Fireworks for the dollar

How very Bush-esque a question. As if we had any say in the matter. The greenback will continue to fall no matter how many people say utter the “strong dollar” mantra.

taken from…
Intervention will not stop dollar’s slide
By Peter Schiff July, 2 2008

…We can’t count on any help from our friends, the only option would be for the Treasury to intervene unilaterally. However, the US government should think twice about bringing a knife to a gunfight. The Treasury has only about US$75 billion in foreign currency reserves with which to intervene. The war chest is just a spit in the ocean.

To put this number in perspective, Poland has $77 billion, Turkey has $78 billion, and Libya has $79 billion. On the other end of the spectrum, China has $1.7 trillion (not counting Honk Kong�s $150 billion) Japan has $1 trillion, Russia has $550 billion, India and Taiwan each have about $300 billion. Singapore, a nation with fewer than five million people, has $175 billion.

In fact, the United States holds just about 1% of the world’s $7.6 trillion of foreign currency reserves, and our total position amounts to just 2.5% of the total daily volume of foreign exchange trading.

Talk about Bambi versus Godzilla! In other words, if the dollar is going to fall, the Treasury is completely powerless to do anything to stop it.

Globalization happened. Like it or not. And the value of products and services will balance world wide. Also like it or not. And we wont like it because the dollar has been unreasonably high for, well like forever. How do you know it has been too high? Because of the disparity between the cost of labor in the US, and labor in the rest of the world. It is insane to think that we need 20$ an hour to live on and other people only need 2$ a day.

Globalization happened. Things will balance and the dollar has a long way down to go.

I think it went up only because it was a Thursday and people will trying to squeeze any semi-positive news out of everything that they could. But I’ll bet next week it drops down again, losing any gains it’s made today. We might see some relief/stabilization when the fed raises interest rates next, and certainly will not be as strong as it was unless the politicians stop selling our future to China, “promoting democracy” abroad, and actually start investing in America and fiscal responsibility.

The value of the US$ is related to the amount of debt, primarily the trade deficits and the budget deficits. And while we may see some improvement in the trade deficits as the economy slows (ie less consumer buying of imported products), I do not expect much improvment because of the cost of imported oil (a supply-demand issue). I also expect the Federal budget deficits to mushroom due to decreased revenues and increased spending. In fact, if the recent past is any indication, then Congress will be providing numerous bailout packages and stimulus programs at a very high cost. Bill Gross has recently recommend that Obama, should he be elected, double the federal budget deficits to $1 Trillion annually. Of course, we are already approaching $1 Trillion now if the $167Billion in tax rebates, the $200Billion stolen from the SS trust fund, the $150Billion in off-budget war expenditures, and other off-budget items are added to the current $320Billion deficit (and there’s still 3 more months in the fiscal year). I also expect bailouts for some major corporations and GSEs such as GM, F, FNM, and FRE. All of which adds to the federal deficits. I expect the US$ to get crushed.

As someone said a while back in your column (I think) – nothing can replace the almighty dollar and pretty soon it will. The first step to changing that would be to throw out the political hacks and financial cowboys who have been devastating the dollar. Maybe we should put Greenspan back in charge; he can finish what he started.

WELL I THINK WE NEED HENRY PAULSON AND BEN BERNANKE TO SPEAK MORE FREQUENTLY OF THE STRONG DOLLAR POLICY. BOY THATS REALLY HELPED IN THE PAST SEVERAL YEARS. MORE RETORIC IS WHAT WE NEED.

I don’t think so Michael. The dollar right now did not weaken but watch when the rest of the Central banks up their rates to keep with Inflation. It’s going to Tank. Most countries wont even take it making the amount of money in the streets ridiculous.

Fortis predicts a market crash within weeks. I hope they’re wrong for the sake of every single one of us.

The dollar will continue to trend downward (with a lot of bumpy moves) until the trade deficit is eliminated. This could take a long time. It is siphoning too much cash out of the country, making dollars plentiful overseas, causing them to drop in value relative to other currencies.

I believe it will make a small comeback. As US distributor of German products, I’m relieved that the Dollar has finally stabilized. We can deal with the weak dollar when it’s gradual but not when it drops 20% in one year. Overall, I think we hit the lowest we’re going to see and strengthen somewhat from here. It may weaken slightly more but not by much. But I foresee dollar weakness for the next 10 years before we start to see the strength we saw in 2000.