World getting ready to dump the dollar

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rci2145's picture
rci2145
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World getting ready to dump the dollar

Very interesting article.

 http://seekingalpha.com/article/123965-why-the-u-s-dollar-is-vulnerable-to-a-sharp-decline-now

that1guy's picture
that1guy
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Re: World getting ready to dump the dollar

The more I research the more I feel this is bound to happen. Why would any government let alone person want to keep their savings something that has been steadily loosing value since 1971....

SkylightMT's picture
SkylightMT
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Re: World getting ready to dump the dollar

I don't see it. I think global investors will flee to the dollar as things go downhill.

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: World getting ready to dump the dollar

that1guy -

Take a look at the "Risk to Europe" section of the article at this thread link.

http://www.peakprosperity.com/forum/while-rome-burns-john-mauldin/14057

I'm not trying to imply the dollar is healthy by any means, but what is the world going to pick up once they drop the dollar?

I think Skylight might be onto something - I don't know that they will flee to the dollar, but they may try to catch a falling knife that's not as sharp as the others.

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SagerXX
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Re: World getting ready to dump the dollar

Indeed -- what are people going to flee to if the Euro/Pound are toasty?  The Yuan?  The Riyal/Rial (Saudi/Iranian)?  Surely those two countries have limits on foreign investment in the currency?  Right or wrong, I think the dollar is still king.

Now, they could flee to gold...(not that I own any).

Sager 

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Ruhh
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Re: World getting ready to dump the dollar

CAD?

They're touting the Canadian banking system to be the best in the world. I'm not banking on that though.

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joemanc
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Re: World getting ready to dump the dollar

Another take on the dollar. It's hard to time all this stuff. Expect it to happen, sooner or later. Hopefully later so we have time to make the necessary changes to our lives and so we can spread the word.

http://www.europac.net/externalframeset.asp?from=home&id=15609

Quote:

If the Euro appears under serious threat, there could be a massive
financial panic and a stampede into U.S. dollars, driving it to
unexpected highs. This is likely to add temporarily to a recessionary
fall in the dollar price of gold. In light of this unfolding evidence,
it is becoming increasingly risky to sell short the U.S. dollar. In the
long-term however, President Obama appears to have set the seal on a
dollar collapse.

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that1guy
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Re: World getting ready to dump the dollar

Ok, so no one here is completely wrong about the euro at all, or even the pound (I have been living here in England for three years now...USAF), but it is truly hard for me to see everyone sticking with the dollar. Let’s see if we can break this down a little bit between us all here.

Starting with the pound. In the time I have lived here I have seen it go from an exchange rate of 1.70 to one pound to as high as 2.13 to one pound. We currently sit at between 1.40-1.45 to one pound. Personally England has been following in the US's footsteps in many ways, all the way down to the housing market, and 'quantative easing'. With that said England has some rough waters ahead, but not at nearly the size or rate of debt the US is getting itself into. As Joe posted, and I believe, our administration seems to be sealing the deal for the dollar. Just look at the Omnibus package just passed...another 400 billion down the drain. At this point in time, I don’t see the pound going anywhere, they are just in for some major issues ahead, but still may be the lesser of two evils between the dollar and pound (definitely not as sharp).  

The Euro seems to be in a ton of troubles, and can see it playing out in a few ways; the complete break of the Euro (going back to individual currencies), a few countries defaulting in the very near future and possibly dropping out of the Euro zone, or even the Euro zone suffering a large amount and squeezing by. Oddly enough the exchange rate is still 1.25 to one euro. Do I see people fleeing to the euro...not right now, that’s for sure,

 Now, the one that I really think people should be eyeing is China. We all know about their HUGE reserves, and some may know about them starting to use it (hence the billions being spent in Europe, Russia, UK...). They have even recently started a 'practice' program with 8 countries making the yaun the currency of trade (all bills receivable in yaun, not dollars). This stuff is all happening now...and frankly with almost 2 trillion in reserves, it is not surprising, not to mention the fact that they are still looking at a positive growth rate this year. I’m sure not in the double digits like the past, but the fact that it is positive (they are guessing 8%) should say something really big to anyone all the while we just contracted 6.2% in the last quarter. Maybe I am crazy, but just off of that very small bit of info why would people dump their money into dollars when just off the numbers alone we are COMPLETELY insolvent. 

We (the USA) are currently 10,946,000,000,000+ in debt and counting. In the last month alone we have gone up 300billion (I have the meter on my screen and the site saved). All of fiscal 08, not counting any unfunded liabilities of course, was only at about 454billion total. Am I saying Bush was any better.....absolutely not. Now we have the rest of the 700 billion bailout, the new 787 billion bailout, the trillions on all their other programs, the (horrible) housing bill, the 200billion+ TALF, and  now to top it off they are even passing 400 billion omnibus spending bill with over 7 billion in pork barrel crap. The list goes on and on and on. By the time Obama's first term is done we are in track to hit (and surpass) 15trillion in national debt, This all started a long time ago, I think we can all agree on that, but to think that the dollar is the only 'safe haven' out there I feel is silly.  Peter Schiff made a great analogy that the government’s plan to fix everything by supplying more credit is like giving a fat kid on a diet Twinkies, it just won’t work, so for governments and people alike to bet their futures and invest in the dollar (whether it be bonds, stocks or cash) I feel is the worst choice of them all.

As sagar said, there is always gold as well. Whatever happened to that you know? If they could figured out a way to get rid of the fractional reserve system, or at least tweak it, that would at least put somewhat more of a cap on all this crazy printing, and bailouts. Rumor has it that china is even looking to amass about 4000 tons more gold in the near future, though I have not been about to find anything backing that other than rumor mills yet, but if you think about it, it would only run them about 96billion dollars to do right now, and with 700 billion in dollars in their reserves that would be a synch. Anyway, I’m guess I should get back to work, I’ll be on later tonight though, I can post some links to news and other items I have if anyone is interested. I did my best to condense a TON of info, I hope it isn’t too hard to read, lol...I'd like to hear your thoughts...

 

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Re: World getting ready to dump the dollar

that1guy, have you heard about the potential new Arab Gulf Cooperation Council (GCC) currency, the Khaleeji?  There is talk it may be pegged to a basket of cuurencies and gold.  They are trying to make that happen by 2010.  If it does, this may become another alternative to those seeking refuge from the US dollar and other troubled currencies.  Here are a couple links I just came up with on Google:

From Stefan Pernar on the MarketOracle, Feb. 17, 2009, "New Gulf Currency 'Khaleeji' poised to be Gold backed to remove 'Riba'", at http://www.marketoracle.co.uk/Article8947.html 

MarketSkeptics' has some interesting commentary on the above article: http://www.marketskeptics.com/2009/02/khaleeji-will-be-gulfs-common-currency.html

Quote:

My reaction: Although I already reported about the Khaleeji on January 2 in my entry *****Gulf Arab Nations Break Their Dollar Pegs*****, I felt it was worth mentioning again for those who might have missed the story. Here is a quick recap of the important points about the GCC's proposed common currency:

1) On December 31st 2008, GCC (Gulf Cooperation Council) leaders concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.

2) The currency, named the Khaleeji (Arabic: خليجي), will be sole legal tender in Saudi Arabia, Kuwait, Bahrain, Qatar, and the United Arab Emirates.

3) The term 'Khaleeji' is Arabic for "of the gulf".

4) The Khaleeji project is gathering pace, with Saudi Arabia's King Abdullah directing the GCC economic integration committees to speed up their work and complete the whole exercise by September 2009.

6) Speculation is that the Khaleeji will be backed by gold.

7) In November 2008, a group of Saudi businessmen allegedly bought $3.5 billion worth of gold, believed to be the largest ever single transaction for the precious metal.

8) Gulf countries are keen to break away from the link with the US dollar because it ties them to inappropriate monetary policies that exaggerate the boom-to-bust cycle in their economies.

Conclusion: I feel the same way about the Khaleeji today as I did back in January:

My reaction: Wow, Arab countries have announced that in 2010 they will stop selling oil for US dollars. Even more interesting is the possibility of the Khaleeji being backed by gold. Could this foreshadow a move a move back to the gold standard?

In any case, this development, together with China making the Yuan an international currency, effectively end the dollar's role as the world's reserve currency. Soon, the US will be buying its oil in gold/Khaleeji and its consumer goods in yuan. The US dollar is now living on borrowed time.

Think about it: If you can't buy consumer goods or oil with the dollar, what good is it as a reserve currency?

 

From The Arabian Research Bureau's "The State of the Nation 2", 2 January 2009, http://www.arabianresearch.com/lib/files/en/docs/State.of.the.Nation.2_English.pdf

Quote:

What do you think are the prospects and implications of a single GCC currency? The conception and birth of a single currency is no easy matter, witness the case of the Euro and it is by no means certain that the target date of 2010 is achievable although there is clearly political will to meet the deadline. Whilst the GCC is a more homogenous region than Europe, which faced huge challenges over convergence, there are still issues and the current global financial crisis may shine a light on some of these, for example levels of debt and inflation. But I still think it is a matter of timing rather than there being any doubt that it will happen. A unified currency will present advantages not least for traders who will no longer have to keep accounts in 6 different currencies and for companies which have operations in a number of different GCC states. At present Oman has opted out of joining but should still reap some of the benefits in that it will be dealing with one other GCC currency rather than five. However there is an assumption that the new currency, the Khaleeji, will be pegged to a basket of currencies and gold and that the dollar link will either be dropped or radically reduced; this may require Omani importers and exporters to hedge against currency fluctuations. On a positive note it will certainly be a relief for frequent business visitors who will no longer have to keep a drawer full of different currencies for when they cross the border!

And finally, some interesting additional comments on the GCC Currency from a Ron Paul blog:

http://www.ronpaulforums.com/showthread.php?p=1973001 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: World getting ready to dump the dollar

More on the Gulf Cooperation Council here:

http://www.peakprosperity.com/forum/gulf-countries-including-saudi-arabia-approve-new-currency/11066

that1guy's picture
that1guy
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Re: World getting ready to dump the dollar

Ya, I have actually heard a bit about that, although i didnt realize they were right on track (though not surprising to me in the least). When you put that together with the steps china is taking it really shows we are on borrowed time...If they meet their timeline at least until sometime in 2010 it seems.

thanks for the links, I saved those too with my many others, lol.

mike

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Lou
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Re: World getting ready to dump the dollar
that1guy wrote:

...... it just won’t work, so for governments and people alike to bet their futures and invest in the dollar (whether it be bonds, stocks or cash) I feel is the worst choice of them all.

What would you consider the best choices?


Quote:

.... I can post some links to news and other items I have if anyone is interested.

 I am, thanks. 

Quote:

I did my best to condense a TON of info, I hope it isn’t too hard to read, lol...I'd like to hear your thoughts...

 

Thank you!

that1guy's picture
that1guy
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Posts: 333
Re: World getting ready to dump the dollar

No problem Lou, I'm learning and studying and prepairing like the rest of us. Here are some of those links...

http://new.asianews.it/index.php?l=en&art=14131 

 

http://www.canada.com/business/fp/China+spending+spree+likely+include+Canadian+companies/1352443/story.html

 

http://seekingalpha.com/article/123965-why-the-u-s-dollar-is-vulnerable-to-decline-now

 

http://news.xinhuanet.com/english/2009-03/07/content_10964698.htm 

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTBdAKWmGabQ

 

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/03/china_still_buying_the_world.html

 

It looks like china is sending another dleigation to spend billions more aquiring more assets... http://news.xinhuanet.com/english/2009-03/07/content_10965642.htm 

 

Alot of the ones I posted here have to do with China's actions to dump their reserves, and make the Yaun an international reserve currency. Ill see about posting a few more on others after dinner =)

mike

 

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