 |
| Author | Post |
|---|
prophet
Forum Addict
| Joined: | Sun Jul 9th, 2006 |
| Location: | |
| Posts: | 225 |
| Status: |
Offline
|
| Mana: |  |
|
Posting #1: Wed Nov 14th, 2007 08:05 |
|
A Crisis to Shatter the World
Adrian Ash
Bullion Vault
13 Nov, 2007
If the US won't swap Dollars for gold, the rest of the world will just have to make the exchange itself... THE PRESIDENT of FRANCE went to Washington this week. He spoke to Congress en Français and told the United States to stop dumping Dollars on the rest of the world, risking a global financial crisis.
Zut alors! Sounds just like old times...
"The Dollar cannot remain solely the problem of others," said Nicholas Sarkozy before a joint session of Congress on Wednesday. He was riffing on the (infamous) joke made by John Connally, Treasury Secretary to Richard Nixon in the early '70s.
Connally had told the world that the Dollar was America's currency "but your problem." Au contraire, replied Monsieur le President this week.
"If we're not careful," Sarkozy went on - apparently using "we" to mean both himself and the US Congress - "monetary disarray could morph into economic war. We would all be its victims."
Ooh la la! Did Sarkozy need to take a little Dutch courage before speaking his mind to US legislators and wonks? (As the Belgian news anchor in this clip from June's G8 summit puts it, M.Sarkozy only ever drinks lots of water.) Telling the US to take responsibility for its actions - and its currency - is a gambit for only the brave.
It weighs heavy with history, too. "What the United States owes to foreign countries it pays - at least in part - with Dollars that it can simply issue if it chooses to," barked French president Charles de Gaulle in a landmark press conference of Feb. 1965.
"This unilateral facility contributes to the gradual disappearance of the idea that the Dollar is an impartial and international trade medium, whereas it is in fact a credit instrument reserved for one state only."
De Gaulle did more than simply grumble and gripe, however. Unlike Nicholas Sarkozy, he still had the chance to exchange his dollars for a real, tangible asset - physical gold bullion - at the Federal Reserve.
Gold "does not change in nature," de Gaulle reminded the world in that 1965 speech. "[Gold] can be made either into bars, ingots, or coins... has no nationality [and] is considered, in all places and at all times, the immutable and fiduciary value par excellence."
How to collect and hoard this paragon of assets? Back in the 1950s and '60s, world governments could simply tip up at the Fed, tap on the "Gold Window", and swap their unwanted dollars for gold.
So that is exactly what de Gaulle did.
Starting in 1958, he ordered the Banque de France to increase the rate at which it converted new Dollar reserves into bullion; in 1965 alone, he sent the French navy across the Atlantic to pick up $150-million worth of gold; come 1967 the proportion of French national reserves held in gold had risen from 71.4% to 91.9%. The European average stood at a mere 78.1% at the time.
"The international monetary system is functioning poorly," said Georges Pompidou, the French prime minister, that year, "because it gives advantages to countries with a reserve currency.
"These countries can afford inflation without paying for it."
In 1968, de Gaulle then pulled out of the London "Gold Pool" - the government-run cartel that actively worked to suppress the Gold Price, capping it in line with the official $35 per ounce ordained by the US government. Three years later, and with gold being air-lifted from Fort Knox to New York to meet foreign demands for payment in gold, Richard Nixon put a stop to de Gaulle's game. He stopped paying gold altogether.
De Gaulle called the Dollar "America's exorbitant privilege", repeating a phrase of his favorite economist, Jacques Rueff. This privilege gave the United States exclusive rights to print the Dollar, the world's "reserve currency", and force it on everyone else in payment of debt. Under the post-war Bretton Woods Agreement of 1946, the Dollar could not be refused.
Indeed, alongside gold - with which the Dollar was utterly interchangeable until 1971 - the US currency was real money, ready cash, the very thing itself. Everything else paled next to the imperial Dollar. Everything except gold.
And today?
"Printing a $100 bill is almost costless to the US government," as Thomas Palley, a Washington-based economist wrote last year, "but foreigners must give more than $100 of resources to get the bill.
"That's a tidy profit for US taxpayers."
This profit - paid in oil from Arabia... children's toys from China... and vacations in Europe's crumbling capital cities - has surged since the Unites States closed that "Gold Window" at the Fed, and ceased paying anything in return for its dollars.
Now the world must accept the Dollar and nothing else besides. So far, so good. But the scam will only work up until the moment that it doesn't."The US trade deficit unexpectedly narrowed in Sept.," reported Bloomberg on Friday, as "customers abroad snapped up American products from cotton to semiconductors, offsetting the deepening housing recession that is eroding consumer confidence.
"Exports have reached a record for each of the past seven months, the longest surge since 2000," the newswire goes on, which "may help explain why the Bush administration has suggested it's comfortable with the Dollar's drop. It has declined in all but one of the past five years, even as officials say they support a 'strong' Dollar."
What Bloomberg misses, however, is the surge in US import prices right alongside. They rose 9.2% year-on-year in October, the Dept. of Labor said on Friday, up from the 5.2% rate of import inflation seen a month earlier.
Yes, the surge in oil price must account for a big chunk of that rise - and the surge in world oil prices may do more than reflect Dollar weakness alone. The "Peak Oil" theory is starting to make headlines here in London. Not since the Club of Rome forecast a crisis in the global economy in 1972 have fears of an energy crunch become so widespread.
But if you - an oil producing nation - were concerned that one day soon your wells might run dry, wouldn't you want to get top dollar for the barrels you were selling today? Especially if the very Dollar itself was increasingly losing its value?
"At the end of 2006, China's foreign exchange reserves were $1,066 billion, or 40% of China's GDP," notes Edwin Truman in a new paper for the Peterson Institute. "In 1992, reserves were $19.4 billion, 4% of GDP. They crossed the $100 billion line in 1996, the $200 billion line in 2001, and the $500 billion line in 2004."
What to do with all those dollars? "If all countries holding dollars came to request, sooner or later, conversion into gold," warned Charles de Gaulle in 1965, "even though such a widespread move may never come to pass... [it] would probably shatter the whole world.
"We have every reason to wish that every step be taken in due time to avoid it," the French president advised. But the step chosen by Washington - rescinding the right of all other nation-states to exchange their dollars for gold - only allowed the flood of dollars to push higher.
Nixon's quick-fix brought such a crisis of confidence by the end of the '70s, Gold Prices shot above $800 per ounce - and it took double-digit interest rates to prop up the greenback and restore the world's faith in America's paper promises.
The real crisis, however - the crisis built into the very system that allows the US to print money which no one else can refuse in payment - was it merely delayed and deferred? Are we now facing the final endgame in America's post-war monetary dominance?
If these sovereign wealth funds - owned by national governments, remember - cannot tip up at the Fed and swap their greenbacks for gold, they can still exchange them for other assets. BCA Research in Montreal thinks that "sovereign wealth funds" owned by Asian and Arabian governments will control some $13 trillion by 2017 - "an amount equivalent to the current market value of the S&P500 companies."
And if China doesn't want to buy the S&P500 - and if Congress won't allow Arab companies to buy up domestic US assets, such as port facilities - then the sovereign wealth funds will simply swap their dollars for African copper mines, Latin American oil supplies, Australian wheat... anything with real, intrinsic value.
They might just choose to Buy Gold as well. After all, it remains - "in all places and at all times... the immutable and fiduciary value par excellence," as a French president once put it.
Charles de Gaulle also warned that the crisis brought about by a rush for the exits - out of the Dollar - might just "shatter the world". It came close in January 1980. Are we getting even closer today?
10 Nov, 2007
Adrian Ash
|
stockraider1
Forum Novice
| Joined: | Tue May 15th, 2007 |
| Location: | |
| Posts: | 525 |
| Status: |
Offline
|
| Mana: |   |
|
Posting #2: Wed Nov 14th, 2007 12:11 |
|
This article come from European perspective.
But do they know that; Europe is the most high cost countries in this world ?
Just look at the purchasing power parity or even for simple analysis compare the cost of Mcdonalds in Europe v USA v Asia.The ratio is 4:2:1.This mean US 2 time more cost effective then the French.
Facing with decreasing US interest rates,they should have decrease their interest rates as well to lessen the impact but instead they hold.
The next 9 months u can see Europe competitiveness suffer further and their export will faltered.
As what to do with excessive dollar beside buying gold ?.
Actually can buy very good value US properties and Equities, in addition to buying USA goods and services.
Conclusion dollar devaluation good for US business,Equities and Properties no fear with low interest rates !
|
prophet
Forum Addict
| Joined: | Sun Jul 9th, 2006 |
| Location: | |
| Posts: | 225 |
| Status: |
Offline
|
| Mana: | |
|
Posting #3: Fri Nov 16th, 2007 03:19 |
|
stockraider
Buy US assets and watch your asset value depreciate with the USD and stockmkt? 
China's wealth fund feels pressure to make money
Wed Nov 14, 2007 5:45am EST
BEIJING, Nov 14 (Reuters) - China Investment Corp, the country's new sovereign wealth fund, will feel the heat at home if it loses a lot of money on its investments, a senior official at the firm said on Wednesday.
Zhao Haiying, head of CIC's asset allocation and strategic research department, said China's foreign exchange reserves had grown so big they were now an international political headache.
The stockpile, the world's largest, had ballooned to $1.43 trillion at the end of September, an increase of $367.3 billion in the first nine months.
"Two years ago nobody was really that worried about China's reserves of foreign currency. Now, suddenly, we are not only worried, it's become one of our headaches and we have to deal with it," she told a forum at Tsinghua University in Beijing.
CIC has been given an initial $200 billion chunk of the reserves to manage. Its first investment, a nearly 10 percent stake in Blackstone Group (BX.N: Quote, Profile, Research) that cost $3 billion, has lost 25 percent of its value since the U.S. private equity giant's IPO in June.
Zhao said CIC attached great importance to a stable U.S. economy and to stable U.S. markets.
"Otherwise, if we came into the market and the market lost, say, 20 percent, then we'd be in big trouble," she said.
"All Chinese people will be criticising us, 'Look, it's our people's money and you are losing it'," she added.
Zhao said CIC was in the process of deciding its strategic asset allocation -- which asset classes, which industries and which parts of the world.
"We are in the tough process of deciding these issues," she said. (Reporting by Zhou Xin; Writing by Alan Wheatley; Editing by Ruth Pitchford)
|
stockraider1
Forum Novice
| Joined: | Tue May 15th, 2007 |
| Location: | |
| Posts: | 525 |
| Status: |
Offline
|
| Mana: | |
|
Posting #4: Fri Nov 16th, 2007 15:34 |
|
During Asia Financial Crisis 1997-1999 at the hight;
Ringgit depreciate agst USD to 5 :1. today 3.3:1
THAI Baht depreciate to 6:1. Today 3.2:1
Korean Won depreciate to 3000: 1 .Today 900 :1
This is a cycle !
What go down ! will go up.
What go up ! Will also go down !
That is the reason why European and Asian should buyout USA .
|
prophet
Forum Addict
| Joined: | Sun Jul 9th, 2006 |
| Location: | |
| Posts: | 225 |
| Status: |
Offline
|
| Mana: | |
|
Posting #5: Mon Nov 26th, 2007 03:30 |
|
Of course ALL economies goes in cycle AND the clock IS ALWAYS RIGHT TWICE A DAY! DOH!
The USD will go lower. You may be holding crocked USD for the next 10 years or more. Will ther be better investment? Of course there will as the USD has JUST broken its critical levels.
If the above is what you are suggesting are you buying USD? As you suggested it WILL go up again............................................................................................................................................................................................................... SOME DAY! :0)
Last edited on Mon Nov 26th, 2007 03:39 by James Bull
|
stockraider1
Forum Novice
| Joined: | Tue May 15th, 2007 |
| Location: | |
| Posts: | 525 |
| Status: |
Offline
|
| Mana: | |
|
Posting #6: Tue Nov 27th, 2007 02:21 |
|
Dear Prophet,
Technically USD has a temporary weaknesses but fundanentally USA is the most competitive country in G7 with the fall in the dollar this is an additional boost.
Yes the strategy is to buy USD but not their currency.
Buy into good value competitive multinational companies such as;
1)CITIBANK
2)Merck
3)Boeing
4)Smithkline
5)Johnson & Johnson
6)Fannie Mae(contrarian play)
8)General Electric
9)Exxon
|
prophet
Forum Addict
| Joined: | Sun Jul 9th, 2006 |
| Location: | |
| Posts: | 225 |
| Status: |
Offline
|
| Mana: | |
|
Posting #7: Tue Nov 27th, 2007 05:00 |
|
StkR
You are not comprehending. Temporary is an understatement. When you invest in US stks, its in USD! Unless they have changed to the Amero lately?? 
How do you know that the credit mess has ended?
like i said: the clock IS ALWAYS RIGHT TWICE A DAY! DOH!
|
prophet
Forum Addict
| Joined: | Sun Jul 9th, 2006 |
| Location: | |
| Posts: | 225 |
| Status: |
Offline
|
| Mana: | |
|
Posting #8: Tue Nov 27th, 2007 05:13 |
|
Is Your Bank at Risk of Failure?
Could Your Bank Fail? What You Need to Know When Stashing Away Your Cash
By LIZ MOYER
Forbes.com
Nov. 19, 2007 Special to ABCNEWS.com —
Concerns about liquidity in the banking system have raised the possibility that there will be an increase in bank failures in the next year or so.
Bank failures in the U.S. are rare--the three logged so far this year are out of nearly 8,000 banks in existence--and there have been just 28 since 2000. From mid-2004 until this February. there were no failures, the largest span of time without any since the Great Depression.
But the credit meltdown that has simmered since the summer has depleted capital levels, and banks are getting stuck with mortgage-related assets, the values of which have declined sharply in the last few months. Regulators have been fretting about the problem since early this year.
Click here to see more about bank failures at our partner site, Forbes.com.
"Some have come to believe that the FDIC should not spend any time worrying about or planning for a large bank failure because these banks have become so well diversified and sophisticated in their risk management," said FDIC Chairman Sheila Bair in a speech to the Exchequer Club in Washington, D.C., in March. But, she added, "it does not mean we can rule out potential problems."
Banks fail because they either run out of capital to support their ongoing operations, their asset values drop below that of their liabilities, or fraud forces regulators to step in and take over. Most bank failures are of small institutions. There have been just two failed banks with more than $1 billion of assets since 2000.
If your bank is failing, you probably won't know about it. Regulators deliberately keep a pending closure secret to avoid a mad rush to remove deposits--a run on the bank, if you will. For one thing, a sale of the institution is often possible at the last minute, eliminating the need for federal intervention. But a buyer isn't going to take on the deal if all the deposits rush out the door. For many customers, the first time they know their bank has been shut down is when their credit card gets declined or they walk to their branch and notice it's closed.
Deposits for regular accounts are insured by the federal government's deposit insurance fund, but only up to the $100,000 cap. Any money over that means you have to wait in line with other creditors for recovery. That can take years, and you might not get 100% of it back. Some accounts, like individual retirement accounts, are insured for up to $250,000. Of course, if you're married and have multiple accounts in different categories at the same bank, each of those accounts is insured. Ask your bank if you have questions.
Among the most spectacular failures: Six years ago, the Pritzker family of Hyatt hotel fame (No. 149 on the Forbes richest Americans list), paid $450 million to avoid being punished for the failure of Superior Bank F.S.B., which they co-owned with New York real estate developer Alan Dworman.
The government seized Superior in 2000 after it collapsed because of poor lending practices and shoddy bookkeeping. Its failure cost the government $1 billion.
The Pritzkers' settlement was the largest with banking regulators since 1992, when Michael Milken, Drexel Burnham Lambert and dozens of other companies paid $1 billion to settle allegations that they convinced savings and loans to buy risky junk bonds with government-insured deposits, accelerating the thrift industry's collapse in the late 1980s.
First National Bank of Keystone, once a pillar of its West Virginia mining community, was hailed throughout the 1990s as one of the best-performing banks in the nation. The company went from a sleepy backwater with $102 million in assets to a $1.1 billion institution in the span of just seven years.
That fast growth raised suspicions with regulators, however, who began digging around. Ultimately, they would uncover a massive fraud and cover-up involving senior executives and board members, some of whom went to prison for obstruction. One of the executives had buried critical bank documents on the grounds of a ranch she owned. Keystone's failure cost nearly $850 million.
Honors for the costliest failure on record go to Republic Bank of Dallas, which collapsed in 1988 and cost the deposit fund nearly $3 billion.
Then as now, the controversy was over the concept of "too big to fail," or the idea that the government would step in to shore up a failing bank no matter what, purely to stave off harm to the system as a whole. Too big to fail was applied to the federal bailout of Continental Illinois in the 1980s and, at least in spirit, to the private $3.6 billion bailout (with the Federal Reserve's encouragement) of Long-Term Capital Management, a hedge fund, in 1998.
Copyright © 2007 ABC News Internet Ventures
|
stockraider1
Forum Novice
| Joined: | Tue May 15th, 2007 |
| Location: | |
| Posts: | 525 |
| Status: |
Offline
|
| Mana: | |
|
Posting #9: Tue Nov 27th, 2007 07:27 |
|
Dear Prophet,
Why USD weaknessess is temporary ?
Exchange rate is depending on the interaction of demand and supply.
Factors like trade deficits,competitiveness,attractiveness a country as a destination, govt policy, interest rates etc.
In the case of US they are already the most efficient country in the G7 b4 the dollar depreciation.
With the dollar depreciation of 30% agst Euro their competitiveness will enhance tremendously !
Corporation in US with oversea exposure is going to make alot of money bcos of the dollar boost.Take Boeing for example they will outsell Airbus !
Eventually based on competitive fundamental US dollar will strengthen bcos the weaker the currency the stronger its competitiveness.
The fear of Bank failure is an exaggeration.
How can bank fail when Federal Reserve in pumping in excess liquidity and keeping the interest rates low ?
Although this is a bail out, but to US this is the correct approach to do. !
The low interest rates and dollar will help US to export out all their trouble and invite investors to USA.
Giving this scenario there is high chance the Euro and Asia zone will start buying up America bcos this is a rationale way to go based on excange parity there is already 40% advantage.
Once Europe has put in their act together such as clearing off the sub-prime issue there will be huge M&A flow from Europe to USA.
Finally do u think USA will lose their status as the largest world economic power in the next 2 years bcos of the sub-prime and trade
deficit issue ?
If the answer is no ! Then the dollar and equities in USA will improve and grow !
|
stockraider1
Forum Novice
| Joined: | Tue May 15th, 2007 |
| Location: | |
| Posts: | 525 |
| Status: |
Offline
|
| Mana: | |
|
Posting #10: Tue Nov 27th, 2007 07:34 |
|
Latest Dubai Investment has pumped in US 7 billion to take up 2% equity placement of citibank.
The reverse flow trend from Asia and Europe is actually coming !
|
Current time is 03:43 | Page: 1 2 3 4   |
|
|
|
|
