Please explain the strengthening of the dollar to me...
Submitted by PzldPtrt on Mon, 10/27/2008 - 08:08
I completely understand that this is only temporary, and there is no doubt in my mind that over the next year, and years to come, considering the monetary policy (constant printing), deficit spending, endless borrowing, continued socialization and overall economy in the US, the dollar's value is going to crumble. That said, how on earth has it been strengthening over the last few months with what has been happening in our country? Is it pure manipulation, and if so, who is doing the manipulating and what exactly are they doing?
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It is because of the
forced unwinding of most types of investments (oil, commodities complex, and forex) possibly due to margin calls by most types of Funds which have a $USD component to them. This causes a temporary huge demand for $USD.
It is kind of like the water receding from the shoreline before the Tsunami wave hits the beach.
great analogy
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"The essence of freedom is the proper limitation of government". ~ Founding Fathers
here's some articles that made sense to me
The flight to the Dollar. Why and for how long ?
http://meltdown101.livejournal.com/9769.html
U.S. Dollar Currency Collapse Within 30 Days
http://www.marketoracle.co.uk/index.php?name=News&file=artic...
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"The essence of freedom is the proper limitation of government". ~ Founding Fathers
Stagflation?
http://www.financialsense.com/editorials/petrov/2008/1024.html
Here is a nice read, don't know about the credibility of this author but he makes some good points. He seems to suggest the dollar is temporarily being bought as hedge funds deleverage. Maybe another factor is the weakening world wide currencies as foreign emerging markets suffer recession and investors flee those currencies for the dollar. The author above seems to suggest that inflation will really start shooting up first qt of 2009.
Short squeeze on dollars
Large hedge funds borrowed US dollars to fund their speculations. Gambling with borrowed money is called "leverage." Now those funds are seeing their investments go sour. Their investors want what's left of their money back. So the funds are forced to sell assets and pay off loans. When loans are paid off, that "Mandrake money" disappears back into the printing press from whence it came. The value of the money that remains in the system increases. (Gasoline is down $0.53 in two weeks!)
The Treasury and Fed are trying their best to get banks to make new loans, but it's not happening. Some people call that "pushing on a string."
How long will this last? I wish I knew. When the de-leveraging is over, will inflation come raging back? Quite possibly. In the long run, it would appear to this naive student to be inevitable.
When will deflation END
and Inflation begin??
DEFLATION is starting, in my opinion. Read This.
"Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters." Benjamin Franklin
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Inflate Or Financial Tsunami by JayTaylor
http://www.gold-eagle.com/gold_digest_08/taylor090608.html
In the article, Jay Taylor wrote,
"I can’t help remembering Bob Hoye’s constant refrain that when the global economy runs into trouble, the senior currency gets stronger. Why so? Bob reasons that debt is really a 'dollar short' position. When the debt has to be repaid, everyone scrambles to sell assets and buy dollars to answer the call of margin clerks."
http://www.depression2.tv/d2/node/181#comment-848
government of the people, by the people, for the people
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We SHOULD be seeing deflation
But I think the 'unlimited credit' the Fed has guaranteed with our printing press will not allow it to unwind.
As things get worse, the dollar will continue be propped up and then more dollars will be sent into the hands of international entities.
This will continue until the system breaks down and the propaganda throughout will be, "The free market is too dangerous -- bring in the New World Order!"
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Glen Beck -- An Exposed Enemy:
http://www.dailypaul.com/node/90198
Glenn Beck Supports NAFTA and taking your job:
http://www.dailypaul.com/node/86643
I think it's a slight deflation.
I think it's a slight deflation. Banks aren't lending as much as normal (they're still lending but with stricter requirements, plus many waiting for more government hand-outs) at this point, which means less money creation (everything they lend is created out of thin-air). Much debt is still being paid back, however, which decreases the money supply.
I would guess that is the main reason.
Since the government has been making all kinds of highly inflationary moves to try to prop up the economy, the deflation won't last for very long, and inflation will be the highest we've seen in a while.
Here's a good book to read to understand banking as it was, and as it is today: The Mystery of Banking by Murray Rothbard.
DEFLATION is when inflationary moves no longer
"Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters." Benjamin Franklin
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work to prop up the economy, in my opinion.
government of the people, by the people, for the people
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The strengthening of the dollar
Comes from major players dumping foreign currency and gold to prop-up the dollar because it is the foundation of the world's currency and the current system of obligations requires them to do so.
A good example would be the Wallstreet bailout. If JP Morgan and AIG are failed companies, then why is the Government buying and its stock rising?
Because the Government has concluded they are too important to fail and will sacrifice the system to 'save' it.
What we are seeing with the dollar is an International Bailout because the dollar was deemed too important to fail and they will sacrifice the system to 'save' it.
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Glen Beck -- An Exposed Enemy:
http://www.dailypaul.com/node/90198
Glenn Beck Supports NAFTA and taking your job:
http://www.dailypaul.com/node/86643