Dollar May Get `Crushed' as Traders Weigh Up Bailout

[villager]

Source: Bloomberg

Dollar May Get `Crushed' as Traders Weigh Up Bailout (Update1)

By Bo Nielsen and Anchalee Worrachate
Enlarge Image/Details

Sept. 22 (Bloomberg) -- Treasury Secretary Henry Paulson's plan to end the rout in U.S. financial markets may derail the dollar's three-month rally as investors weigh the costs of the rescue.

The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.

``As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, which manages about $15 billion.

The dollar fell against 14 of the world's most-traded currencies on Sept. 19, including the euro, as Paulson unveiled the plan, while the Standard & Poor's 500 Index rose 4 percent. The plan may end the rally that began in June and drove the U.S. currency up 10 percent versus the euro, 2 percent against the yen and almost 13 percent compared with Brazil's real, strategists said.

<snap>

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=arSYa87HCb9U&refer=home

[MercutioATC]

1. Gee, ya think?

We're printing another TRILLION dollars that we don't have. Might that have a small effect on the value of the current money supply?

:eyes:

[lib2DaBone]

3. Happy Talk.. Money Honeys.. Botox Babes.....

CNBC.. Monday Morining.. Everything is "Rosey".. couldn't be better. It's the American workers fault.. he shouldn't have got that mortgage or bought that Dodge Ram Truck.... Shame on America... God Save the Wall Street Bankster/Gangsters.

[AwareOne]

2. Time to commence the Yukon Cornelius plan

Silver and Gold, Silver and Gold. Silver is on sale right now at around $12.50 an ounce, it was $19.00 an ounce about six weeks ago and dropped drastically for no sound reason. If the dollar is going to be junk, buy metals now. Go to your local coin shop and buy bars now!

[Xipe Totec]

4. I still have some silver ounces I bought in 1980 @ $15

Not my brightest investment.

[MercutioATC]

6. Save 'em. They're going to be worth a lot more soon.

I have about 200 ounces that I bought at $12. Yes, I should have sold them when silver broke $20 recently, but it's a long-term investment. I just wish I has $10 or so to put into silver right now.

[AwareOne]

7. Shortly after Bush took office

I bought silver at $5.50 an ounce and gold at $350.00 per ounce. I also bought a gold and silver mining mutual fund that I sold in May and made a very nice profit. I never made an investment like it before and may never again.

[MercutioATC]

11. Precious metals are going to increase in value.

They generally move in a loose inverse proportion to the value of the dollar, which we KNOW is going to decrease in value.

Of gold and silver, I'd go with silver because I think it has more upside. For years, the gold/silver value ratio has been 51-54/1 (51 ounces of silver have the same value as an ounce of gold). With the recent dip in metals, the ratio is now at 69/1. Silver decreased n value more than gold and I think it'll equalize to at least 55/1 on the next run-up.

[KayLaw]

28. I, too, like silver.

One reason is that I believe that if people turn to PMs, there's more likely to be a speculative bubble in silver than in gold, because silver is so much more affordable. Of course, that's just my personal belief and I wouldn't bet my bottom dollar on it.

[Alcibiades]

13. My grandfather did that, too

Spent all his savings on silver back when the Hunt brothers were trying to corner the market, because he thought they were so smart. He bought most of it for way less than $15 an ounce, though. He still has it all, and has been waiting for it to go back up. He's 84.

[KayLaw]

27. $15 may seem high, but I don't think so.

Just hang on to it if you still have it.

[Xipe Totec]

29. If I can hold on to them for 1,000 years they'll be worth a lot

now we're talking long term investment.... :evilgrin:

Seriously, If I had put the same $15 in the bank, at 1% interest for 28 years, it would be worth $19.82 today.

[KayLaw]

30. Not 1,000 years.

Silver was trading at $20 a few weeks ago.

[Xipe Totec]

31. In 1,000 years they would be priceless historical relics.

My point is that if you hold on to anything long enough (even coprolites), it becomes priceless.

The only problem is hanging around long enough to cash in.


I also point out that the $15 invested at 1% for the same time as I held the silver, 28 years, would be worth just shy of $20 today.

And the average interest rate on savings for the past 28 years has been more than 1%.

[depakid]

5. Relatively, the US may be on better ground than other nations

involved in the current situation with respect to currency.

Probably not a popular view on DU espiecially- but one that people might want to think about.

[eowyn_of_rohan]

9. well, you are probably correct...

this may not be popular either, and i didn't do too well in econ 101 (actually never took it ;) ) but it seems to me that losing a bit on the dollar this week, while Congress works this out to our advantage, is not such a bad thing. I am willing to lose a little on the dollar if it helps get this country back on the right foot. It seems like good investment in our country's future

[karynnj]

8. Wow, that will have major impacts

as it will raise the dollar price of all things that are international commodities - oil for one.

[azul]

10. yep, gas will jump over $5/gal if the dollar dives.

And just after they strengthened the dollar to drop the price for the election, and ditch the pesky notions of alternative energies from gaining traction.

[struggle4progress]

25. Or much higher: It'll be time to dust off the ole walkin shoes

[neverforget]

12. Good times indeed: a crashing economy AND rising inflation! Bush

is a world class fuck up.

[adamuu]

17. you're being too generous to Bush n/t

[Alcibiades]

14. Would it really be all that bad?

If the dollar were crushed? Maybe if we could disentangle ourselves from the international economy for a while we could sort some things out, rebuild the factories that were shipped overseas, and do a little restructuring.

[truthisfreedom]

23. Not so bad for me. I manufacture in the States and ship overseas... the Euro has been

so powerful that I've really increased sales over there. A lower dollar always helps me in Europe and Asia!

[roamer65]

15. I wa waiting for Bernanke and Paulson "to shit or get off the pot".

They have now chosen the hyperinflationary route that I thought they would. Buy gold, silver and anything else that will hold its value...except the US dollar.

[roamer65]

16. ...and I'll add that this will now morph into a dollar crisis very soon.

[eridani]

18. Do people who buy gold and silver actually HAVE gold and silver?

Or do you just have some electronic blips on a hard drive somewhere that assure you that you do?

[halobeam]

19. anyone I know who bought it actually has it.

Now I don't know REALLY rich people, but some that have had experienced the depression in their earliest years and the following decade they remember well; as well as the stories their parents told them and values that were instilled in them (along w/ fears.) Oh they HAVE it all right.

Problem I think is, in 1999 I believe a law passed that if the gov't declared a federal emergency, they can order you to turn in all your gold, etc. Sorry I don't remember the name of it, but you can google it and I'm sure easily find it.

If I get carried away with the worst case scenarios, I imagine people buying black market bread w/ black market gold. This is why I try not to read too much but yet, I want to know what's a good idea to have all set up. I know my grammar is probably atrocious at this point, I'm exhausted, so pardon me.

[SlowDownFast]

22. Places to buy physical bullion

www.apmex.com

www.golddealer.com

www.bulliondirect.com

I have bought from all 3 places and found it a good experience.

Also, a good forum to talk precious metals is:

www.goldismoney.info

[eridani]

26. What do you do if it gets ripped off?

I've heard that safety deposit boxes aren't always safe.

[SlowDownFast]

35. I wouldn't use a safe deposit box.

Get a safe, hide it, bury it, etc.

Bank of Sealy.

No, really.

[depakid]

38. You can buy and store gold at the Perth Mint, in West Australia

http://www.perthmint.com.au/investment_invest_in_gold_overview.aspx

[ret5hd]

40. Why not buy it at a local coin shop and get INSTANT delivery and store it yourself?

[eridani]

24. And they keep it in their safe deposit boxes?

My brother in law only had ownership certificates.

The idea of using $700 worth of gold to buy a loaf of bread sounds pretty preposterous to me. How does the seller make change?

[SlowDownFast]

37. Buy fractional ounces.

Gold American Eagles sell in 1oz, 1/2oz, 1/4oz and 1/10oz increments.

And then, of course, there's poor man's gold - silver - which is getting harder to find..

The idea is buy bullion as close to spot as you can. I think gold will consolidate around $900 for awhile (barring any more major financial news - positive or negative) before rising. I would still feel comfortable buying around $900/oz.

I have been railing here at DU of an impending market crash/bank insolvencies/falling dollar and the need for store of wealth in precious metals for at least a year now (check economy forum). Precious metals market is volatile - huge wild swings as we have seen this summer (+/-$100 in a week) - but it is still a bull market during financially unstable times - especially now that the deflation/inflation debate seems to settled, ie: Bernanke cutting rates on the dollar still. When/if they get ready to raise rates, sell your metals. It's not so much of an investment as it is a store of wealth - worthless dollar = inverse in precious metals worth. Strong dollar = weak metals.

[amandabeech]

20. The Asian currencies will probably hold up because many Asian countries

manipulate their currencies and make no excuses for it.

The Euro will probably take a huge hit, and they'll be after the Japanese to let their currency float.\

The Chinese will prop their currency up by fooling around with the reserve requirements of their banks, but they'll piss, moan and refuse to buy any dollar denominated asset every again even though a lot of this was foreseeable for students of the late '80s and '90s. Same with the Indians.

[edwardian]

34. Please explain

why the Euro will likely take a hit, as you say? European monetary policy is still linked to manufacturing and actual production of goods/wealth. Though exposed to CDO's and such imaginative financial instruments, most European financial transactions that involve high levels of risk are insured, literally, against such eventualities. I am not inherently disagreeing with your statement, but I would like to hear why you think this. Peace

[amandabeech]

36. I didn't make myself clear.

I meant to say that the Euro will rise against the dollar. I phrased my answer from the perspective of a European exporter--if the Euro rises against the dollar, exports will take a hit.

Thanks for calling my bad writing to my attention!

[MilesColtrane]

21. George W. Bush

The "W" stands for Weimar.

I guess it's time for folks to stock up on dollars.
They'll need to burn something so they can stay warm this winter.

[lonestarnot]

33. Richies running with their grocery carts!

:rofl:

[BlueInPhilly]

32. Damn! I haven't paid for my hotel in Barcelona!

At EU 150.00 / night, I'm gonna get robbed blind this November!

[crossroads]

39. A fine mess you got us in this time Bushie and crew... nt

cr