Thread: WARNING.... U.S. Dollar Exchange Article of Interest

I was listening to the Economy News on this Dollar Weakness. I have stated before and OSW agreed that this deminishing is Bad for the Investor. But for the US at home it has its good points.

1. Tourisim will be cheaper to come to the States.
Which means dollars spent localy

2. GDP will be in higher Demand
Do to Cheaper Dollar.

3. More Jobs will come back home
do to cheaper wages in the US compared to Overseas help.


So from what I hear in the Waves is it has its Good and Bad Points.

Neno has an excellent point for the scenario of a gradually declining dollar...but if there is a stock market crash like the one in 1929...a huge depression will follow and all bets are off. I do believe that safeguards are in place so this can't happen though.

Sounds like after the Rv, some poeple in here deserve an honorary degree in Economics!

Just remember the few UDS you felt easy about risking when you invested in the dinar, at the rv will be now be a HUGE risk to leave in the hands of the wacky iraqi.
If i make a mil out of this project I consider it a fine return.

Of Interest................................

CNN worries about a "tidal wave of foreclosures" hitting central Florida.

"Orlando has blown up," says a source quoted by CNN.

The man doing the talking runs a website where desperate sellers can try
to get rid of their houses fast. The houses are put up for sale at prices
below appraised values...and then marked down systematically until they
sell.

"There's been a 700 percent increase in traffic of people filling out our
forms," he continued. "I could put a bull's-eye on Orlando and write the
headline for what will be going on in January and February."


When you need to make a monthly mortgage payment, there is not much
fantasy or romance to it. It is real. When you don't have the money, it is
even more real...which is to say, the experience is more intense and more
memorable.

In the financial world today, some experiences are much more real than
others.

As you know, we are enjoying what Mises called a "Crack-Up Boom." It's
great fun...as long as it lasts. But it has some very un-real parts to
it.

The whole thing is tricked along by money that is, essentially, not real.
Central banks create money "out of thin air." The quantity of money is
growing very rapidly, all over the world. Everywhere you look, money is
increasing two to 20 times faster than GDP growth. (In Zimbabwe, the
increase is infinite...since the money supply is growing by thousands of
percent, while GDP growth is negative.)

Can you get something real from something un-real? Does something come
from nothing?

We don't know...

But what we do know is that there are a lot of phony parts to this boom.
In the West, art, stocks, houses - they're all going up. Just look at a
chart of almost any stock market in the world. Or a chart of housing
prices. Or a chart of almost any tradable asset class. Asset prices are
rising; and the people who own them feel they are much richer. But is this
increase real? Are these assets actually worth more? Or are they merely
being teased up in price by a higher volume of money? Is a Monet more
attractive today than it was 10 years ago? Not really. Does a house give
better service? Is the yield from a stock higher? The answer is no. Much
of the extra wealth that people think they have is un-real.

Meanwhile, in the East, factories are being built...output is going
up...people who used to tend ducks and till the soil by hand are now
working on assembly lines and living in air-conditioned apartments in
brand new cities. This wealth is real and growing at breakneck speed.

Meanwhile, back in the Homeland...and Britain too...ordinary people are
suffering their prosperity. They have enjoyed more apparent wealth -
bigger houses, more vacations, more dinners out - but this is wealth
consumed, not wealth created. In order to afford to spend so much more
money, they had to borrow. So their real net wealth actually went down.

"Lost your pay slip? Call us..." say signs along the highways in Britain.
We had no idea what this meant. Why wouldn't people just ask their
employer for a copy?

"Oh no...it's a big scam," MoneyWeek editor Merryn Somerset Webb
enlightened us. "There's a whole industry of people who provide fraudulent
pay slips so that you can get a mortgage to buy a house."

And now many of these people are living in bigger houses, but sending in
higher mortgage payments and more property taxes, and these larger houses
cost more in utilities. When the going was good, it looked as though it
would be no trouble to keep up this level of extra wealth consumption. But
now that the going is not so good, many of these people are in real
trouble. Some are trapped between two mortgages and need to sell a house
fast. Others simply have mortgage payments that are too large.

Mortgage rates are rising in the United States. And in Britain, last week,
the Bank of England raised rates. "Now it REALLY hurts," shouts a headline
in The Daily Mail.

Freddie Mac predicts that house sales this year will drop 7% - to their
lowest level since 2001. And an article in Barron's explains why. The REAL
mortgage rate is the difference between what a person pays for a mortgage
loan and how much the property goes up. If mortgage money costs 6%, and a house goes up 6%, in effect, the real cost of the mortgage is zero.

A couple years ago, people might have paid only 5% for mortgage
money...while their houses went up 15%. It was as if the mortgage rate was
really MINUS 10%. But now, house prices aren't going up...they're going
down - at least in America.

So much so, in fact, that our friend Mish Shedlock recently informed
readers of his Survival Report that if the current price collapse follows
previous boom-bust cycles, housing values could crash 43.5% - between now and 2011. Ouch. (For Mish's full report, and to find out how you can hedge protect yourself and your assets against the coming housing fall-out, see here:

Barron's put the real cost of a mortgage at about 6%. But in an area such
as Orlando, where house prices could be falling fast, the real cost of a
mortgage could be 10%...or 15%. No wonder sales are sluggish. Who wants to buy a house under those conditions?

Not only is the marginal homeowner subjected to some real pain, so are the
rich professionals who lent him money. Credit Suisse estimates that real
total losses from CDOs (collateralized debt obligations - derivatives
backed by mortgages) will top $52 billion. Of course, that assumes that no
one panics...and nothing else goes wrong.

Originally Posted by danny51

Neno has an excellent point for the scenario of a gradually declining dollar...but if there is a stock market crash like the one in 1929...a huge depression will follow and all bets are off. I do believe that safeguards are in place so this can't happen though.

Interesting,

We would all like to think there are safeguards in place, but sadly, they dumped the baby out with the bath water when the U.S. dropped gold standard, now the dollar is not supported by anything other than smoke and mirrors, so if the scenario of 1929 repeated itself, we would all be toast, a total implosion of economy, and ripple effects would be far reaching. Hang onto your dinars fellow dinarholics.

Good luck and health to all, Mike

Originally Posted by Xman1

Just remember the few UDS you felt easy about risking when you invested in the dinar, at the rv will be now be a HUGE risk to leave in the hands of the wacky iraqi.
If i make a mil out of this project I consider it a fine return.

This is the sole reason for me personaly waiting on the FI & WTO to just do it from Homeland. Maybe wrong or maybe right. But I prefer just the Hard Currency at this time. Plus I have no extra for that.

A Worthless Dollar?

Time to Face the Music

2007-07-13
By Peter Schiff

This week, bond rating agencies Moody's and Standard & Poor's finally announced downgrades on billions of dollars of bonds backed by sub-prime mortgages. Though the cuts will certainly not reflect the full weakness of the bonds, and will not include nearly as many issues as they should, they nevertheless amount to the beginning of the end of the phony mortgage investment market and the unrealistically high home prices that it helped support.

In a sign of desperation, the U.S. has dispatched Housing and Urban Development Secretary Alphonso Jackson to Beijing to beg the Chinese to use some of their $1.3 trillion in foreign reserves to buy more U.S. mortgage-backed securities. Talk about chutzpah! We bash them publicly, but behind the scenes we go hat in hand seeking their help. If the Chinese have any sense they will send the Secretary packing. After all, why should they use Chinese taxpayer money to bail out the U.S. housing market by purchasing securities that no American would touch with a ten-foot chopstick?

Seen it all before


Is it just me, or have we seen this movie before? In the 1990s, the very Wall Street firms that created these securitized mortgage products were busy packaging worthless dot-com start-ups into multibillion-dollar IPOs. Back then the game involved in-house analysts slapping "strong buy" ratings on companies that the investment bankers themselves knew were worthless.

This time around, the bankers persuaded ratings agencies such as Moody's and S&P to rubber-stamp investment-grade ratings on mortgage-backed bonds that the bankers knew were extremely risky.

Unfortunately, investors have very short memories when it comes to these scams. They don't understand the profit motives that are behind Wall Street's cleverest strategies. Whether it's worthless companies or worthless bonds, Wall Street will sell anything if it can make a buck, no matter what it has to say or do to make the sale. The biggest problem for investors is that the riskier the investment, the more profit Wall Street makes selling it.


In its defense, S&P claims that their ratings were based on faulty data. This doesn't hold water because it would have been obvious to anyone with a drop of skepticism (and the agencies are supposed to have gallons) that the assumptions about mortgage performance were overly optimistic at best and completely unsound at worst. It is not by accident that "no documentation" loans have long been referred to by all levels of the mortgage industry as "liar's loans." Did the rating agencies possess some deep reservoir of faith in human financial honesty that everyone else lacked?

Prime mortgages in trouble, too

Also, to assume that these problems extend only to sub-prime debt is extremely naïve. Many prime adjustable rate mortgages will face similar problems as mortgage rates continue to reset higher. De****e their unblemished credit reports, many of the prime borrowers were "qualified" based solely on their ability to afford the temporary teaser rates. No consideration at all was given to whether or not they could afford the higher rates to which those mortgages would ultimately reset. This also includes mortgages guaranteed by Fannie Mae and Freddie Mac!


Greasing the skids

The next group to face heavy scrutiny will likely be real-estate appraisers. Similar to the way the ratings agencies "appraised" bonds with ratings that were far too high, real-estate appraisers greased the skids of the mortgage industry by validating unrealistically high home prices. During the boom, most appraisers merely rubber stamped whatever price the parties had agreed to. But the grim current news on home prices will force appraisers' hands. Rather than using comparable sales from a year or two ago, when everyone was buying and lending and no one was selling, appraisers will use more recent prices obtained though foreclosure auctions. Given that such sales often occur for less then half of current "appraised values," new transactions will be impossible to finance at anywhere near current prices. Just imagine the economic fallout when that time bomb explodes.


The biggest downgrade yet to come, however could be for U.S. government debt. With the U.S. dollar breaking below long-term support, a significant near-term decline looks likely. Over the next few years a 50% markdown in the value of the dollar seems like a "best case" scenario. As this disaster unfolds, and U.S. interest rates soar as a result, S&P and Moody's may finally be forced to recognize the truth and lower their ratings on U.S. treasuries. If they are honest they will cut the rating all the way to junk!

A worthless dollar?


More likely though, they will stick to their AAA rating until the bonds are practically worthless, either through legitimate default or hyperinflation, just as many dot-com analysts kept reiterating their strong buys practically to the point of delisting. For those who do not want to go down with this ship, time is running out to get rid of your dollars. Got gold?

As you can see, we may all be better off holding dinar with whacki Iraqi's than the U.S. dollar which is backed by gov. smoke and mirrors, I'll take the whacki Iraqi's dinar every time. lol

Good luck and health to all, Mike

Amen Mike...cheers to the Whacki Iraqi Dinar!!

Interesting,

With all the recent news on dollars confirmed plunge, gold and silver, and any other currency is where you should be putting your savings. I have moved all my investment assets into offshore assets, and that is what our dinars represent, offshore investments, smart, so hang onto them if you are in U.S.



U.S. dollar keeps falling
Ned W. Schmidt,CFA,CEBS
7/18/2007 2:24:25 PM


TRADING THOUGHTS
from THE VALUE VIEW GOLD REPORT


Well, the markets took the U.S. dollar out back and shot it last week. Writers comparing the U.S. situation with Zimbabwe will be common. The stock market in Zimbabwe has been a stellar performer in local currency terms. No one wants or will accept the Zimbabwe currency. Those left holding that currency “bag” toss it into the stock market. The same was happening with the U.S. dollar in the past week. No one seems to want it. As can be seen on the last page the U.S. dollar has fallen into one of those proverbial “bottomless pits.” Thanks Ben!


Basic Trend: $Gold Up. Investors should focus on Buy signals. Strategy: Positive, per Investment Policy of Oct2004. Investment Policy: Act on buy signals. Hold long-term core position.

Gold has now moved from the 2007 low of about US$642 to almost $670. Given the prospects for the U.S. dollar, the low for 2007 has likely been seen. Nearly all important currencies have moved up in value versus the U.S. dollar, with the exception of Gold. Dollar has now made a new low against the major currencies in what has to be called a downside breakout. Graph on page four portrays this situation.


Only money that has not fully reflected the collapse of U.S. dollar is Gold. Fund driven selling has dominated Gold market for many weeks. Market forces seem now to be overcoming that selling. Additionally, the funds are watching their equity disappear down the CDO hole. That means they have less ability to sell Gold.


Two numbers are now important, $670 and $690. Both of those level will be prominent on every trader’s screen these coming weeks. Those levels are the only interference with Gold’s ability to make a new cycle high. Given the over bought condition at present, some resting is likely this coming week. A move above $670 may require another week, but is coming. With global markets selling the U.S. dollar, $Gold is a coiled spring ready to move higher.

Basic Trend: $Silver: Up Investors should focus on Buy signals. Strategy: Positive, Per Investment Policy of October 2004 Investment Policy:

Emphasize Buys

Selling Silver below $13 continues to be a foolish market strategy. Buyers exist below that level as learned again in the past two weeks. Selling against cash buyers is often a foolish trading strategy. That has been the situation in Silver. Any move down in metal’s price is met by buyers.

Silver has now seen the low for 2007. Funds have tried hard to sell Silver down, but it keeps coming back. Over bought condition on short-term indicator suggests that some resting is likely this coming week. With low in place, Silver is now ready, after a rest, to make a new cycle high before a year end.


Recommendations: Hold existing Gold and Silver positions for higher prices, and further profits! Add to positions on buy signals.

CN$Gold: CN$698.0 +13.7

Last week likely marks the end of the run in the CN$. Traders have been using the currency as a proxy for commodity prices, especially oil. With the Bank of Canada having raised rates, interest rates in Canada seem too low verus those in prevailing in the U.S. Of the 11 currencies tracked, the U.S. dollar was the weakest last week. Next in line was the CN$. A major bottom has been put in place in CN$Gold. While short-term over bought, CN$Gold has bottomed and preparing to move higher.


Recommendation: Use strength in CN$ and buy signals to add to holdings. CN$ long-term sell.


EU Gold: 483.0 + 4.0 EU strength has been pushing EU Gold down for several months. That action appears to have come to an end. Gold’s price is likely to now dominate the movement of the Euro. Low price for EU Gold has likely been seen for this year. While over bought in the shortterm, Euro-based investors should continue to buy at price below EU 490.


EU Gold Recommendation: EU investors can hold Gold for long-term. EU likely to appreciate against US$.


GBP £GOLD: £327.4 + 2.9 GB£’s strength likely has been over done. GB£’s strength has dominated the price of Gold. That situation, like in the case of the Euro, is probably coming to an end. At Gold price below GB£340 continue to add to positions.


Recommendation: GB£ now in long -term bear market. Add to Gold positions.

GDM: 1123.67, +25.11 or +2.3%:

In the past few weeks Gold stocks have been in one of their strongest runs. GDM has moved from about 1000 to more than 1120. With all eyes on that last cycle high, greed may take hold in the coming week. The over bought condition does suggest some resting, but momentum may dominate. A move above 1160 on the GDM would mean the whole Gold complex is ultimately going higher. In that case, 1150 would then become a floor for the Gold stocks.

U.S. DOLLAR: The U.S. dollar this past week plunged to a new low, as we have been expecting for some time. The divergence between the price of Gold and the value of the dollar in the graph continues to suggest that a major move up in the dollar price of Gold is increasing likely. Fund selling can not depress THE global money when all other national monies are rising against the dollar. Yen may be poised for a significant move upward given the much improved momentum in that currency last week. That could mean serious problems for carry trade loans.

Good luck and health to all, Mike