(Russian) Central Bank stops supporting dollar

[Minstrel Boy]

Central Bank stops supporting dollar

2004-10-22

The weighted average dollar exchange rate was 29 RUR/USD in the first 90 minutes of trade at a special session today. Thus, the official dollar rate for October 23-25 will decrease by RUR0.12. This is the most considerable one-day drop of the dollar against the ruble since late April. The low on the deals was even 28.95 RUR/USD at the UTS.

According to commercial bank dealers, the Central Bank has not supported the dollar despite a large selling of dollars by market participants.

Banks sold over $436m at a special session at 11:30 a.m. Moscow time. Yesterday, the trade volume was just $19m at the UTS at the same time. The average lot of dollars to be sold was $1.7m in the first 90 minutes of trading.

A Bank of Moscow expert told RBC TV that the trade volume on MICEX including a special session for today deals almost reached $1bn in the first 30 minutes of trading. The expert said that the Central Bank's activities could be attributed to the dollar's decrease on international exchanges and growth in the gold and currency reserves in Russia. However, the Central Bank's leaving the market at the end of the week was quite unexpected. The specialist thinks that the Central Bank is currently concerned about its obligations on preventing inflation.

http://newsfromrussia.com/main/2004/10/22/56751.html

[Boredtodeath]

1. Ohhhhhh, shit!

This is very, very bad. All hell breaks loose on the markets on Monday.

[Spazito]

2. Whoa!

The snowball has started down the hill.

[Jim Sagle]

3. Guess w was drunk when he looked into Putin's soul. Looks as if they

timed it for max electoral effect here.

[bemildred]

4. I think they're just covering their ass.

Dollar tanked against Yen, Euro, Looney this week, although only
the Looney is in new ground (in recent decades anyway). Why should
Russia take it in the shorts? They are rolling in oil dough too,
they gotta worry about inflation and stuff. When he starts putting
oil contracts in Euros, then watch the shit fly.

Hmm, I wonder if they need software engineers in Russia?

[grasswire]

5. thank you, Canadian friend...

...and I hope someone with expertise in financial markets can tell us more or point us to more information.

I know nothing about matters financial, but knew as soon as I saw the headline that this is very bad. Could they be attempting to influence our election?

[goforit]

6. OUCH!!!!..................Doesn't look good.

[RebelYell]

7. Quoting a friend when I told him about this article:

It will be interesting to see what the bond market does.

I'm not an economist but from what I have read...

If it becomes a trend -- specifically if China stops supporting the dollar -- then it could have large effects. We can maintain our low interest rates without inflation only when a lot of investors want to buy up our debt. This is what Russia has stopped doing.

In an extreme scenario where everybody loses their appetite for US debt, then interest rates will skyrocket. The rate is the incentive to buy a bond, and the incentive is quite low now because there is such a huge demand for them (among other reasons.) With less demand, the bondholder has to offer more to make it worth the risk of giving the government money now for a potential future payoff. If we were not running deficits that wouldn't be as big of a problem as it is now -- because to keep the government running we have no choice other than to keep issuing bonds at a price that people will buy.

Well, there is one other choice -- print money. However it does exactly the same thing as bond buyers will demand higher rates to cover the expected inflation. Nobody likes to lose money, and if you have a bond at less than the current inflation rate you are losing money.

So... the effects to worry about. The stock market will become less attractive; if you could get a guarenteed %15 return on a bond would you take the risk of investing in something that could lose you money?

The property bubble will finally burst; house prices are now set assuming a low interest rate. In the expectation of always increasing property values, a rational person has bought as much house as they can afford at their salary. Raise the interest rate and they can no longer afford that house (hope they have a fixed mortgage!) but more importantly neither can other people in their wage category. When they go to sell, they may find that there are no buyers. Where it gets really bad is if a lot of people lose their jobs at the same time. Then the houses have to be sold at a loss and the banks are screwed.

The economy in general will slow down even more; businesses will be less able to afford loans to expand their businesses.

None of this is the end of the world, stuff like this happens all the time to a greater and lesser extent. Only sometimes does it become a depression. You would need to have other factors such as extremely high energy prices and a record current account deficit to make a perfect sto.... oh wait. Nevermind.

[nadinbrzezinski]

9. We are in perfect strom territory

Remember folks... the Stock exchange has been droping as well

Can you say 1929 and the Great Depresion?

[orpupilofnature57]

11. And porgie and his crew,will never miss a beat,because if...

Wealthy Americans put no stock in the dollar,why wouldn't the rest of the world follow .

[Rose Siding]

43. Does this fit with "...everybody loses their appetite for US debt"?

I read this article this week- I don't know markets or economics but it looks like this may already have happened, to an extent:

Bearish on Uncle Sam?
As Foreign Investment Shows Decline, Economists Keep Watch

NEW YORK -- On Sept. 9, as it must frequently do, the U.S. government turned to Wall Street to raise a little cash, and Paul Calvetti bet that demand for $9 billion worth of long-term Treasury bonds would be "huge."

But at 1 p.m., as the auction opened and the numbers began streaming across his flat-panel screens, the head of Treasury trading at Barclays Capital Inc. slumped in his chair. Foreign investors, who had been voraciously buying Treasury bonds, failed to show up. Bond prices cascaded downward, interest rates rose, and in five minutes, Calvetti, 38, who makes money by bidding on bonds at one price and hoping market demand lets him quickly resell them at a profit, had lost $1.5 million.

"It's amazing," he gasped, after the Treasury Department announced that Wall Street traders, not foreigners, had been left to buy virtually the entire auction. "I don't think I've ever seen this before."

http://www.washingtonpost.com/wp-dyn/articles/A43402-2004Oct18.html

[Eloriel]

46. About China.....

China Dumps Dollars for Oil and Gold
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x2534275

[UpInArms]

8. the tie between the ruple and the dollar

has not been strong for quite a while now (say - during the *Co administration).

They (Russian central bank) began not to support the dollar prior to the Iraq invasion.

here's some background:

http://english.pravda.ru/economics/2003/03/11/44225.html

14:10 2003-03-11

Russia No Longer Backs up Dollar?

The whole of the world is standing motionless waiting for the Iraqi crisis to be solved. The oil price is increasing, the dollar rate keeps on declining. But now it seems that these problems draw attention of particular specialists only. Meanwhile, the dollar sank on the United Trading System once again. At that, during the trades USD reached the minimal quotation of 31.48 rubles per dollar, the same result was fixed at the end of June 2002. In other words, the annual dollar rise has come to nothing. It is quite clear that Russians who prefer to keep their savings in dollars are very much upset with this situation.

What is more, experts from Russian commercial banks, those who always closely observe currency-related operations of the RF Central Bank, emphasize that this time there was practically no dollar purchase by the Central Bank at a special session. It means both variants: either a decisive moment hasn-t come yet for inevitable intervention of the Central Bank, or the situation is actually such that the Central Bank cannot influence upon the situation.

Participants of the trades unanimously say that if we assume that the Central Bank hasn-t yet given up dollar support at the United Trading System, then its ruble intervention was so wonderfully concealed that nobody even managed to notice the intervention.

Experts are sure that it would cost the Central Bank practically no effort to keep the dollar rate under the present-day conditions. Indeed, after a three-day break, the trading volume hasn-t exceed 119 million dollars. However, nothing was done at all.

Meanwhile, the USA has finally revealed some nervousness in connection with the successful decline of the national currency. By the way, the situation is actually disturbing. Since election of George W. Bush to the presidential post, the USD has dropped by 18% concerning other major currencies of the world. And the dollar has particularly fell in price with respect to euro.

and here:

http://www.russiajournal.com/news/cnews-article.shtml?nd=42027

MOSCOW - The battered U.S. dollar continues its downward trajectory at the Russian currency exchange today, shedding of 14 kopeks to close at RUR28.99. This is just one kopek below the psychological mark of 29 rubles, the lowest exchange for the dollar in Russia since May 2001.

Today’s landmark event followed a similar poor performance of the U.S. legal tender on Jan. 8, when it dropped off 11 more kopeks from its value. On the whole, it has lost 46 kopeks, or a depreciation of about 1.6 percent, with respect to the ruble since the beginning of 2004.

The dollar’s nightmare is further worsened by the Central Bank’s decision not to interfere at the exchange transactions for the past two days, though several market experts had expected CB officials to support the dollar, whose rapidly declining exchange rate negatively influences Russian manufacturers as well as its citizens.

...more...

They seem to think that supporting the dollar could possibly create inflation within their own monetary system.

[juliagoolia]

10. This has been predicted for a while... dollar dropping and deficit growing

YIKES


Meanwhile, the USA has finally revealed some nervousness in connection with the successful decline of the national currency. By the way, the situation is actually disturbing. Since election of George W. Bush to the presidential post, the USD has dropped by 18% concerning other major currencies of the world. And the dollar has particularly fell in price with respect to euro.


We should make sure this gets mainstream media attention.. bigtime.

[UpInArms]

19. that particular article was from March 2003

and the dollar has been dropping steadily since *Co took office.

Mainstream media has absolutely no interest in the financial stability of this country - they have proved that by repeatedly ignoring any and all items of interest in regard to the deficit, debt and dollar.

The 3 "D"s - they are more interested in using the 3 "G"s to get ratings - guns, gays and gawd.

Most of the execs of the remaining (IIRC there are 6) corporations that own 90%+/- of the media in this country are devoted pukes that could give a rat's ass about the sustainability of our country, our planet or our lives.

They have all signed up for the RayGun theory that "deficits don't matter" and completely ignore the debt and the cost of such a foolish ideology.

[sweetheart]

12. Oh please

Russia may be a big country geographically, but in economic terms,
think: "belgium". This is small action if it ain't in billions.
As well, the foreign exchange market is not the stock market, and
there is a tendency for people to see them similarly. FOREX is
bilateral. When IBM's share price drops, it drops for ALL investors
the world over, whereas, a forex rate move is relative to one
bilateral trade relationship, and is not global to others. There
are ripple effects, but only from serious players. Russia's central
bank is not one of those, rather a mouse running from the elephant's
foot.

Why am i saying people are misinterpreting this like the stock
market? What? Well, lets take 3 rates, euro/dollar, yen/dollar
and euro/yen. Logic has it, that if euro/dollar changes,
mathematical purity would demand change in yen/dollar and euro/yen
to keep things the same... but it does not work this way. Each
economy is stacked up against the other directly. In this regard,
russia's policies are simply acting in its own self interest, and
are no signal that anything is moving in China or Japan (Where news
like this would be "wormsign") "wormsign" would be japan planning
to invest 50% of its US government bond holdings in domestic
infrastructure, by divesting (selling) its holdings. Watch
government debt auctions, as they contain the microcosm of dangerous
signals. This is not one, and why i say "oh please."

The dollar is overvalued, and no central bank can get very far
fighting the tide, so expect dollar slippage in all markets. After
november 3rd, if bush steals it, expect serious movement.

Expect a general slippage in the dollar down 20% in the next few
months on all markets without central bank intervention. The
deficits are too large, and rebalance is in the cards. So much
depends on Nov. 3.

[WCGreen]

13. The problem I see is that OPEC nations,

may wish to stop recieving payment in US dollars and switch to say the Euro. The price of Oil could very well be connected to the drop in value of the dollar since the Dollar is the fiat currency to many third world coutries including all of the oil producing ones.

Prior to 2000, IRAG and Venezuela were making noise about switching for the dollar to the Euro which would have put pressure on the other members of OPEC to follow suit. We know what happened in Iraq and Venezuela.

Now, Russia has been standing behind the dollar and reisisting pressuere to switch to the Euro as a means of holding value.

That could change once the black market economy realizes that the a buck just ain't worth a buck anymore.

Remember, the world is a wash in greenbacks and a good chuck of the worlds illegal transactions are conducted using the US Dollar. If the mob looses confidence in the Buck, watch country after country disengage their currencies from the US buck,

What will happen is US imports will rise in price becoming less competative here at home while our exports become cheaper abroad and people purchase more and more goods made in America.

Could this be the Bush plan to invigorate the manufacturing base in America......

Stay tuned......

[sweetheart]

14. surely it is

A weak dollar would end the arbitrage of india and china, as with
serious shifts, the whole offshore thing would become unprofitable.
Just oh dear.

If the dollar is displaced from reserve currency poll position,
it will end economic hegemony, and the last of the post WW2 consensus. American buying power abroad will decline and with it,
the imperium. Strangely, this bush team seems bent on projecting
a new military empire whilst totally rotting out the economic
empire... and whilst it all sounds good on paper... it is
destruction of value, no matter how you cut it.

Buying american will sadly become a necessity, rather than a
choice... as foreign goods will simply become too expensive to
reasonably compete in american markets.

The oil thing... that's bound to shift, and dollar stability is
core to why it stays in dollars to date... an unintended consequence
of screwing around with the fiscal balances will be loss of reserve
currency status....

I could write a book on that... every single market, every single
supply chain and commodity will have a massive shakeup due to this.
These boys are playing with matches. It is distressing.

[RainDog]

50. a question for you, sweetheart

it is my understanding that the dollar needs to "float" --in regard to our current export/import imbalance-- in order to make American exports increase. In other words, the dollar needs to be devalued to improve our balance of trade.

BUT at the same time this is needed, the loss of certain industrial production to other nations makes this issue a "non-issue" for, say, blue collar workers who don't have their jobs anymore, while the CEOs, etc. would, again, be the ones to reap the benefits without absorbing the shocks thus far.

However, this is not the only issue now because of the huge, huge deficit. A lower dollar/increased exports should offset the deficit, but would that still hold true with the current depletion of manufacturing in the U.S.?

At the same time, if the dollar falls, and we do not have valued exports, Treasury Bonds will have to pay more to buyers and thus, as discussed in this thread, we could expect inflation.

Since, as Greenspan acknowledges, but doesn't admit is a problem, Americans are highly leveraged by mortgage and credit card debt, if their debt is tied to an adjustable rate, Americans will not have as much disposable cash b/c they'll pay more interest.

At the same time, those hoping to get into the housing market may be priced out by an increase in interest rates, and in certain parts of the country, this may stop the housing bubble. If people who have bought with ARMs at the max of their lending, these people may have a little problem with discrepancies between the value of their property vs the value of their mortgage.

Not to mention those who are trying to keep their houses in spite of jobs that are not paying as much as ones they may have lost.

This issue, separately, but also connected to the dollar and Treasurey issues, would also adversely affect American products because, even if they're cheaper, if you don't have the extra bucks to buy, you don't.

And, in yet another area, the move by China and India, for instance, away from buying dollars to investing in the infrastructure of their countries would mean less competition for lower rate T bonds.

Then, investors in these instruments might find themselves in a situation in which the first person to punt would be the winner. And in that case, the dollar/deficit would make the American people the losers in that situation.

All of these issues, as an overall issue, could mean stagflation.

So, do I have this right?

[aneerkoinos]

16. Russia

Don't mix economic weight with the size of GDP, don't underestimate Russia. Europe, China and Japan are dependent of Russian energy, dependent in the boolean sense. If this is a sign of Russia jumping the petrodollar ship and changing into petroeuro, partly at least, watch China and Japan dumping lots of their dollar reserves to buy euros. Then, whatch US become irrelevant.

Nobody needs what is just a big mouth with endless appetite, really. World just needs to find another lubricant to replace the saliva dripping from US mouth corner, ie dollar as reserve currency.

[Art_from_Ark]

59. Japan is not about to start dumping dollars for euros

The whole point of Japan's buying dollars was to prevent the dollar from falling below the "threshold of pain" for Japanese exporters, which appears to be about 105 yen/dollar. Japanese exporters were really hit hard the last few times the yen was so strong, so the government finally got involved and decided to intervene, threatening to use its vast reserves of idle yen to buy up to 1 TRILLION US dollars.

Japan, like other East Asian countries, takes a long-term view. The government won't start selling its Treasuries until the yen-dollar rate reaches the threshold of pain for importers-- probably 123 yen/dollar, or thereabouts.

[aneerkoinos]

15. Why now?

Why is the rest of the world letting US collapse right now? The underlying reason is clear, US has become too heavy for world to support, and the question has been when, not if.

So why now? This is the safest time there can be, US election creates power vacuum (which is likely to continue quite long with close tie and judicial and other form of infighting), so US ability to retaliate coherently against the first ones to jump the sinking ship is at it's lowest.

In short, some serious players may be hoping that there is enough time to perform the continental shift in world's financial power structure while Washington is locked in serious infighting, so when and if US comes out with a leadership, it's New World Order where US is powerless to take most of the world down with it, at least by financial retaliatory means.


Notice also this:
Bush Signs $138 Billion Corporate Tax Cut Into Law

http://www.smartmoney.com/bn/ON/index.cfm?story=ON-20041022-000770-1139

World ain't happy, what they demanded was less pork according to WTO, Bush is slapping their face with ten times more pork to US corporate and sucking big money into US corporate headquarters.

Something big is about to happen...

[smirkymonkey]

17. I agree. Remember during the primaries when Kerry said

that he had been talking to European/Foreign heads of state and that they were unhappy w/ W* in power? He wouldn't say who, but for some reason that stuck in my mind that if would come back later to bit Bush in the ass.

I have a feeling that some of those same people are following through in showing their displeasure with the current regime.

[lil-petunia]

18. A great NPR story on this issue this morning. Of course, it was 5AM

so my memory is cloudy.

Bond market activity?

Here's a simple ABC of our situation.

For the past 4 years, we have been spending much more money than we bring with taxes. The only way to pay for our Little Iraqi-Halliburton Vacation, and Mr. Bush's little Tax Cut, is to bring in money from elsewhere. What we have been doing is selling bonds. Many bonds, Billions in bonds, to China, Japan, Russia, and others. If we had control over our spending, and a realistic tax policy and if we did not waste so much money on bushisms, the dollar would strengthen, the bond holders would get a good return on their investment, and the US economy could begin to right itself.

instead, deficits continue. There is no sign of explosive economic growth in the US that could help fix the problem. Worse, countries and investors holding US Treas. bonds have seen the value of their holdings DROP by 7-20% for a short time, a way to regain that loss it so continue to support the US economy by - buying more bonds.

Foreign bond holders have reached their limit. They cannot afford to buy more, nor can they afford to hold a money loser. So, they are starting to dump bonds.

That means our deficit will be unfinanced, US credit will be worthless, the dollar will crash, and everything foreign will jump in price 10-30%. This might happen just as 11/2 rolls around. most economists predict it at the end of the year.

that means: Gas. Clothing. Autos. Food. everything that we import every single day will be that much more expensive. $2 a gallon for gas? try $2.70.

In the old days, before we exported our manufacturing to places far, far away, our own production would have been pumped up and we could have manufactured our way out of this mess. But, by becoming a service based economy, we don't have the ability to make things anymore. If we did, our exports would be cheaper than many other countries. We would buy our own goods, export them elsewhere, and grow like the dickens.

Today, falling dollar, lack of export ability, huge inflation, and a collapse in the support of our economy spell serious, serious trouble.

[tanyev]

49. So if Kerry wins,

is the hole already so deep that we can't climb out? Will the short memory of the populace start blaming a Kerry administration after a year goes by?

(I don't know if you have the answer, lil-petunia, but my question seemed to fit the best with your post. I hope anyone who has thoughts on this will reply.)

[AntiFascist]

51. Hopefully Kerry is paying attention to the situation nt

[aneerkoinos]

55. ... he's fu**ed

Yep, the hole is too deep to crawl out if not for else, because of PO. And yes, you can count on the short memory of the populace. It happens on his watch, therefore it is his fault, even though the root of the problem goes back to Reaganomics (and ultimately to Pope's decision in the Middle Ages to allow also Christians to lend money with interest, against what Jesus taught ;)).

[reprobate]

21. Seymore Hersch agrees also.

I saw him the other noght on University of California TV, recorded two weeks ago, so it was fairly current. He was talking in political terms but that's not far from economics.

He said that european leaders were so fed up with bush that we should expect to see them moving in unison to make america irrelavent. This may be the beginning of what he was talking about. My question for anyone with more than my Econ 101 background is this: What effect will the move to petroeuros have on the troops and bases we have in europe, and what if they demand we pull out of there, like Hersch implied?

Thanks , george. Once we were the fire, now we are the toast.

[aneerkoinos]

22. Unlikely

There is lot of mental inertia related to NATO, and Europe is divided on the subject. All the leaders keep giving their pledge of oath to NATO, and even though common European defence is advancing faster than I expected, it takes a lot of time and negotiations. Getting rid of the English fifth column would make the development much faster.

So the US bases will not be kicked out, but nobody sees no real need for them and most hope that US will just pull out without any fuzz. Their purpose is not to defend Europe but help US project it's military might wherever it wants.

But should US decide to attack Iran or Syria, it is possible that some NATO countries would think seriously about denying US the use of it's bases in support of further wars in Middle East. Which would create extremely serious problems for US support lines.

[RebelYell]

20. Thank you all for helping me grasp the implications

Here's another comment from a friend, Ruy:

Just a few days ago, China was reported to be slowing down significantly on the purchase of US debt in favor of strategic raw materials and gold. This and the Russian CB moves partly explain the substantial weakening of the dollar in currency markets.

This is just the beginning. Wait till the Japanese, the Saudi gov't and those billionaire Arab speculators make their move--not to mention the giant US, Asian and European corporations.

Take a look at the chart in the link; the third chart titled "EUR weekly candle". The euro is preparing to assault the previous strong resistance at $1.28-$1.30 with a cluster of short white candlesticks. This preparatory move is like a coiled spring full of energy. The energy would be needed in case the US Treasury Dept. and other Central Banks oppose the euro advance.

http://www.kshitij.com/graphgallery/eurcandle.shtml

From a longer-term point of view, a very sizable devaluation of the dollar is a virtual certainty. Sometime in late 2006 to early 2007, the crucial level of $1.60 per euro could be overrun. That could be a widespread loss of confidence. Goodbye to the dollar as world reserve currency. This is apparent in the long-term monthly euro-dollar chart.

http://www.kshitij.com/graphgallery/eurmth.shtml

[Minstrel Boy]

23. a kick, and a thanks

for all the informed comment. I'm a financial idiot, hold the savant.

[VegasWolf]

24. Hell, if bush wins again, I'm switching all my assets to be euro based.

New Information Shows Bush Indecisive, Paranoid, Delusional

[leftchick]

25. after reading these informative responses, am I to assume....

we are in Deep Shit???

[VegasWolf]

26. That would be a correct assumption. Japan proved 15 years

ago that a service based economy doesn't work. You can't
wash my shirt and I wash your pants and it all comes out
even. You need a strong manufacturing base at the bottom.
Japan thought that they were the intellectuals and farmed
out manufacturing to Korea. Korea then became the dominant
society and Japan languished. This admins idea of outsourcing
jobs coupled with a weak dollar philosophy is a disaster.
I moved my money way back when the DOW was at 12,500.

New Information Shows Bush Indecisive, Paranoid, Delusional

[leftchick]

28. two things....

I am glad I am not totally ignorant of Economics when Japan was the first thing that popped into my head when I read this as well.

My hubby was just asking me the other day about our retirement money and what to do. Like I know! Have any suggestions?

thanks :)

[bemildred]

30. The UK tanked with much the same issues in the 60s and 70s.

It's a very old story.

[VegasWolf]

32. I thought the UK tanked in the 60's because of misguided

impearialism. Also like bush. I liked your point in
a previous post about people just covering shorts against the dollar.

[bemildred]

33. Everyone has an opinion.

I remember well reading articles about the difficulties of the dying empire
with being a "service economy" and loss of manufacturing base and the
associated good jobs and so on, and the corresponding erosion of the pound.
There was a good deal of blather about loss of moral fiber and such too.

It seems to be a common way for imperial/colonial economies to crater out,
and one can see why. A colonial arrangement inevitable distorts an economy
and reduces it's autonomy and robustness under stress, fills it with "leaders" used
to cheap easy solutions based on screwing the natives, so when things change
big adjustments are required, living standards fall, rebellions happen and so on.

Another fellow I talked to some time back pointed out Spain after we kicked their
ass in the Spanish-American was as a possible example of what could happen here.

Edit: WRT the other thing, currencies, Russia is not a big player in keeping the dollar
anywhere, and it's unlikely to do anything without coordinating with it's other EurAsian
peers, even the oil switch will be done in a measured and coordinated way.

[Spazito]

27. As in all things, there is a 'tipping point'...

could this be an indicator that the point has been reached? Watching the stock market, the bond sales and the devaluing of the US dollar that has already occurred, one has to wonder how long it can be artificially propped up?

[bemildred]

29. Nobody knows.

They sort of stabilixed things last Spring, now it looks like
that it's going unstable again. Things moved a lot in a week.
But we are not in new territory yet. Stay tuned.

[Mr E McSquare]

31. pheeeew!!

Arent I glad I never had any money in the first place!
No mortgage
No car payment
No credit cards
No 401k
No kids
No stocks
nothing!
All this time I thought I was a loser.
We'll see who has the most to loose.

[Lydia Leftcoast]

34. The dollar is falling against the yen as well

It's been between 109-111 yen per dollar for months. Today when I checked (I get paid in yen, so it's a matter of importance to me), it was 107 to the dollar.

This may not seem like much, but it's a huge drop for one day.

[AntiFascist]

47. Japan will be "propping up the dollar" through intervention....

by having the Bank of Japan first threaten to and then actually buying dollars. This can only last so long, and with the rest of the world against us.....

[Art_from_Ark]

60. Now it's down to 106.65

Nearly a 3-yen decline in the dollar's value in the past week:

[Minstrel Boy]

35. "China Dumps Dollars for Oil and Gold"

China Dumps Dollars for Oil and Gold

by T. Stein / S. McIntyre
October 21, 2004

Safeguarding one's access to vital natural resources such as oil and gas is crucial to nation's long-term prosperity. But telling soldiers and their families that they are fighting in part to protect against the threat of $10.00/gallon gasoline is not exactly good for morale or public relations. Protestors chanting "No blood for oil" would have a field day if the White House press secretary made an announcement such as, "Good news, the Baghdad Museum has been looted, 1,000 American troops have been killed, but we have secured 90% of Basra's oil fields."

Skeptics would tell you that part of the reason why American and NATO troops remain in Afghanistan after overthrowing the terrorist-harboring Taliban is to get a foothold in the game for Caspian Sea oil. Whether or not you believe these skeptics, it is a fact that multinational energy companies have developed a renewed interest in building gas and oil pipelines linking the Caspian region with the lucrative international market of the Arabian Sea. This activity has worried the three large powers in the Central Asian region: Iran, Russia and China. All three of these countries have indirectly (or sometimes directly) supported America's enemies over the last three years with either military or financial assistance. While Iran and Russia have long supplied America's adversaries with arms, the fact that China has stepped up its efforts in this arena marks a disturbing trend.

China, which President Bush has called a "strategic competitor", will see its demand for industrial energy more than double over the next 15 years. China's electricity demand has doubled within the last decade and is likely to quadruple by 2019. Could China's recent shenanigans in the region be a small baby step for an energy-hungry power getting restless?

...

Like Britain a century ago, the United States has greatly over-borrowed in an effort to control access to the world's energy supply and at the same keep its domestic economy firing on all cylinders. As competition for diminishing oil resources threatens U.S. dollar hegemony over world oil transactions, expect to see increased Chinese political and military presence in the Middle East. The presence of Chinese PLA troops in Sudan, in our opinion, marks the middle kingdom's entrance into the great game. China's next move could come in the form of massive dollar devaluation when they decide to unload their supply of accumulated greenbacks. China just recently released six billion of those greenbacks for its purchase of Noranda Mining - Canada's biggest mining company. Keep your eyes open for stepped-up greenback dumping by China in exchange for natural resources such as oil-bearing properties or perhaps more mines. We predict that in the near future, Saudi princes will decide to denominate some of their oil transactions in Yuan (or at least something other than dollars) and invest their profits into shares of China Mobile or PetroChina instead of Citigroup.
http://www.safehaven.com/article-2102.htm

[sangh0]

36. Have these "facts" been reported by any major newspapers

It doesn't sound likely that news like this could be suppressed. There are millions of investors in the US who would find out about this pretty quickly, so I don't see how this could happen and NOT be reported by WSJ, NYT, etc. Yet, all of the links are to papers I've never heard of.

[NVMojo]

37. isn't there some sort of relation to this story and the one

where the US got pissed off at Sadaam for announcing to sell oil under the euros instead of the US dollar a few short years ago? France, Germany and Russia had big contracts with Iraq when we invaded it. I believe Russias contract was around 30% of their oil supply so we screwed them when we took over. All's fair in turn around when we mess with each others purchasing power in global markets.

[sangh0]

38. We've been hearing rumors of this for years

but never any corroboration

[Kellanved]

57. no, IMHO not

First, contrary to the RW talking point, Germany did not have any major Iraq contracts at all. On the other hand, the US did.


Russia is currently very active building economic relations with the EU, especially for natural gas and other ressources. With the dollar rate as it is and the majority of the trading done with Euros, the dollar simply is a liabilty for Russia.

[Minstrel Boy]

39. China just used $6 billion of its US dollars

to buy Canada's largest mining company. I believe this is an example the authors use of China "dumping" American currency in favour of raw resources.

[sangh0]

40. That isn't "dumping" and it's not honest to call it that

They are BUYING natural resources for a very simple and reasonable purpose - Because they need them.

"Dumping" is when you sell something cheap in order to lower it's price in the market. China is selling something cheap - It's buying something expensive, and it's actions arent lowering the dollar (it's been doing that without China's oil purchases) - they're raising the price of oil, or havent you noticed?

I believe this is an example the authors use of China "dumping" American currency in favour of raw resources.

China isn't buying stuff with raw resources instead of buying stuff with dollars. You are wrong on the facts. Somthing isn't called "dumping" merely because "you believe" it is dumping. If you don't know what the economic terms are, you shouldn't be expressing opinions about what they mean.

[Chicago Democrat]

44. The Chinese have gigantic Dollar reserves...

What else would they use? Point taken.

Having investment in non-dollar units is a must for any balanced portfolio.

The real issue is OIL..Oil is everything now! Demand for oil cannot be satisfied soon and the price of oil going up will destroy our economy and make the dollar go down which makes the price of oil go up and on and on...


Get going on that Hydrogen car! but we need electricity to make it from limited options (Coal yuck, nuclear yuck, solar yay, geothermal yay)

[Dancing_Dave]

41. I wonder if the world is trying to send America a message?

There's plenty of reasons for the value of the dollar to drop, but when several major foreign governments dump dollars right before the election, you have to wonder if they're trying to send us a message about the Bush economy!

[sangh0]

58. Because THERE IS *NO* DUMPING going on.

They are buying energy. When did a simple purchase become dumping?

Oil sales are usually denominated in dollars. If anything, the effect of their using dollars to buy energy BOLSTERS the dollar's role as an international currency.

[UpInArms]

42. dollar now open on overseas markets - dropping

now at 85.47

you can watch the chart here:

http://quotes.ino.com/chart/?s=NYBOT_DXY0

the Friday closing number was 85.87

this is a significant drop

[UpInArms]

48. now at 85.12 ....... n/t

http://quotes.ino.com/chart/?s=NYBOT_DXY0

[Chicago Democrat]

52. $550 Billion in new T-Bills, $500 Billion trade deficit which would

only grow if the Yuan wasn't artificially kept low. Its amazing this hasnt happened earlier.

[UpInArms]

53. someone sent me this link earlier

and I found it interesting

http://www.rumormillnews.com/cgi-bin/forum.cgi?read=57798

[Chicago Democrat]

54. Holy yikes! very "interesting"

I don't like "interesting"... Boring was great...

[UpInArms]

56. what was that ancient curse?

"May you live in interesting times"

[Spazito]

45. It would seem to me, naive as it may be, that, when a country...

goes from a manufacturing dynamo to a service only industry, there is a corresponding downgrading of the ability of that country to be self-sufficient. It also seems to me, possibly naive again, that a country that is owned, in respect to it's debt, by foreign countries one could assume that the risk is heightened for a MAJOR crash in the near future.

I only know that I have been holding US dollars and am now going to trade them in asap.