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Title: TOLDJA!! The Dollar Broke Lower—So Now What?
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URL Source: http://gonzalolira.blogspot.com/201 ... what.html?utm_source=BP_recent
Published: Mar 22, 2011
Author: Gonzalo Lira
Post Date: 2011-03-22 14:22:54 by Capitalist Eric
Keywords: None
Views: 2833
Comments: 5
Like Nikki Finke always says whenever a scoop of hers gets confirmed: TOLDJA!!
Picture of my girlfriend
and the fish I caught. Honest!
Now what?
The intervention last Thursday night (Friday morning in Japan) was so as to bring the yen down: Following the Sendai Earthquake, there was the expectation that Japanese companies will repatriate foreign excedents and buy up yens, in order to rebuild. So the markets started buying up yens in anticipation of this sea-change, pushing the currency down to ¥78.50 to the U.S. dollar. Once Quantitative Easing-2 ends this coming June, the Treasury bond purchases will be extended indefinitely—call it QE-3. The amount of each month’s purchase of Treasury bonds by the Federal Reserve will be at least $75 billion—but don’t be surprised if it’s as high as $100 billion to $125 billion. Per month.
Yes.
Update (Tues. morning): So here’s the three-year dollar chart I've been obsessing over in previous posts (here and here), updated as of last night:
As I write this (7:03am EST), the dollar index has broken down to 75.267—and it’s clearly heading lower.
I cannot emphasize this enough: This moment will be looked upon as the turning point in the dollar. From here on out, it’s all monetization, all the way to the end—the Fed has essentially tattooed “QE ‘til I die!“ across his chest.
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#1. To: Capitalist Eric (#0)
Dey gots a bag of tricks, ya see. Beam me up, Scottie!
I recall a re-run of MASH I saw where this uber right winger named Colonel Flagg... Why do you want a strong dollar?
"Keep Your Goddamn Government Hands Off My Medicare!" - Various Tea Party signs.
The AMERICAN CONSUMER WINS with a STRONGER DOLLAR, the AMERICAN people who have worked and saved WIN with a stronger dollar. The reason that you libTURD pukes like inflation and a weaker dollar is that you STEAL the value of the AMERICAN people's money as a silent tax. Through inflation/weakening of the dollar as monetary policy. What's a TRILLION DOLLARS when it takes more than that to buy bread? This is what the feral gooberment has been DOING as AMERICAN monetary policy , just not what it's been saying, for over four decades. Once we adopted a fiat monetary system and there was no intrinsic backing required ... Welcome to totally out of control gooberment spending. I piss on you and the rest of your ilk who support this theft from AMERICANS and this outrage against OUR liberty. =3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3=3 = "Stronger Dollar Good or Bad For the US? By Richard Lee, Currency Analyst Published: February 22, 2007 Is a strong US dollar good or bad for the US economy? Typically the word strong is perceived as a positive reference but when it comes to a country's economy, a strong currency may not be in their best interest. In fact, many countries like China and Japan take an active effort to weaken their currency because their countries are export dependent. Being the most actively traded currency in the world, it is very important to understand whether a strong dollar actually helps or hurts the US economy, especially given the currency's recent movements. Over the past 2 months, the dollar has advanced almost 4 percent or 500 points against the Euro. Against the Japanese yen, the greenback has mounted an advance of 750 points or 7 percent in two months. Is this appreciation good for America? Some people claim that it helps to accelerate the pace of growth while others hail the drawbacks of a stronger dollar, saying that it will have detrimental effects over the longer term. With arguments on both sides, it is important to examine the specific pros and cons of a stronger dollar. Benefits of a Stronger Dollar When growth is strong, we typically see an increase in the value of the US dollar because at that time, the stock market is most likely performing well and attracting foreign investment. As the stock market rallies and the economy continues to boom, the Federal Reserve becomes worried that this euphoria may get out of hand by boosting inflationary pressures and creating a speculative bubble. Therefore towards the middle boom, they begin to consider raising interest rates to tame growth and to prevent a damaging crash that may occur later on. Reflective of US Economic Growth A stronger dollar is good for the US because it tends to reflect accelerating growth in the economy. When investors and speculators buy or sell a specific currency, they do so because they expect the value of the currency to go higher relative to another currency. Since the US dollar is the most actively traded currency in the world, its valuation tends to be reflective of the direct outlook for the US economy and its monetary policy. Higher amounts of exports, increased production and advancements in goods manufacturing all contribute to a growing economy and increase the demand for the US dollar. Consumer spending also helps. With higher employment, consumers will not only become more optimistic, but they will tend to spend more as well. This increase contributes a good portion to the economic expansion as consumer spending equates to almost 60 percent of overall growth. Ultimately, all factors considered, the positive sentiment supports a stronger currency as foreign investors seek stable assets. US Purchasing Power Increases Abroad The benefit of a stronger dollar is that it also increases the purchasing power of US consumers abroad. A luxury handbag or a car that once was too expensive to own, may be purchased for a cheaper price thanks to a higher exchange rate. Vacations and trips to foreign countries also become bargains as travelers are able to see the world at adjusted package prices. Here, not only has the cost of travel (buying a ticket, booking a hotel room) become cheaper, voyagers can also stretch their budgets to include more activities that would have otherwise been foregone. This tends to boost consumer confidence as the shift in exchange rates make US citizens feel wealthier. Cross Border Transactions Accelerate Consumers are not the only ones to benefit from a stronger dollar; companies on an acquisition binge do so as well. Much in the same light as a consumer, a company's purchasing power also increases when converting dollars into euros, pounds or yen. With a stronger dollar, foreign companies become cheaper in valuation compared to US based or domestic companies. The bargain notion could spark a wave of cross border transactions as American companies look to either add to their own overall business or eliminate a competitor by acquiring them. Risks Brought on By a Stronger Dollar Yet there are as many negative ramifications of a stronger dollar as there are positive ones. Widens the Trade Deficit Although the appreciation in the dollar does give consumers more purchasing power, odds are that most of the increased spending will take place outside of the US. The demand by Americans who known for their penchant for foreign luxury goods, will increase the import balance and the US trade deficit. This increase has its detriments as it erodes overall growth, hurts GDP and weakens the economic expansion. There is essentially a self-correcting mechanism in the foreign exchange market. A stronger dollar basically leads to a weaker dollar while a weaker dollar eventually leads to a stronger one through the implications of growth. Cuts Into Corporate Profitability Along the same lines, a stronger dollar reduces the competitiveness of US goods that are sold outside of the US. When the US dollar strengthens, foreign trade partners will have to pay more euros and pounds in order to make up for the appreciated dollar when they import from the US. Subsequently, the increase will lead to a decline in demand as American made goods become less attractive to buy at the consumer level. This slump in demand will ultimately translate into thinner profit margins of manufacturers and producers in the US, depleting expansion potential in the country. The result in the longer term will be slower growth even as US consumers up their near term standard of living. Could Force the Fed to Raise Rates to Tame Growth A stronger economy could force Federal Reserve policy makers to consider raising benchmark interest rates. Initially this will help to fuel even further gains in the US dollar as foreigners send money into the US to capitalize on the higher yield. However the rate hikes essentially raise the cost of money, making it costlier for consumers to spend. Ultimately, the decisions would hinder growth as they promote consumer hesitance rather than spending. What's Going On Now? A more macro look at the performance of the US dollar over the past 12 months reveals that it has fallen 10% against the Euro, 12% against the British pound and has risen 2.5% against the Japanese Yen. The fact that dollar strength is not unanimous indicates that the currency's value is not a major concern for economy watchers at the moment. Instead, the dollar's strength against the Asian currencies such as the Chinese Yuan and Japanese Yen are a mere annoyance, albeit a big one. The depreciated yen and low value of the Yuan are making Asian goods cheaper than American goods both domestically and internationally. This has fueled a record trade deficit with China and spurred protectionist sentiment. Manufacturers have been screaming since the strong dollar, and weak Asian currencies are cutting into corporate profitability. Conclusion A stronger currency has its backers and opponents like anything else in the market. A stronger dollar is good in the sense that it helps consumer spending and reduces inflation. It effectively allows the American consumer and corporation to stretch their dollar further, either abroad or on imported goods. But, an appreciated greenback conversely increases the trade deficit while weakening the export sector, removing the competitiveness of American made goods. Ultimately currency valuations are cyclical. A stronger dollar tends to lead to a weaker one which eventually helps to encourage economic growth and provide the backdrop for a stronger currency. Either way, currency fluctuations are becoming an increasingly larger consideration expanding from the small town shopper to the manufacturing giant and onto even bigger US policy makers. As the dollar continues to strengthen, or weaken, everyone in some part will need to take a side. Living in mouth breather's empty noggins 24/7/365 totally rent free!
excellent article.
Socialist ass-hats think "There will be no more money when the U.S. dollar has no value, until that time we can keep printing more." And yes, that IS from LF's answer to Ben Bernanke, go65, leading disfunctional and delusional socialist of the forum. "You want me to kill THE ENEMIES of Jappos, I'll kill THE ENEMIES of Jappos, Rebs, or Sioux, or Cheyenne... For 500 bucks a month I'll kill whoever you want. But keep one thing in mind: I'd happily kill you for free." Algren, "The Last Samurai" What do you mean 'broke'? As long as the printing machine ain't broke then neither are we. /sarc
Fisher added that the U.S. Federal Reserve had ways to tighten its monetary policy other than interest rates, including by selling treasuries, changing reserves levels and using time deposits.
"We (government) need to do a lot less, a lot sooner" ~Ron Paul
Godwinson posted on 2011-02-23 11:47:32 ET
http://libertysflame.com/cgi-bin/readart.cgi?ArtNum=18011&Disp=46#C46
#2. To: Capitalist Eric (#0)
#3. To: Godwinson, Capitalist Eric, ALL (#2)
Why do you want a strong dollar?
#4. To: Mad Dog (#3)
#5. To: Capitalist Eric (#0)
(Edited)
The Dollar Broke
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