[" why are USDollar fundamentals worsening, even at these lower levels ?"]
...what specific "fundamentals" of the USD are you referring to J-Willie ?
There is little debate that the US Deficit is growing - albeit it alone is no where near a % of GDP that a USD crisis, or collapse is near - if that's your point ?
There is also little debate that King-USD had reached unsustainable levels...a bubble in fact. We addressed that as part of the reason we came to gold - over a year, before you arrived to the party, a bit late I may add...(vbg).
There is little debate on the Fed pumping money into the system being negative for USD trading levels....that's not a revelation ?
...yada, yada, yada on the fundamentals....we all know what they are & yes, most are negative....but, that's not news, or the issue of disagreement here.
The issue for debate is that You & some of the other iNet Gold-Hypesters are predicting the imminent collapse of the USD, if not the global financial system, that the US is on the brink of a depression; along with all of the other Chicken Little - the Sky is Falling/End of the World Gloom & Doom BS....and that Gold is going skyward at any moment.
The questions are pretty simple and I am sure we will agree to disagree on what the answers bring...
1. Where is the USD going over the next couple of years ?
2. At what level would it trigger a crisis & what would that crisis bring ?
3. Is Gold going to track the Policy deflation of the USD tit for tat all the way down, or is there going to be a disconnection level; if so where & why ?
4. Is Gold even the best anti-USD play ?
- it hasn't been so far... for example, the Norwegian Krone has outperformed Gold over the last year etc....and most US investors are getting their Gold & Goldstock returns discounted by falling purchasing power via USD demoninated returns....no startling revelation there either.
Open up an International Account and hedge the USD contraction via the Norweigian Krone, the Euro, the Swissie or the commodity oriented currencies of New Zealand, Australia & Canada...no Mensa level work needed here.
Again; the debate - is when and if the USD is going to trigger a "crisis" event and when & if Gold will be the primary benefactor of that crisis, or would other USD Hedges actually perform better....yada, yada, yada...
Bottomline: Predicting both Golds meteoric rise and the demise of the USD is a bit premature here.
The USD on a trade weighted basis against the G-10 has been significantly lower than present levels - ie:
internetional.se
At USD 115 - US Corporate CEO's at an Economic Summit with the Bush Administration were calling for a 30% lower USD - as POLICY !....USD 115 - 30% = USD 81
The USD is going to 80 ....but, news to you perhaps - is part of the reason it's going there, is because it's US Policy to take it there & it's NOT going to lead to the collapse of the American Way of Life.
USD 50 ? ...there we would be in agreement of "what" would happen...are you predicting USD 50 and if so, when ?
Here's some interesting commentary:
economist.com
How far can it fall?
Jan 10th 2003
From The Economist Global Agenda
After losing one-tenth of its value during 2002, the American dollar has fallen to its lowest point against the euro since 1999. Will it continue its retreat?
IS THE party finally over? For years, currency experts have been confidently—and largely mistakenly—forecasting the decline of the dollar. They were able to marshal an impressive array of evidence in support of their arguments. It was, they said, overvalued on any historical measure. America could not continue to absorb the large capital inflows which had propped up the greenback for so long. The euro, after its creation in January 1999, would soon challenge the dollar’s reserve-currency status. More recently, America’s burgeoning current-account deficit alarmed economists, who saw no alternative to a precipitous collapse of the dollar.
Yet the dollar—or, more accurately, the people who buy and sell currencies—remained impervious to economic forecasts. The world’s most important currency continued to be its most sought-after. The euro endured what to many Europeans was a humiliating decline in its international value almost from its inception. Neither the American recession in 2001 nor the huge and growing current-account deficit (about 5% of GDP) seemed to discourage people from holding dollars. And then, in the closing months of last year, the dollar finally started to weaken. By the end of the year, the dollar had lost 10% of its value as measured against a trade-weighted basket of currencies. The first few days of 2003 have seen it slip further against the euro and the yen.
Will the slide continue—and if it does, what will it mean for the global economy? Only a brave forecaster would try to predict with any confidence where the dollar will be in six months’ time. Of course, currency economists make such forecasts all the time—but that's their job and they are frequently mistaken. The factors which affect the value of one currency in relation to another are numerous and complex, and often confusingly contradictory. It is not simply a question of working out what foreign-exchange speculators think. Most currency trading is not speculative: it is the consequence of economic decisions taken by largely rational actors. Any shift in a currency’s value is driven by the cumulative impact of those millions of rational decisions.
The source of the great dollar surge in the late 1990s was easy to spot. The booming American economy offered enormously attractive rates of return on investment: as a consequence, large amounts of investment capital flooded into the country. Even when boom turned to bust, America still looked to be a better home for capital than many other, even more lacklustre economies. In 2001 and 2002, for instance, Europe’s economic performance was disappointingly sluggish, and the prospects for 2003 look little better. Emerging-market economies have lost their allure for most investors, especially after the collapse of the Argentine economy.
As the most important reserve currency, the dollar is also seen as a haven in times of global political uncertainty. Even after the terrorist attacks on New York and Washington—putting America, for the first time, at the heart of the security threat—it was to the dollar that nervous investors first fled. More recently, gold has recovered some of its attractiveness as a haven, reaching its highest level in six years this month. But the yellow metal is still worth only a fraction of its long-term historical value.
The prospect of war with Iraq, and the continuing threat from international terrorism, have made investors more nervous about the future. Yet the tide now seems to be turning against the dollar. This suggests that, for the time being at least, factors other than risk-aversion are more powerful in determining currency flows. One of the most important is the recognition that American investment returns are likely to be significantly worse than in the recent past for at least the next year or two. It doesn’t need investors to start shifting capital out of America to weaken the dollar—lower inflows would be enough.
Some of the dollar’s weakness is also likely to be self-fulfilling. As investors become convinced that the American currency will depreciate, they will seek an alternative home for their funds. That will, in turn, put further downward pressure on the dollar.
But is the decline such a bad thing, for the American economy or the rest of the world? Few American exporters will weep as the greenback sinks: the strong dollar has made it difficult for them to compete in world markets in recent years. Nor will tears be shed among manufacturers who have been desperately trying to fight off competition from cheap imports. Those countries whose currencies are linked, loosely or tightly, to the dollar will breathe a sigh of relief as well—Hong Kong and Brazil are among those economies that have suffered as the dollar has soared. Argentina’s currency peg was stretched to breaking point—and beyond—partly because of the American currency’s strength.
Those countries that compete for business in America, or with American exporters, though, will not relish the impact of the dollar’s decline. The rise in the value of the euro might boost morale at the European Central Bank in Frankfurt, but it will not bring much comfort to Germany’s export-driven corporate sector. East Asian economies such as Singapore, still reeling from the collapse of the high-tech boom, have no reason to welcome a devalued dollar.
Paul O’Neill, the treasury secretary fired by President George Bush at the beginning of December, was known for his belief in the benefits of a strong dollar. Such conviction is the refuge of old-fashioned politicians who associate national pride with a strong currency. Mr O’Neill was accused of trying to talk up the dollar, and consequently blamed for its persistent strength. His successor, John Snow, is, as yet, innocent of such uncomplicated views. In reality, of course, politicians have almost no power to influence currency movements except in the very short term. They are reduced to watching when currencies overshoot—as they almost always do—on the way up, and on the way down.
More "SANE" anti-Tokyo-JimWillie info/discussion/charts on the USD debate @
internetional.se |
