Thursday, August 20, 2009

Open Forum

Bernanke Diverging With King Means Dollar May Decline
Aug. 20 (Bloomberg)
“The question is not whether the dollar will weaken over time, but how it will weaken,” said El-Erian, a former deputy director of the International Monetary Fund whose firm runs the world’s largest bond fund. “The real risk is that you will get a disorderly decline.”

‘Orderly Fall’

An orderly fall of the dollar would be good for the world economy as it helps the U.S. continue to expand while consumers retrench, El-Erian said, declining to be more specific about currency levels. Such a drop would also help other countries including China wean themselves off their dependence on exports, promoting growth worldwide in the process, he said.

Derail Recovery

Without that coordination, there’s a danger of a disorderly dollar fall that would destabilize financial markets and could derail the recovery, he said.

Treasury Insanity In Support Of Grift

This is the price of supporting the grift and fraud in our banking system.

I count $207 billion, coming two weeks after a $250 billion dollar week.

Let's annualize - that would be about $5 trillion a year in annualized issuance. My-oh-my how long can this continue?

The Countdown To The Implosion Of The Dollar
Posted: Aug 19 2009 By: Jim Sinclair
My Dear Friends,

You can take your waves, percentages, algorithms, quants and quarks and throw them directly into the basket. The time for lines and squiggles are behind us. The common shares of the US dollar are and have been in a long term downtrend. That downtrend is 81 days from implosion. The selling of the US dollar and US dollar instruments is increasing in international markets, making it ever more difficult to manipulate the popular US dollar index, the USDX.

The price of gold is all in the dollar, times 100.

The manipulators have built a fundamental spring into gold by their capping activities.

COT has cooked its own goose.

Where the price of gold is concerned, there is no other focus of interest as all points of interest have but one common denominator.

That entity is the US dollar.

The Fundamental illustration below is dollar flow momentum.

China holds in its hands the future of the category, “Foreign Purchasers of US bonds.”

China wishes the annihilation of the Fed policy of “Quantitative Easing.”

The Fed wishes to accommodate China.

The US Treasury is absolutely opposed to any such consideration as it would cement the present Administration into a one term wonder.

The US Treasury must win this battle because the boss of this opposition has the power to appoint the new Chairman of the Fed, either Summers or Geithner.

Political control of the US Fed and therefore of monetary policy is in the cards.

China as spokesman for the BRICs has publicly stated their desire for the institutions of a Super Sovereign Currency. This is not an intended as an immediate substitute for the dollar as a reserve currency but rather an alternative in new commitments.

Only the misinformed assume the desire for an SSCI is a desire for a total exchange of dollar reserves.

The desire of the BRICs and in truth all other major trading nations is for dollar diversification in order to break away from the dollar dictating their futures. It means a significant decrease in purchases of US dollar denominated instruments.

Selling is not required for substantial depreciation in a major currency.

Momentum collapse in buying is all that is required for a severe depreciation in any major currency.

The USA in all probability will not be able politically to deliver support for the SSCI, however political control of monetary policy is CERTAIN as the Fed cannot win this contest against the Administration in the form of the US Treasury.

Bernanke becomes a team player or a team player will replace him.

The later is becoming a probability as it is hard to trust a prior adversary.

The depreciating dollar was a tool of Roosevelt’s failed anti-deflation program that like monetary stimulation is believed to have been abandoned too soon in the 30s by Administration intellectuals. Because of this, the US dollar is out of the picture for serious Administration consideration other than as a sales issue on US treasuries.

It is my understanding that the BRIC countries, not China alone, have given the US until early November to deliver.

As a result of the above I see 81 days left for the US dollar.

The gold price has but one criteria and that is the US dollar. Armstrong and Alf are correct on the levels awaiting the gold price.

I know $1224 and $1650 are certain.

Note: Eric’s humility is the sign of his maturity and genus. Well done eric.

Respectfully yours,


I know that Dan’s TIC work is far superior to mine, but I find this simple chart so ominous I had to send it. Decelerating year-over-year inflows and outflows across the board. Stick your head in the sand if you like, but string this trend out a little longer and you’re going to have flight from the dollar.



#79 said...

FOFOA, I discovered your blog a month or so ago and find myself spending a great deal of my free time reading the voluminous archives. Thank-you for the time you spend sharing your thoughts.

There is one question I can't seem to get my mind around: How would a devaluation of the USD realistically work? Let's assume they do nothing official w/ regards to the price of gold and they wanted to devalue the USD by 50%, how would the gov't execute that goal? I mean they can't tell seller's of goods to double all their prices or banks to reduce amounts owed to them by 50%, right? They can't reduce the face amount of currency by half. So how would they achieve a sudden, over-night devaluation?

Best regards. #79

FOFOA said...

Hi #79,

That is a good question. However I think it focuses too narrowly on only one possibility.

But, in answer to your question, perhaps they would simply cease their covert operations to prop it up and let gravity do the work. That way they could blame "the evil speculators"!


Anonymous said...

$-Devaluation : Best case scenario is another global (G-20) "accord" on the $-devaluation (cfr. Plaza Accords and other).

On a recent ECB symposium, tree old sages stated that a global fiat regime with only one currency ($) is a priori unstable (and dangerous). Brings us back to the SDR (Chinese) idea with or without gold .

A $-devaluation could possibly happen (be agreed on) within a new reserve structure.

But I doubt very strongly that the $-regime will cede only a fraction of its global controlling power in a reasonable global accord.

First we will have to "crash" and count the respective cards after that crash (new balance of power).

With "crash" I mean : Sudden global distrust on the $-system/regime/standard. Simply because the US&$ can't put its own house in order and is not worth to lead the international monetary/financial system, anymore.


Anonymous said...

ECB symposium - Snip

Valéry Giscard d’Estaing: We must remember that the monetary world was always stable when there was more than one unit of reserve. At least two or three. When there is just one, it is dangerous. In the past we saw gold and a currency, gold and the sterling, gold and the dollar. Since 1917 there is in fact only the dollar. So it’s by nature an instable system and can not be based on one single currency.


Anonymous said...

" Where are we in the gold cycle ? "

MUST SEE !!!!!!!!!!!!!!

(sorry if it has already been posted)


Anonymous said...

An Armstrong snip :

When we try to guess how long it will take for the dollar to collapse, why should precedent matter? History almost never repeats itself in a way that can be clearly foreseen and easily predicted. There’s always a twist, and in this case the speed of the collapse is exactly what we might expect to undo even those who profess to be “ready”. Bear in mind that the dollar is already a fundamentally valueless IOU, not money, and it is therefore only mere perceptions that need change to make this so in practice. That could happen — globally — in the space of time it takes to air the evening news.

Moreover, it is not the reichsmark or Zimbabwean dollar that we are talking about, but a currency in which nearly everyone on the planet has a crucial stake either directly or indirectly. Under the circumstances, and given the lightning speed at which news travels these days, it is not difficult to imagine how a global run on the dollar might become unstoppable in mere hours.

The world may be ready and perhaps even resigned to the dollar’s collapse; what few seem to be imagining, however, is how very quickly the collapse could run its course around the world — as quickly, even, as a run on a single bank.


Anonymous said...

Armstrong or Ackerman?

Anonymous said...

Pimco on G-2 - China/US

Great charts.


Anonymous said...

Re :

Received the snip in mailbox titled Armstrong (???) Haven't checked if correct.


Anonymous said...

UK/US divergence !?

Low interest rates are here to stay, City predicts Bank of England gives strong hint it may again expand its policy of flooding the economy with money.

>>> When CBs stop acting in lockstep,...the one-currency international monetary/financial system gets more unstable and dangerous...


Anonymous said...

In july '09 Russia added 19 tonnes to its goldreserves of 572 tonnes !


Anonymous said...

Shocking !

Pensions' Private-Equity Cash Reduced 59% as Profits Shrink
Major U.S. pension funds have recouped less than half of the $53.8 billion in cash they've invested in private-equity funds started since 2000.

All told, they haven't seen a paper profit in seven years. That means less money for the plans' retirees.

>>> In my opinion another element in the Big Catch-22 situation where nothing ($-devaluation) can be done without catastrophic consequences for American citizens AND the entire world.

The succesfull liberalization of gold (gold for the people) in China will later be seen as a brilliant measure.
No VAT on bullion in Euroland is a crypto liberalization as to encourage free-er monetization.

If and when the G-20 tries to make an accord with the $-regime,...this goldprice liberalization/demonetization shall surely be on the agenda. Ifffffff...???


Anonymous said...

I often hear various people post that a devluation of the dollar would be as simple as either setting or letting the Gold price go "higher".
I am a simple man and do believe that a solution like that includs the assumption of settlement of debt,even if it just the books that get adjusted.
Now,I dont have debt,but if I did,and I am forced to settle it why on earth would I just reprice my Gold?I mean,sure,that would look nice on my and your book,if you are the creditor.But I am asked to admit that I am broke,on paper,and you want me to give you my Gold to truly settle my debt??
I dont think so.
Likewise,you,my creditor come to me and ask me what a "higher" Price of Gold means to your account,well,I say "nothing".
Is that how its going to be ?
FAFOA,awesome work,I am far from getting a firm foot on the trail,even after a decade of beeing in the "bullmarket for Gold"and reading most there is to read.
Please keep helping me.


Anonymous said...

" Fragmentation " :


Anonymous said...

Yu, China Economist With ‘Impact,’ Says Yuan Sales Should Slow

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By Bloomberg News

Aug. 21 (Bloomberg) -- Yu Yongding, the Chinese economist whose calls for liberalizing the yuan heralded its 21 percent gain since 2005, said the government should reduce sales aimed at keeping the currency weak so it can someday float freely.

“The People’s Bank of China should try to reduce intervention on the exchange rate as much as possible,” Yu, a member of the central bank’s monetary policy committee from 2004 to 2006, said in an interview. “Eventually, the yuan should be demanded as a reserve currency, and we are far away from this stage.”

G-20 in september !?


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