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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: TH who wrote (10726)	8/27/2008 3:37:59 AM
From: Real Man	Read Replies (4) \| Respond to of 71456

The current account deficit will be dramatically reduced in case of serious US recession (we don't buy foreign stuff). The reduction trend started, at least as a percentage of GDP. It may get reduced further if US economy slows further. The dollar rallied in 1988 under similar circumstances. Note that June data was at oil =140 bea.gov I agree with you, the entitlement crisis (SS + medicare) looms large, and the government will either have to engage in serious printing or drastically raise taxes, or cut these programs. In other words, the crisis is not at all cured, but ... the dollar was already cut almost in half at the bottom, so there may be a change of intermediate term trend. Note: Yes, a serious manipulation on part of the ECB and the Fed. They call it currency market intervention -g- I just watch 74 on the downside, 78-80 on the upside. It could be that all the effort will just prevent further downside for now, and the dollar remains stuck between these levels. FWIW, the dollar bottomed in March, so it has been 5 months, and 2-4 months more does define a change of intermediate term trend -ggg- The long term trend is down. I think gold just might decouple from the dollar, but we'll see. Reduced US current account deficit means much less printing on part of Foreign Central banks, which has been a major drive under commodities. No, it was not Fed printing, it was the accumulation of USD reserves by FCBs with printed money. Granted, the Fed printed some too, but 20 billion per year is nothing compared to a trillion a year printed by FCBs to buy dollars And, the debt IS contracting. We need to watch the developments.

To: TH who wrote (10726)	8/27/2008 4:41:57 AM
From: Real Man	Respond to of 71456

I agree. Personally, I took advantage of the PM dump to reposition a bit. Down from 90% physical to 70%, up from 10% PM equities to 30%. So, my positions are pretty dollar bearish. However, the market can take sweet time to connect the dots among manipulation, perception and reality. Short term and even intermediate term moves are often driven by perception, not reality. The perception now is that the agencies are not safe, but the US government debt is as solid as a rock. That will have to shift to a realization that lower taxes and high bailouts for WS don't work without some serious printin', so the UST aren't safe against the evil inflation... Thus, effectively US government debt is NOT AAA, but closer to D. Geez, what does the bailout of FNM/FRE by the government tell us about the treasuries? The market can take its time to realize this, and then it will move... a lot. Treasuries are A LOT safer than your money in the bank, so even I would prefer to store excess USD cash there, rather than in a savings account, which is exactly what has been driving them higher during credit stress. The bond market is a lot larger than the treasury market, so quite a bit of cash can drive T-yields lower during credit stress. I think we have a PM bubble still ahead of us, which will propel gold to a few K. 3K? 5K? 100K? Depends on the level of printin' and the insanity of US government. It will take 4-5 years, something similar to 75-80 period. So far we had an EARLY stage of commodity bull market, and a correction of a very overbought condition in March as gold went to new all time highs. The financial crisis CANNOT be solved by government bailouts of Wall Street and its financial bubble. They MUST focus on the REAL ECONOMY and let the financial bubbles pop. Until someone smart or the market does that, the crisis will be ahead of us. By bailing out financial bubbles, the government actually plants the seeds for hyperinflation ahead.