Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: gbirmin who wrote (12427)	11/2/2001 2:36:23 PM
From: sea_urchin	Read Replies (1) \| Respond to of 81139

Hi GRB, welcome to our little thread. I'm not an economist, nor am I a US exporter, so the impact of any USD "overvaluation" concerns me only in respect of the way the USD affects the price of gold. Economists are concerned about balance of payments, national debt etc while exporters are concerned that a cheap local currency enables increased exports. Of course, an expensive currency benefits US importers and US consumers. When I say the USD is "expensive" and becoming more so, my opinion is derived from the long-term chart of the US Dollar Index and the technical indicators, eg stochastics (below). treasurestatefutures.com The relationships of this index are the other major currencies, particularly the Yen and the Euro. Into the "pot" one can also put the Canadian dollar and Sterling. Therefore, the strength/weakness of the dollar can be assessed, inversely, by the strength/weakness of the other currencies because their exchange rates are all measured against the USD. Euro treasurestatefutures.com Yen treasurestatefutures.com Sterling treasurestatefutures.com As far as the price of gold is concerned, there is a 'kind-of' inverse relationship between the value of the USD and the POG. Here's a chart of XAU v USD (bottom chart): goldsheetlinks.com Briefly, some of the reasons why the USD is so strong (relatively) is because the 'powers-that-be' keep it that way. To the US administration it is a sign of confidence in them and in America and to all the other countries it means that the US will be able to buy all their exports at a reasonable price. This is how the US 'supports' the rest of the world. The funds, derived from the sale of non-US goods to the US, are then invested in US bonds etc. Thus there is always a cash flow into the US which indirectly enables the purchase of more foreign goods. This keeps up the strength of the dollar and the one-way flow of business. It's also very bad for the rest of the world because, in effect, those countries are parasitizing the US. Thus the US runs an enormous trade deficit and is also the biggest debtor nation in the world. When there is a hint of weakness of the USD observers are apprehensive that the above state-of-affairs might be ending. In which event, the US will not be able to buy any goods, or will buy fewer, and will have to pay back the debt. So, there's a panic and a flight into foreign currencies and gold. So far, as you see from the charts, the boyz have been able to keep the game going for quite some time. The persistent sale of gold at lower and lower prices by the Central Banks lends credibility to the myth that the dollar is rightfully valued against gold and also that there is no, or little, inflation. However, all one-way-streets have to come to an end!