THE Dollar Crash Thread pt 2

[AgentR11]

They'll have to be real gentle about the Yuan & Yen exchange rate; it wouldn't take take much of a slip to make a Yuan -> Dollar -> Yen -> Yuan arbitrage produce profit. Hard to beat making guaranteed money on three mouse clicks.

In a world of ultra-puny returns, or even fees for sitting on cash deposits, it wouldn't take much to make such a game really attractive.

[eXpat]

India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees

Two weeks ago we wrote a post that should have made it all too clear that while the US and Europe continue to pretend that all is well, and they are, somehow, solvent, Asia has been smelling the coffee. To wit: "For anyone wondering how the abandonment of the dollar reserve status would look like we have a Hollow Men reference: not with a bang, but a whimper... Or in this case a whole series of bilateral agreements that quietly seeks to remove the US currency as an intermediate. Such as these: "World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", and now this: "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says."" Today we add the latest country to join the Asian dollar exclusion zone: "India and Iran have agreed to settle some of their $12 billion annual oil trade in rupees, a government source said on Friday, resorting to the restricted currency after more than a year of payment problems in the face of fresh, tougher U.S. sanctions." To summarize: Japan, China, Russia, India and Iran: the countries which together account for the bulk of the world's productivity and combined are among the biggest explorers and producers of energy. And now they all have partial bilateral arrangements, and all of which will very likely expand their bilateral arrangements to multilateral, courtesy of Obama's foreign relations stance which by pushing the countries into a corner has forced them to find alternative, USD-exclusive, arrangements. But yes, aside from all of the above, the dollar still is the reserve currency... if only in which to make calculations of how many imaginary money one pays in exchange for imaginary 'developed world' collateral.

http://www.zerohedge.com/news/india-joins-asian-dollar-exclusion-zone-will-transact-iran-rupees

[mattduke]

Real federal deficit dwarfs official tally

The typical American household would have paid nearly all of its income in taxes last year to balance the budget if the government used standard accounting rules to compute the deficit, a USA TODAY analysis finds.

Congress exempts itself from including the cost of promised retirement benefits.
Under those accounting practices, the government ran red ink last year equal to $42,054 per household — nearly four times the official number reported under unique rules set by Congress.
A U.S. household's median income is $49,445, the Census reports.
The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits. Yet companies, states and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules.

http://www.usatoday.com/news/washington ... 55179748/1

[ritter]

Real federal deficit dwarfs official tally

No way. More obfuscation by our government? Can't be.

[OilFinder2]

Still awaiting that dollar crash.

Courtesy of Marketwatch, here's a 5-year chart of the US dollar index. Notice it's recently broke through some resistance at the ~82 level.



Some here prefer to measure the dollar's value against gold. By that measure, the dollar has gained about 19% in value since August.

2011

2012

[AgentR11]

I've said it in other places, Bernanke is a friggin genius. We are comfortable, and fretting about trivia, while the rest of the developed world is trying to figure out how to not self destruct.

[mattduke]

China and Japan Drop Dollar For Bilateral Trade

Japan and China are expected to start direct trading of their currencies as early as June as part of efforts to boost bilateral trade and investment, reports said on Saturday.

With the planned step, exchange rates between the yen and the yuan will be determined by their transactions, departing from the current 'cross rate' system that involves the dollar in setting yen-yuan rates, Kyodo News said.

http://www.straitstimes.com/BreakingNew ... 03498.html

[KingM]

The dollar has officially been the trading currency since Bretton Woods in 1944, and the reserve currency in place of gold since the Nixon shock in 1971. This thread about the dollar crash began almost seven years ago, in 2005. This thread, in other words, has been predicting the death of the dollar for 17% of the life of the dollar as the reserve currency and over 10% of the entire age of the Bretton Woods system.

Crash implies a certain velocity, wouldn't you say? If this is the end of the dollar, it's so slow moving as to be almost imperceptible.

[mattduke]

[EnergyUnlimited]

...but gold would make a long blue strip...

[eXpat]

Tomorrow another nail
Japan and China to start direct currency trading on Friday

TOKYO —

Japan and China will start direct currency trading this week, Tokyo said Tuesday, the first time Beijing has let a major unit other than the dollar swap with the yuan.

The move, which will scrap the greenback as an intermediary unit, comes as China introduces measures as part of a long-term goal of internationalizing its currency to rival the dollar.

The two-way trade will also be allowed to move in a wider range than the narrow band at which the dollar and yuan change hands, Dow Jones Newswires and the Nikkei business daily reported.

China will set a daily rate based on dealer quotes with trade allowed to move within a 3% band above or below that rate, the reports said, compared with a 1% band fixed to yuan-dollar trading.

The Chinese central bank earlier Tuesday introduced a rate of 7.9480 yuan for every 100 yen, Dow Jones said.

However, there will be no fixed rates in Tokyo trade with the currencies trading freely, according to the same media reports which provided no further details.

http://www.japantoday.com/category/business/view/japan-and-china-to-start-direct-currency-trading-on-friday

[GoIllini]

Let's just say that with the amount of money rushing out of Greece and Europe right now- not to mention parts of Asia- the US has never been such a strong reserve currency.

And it's hurting the market. When folks are willing to give you 0.8 Euros instead of 0.7 for that trip to France or to buy that BMW with, the market looks more expensive and you invest less. And then when you look at foreign oil companies and manufacturers, a cheap Euro means it's cheaper to buy them.

Expect a QE3 announcement. Bernanke is not a genius, but the Eurozone is run by idiots. Switch back to your old currencies, monetize your debts, and figure out a way to have expenses and revenues be equal. And US fiscal policy needs to begin following that sooner rather than later (though there is significant room for monetary stimulus.)

[mattduke]

Disappointing U.S. economic data, new strains in financial markets and deepening worries about Europe's fiscal crisis have prompted a shift at the Federal Reserve, putting back on the table the possibility of action to spur the recovery.

By "action" they mean dollar printing.
http://online.wsj.com/article/SB1000142 ... 53684.html

[Keith_McClary]

Collapse at Hand - The Economy Comes Unglued

PAUL CRAIG ROBERTS has a theory:

The small percentage of Americans who are aware and informed are puzzled why the banksters have escaped with their financial crimes without prosecution. The answer might be that the banks “too big to fail” are adjuncts of Washington and the Federal Reserve in maintaining the stability of the dollar and Treasury bond markets in the face of an untenable Fed policy.

Let us first look at how the big banks can keep the interest rates on Treasuries low, below the rate of inflation, despite the constant increase in US debt as a percent of GDP–thus preserving the Treasury’s ability to service the debt.

The imperiled banks too big to fail have a huge stake in low interest rates and the success of the Fed’s policy. The big banks are positioned to make the Fed’s policy a success. JPMorganChase and other giant-sized banks can drive down Treasury interest rates and, thereby, drive up the prices of bonds, producing a rally, by selling Interest Rate Swaps (IRSwaps).

Not (necessarily) a conspiracy theory:

This apparent collusion suggests to some observers that the reason the Wall Street banksters have not been prosecuted for their crimes is that they are an essential part of the Federal Reserve’s policy to preserve the US dollar as world currency. Possibly the collusion between the Federal Reserve and the banks is organized, but it doesn’t have to be. The banks are beneficiaries of the Fed’s zero interest rate policy. It is in the banks’ interest to support it. Organized collusion is not required.

[Timo]

Not sure how this fits in with the overall discussion, but it does relate to the euro and the dollar. My wife got a call this morning letting her know that the price of a Eurail Pass dropped by $50 last night. Price drops of that size aren't terribly common (i don't think), which only leads me to believe that the EU (or who ever runs the Eurail system) is getting pretty desperate for new, outside cash. I could be wrong about all that, though, since i don't live there. If anyone else knows anything more specifically, feel free to set the record straight. But, based on what little i know and only on what a read, it's easy to see this as the start, or the continuation of a downard spiral.

Fear and pessimism are the easiest human emotions to extrapolate into dangerous, erroneous territory. Not good.

[mattduke]

China and Brazil in $30bn currency swap agreement
Another dollar-dropping agreement.
http://www.bbc.co.uk/news/business-18545978

[mattduke]

Hot on the tails of the China Brazil dollar drop agreement arrives the China Chile dollar drop agreement.



China and Chile agreed Tuesday to upgrade their bilateral ties to a strategic partnership, and double trade in three years.

Wen suggested that the two sides launch currency swaps and expand settlement in China's renminbi.
http://news.xinhuanet.com/english/china ... 334167.htm

[mattduke]

Fed is moving towards limitless open ended bond buying.

http://www.bloomberg.com/news/2012-09-0 ... nanke.html

[careinke]

Fed is moving towards limitless open ended bond buying.

http://www.bloomberg.com/news/2012-09-0 ... nanke.html

Great idea, then they don't have to have all those pesky meetings to decide how to sell their moves to the public. This way, they just have to make one announcement, then crawl back into the darkness to continue their voodoo.

[mattduke]

Fed announces unlimited QE3. The beatings will continue until morale improves. Gold and silver explode. And treasuries sell off despite it all, because getting paid back in watered down dollars is the same as default.

http://www.bloomberg.com/news/2012-09-1 ... month.html