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

To: Wyätt Gwyön who wrote (24192)	11/12/2009 9:37:49 AM
From: carranza2	Respond to of 71463

You make good points. The USD's fall is like Mark Twain's demise. Arrayed against a precipitous decline are two things the bears ignore. The Fed can withdraw liquidity, if necessary. It won't, not now, but it can should it become necessary. Second, there is a huge amount of self-interest on the part of foreign holders to keep it stable, all BS aside. These two things are being ignored by the lemmings, er, bears.

To: Wyätt Gwyön who wrote (24192)	11/12/2009 9:29:11 PM
From: gregor_us	9 Recommendations Read Replies (3) \| Respond to of 71463

A couple of things to ponder, that will eventually be determinative to the USD outcome. My recent work suggests that if a person bought a house as recently as this Spring, they may already be sitting on a loss. Not a huge loss, but something on the order of 7-10%. My sense coming out of August was that the next leg down in RE was on its way. And now that I see transaction prices for SEP, OCT, and early NOV--in my select cities that I've watched for years--it's here. As I am sure you are aware, public perception of the entire market was swayed by the hot action in the low end, where Uncle Sam has been very busy doling out 3.5%-10% down payment originations, with easy credit checks as the FED buys it all up in the aftermarket. Also, the deficit data today was horrific in that a very nasty delta is bearing down on the US balance sheet in the form of soaring spending during a collapse in revenues. It's as though 20% of what had been the US economy is now gone. Moving forward, it will become more clear that 1. interest payments as a portion of the annual budget are soaring. 2. Funding the budget of the US increasingly comes from either FED monetization (which has officially ended for now as of 10 days ago--but you have to wonder when this starts again) or foreign monetization of our debt. 3. Finally, the cash flow that sits behind the USD and USTreasuries continues to collapse--which is no suprise. The USD rallies in 09 since the new leg down have been weak. It's less suggestive of a strong carry trade. Though, there is no question that globally many players have taken out fresh USD denom loans. What concerns is that only through FED or foreign monetization can we support our USD and UST because clearly global trade and USD reserve building from trade is significantly lower. So I think it's a risk that we experience version of Sudden Stop vis a vis the US-or perhaps via USTreasuries. I have also started to have questions as to whether the balance of accounting that everyone likes to use--you know, if Americans decide to save more than elsewhere in the world someone has to spend more--adds up in that neat and tidy way it's supposed to. The FED, for example, is now operating like a small country in international accounting. And I wonder that there is off-balance sheet monetization of our UST market--though if that's the case it's probably not new. Eric Janszen at iTulip who has studied more crises that I have (though I am catching up) thinks the USD does not collapse and will not collapse because it's the reserve currency still, and the world simply cannot extract itself as they would the Argentine Peso. Instead, he thinks the USD just goes down year in, year out, from here on in. A multi-year devaluation. I favor that too as I like the post-war UK devaluation experience as a good proxy for the US right here. Where there could be a problem, a more nasty dislocation however, is in the price of USTreasuries. The problem may come not from discretionary decisions, but from a collapse in flows into UST. G