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Post by xtra on Jul 21, 2007 9:56:13 GMT -6
www.goldmoney.com/en/commentary.php#currenton www.rense.comThe Dollar Plumbs New Depths The US Dollar Index has declined 3.4% so far this year. The interesting point is that one-fifth of that decline happened today. The dollar plunged across the board, in the process hitting a new record low against the euro and a 26-year low against the British pound. The Dollar Index closed today at 80.86. It is now at its lowest point since closing at 80.53 on December 30th, 2004. That is the last point of support that we can see on the following chart. Once that point is broken, the pace of the dollar's decline is likely to accelerate. Gold and silver remain the best way to protect yourself from the problems facing the dollar. What's more, the precious metals remain undervalued. From its $50.81 low in January, crude oil has climbed 41.2%, which is just one of the reasons the CRB Continuing Commodity Index today made a new all-time high. During this same period, however, gold has climbed 5.6%, while silver has climbed only 2.1%. In fact, the price of gold in Canadian dollars has actually dropped 5.4% this year. All of this means that the precious metals are cheap, and their prices have a lot of catching up to do. -------------------------------------------------------------------------------- Published by GoldMoney Copyright © 2007. All rights reserved. Edited by James Turk, alert@goldmoney.com This material is prepared for general circulation and may not have regard to the particular circumstances or needs of any specific person who reads it. The information contained in this report has been compiled from sources believed to be reliable, but no representations or warranty, express or implied, is made by GoldMoney, its affiliates, representatives or any other person as to its accuracy, completeness or correctness. All opinions and estimates contained in this report reflect the writer's judgement as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. To the full extent permitted by law neither GoldMoney nor any of its affiliates, representatives, nor any other person, accepts any liability whatsoever for any direct, indirect or consequential loss arising from any use of this report or the information contained herein. This report may not be reproduced, distributed or published without the prior consent of GoldMoney. "Gold is Money" Industry Members
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Post by jeffolie on Jul 21, 2007 13:17:39 GMT -6
Support for the dollar at 80 is very strong. That does not make 80 a magic number. 80 becomes important only if the major players panic and a massive selloff happens.
Lots of articles have been written about the declining dollar, it is an old story. In the long term it matters, but in the short term it is unimportant. The average American has no clue.
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Post by jeffolie on Jul 21, 2007 13:26:37 GMT -6
Death Spiral
John Rubino 7/20/2007
In The Coming Collapse of the Dollar, James Turk and I said this about the effect of a falling dollar on other countries:
Recall that the only reason Japan or Europe can generate even their current meager rates of growth is the willingness of U.S. consumers to buy their Hondas and BMWs. As the dollar plunges, Japanese and European goods, priced in suddenly-appreciating currencies, will become prohibitively expensive for U.S. consumers, who will respond by buying U.S.-made alternatives or nothing at all. Correctly interpreting this change in buying patterns as a threat to their vital export sectors, European and Japanese leaders will respond with the only weapon they have left: monetary inflation. They’ll cut interest rates and buy dollars with their currencies, flooding the world with euros and yen the way the U.S. now floods the world with dollars. The result of these “competitive devaluations” will be a death spiral for all major fiat currencies, in which European or Japanese bonds will fare as badly as their U.S. cousins.
This week the markets got a glimpse of how the competitive devaluation story might play out, as Europe confronted the impact of a “strong” currency. For the past few years, the European Central Bank has shown admirable restraint, raising rates in response to a surging money supply and allowing the market to set the value of the euro. This in turn has caused the euro to soar against the dollar, testing the premise that a system as fragile as Old Europe can’t tolerate an appreciating currency for long. And sure enough, France has begun lobbying for—get this—the right to vote on European Central Bank interest rate policies. From Bloomberg:
Trichet's Rebuke of French Government Widens Rift With Sarkozy
July 19 -- Jean-Claude Trichet's rebuke of a French demand for a greater voice for governments in setting interest rates deepened a rift with President Nicolas Sarkozy.
``Such declarations are not acceptable,'' European Central Bank spokeswoman Regina Schueller said yesterday on behalf of Trichet. ``The president of the ECB repeats with gravity that any attempt'' to influence the ECB violates the European Union's founding treaty. Sarkozy has complained that the Frankfurt-based central bank's eight interest-rate increases since late 2005 have driven the euro to a record, threatening European exports. While Sarkozy has retreated from a challenge to ECB independence, he said last week he and Trichet are not ``on the same wavelength.''
``For Trichet, more lobbying from the French government undermines the credibility of the ECB and that's what worries him, which is why he's hitting back,'' said Julian Callow, chief European economist at Barclays Capital in London. ``The battle will get more intense as the euro continues to rise.''
The euro rose 0.2 percent yesterday to $1.3810 at 6:11 p.m. in Paris, retreating from a record of $1.3833 set earlier. It's up almost 5 percent this year and 55 percent since the end of 2001.
Sarkozy has criticized the bank's exclusive focus on inflation, and Trichet has questioned Sarkozy's tax cuts that would violate a French pledge earlier this year to reduce the nation's budget deficit.
Trichet’s European Central Bank won this early skirmish, of course. By law the ECB is independent, so a frontal assault by France or any other European country isn’t going to succeed—at first. But anyone who thinks the Eurozone welfare states will maintain their composure with the euro at, say, $1.50, simply doesn’t understand how democracy works in this late, decadent stage of its evolution. If the dollar keeps falling against the euro—as market forces pretty much guarantee that it will in the absence of major intervention—the euro system will have a nervous breakdown. Under pressure from exporters no longer able to sell to U.S. consumers, member governments will change the ECB charter and force it to cut rates, or they’ll start opting out of the common currency, or they’ll adopt wildly inflationary tax-and-spend policies designed to offset the rising euro.
However it plays out, the result will be a world in which competitive devaluations drive the price of all the major currencies inexorably towards their intrinsic value, which is the paper on which they’re printed. But it might be a while before most people notice. As surreal as this sounds, if the major fiat currencies are falling more or less in tandem, to unsophisticated eyes they’ll continue to appear to be stable. That’s been the case for the past few years, with the prices of oil, gold, healthcare and food soaring (which is another way of saying that paper currencies are plunging) while mainstream analysts proclaim inflation low and many of the world’s currencies “strong.”
But as this process accelerates, the fiction of strong and weak currencies will be harder and harder to sell. Inflation will migrate from “good” things like houses and stocks to life’s necessities, and the link between prices and the unit in which prices are expressed will become clear to everyone. Then the death spiral begins.
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Post by unlawflcombatnt on Jul 21, 2007 14:52:27 GMT -6
So it seems likely that foreign countries will block the devaluation of the U.S. dollar by devaluating their own currencies, thus protecting their export markets to the U.S.
Thus, the U.S. won't be able to rely on a devaluating dollar to reduce our trade deficit.
At the risk of sounding like a simpleton, the only reliable way we to reduce our trade deficit is to impose tariffs, and end our membership in all free trade agreements.
If we can't stop the outflow of American capital into foreign labor markets, then we need to reduce the returns on that capital outflow. Which means putting tariffs on imports, especially those emanating from American-owned foreign production facilities.
It's worth mentioning that with a trade deficit of $800 billion/year, the mathematical effect of completely ending foreign trade would be to increase U.S. GDP by +$800 billion/year, or about +6%. Though clearly it's not that simple, these numbers give at least a vague, qualitative idea of the effect of reducing foreign trade. And it also gives lie to the overstated "dangers" of "protectionism."
The real "dangers" are to the profit margins of American Corporate Multinationals, who've profiteered from the labor arbitrage between American labor and the semi-slave labor of impoverished 3rd-world countries.
The real "danger" from protectionism is that American wages will rise, Corporate profits will decline, and American income inequality will lessen.
The "danger" is that an overwhelming majority of Americans will become better off, at the expense of the most affluent and the Corporate elite.
What a tragedy that would be!
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Post by jeffolie on Jul 21, 2007 15:37:31 GMT -6
To a minor degree, the lower value of the dollar helps our wages be more competitive. Some countries (japan and china) devalue their currencies (especially the yen) faster than the dollar. This classic manipulation of currencies is illigal under Federal law, but does not get enforced.
There is a chance for tariffs against China if the Democrats sweep in 2008.
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Post by xtra on Jul 22, 2007 20:40:18 GMT -6
Lots of articles have been written about the declining dollar, it is an old story. In the long term it matters, but in the short term it is unimportant. The average American has no clue. what does the short term mean when we have this; and people are waking up everyday. thewebfairy.com/911/pentagon/
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Post by blueneck on Jul 22, 2007 20:54:43 GMT -6
it all depends which democrats we're talking about - if its the populist and labor democrats of the Dorgan, Brown, McCaskill breed there is a chance we will finally get action on unfair trade and currency manipulation.
But as long as the "elites" and DLC'ers ala Rangel, Emanuel, Pelosi and Hoyer remain in charge don't bet on it.
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