TWI
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cheers TW
yeah, the soothsayers certainly have their furry skins on atm that's for sure. Folks have been murmering doom & gloom for the dollar all year really, and articles like that merely back all the consensus up. Long as we can nip in & pillage the goods huh?
yeah, the soothsayers certainly have their furry skins on atm that's for sure. Folks have been murmering doom & gloom for the dollar all year really, and articles like that merely back all the consensus up. Long as we can nip in & pillage the goods huh?
Perrington
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My guess is a long on Brent Crude.
The Beyonder
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There are some people who think that if the dollar continues its slide and remains weak then the unthinkable will happen, ie. that one day gold and oil will be quoted in a more robust currency: the euro.
Once the slide in the Dollar continues, it will start to gather pace against all the other currencies. The only options that will be open to the US will be currency depreciation or a significant rise in interest rates. These are both painful options and bring their own problems; a lower Dollar means imported inflation, a definite no no and a rise in interest rates means problems in servicing debts. As most people know, you cannot buck the markets and central bank intervention in the markets only serves to delay the inevitable, besides, the BOJ are already nursing severe losses on their Dollar purchases and they cannot continue racking them up.
Investors in US Treasuries and Stocks are already losing a packet when they convert to local currency and further falls make a bad situation worse. What will happen when these foreign holders of US assets decide that they have lost enough and decide to invest their money elsewhere? In selling their holdings, the prices fall further which leads to higher losses (selling begets selling) and they then need to sell Dollars and buy Yen (assuming they are Japanese) which forces the Dollar lower and it becomes a vicious circle. That is why there are those that see a doomsday scenario evolving. For those that follow US equities, there is a probability that by the time the scenario unfolds, the DOW will be below the 4,000 level.
For UK companies that export to the US or have large operations there, it becomes a nightmare scenario because although the profits may remain the same in nominal terms, a 20% fall in the Dollar will mean at least a 20% drop in profits after currency conversions which would mean a lower share price and lower market rating. Without using exact science, in this case, we could easily see the FTSE100 lose 20% or close on 1000 points. This would be repeated in all major markets worldwide and lead to a general meltdown.
Chump asked what would happen to the real cost of commodities such as gold & oil etc.; the answer would very much depend on the country concerned. If the Dollar were to lose 20% against all the major currencies, because they are priced in Dollars, you will find that the prices will rise by at least 20% (not an exact science) and as a result, the real cost to an American is 20% higher. However, to a European or British company, the nominal price rise is offset by the fall in the currency.
One obvious way that the G8 could stop the Dollar from unravelling is by reducing interest rates whilst the FED raise. This will make domestic assets less attractive and lead to an inflow of capital into the US.
Investors in US Treasuries and Stocks are already losing a packet when they convert to local currency and further falls make a bad situation worse. What will happen when these foreign holders of US assets decide that they have lost enough and decide to invest their money elsewhere? In selling their holdings, the prices fall further which leads to higher losses (selling begets selling) and they then need to sell Dollars and buy Yen (assuming they are Japanese) which forces the Dollar lower and it becomes a vicious circle. That is why there are those that see a doomsday scenario evolving. For those that follow US equities, there is a probability that by the time the scenario unfolds, the DOW will be below the 4,000 level.
For UK companies that export to the US or have large operations there, it becomes a nightmare scenario because although the profits may remain the same in nominal terms, a 20% fall in the Dollar will mean at least a 20% drop in profits after currency conversions which would mean a lower share price and lower market rating. Without using exact science, in this case, we could easily see the FTSE100 lose 20% or close on 1000 points. This would be repeated in all major markets worldwide and lead to a general meltdown.
Chump asked what would happen to the real cost of commodities such as gold & oil etc.; the answer would very much depend on the country concerned. If the Dollar were to lose 20% against all the major currencies, because they are priced in Dollars, you will find that the prices will rise by at least 20% (not an exact science) and as a result, the real cost to an American is 20% higher. However, to a European or British company, the nominal price rise is offset by the fall in the currency.
One obvious way that the G8 could stop the Dollar from unravelling is by reducing interest rates whilst the FED raise. This will make domestic assets less attractive and lead to an inflow of capital into the US.
another interesting 'article' following on from TW's snippet above.....and complimenting the comments on here. I guess each camp have their differing views etc, adding ingredients to the pot!
http://www.frontlinethoughts.com/printarticle.asp?id=mwo102904
http://www.frontlinethoughts.com/printarticle.asp?id=mwo102904
