar but not the European currencies because those currencies are rising too. In that case the Chinese would be seeing the rapid expansion of one market while another, its biggest slowed. They wouldn't have that much reason to ameliorate the speed of currency value change, nor, if you think about it, a very effective mechanism. And besides, why would they want to when the American consumer is so willing to take on debt in order to soak up any price increase.

Over all the world is bound to be characterized by a higher interest rate environment rolling forward because the Chinese need to both strengthen their banking system and slow down their rate of economic growth. The huge amount of debt that the US has to roll over every day is so much obesity given this situation. The only hope that the US has is to back the petro-dollar concept and to ingratiate US corporate interests to the Chinese infrastructure so that as it grows high interest rate profits are skimmed off and sent back to buy US treasuries. In this way the fortunes of both China and the US become intertwined.

Would a US withdrawal from Iraq upset the petro-dollar concept? It might but the answer to that isn't certain. For sure any military loss, however, comes with a certain consequence.