Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

[kingtime]

Originally Posted by bigbull

Short covering, nothing else. Every fund out there is short dollar either as a primary trade or a secondary trade. It is only reasonable to assume that we are going to get a short squeeze in the USD perhaps to 78-79 on the Index before it resumes its downward spiral. There are people who are getting margin calls to cover, but with the insourmountable amount of dollars in supply, whatever bounce that takes place will be short lived.

The only effecive way of slowing the depreciation of the USD is for the FED to raise rates above 1.5%. However, raising rates to those levels could and will most likely put a market ceiling in stock prices and kill the equity bubble that we are seeing right now. If this were to happen, the recession that is still plaguing Main streeet will spread to Wall Street.

As for the Dollar, the Chinese have massively un-leveraged themselves from the USD. Although they still hold a lot of dollars, they've been selling them in the market pretty heavily lately. Again, it is only logical to assume that that trend will in fact persist for the foreeseable future.

With that said, the USD will most likely remain the reserve curency for a bit longer but I wouldn't rule out the possibility that soon enough other currencies will replace the USD. As I said in a previous post, the USD has tremendous leverage not just economically, but politically and militarily, over any other currency simply because it is the reserve currency(everything is a function of the dollar).
As such, countries that do not agree with US policies might want to then remove the USD as reserve currency to try to "level off" the playing field for all. Countries like Russia, China, Venezuela, countries in the Middle East, Japan, etc all want to exert a greater influence in the world, and they understand that the only way of doing so is to dismantle the USD as the reserve currency. Its not because they want to "end" America as so many people would love to think, but they just want a greater voice in the world. They want to end the US opression around the world.

Think about it this way. Fine, let say the Chinese still have huge amounts of dollars. They will nto keep buying so many US "assets"(debt) anymore. As they "gradually" seel these dollars back into the market, they dependence on the USD will diminish day by day, until there is one day where it is to their benefit to just dump the dollar and move on to another currency.

The debate of wether or not the USD will remain the reserve currency is in my opinion resolved. Its not a matter of if it will be replaced, it will be a matter of when, and I can truly envision that happening within the next 10 years.

Interesting thoughts, thank you for the input. I tend to agree that the dollar as we know it now may be doomed as the reserve currency, however ONLY if there is a suitable replacement for it. I think you should remove Japan from that equation of countries aspriing towards more influence. Japan has far mroe serious financial problems and more importantly demographic problems to deal with. The yen has far more government debt weighing it down then that USD has currently , as compared to GDP. demographically japan will have a big problem on its hands with a shrinking workforce it will be extrremely difficult to reduce this debt load, keep taxes out of the stratosphere, maintain low interest rates because their general econ is so weak, without inflating the living crap out of the yen. I do not see how it will be possible. Couple that with comepting against otherr ising economic powers in asia -I think their fianncial influence will continue to decline. Leaving the Euro, well I already touched on why i dont think the euro will be capable of taking the role the USD currently has, I think being a reserve currence would intensify the internal stuggles within the EU between the weak members and the powerhouse members France and Germany. Bigbull what do you foresee taking the role of global reserve currency within the next 10-15 years in that case?

[bigbull]

All fair points kingtime
Japan is without a doubt in a bigger monetary and fiscal mess than we are, but we are fast approaching them. To me, this fiscal and monetary irresponsibility by the FED and White House reminds me more of the Argentinian crisis back in the 90's than the lost decade of Japan.

With that said, Japan is in a very rough shape economically that will most likely persist for the coming years, but that does not mean that they are not seeking to "rise their voice or presence" on the global stage by trying to dismantle the USD as the reserve currency. Japans domestic consumption is virtually non existent. It would be completely useless for Japanese officials to try to revive their economy with domestic consumption. In fact, they have tried multiple times and not been successful. Its about time for Japan to play a bigger role on the global stage and start to take measured risks abroad. Obviously we havn't remotely discussed all of Japan's problems and possible solutions to make any reasonable assesment(s), but Japan really needs to get more of their "revenue sources" from abroad. This of course invovles removing the USD as reserve currency.

To answer your question, I still think a basket of currencies will in the end replace the dollar. I cannot see a single currency taking the place of the USD, unless their is a new currency that is promoted, not necessarily the Amero. Other than that, I still think a basket of currencies is a viable solution, one that is heavily weightd in gold. This will of course, will take a while to actually take place because as I said, everything is a function of the dollar and simply trashing the dollar will hurt everyone who trades dollars(and thats about everyone in the world).

In conclusion, I think a change the USD as the reserve currency is in the end not bad at all for the US or world. Why(in generic terms): a) it forces the consumer and the government to deleverage themselves from debt which would of course bring the economy and market in line with real expectations and b) you could argue that it increases global competition. This of course would devalue the cost of the the debt by whatever amount the USD devalues by but at a high cost, and that is of course paid by the consumer( e.g a poorer consumer).

Just my inane thoughts.

Originally Posted by kingtime

Interesting thoughts, thank you for the input. I tend to agree that the dollar as we know it now may be doomed as the reserve currency, however ONLY if there is a suitable replacement for it. I think you should remove Japan from that equation of countries aspriing towards more influence. Japan has far mroe serious financial problems and more importantly demographic problems to deal with. The yen has far more government debt weighing it down then that USD has currently , as compared to GDP. demographically japan will have a big problem on its hands with a shrinking workforce it will be extrremely difficult to reduce this debt load, keep taxes out of the stratosphere, maintain low interest rates because their general econ is so weak, without inflating the living crap out of the yen. I do not see how it will be possible. Couple that with comepting against otherr ising economic powers in asia -I think their fianncial influence will continue to decline. Leaving the Euro, well I already touched on why i dont think the euro will be capable of taking the role the USD currently has, I think being a reserve currence would intensify the internal stuggles within the EU between the weak members and the powerhouse members France and Germany. Bigbull what do you foresee taking the role of global reserve currency within the next 10-15 years in that case?

[bigbull]

With the recent move of countries like India and Argentina buying massive amounts of physical gold, it can only become more evident that a basket of currencies, one that is heavily weighted in gold, will in fact be the the new reserve currency 10 years out from now. It shouldn't surprise anyone if almost every single industrialized country follows this trend well into 2015.

With that said, I do not think gold will trade anytime soon if ever over $2000 nor below $800. In fact, I expect gold to trade within a range of $800-$1400 for a very long time. The reason behind is quite simple. Those countries who are heavily invested in gold, do not want a bubble to be produced in gold. As you all know, with a bubble comes a bust, and that is not in their nations best interest(either on the bubble side or bust side). All they want is price stability.

Lastly, just because the USD will most likely lose its reserve "status", doesn't mean that it will not participate in that basket of currencies. It wouldn't surprise me at all if the USD is one of the many(probably 4) currencies within that basket.

Just my thoughts.

Originally Posted by bigbull

To answer your question, I still think a basket of currencies will in the end replace the dollar.

[OldFart]

Another move by the trilateral commission to split the world into 3 regions?....

[bigbull]

Don't know about that Old Fart.

Quick comment about my post above. Eventhough the USD will most likely form part of that basket of currencies
that I spoke of above, buying USD is still not the way to invest. Regardless of what the "status" of the USD is as reserve currency, the value of the dollar will lose empirical value over time. This is probably one of the reasons why everyone who is buying gold(and thats every single country in the world) wants a basket of currencies that is heavily weighted in gold, to be able offset the dollars decline with the gradual rise in the pirce of gold.

Something that has to discussed however, is JP Morgan's shorting of gold(paper gold). JP Morgan alongside other power brokers continue to short(naked) gold contracts both in the derivatives and COMEX market. The reasons of why they are doing this should be fairly obvious. What has to be discussed however, is the implications of JPM eventual unwind(stop rolling these nakes short contracts over) of these gold contracts. The unwinding of these contracts will indirectly cause a gold bubble. As I said in my post above, this is not advantageous to anyone, especially for those countries who are holding massive quantities of gold for two reasons: it creates huge price dislocations across all markets(especially those heavily weighted in gold) and it creates some long term economic deficiences. The countries who are buying a lot of gold must be careful to not allow a bubble in gold. They know this and it is why they are buying all of the gold "off the market". If any of you have seen, these transactions between the IMF and the foreing banks do not clear through the market, a plus for these countries as it doesn't surpress the price of gold. Lastly, this move in the gold market can be characterized as a move by the world to end the Wall Street game(it has nothing to do with the US as a country). Many of them have been victims of this market facade over the past few decades, and it hasn't been until now that they've decided to even the playing field. No more sweet deals for Wall Street, a new age of business is here.

[techno791]

1869 - Jay Gould: worked with manipulating and trying to create a gold asset bubble which caused a mini-depression or recession.

I like how all the terminology on issues all sound the same, and whimsical. You'll be able to buy your health insurance on "a national exchange". It sounds like i'm in a store like the progressive commericals. And this, "basket of currencies" as though little red riding hood holds the future in her picnic basket, that yogi bear wants.
I'm wondering if that basket will be as fake as the Euro. You have several underperforming members, and yet it's considered strong for some reason. Is this basket going to look like an index fund or a mutual fund? So that there is technically no reserve currency?

What type of world is it when there is no dominant instrument? I always liked the aussie, but, is the country strong enough and big enough to be the standard?

Maybe it doesn't matter. I guess we could all go marxist and have someone overseas tells us what to make and institute price controls. Instead of propping up a world of failed economies.

[kingtime]

Originally Posted by kingtime

Interesting thoughts, thank you for the input. I tend to agree that the dollar as we know it now may be doomed as the reserve currency, however ONLY if there is a suitable replacement for it. I think you should remove Japan from that equation of countries aspriing towards more influence. Japan has far mroe serious financial problems and more importantly demographic problems to deal with. The yen has far more government debt weighing it down then that USD has currently , as compared to GDP. demographically japan will have a big problem on its hands with a shrinking workforce it will be extrremely difficult to reduce this debt load, keep taxes out of the stratosphere, maintain low interest rates because their general econ is so weak, without inflating the living crap out of the yen. I do not see how it will be possible. Couple that with comepting against otherr ising economic powers in asia -I think their fianncial influence will continue to decline. Leaving the Euro, well I already touched on why i dont think the euro will be capable of taking the role the USD currently has, I think being a reserve currence would intensify the internal stuggles within the EU between the weak members and the powerhouse members France and Germany. ?

Watching the progression.. er regression of the EURO

[kingtime]

Note the shift in sentiment about capping carbon emissions, as I mentioned in one of the posts I think it would be extremely damaging to the US economy and dollar negative as a whole. Well lately there has been plenty of resistance to carbon caps, notably many states (Utah, Arizona, etc) are pulling out of cap and trade agreements. Texas is also heavily protesting CO2 being labelled a danger to human health and wildlife. Even California is backing away from their crazy goals to cut carbon emissions. Interesting how things are playing out...