No definite answers Squire, but I'll chip in with a few thoughts.

Do the Chinese not hold massive amounts of dollars? Is it not in their interest to prevent a sharp fall in the dollar?

Also, the US are oil producers and there are recent signs that they are going to throw their environmental restrictions on drilling to the winds.

The US oil firms are also in the process of doing deals in Iran on the back of new legislation permitting sales to foreign firms. The Iraq invasion overall may be a financial success.

cactus flower wrote:

No definite answers Squire, but I'll chip in with a few thoughts.

Do the Chinese not hold massive amounts of dollars? Is it not in their interest to prevent a sharp fall in the dollar?

Also, the US are oil producers and there are recent signs that they are going to throw their environmental restrictions on drilling to the winds.

The US oil firms are also in the process of doing deals in Iran on the back of new legislation permitting sales to foreign firms. The Iraq invasion overall may be a financial success.

Maybe not dollars, cf, but definitely bonds, notes, bills, munis and the like. all forms of US government debt.

I is in China's interest to keep the dollar up. It is policy, but they are already holding an uncomfortably large whack of bonds etc. If they were continuing such a policy at what point do they consider themselves to be over exposed? If it's potentially a bad risk why extend your involvement? Has a deal been done on Twain!*?

Rising dollar benefits us in Europe, Japan etc. also.

I can see a movement out of equities being part of it, oil contracts may well be another part. Is there also an organised, concerted effort to bolster up the dollar? With the news coming out of the USA and the low interest rates the dollar should be weak. It all feels very wrong.

Where is Young Dan when you need him?

Squire wrote:

I is in China's interest to keep the dollar up. It is policy, but they are already holding an uncomfortably large whack of bonds etc. If they were continuing such a policy at what point do they consider themselves to be over exposed? If it's potentially a bad risk why extend your involvement? Has a deal been done on Twain!*?

Rising dollar benefits us in Europe, Japan etc. also.

I can see a movement out of equities being part of it, oil contracts may well be another part. Is there also an organised, concerted effort to bolster up the dollar? With the news coming out of the USA and the low interest rates the dollar should be weak. It all feels very wrong.

Where is Young Dan when you need him?

Perhaps if you pmd him he would come to our rescue?

Squire wrote:

I don't buy it being about a possibility of reduced oil consumption, that is too far ahead. There is now massive investment in alternative energy but some of this will take quite a few years to mature and some of the more interesting developments may be in places like Japan.

There is something about this that defies sense. It is a huge flight of money back into the currency or out of other currencies. In the last 3 months the dollar has risen against the Yen from 97 where it fell to in March back up to 110. It fell against the Yuan and is now rising, this is crazy. If any currency should be rising it is the Yuan. There is no sense in this that I can see and that bothers me. I wouldn't hold dollars unless I was forced to.

It does defy sense and what you say about energy investment is sensible - this move is too sudden to be based on investments but the oil price did fall as suddenly and dramatically as the Dow and dollar rose - did all the oil-speculators go to China together to see the olympics? Doesn't the rate of the yuan track the dollar? Here the dollar has been falling (?) for a year but it just rose again with the olympics ...



Very sudden - could very well have something to do with what cactus is saying about the off-shore drilling ...

Auditor #9 wrote:

Doesn't the rate of the yuan track the dollar? Here the dollar has been falling (?) for a year but it just rose again with the olympics ...

The dollar has been falling against the yuan since the yuan is under-valued against the dollar according to the Big Mac Index. The Chinese government have allowed the yuan to slowly rise against the dollar over the past few years to curb anti-Chinese sentiment in the US and to advance their path towards fully-fledged market capitalism.

Quote :

Very sudden - could very well have something to do with what cactus is saying about the off-shore drilling ...

It's a bit of a kink in a long-term trading pattern. It'll be a while before we could call a movement like that a definite paradigm shift in the Dollar/Yuan trade. There's also the complicating factor of Chinese domestic politics. A backlash against the appreciation of the yuan is building with the rise of the currency being singled out as the reason for the closure of many exporting firms in China. These political grumblings may be another driving force in this newfound weakness in the yuan.

As regards to dollar exchange rate, there is theory floating around the ether explaining the dollar's steep rise against other currencies by simple supply and demand factors. 100's of billions of dollar loans are being written off in the US - it's generally called credit destruction. On top of this, there is a marked slow down in mortgage and corporate lending across the board. These two factors have essentially wiped out dollar velocity in the first case and stopped new money supply from coming onto the market in the latter instance. Hence, there are fewer dollars around now than there was this time last year. The dollar is simply becoming a scarcer commodity in a relative time frame. The fall in the supply of US dollars, at least temporarily, means that inflationary pressure is also decreasing and hence why gold and other commodity prices have fallen in tandem with the dollar's rise.

rockyracoon wrote:

Hence, there are fewer dollars around now than there was this time last year. The dollar is simply becoming a scarcer commodity in a relative time frame.

That's interesting alright but what does it mean in terms of the economy? Surely with a weak dollar the Americans were doing more exporting whereas now that will slow down?

Or is American production located more offshore now in MNCs everywhere that it's better that they import to their own country?

rockyracoon

Thanks that would make some sense, can't see much sign of it, who exactly is Santa Claus? (or is it fool left holding the baby)

Some weeks ago I posted somewhat of a warning on P.ie on the iseq thread thread. I said that the vast majority of people I read are all predicting inflation and a falling dollar etc. I said to watch out for the dollar rising and that this would not be good news for my silver stake but that I would stick with it. How right the silver fear proved to be as it has lost 25% very quickly.

The guy who was going against conventional wisdom is Gary North. He is not a trader. He is a very unusual charactor and his father-in-law was also.
Anyway his observation is that the Fed is not increasing the money supply as most think as the loans being given are loans for 28 days and must be repaid(little chance) or rolled over. The mechanisms by which all this takes place is by no means easy to follow but the emportant thing is that at the start of this the Fed held over 800 billion of Treasury Bonds. For the sake of argument we will assume these to have full value. When banks come for assistance they bring rubbish assets like bundled mortages or bonds of other entities as collatoral. The Fed does the Nice Guy and swaps these for Treasury Bonds so the assets now have face value again. At the moment the Fed have swapped out over 400 billion of the Treasuries they held.

North reckons that at the moment the Fed is contracting the money supply and the interesting thing will be when the Fed has swapped out the entire stash. It is at this time that hyperinflation will kick in as the Fed will then have to print as the cupboard will be bare.

I was able to see last Thursday that there was something very important about to happen. The buying was so heavy in the bond market which had it's best day in years and the dollar. I concluded that the Iranian attack was about to happen. There are 2 carriers on site and 2 moving into position. The British carrier fleet was moving in and some French subs. I saw describtions of it being the biggest armada since the WW2. It turned out that the Georgian War was what had moved the market in advance. The big wheels know in advance and Georgia would not have gambled without Washington's OK. What was seen was a classic flight to safety into the US dollar.

This war is very important as it throws a spanner into the Iranian attack. The BTC pipeline was to be the backup if the Iranians had managed to close the Straits. Now the Russians have bombed the pipeline to smithereens.

A hugh strategic event has happened but the oil market does not seem to realise it.

The Europeans are pickled and the Euro is screwed. The fact is the Europeans are completely naieve. They believed their own happy talk. Now their goose is cooked.

So you have a few things happening. There is deflation in the US. The supply of dollars is falling like a stone as every writeoff makes more of them dissappear. The demand is sure rising as people try to get them to pay off debts.
The reason for imagining the Euro to be strong is gone up in smoke because politically Europe is very weak and economically it is beginning to look as if they are in even worse shape than here

So we will see if oil jumps in a short while and if the markets tank altogether. It would surprise me if the Russians do not wipe out Georgia. The significance of this also is that it will mean they can fight the American planes in Iran as they need only overfly Azerbijian who will keep their yaps shut.

Is it more weakness of euro than strength of dollar?

Quote :

Would the euro have been affected by the No vote? Was the rise of the dollar more to do with the weakness of the dollar than any inherent strength in europe? Unemployment is rising, Lisbon has failed, the UK property market is in free fall and Europe has little in the way of oil and gas resources. The situation in Georgia won't help, and neither did Kosovo. It has an aging population. Europe looks to lack the advantages of the rising states China, India and Brazil in many respects. The ECB strategy in raising interest rates has not stopped inflation. Overall, it may just be that the fundamentals aren't that good.

Are you sure you weren't right about Iran youngdan? Isn't the pipeline strategy one route via Afghanistan - not looking too good at the moment and another route with two pipelines through Georgia? This was meant to be a strategy to avoid going through Iran, which supplies Europe ?

At this stage might they not be thinking about Iran?

At the end of the day a currency derives much of it's strenght from the strenght of the political unit backing it. To hear this bleating for a cease fire is pathetic. The only ones the Europeans can bully is there own jellyfish citizens. Harsh but true.

The West is run by New World Order fools who have destroyed nationalism in their own countries in furtherance of their plan for a one world government.

Remember when I was talking about Putin telling the high level delegation to go and screw last Summer. He has called their bluff and Europe is toast.

The Afghan was was all about the pipeline. Unical lost the contract to Bridas from South America so the Taliban had to go. Now there is no pipeline in any direction and the danger of a Russian/American jet battle over Iran has gone from a possibility to being almost assured. The Russians have nothing to lose because the dumb Americans have cut back their nukeswhile the Russians modernised theirs.

The Georgians downed a few jets though and that should be a wake-up call that missiles have the upper hand over jets. The American jets are better but the Iranians will shoot some down. The only thing now is an EMP detonation to fry them

Roll on tomorrow and we will see how the markets are in Europe

youngdan wrote:

. . .Anyway his observation is that the Fed is not increasing the money supply as most think as the loans being given are loans for 28 days and must be repaid(little chance) or rolled over. The mechanisms by which all this takes place is by no means easy to follow but the emportant thing is that at the start of this the Fed held over 800 billion of Treasury Bonds. . . At the moment the Fed have swapped out over 400 billion of the Treasuries they held. . .
I was able to see last Thursday that there was something very important about to happen. The buying was so heavy in the bond market which had it's best day in years and the dollar. I concluded that the Iranian attack was about to happen. . . A hugh strategic event has happened but the oil market does not seem to realise it. . .So you have a few things happening. There is deflation in the US. The supply of dollars is falling like a stone as every writeoff makes more of them dissappear. The demand is sure rising as people try to get them to pay off debts. . .

Hiya youngdan (moved me cracass from yon other site for good). Yeah, I've now read several cases where people have claimed that US money supply was contracting despite the huge amount of money being pumped into the system. Nice slight of hand!

Also, I realised that the Fed bond market was picking up, but I still can't see how the flight to US dollars is going to make a long term profit for holders of US dollar denomiated assets. As far as I can tell they are only parking their dollars until the markets stabalise into a recession in the coming year.

I had no idea, however, of the economic ramifications of the Georgian situation. I only thought it was aboot Russia's drive to assert its zone of influence. Topographically, it seems it's the US against Russia with Iran being the joker in the pack. The EU is of course angling to position the Euro to become the world's fiat commodity currency. One client so far: Iran.

As far as I'm concerned, they would being doing the US one huge favour. The change would be gut wrentching for the US economy but would ultimately force the US to do what is does best through investment industry and innovation. It would be interesting to see the Euro become the commodity currency. Could the German's restrain everyone else in Europe from increasing the money supply in order to stimulate growth, especially in an economic downturn? Will the ECB's remit have to be extended to a dual mandate of growth and inflation control? Could be interesting if it occurs. Of course, the simple solution is to price commodities across a basket of currencies but that wouldn't make for nice geo-political shenanigans.

Anyhow, the Georgian's are getting their arse's kicked and are crying quits while the Russians have bombed Tiblisi this fine Monday morning. The news wires already have picked up on oil supply concerns (well spotted).

I'm currently 100% cash as I just can't handle the volatility. I has several equities lined up to trade on an intraday basis but today might not be a good day to experiment.

Btw, I'm really very remis on the bond markets. Do you have a good site where I can monitor bond volume on a daily/weekly basis? Would be much appreciated. Also, I think I'll visit market oracle today. Haven't really paid too much attention to alternative viewpoints but I think a dollop of doomsday might add a bit of perspective to the macro-economic situation, and their adjusted econometric figures are always worth a gander. gl all

The thread over yonder will miss you if you leave Rocky. The argument would be that the contraction of liquidity due to defaults and writedowns is so great that it will overwhelm all else. While a bit of sanity remains this would appear to make sense but should the Fed start buying junk outright then all bets are off.

I come accross a lot of The Oracle articles.

The people buying US Bonds can not hope to make a profit as you suspect, they are parking it in a safe place to avoid possible losses elsewhere. Short term as the Bond Market can only fall as the interest rates are pretty low. If deflation kicks in rates could go lower if it were the olddays but thedefault risk would only increase now.

The war has more implications than I have seen reported. A bigger event than most grasp. The Georgians seemed to think that the EU or nato would help them. How crazy is that. The Europeans in Afghanistan will not go out after dark.

The Germans should have stuck with the mark and used it throughout the EU if necessary. I consider the EU to be a very bad thing.

The West is shown to be very weak. Nobody expected anything from the Europeans but in fairness, who is going to listen to Condi Rice or Bush who said he could trust Putin. Unfortunately Obama was lucky to be on vacation as the thought of him handling Putin is a joke. This crack about the UN is drival only the socialist fools would pay any heed to.

Today is pivotal as the Georgians are begging. If as I suspect the Russians press on then the economic situation is changed bigtime.

I will be back after the markets close.

If a person wants to know what Russia is going to do, it would be a start to look at their situation and how they perceive it.

The US after withdrawing from the Anti-Baliistic Missile Treaty is moving into Poland, the Czech Republic with an anti-missile shield - this is current. The reason for the Treaty was the understanding that these shields are for the purpose of postiioning a power to be able to undertake a first strike and be prepared to knock out retaliation. The technical ineffectiveness to date does not give me comfort that the US military would not proceed, as the were ready to do so in 1983 without a shield. The idea that the US is truthful in saying that this shield is directed at Iran is absurd as the system is specifically designed to take out sophisticated nuclear ballistic missiles that Iran does not have and that Russia does have.

Romania and Bulgaria have joined NATO and this has tilted ground troops/tanks strength out of kilter with current treaties. Georgia's president is desperate to join. The experience of the former Russian satellite states in the USSR was such as to create a readiness to jump into bed with any alternative.
There is large scale popular opposition in these countries to what their leaders are doing, but there is no chance of it being listened to.

The US strategy as published by the PNAC (to be found on the NATO thread) is to create a virtual US protectorate in eastern europe and in particular in south eastern europe ("Rebuilding America's Defenses" - Project for a New American Century). This would leave "Old Europe" encircled and irrelevant.

Georgia under Saakashvili joining NATO was an essential step in this strategy. The EU countries have recently opposed his application on grounds of the instability of the Georgian entity and because they recognise the US squeeze on Europe.

The creation of the US client statelet Kosovo with its massive NATO base at its heart had Russia rightly panicked. Russia warned that if Kosovo was recognised it would open the door for general instability and in particular the independence of South Ossetia and Abhkasia.

At the same time GAZPROM is being demonised by the European press who are understandably uncomfortable with dependence on Russian gas and oil (as we are here in Ireland). EU gas and oil comes from Iran and Russia. When there was a short-term dispute last year the UK was quickly down to three weeks back up gas supply and the prospect of industrial shut down. They are Russian mineral resources but presumably if they don't deliver on our terms that will be seen as an attack.

Overall, Russia had little alternative to a firm response to Georgia's attack on South Ossetia last week. It is a no win situation for them, as they are losing the propoganda war.

The breakdown of the GAZPROM - BP joint venture last week may have fed into the weakness of the Euro and also into the Georgian move.

The US strategy is as much a strategy to scalp Europe as it is against Russia and the other oil rich countries.

Perhaps that is a reason why the Euro would be shaky.

cactus flower wrote:

I f a person wants to know what Russia is going to do, it would be a start to look at their situation and how they perceive it.

The US after withdrawing from the Anti-Baliistic Missile Treaty is moving into Poland, the Czech Republic with an anti-missile shield - this is current. The reason for the Treaty was the understanding that these shields are for the purpose of postiioning a power to be able to undertake a first strike and be prepared to knock out retaliation. The technical ineffectiveness to date does not give me comfort that the US military would not proceed, as the were ready to do so in 1983 without a shield.

Romania and Bulgaria have joined NATO and this has tilted ground troops/tanks strength out of kilter with current treaties. Georgia's president is desperate to join. The experience of the former Russian satellite states in the USSR was such as to create a readiness to jump into bed with any alternative.
There is large scale popular opposition in these countries to what their leaders are doing, but there is no chance of it being listened to.

The US strategy as published by the PNAC (to be found on the NATO thread) is to create a virtual US protectorate in eastern europe and in particular in south eastern europe "Rebuilding America's Defenses" - Project for a New American Century. This would leave "Old Europe" encircled and irrelevant.

Georgia under Saakashvili joining NATO was an essential step in this strategy. The EU countries have recently opposed his application on grounds of the instability of the Georgian entity and because they recognise the US squeeze on Europe.

The creation of the US client statelet Kosovo with its massive NATO base at its heart had Russia rightly panicked. Russia warned that if Kosovo was recognised it would open the door for general instability and in particular the independence of South Ossetia and Abhkasia.

At the same time GAZPROM is being demonised by the European press who are understandably uncomfortable with dependence on Russian gas and oil (as we are here in Ireland). EU gas and oil comes from Iran and Russia. When there was a short-term dispute last year the UK was quickly down to three weeks back up gas supply and the prospect of industrial shut down. They are Russian mineral resources but presumably if they don't deliver on our terms that will be seen as an attack.

Overall, Russia had little alternative to a firm response to Georgia's attack on South Ossetia last week. It is a no win situation for them, as they are losing the propoganda war.

The breakdown of the GAZPROM - BP joint venture last week may have fed into the weakness of the Euro and also into the Georgian move.

The US strategy is as much a strategy to scalp Europe as it is against Russia and the other oil rich countries.

Perhaps that is a reason why the Euro would be shaky.

Here is an idea, cactusflower. Has "Europe", by which I mean the power countries within the EU, ever given thought to the US strategy of turning "Europe" into some sort of eunuch and using the only logical defense against this strategy?

To me, the only logical defence is ever closer economic and cultural ties with Russia to offset the NATO "negative" as Russia perceives it. While Ireland and the UK are very much within the Anglo-Saxon US sphere of influence, Middle Europe is not and feels culturally closer to Russia to a much greater extent. Rather than be part of a group trhat appears threatening to Russia, there is much to gain by reaching out to Russia in almost every field except militarily. It might piss off the US but they are pissing off major parts of the globe as it is. Sod them. There is much to gain by integrating Russia into "Europe" and offering Vlad the hand of friendship.

Just a thought.

It is indeed. We have invaded them a lot of times in the past. They have relied on their size, weather and remoteness for survival as well as the loss of millions of their inhabitants.

Perhaps the Eurovision Song Contest result was an augury for the future of Europe.

The ISEQ is surging today by more than 100 points to the good. We're above 4600 now.

The banks are leading the rally and CRH is leading the builders up as well.

So maybe it's just the end of the bottoming out of the Dow and ISEQ or is the fear of war that's driving the dollar up do ye think? Fear and other such negative emotions seem to be great economic emotional drivers. What about the Hope and the Love ?

Is it coincidence that the ISEQ is rising with the dollar or the fall of oil ? Or is our share betting economic index inextricably linked with the economy of America and American MNCs here?

I wonder if everything works out well by fluke will Cowen take the credit for it like Bertie before him?

"I knew exactly when to go on holidays and keep my mouth shut. It takes a good leader to do that".

Slim. That sort of thinking is what has convinced me that Europe has not got the backbone to survive. The EU is just a soviet union and now you just want to surrender to Vlad.

Hitler is beginning to look bright. He wanted to exterminate them and the stupid Brits decided to fight on the Russian side.

A bit peevish youngdan. Although that is certainly what was on the agenda for WW2.

Having invaded Russia umpteen times, a bit of fresh thinking from Europe might be timely.

Perhaps the times when the US could stand back watching the European states batter each other over the head could come to an end. As Slim Buddha said: an interesting thought.

The dumb Brits should have stood back and let the Germans do the heavy lifting. Same mistake in 1914. There was a lot of talk here about an EU army. Needless to say that there are no troops moving

I did not expect to be proved correct so soon. The idea of an EU army to defend against Russia or China or as some said to defend against Africa is so brainless that it does not bear discussion.

The EU army is to be used against the citizens of the EU.

youngdan wrote:

The dumb Brits should have stood back and let the Germans do the heavy lifting. Same mistake in 1914. There was a lot of talk here about an EU army. Needless to say that there are no troops moving

I did not expect to be proved correct so soon. The idea of an EU army to defend against Russia or China or as some said to defend against Africa is so brainless that it does not bear discussion.

The EU army is to be used against the citizens of the EU.

I'm sure that the intention is there in part.

Would it not be useful to defend Europe from the US?

They can not defend against anyone. They are a joke. They could not even save the people who ran into their camp in the Yugoslav breakup. The Dutch just stood there while they were all killed.

It is no wonder the Euro is in trouble. Who in their right mind would be inspired by Merkel, Sarkosy, Brown or Cowen. They are a laughing stock and whoever voted for them deserve what they get. I hope Europe freezes and maybe then they will wake up.

The only thing missing is Obama talking about strong diplomacy.