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

To: Giordano Bruno who wrote (33375)	12/13/2010 9:33:53 PM
From: John	Respond to of 71454

Edit: Disregard T Rex. I see that you had already posted the Moody news in CFZ earlier today. I'm a half-day late and two bits short. -g- --- Everyone knows (or should know) that Moody's is a puppet, yes-man, biased agency, but, for what it's worth... Moody's May Cut US Rating on Tax Package cnbc.com excerpt: Moody's warned Monday that it could move a step closer to cutting the U.S. Aaa rating if President Obama's tax and unemployment benefit package becomes law. The plan agreed to by President Obama and Republican leaders last week could push up debt levels, increasing the likelihood of a negative outlook on the United States rating in the coming two years, the ratings agency said. A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months. For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasuries, which currently rank as among the world's safest investments. "From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth," Moody's analyst Steven Hess said in a report sent late on Sunday. After Obama announced his plan, Treasury prices fell sharply in volatile trade last week and yields have hit a six-month high, in part due to concerns over the effect the package will have on government debt levels. If the bill becomes law, it will "adversely affect the federal government budget deficit and debt level," Moody's said. On Monday, the Democratic-led U.S. Congress moved toward grudging approval of President Obama's deal with Republicans to extend expiring tax cuts, even for the wealthiest Americans, Last week, Moody's and Fitch Ratings both expressed concerns about the U.S.'s rating longer term, with Moody's fearing the impact if the tax cuts become permanent. For more, see In a market obsessed with the euro sovereign debt crisis, the Moody's note reminded foreign exchange investors about their worries of growing U.S. debt and was a factor pressuring the dollar on Monday. The cost of insuring U.S. government debt in the credit default swap market was little changed on Monday at around 41 basis points, or $41,000 per year to insure $10 million in debt for five years, according to Markit Intraday. Negative Impact A negative outlook would indicate that the rating may be more likely to be cut from the top Aaa rating over the following 12 to 18 months. The United States currently has a stable outlook, indicating a rating change is not anticipated over this time frame. Moody's estimates the cost of the funding the proposed tax bill, along with unemployment benefits and other policy measures, may be between $700 and $900 billion, which will raise the ratio of government debt to GDP to 72 to 73 percent, depending on the effects on nominal economic growth. This means that the government's debt relative to revenues will decline much more slowly over the coming two years, to just under 400 percent from 420 percent at the end of fiscal year 2010. "This is a very high ratio compared with both history and other highly rated sovereigns," Moody's said. --- Recall that China has already downgraded the U.S. credit rating to A+ back in early November. english.peopledaily.com.cn excerpt: A leading Chinese credit rating agency yesterday downgraded the sovereign credit rating of the United States from AA to A+, claiming that the U.S. government's solvency is "on the brink of collapse".

To: Giordano Bruno who wrote (33375)	12/13/2010 9:48:28 PM
From: John	Read Replies (1) \| Respond to of 71454

Offshore Trading in Yuan Takes Off online.wsj.com excerpt: "This is the beginning of a new era," said Norman Chan, head of Hong Kong's central bank. "This is a step moving to full convertibility of the yuan, and is a major change of the international financial landscape." The yuan makes up a sliver of the $4 trillion daily trading in currency markets and is dwarfed by trading in the dollar, yen and euro. But traders are surprised at how quickly it is gaining critical mass. Chinese companies are placing yuan into accounts in Hong Kong, where the offshore trading is allowed, and could have as much as 300 billion yuan ($45 billion) there by the end of the year. The yuan, which closed official trading Monday at 6.6670 per dollar, down slightly on the day, has risen 2.4% against the greenback since mid-June, when China loosened the currency's peg against the dollar and allowed the yuan greater flexibility to rise or fall in value. --- Time to begin scaling into the yuan? Nah! Just buy more precious metals. -g-