Is the dollar doomed?

[James_Newman]

http://www.informationclearinghouse.info/article17512.htm

Consider this: In 2002 the euro was $.87 on the dollar. Last Friday (4-6-07) it closed at $1.34-- a better than 50% gain for the euro in just 4 years. The same is true of gold. In April 2000, gold was selling for $279 per ounce. Last Friday, at the close of the market it skyrocketed to $679.50---more than double the price.

Gold isn’t going up; it’s simply a meter on the waning value of the dollar. The reality is that the dollar is tanking big-time, and the main culprit is the widening trade deficit.

 

[NaasPreacher (C4K)]

I depend on the dollar/euro exchange rate daily. All of my dollars are converted into euro.

Of course I am very concerned, of course at the exchange rate, there are a couple of things to note:

1) The 2002 price is artificial. The euro was finding its footing. No one though those days would last. When the euro was introduced the price was about $1.16 to the euro. That would be a better base point.

2) I theorise that the Fed is keeping the dollar low for a different reason. In a globalised market it makes sense to keep the dollar weak so that the world is tempted to buy American. A weak dollar makes American products appealing.

The European Central Bank is not strong enough yet to control the world market.

HOWEVER, there is a real danger here for the dollar. If oil were to priced in euro the dollar would lose huge appeal and plummet to a point where the Fed could do nothing about it and America could lose her power to control the world economy.

The Fed are walking a fine line here.

 

[Rufus_1611]

Spiraling US Federal Debt Triggers Decline of Dollar

Spiraling US Federal Debt Triggers Decline of Dollar http://www.globalresearch.ca/index.php?context=va&aid=6288

The U.S. federal debt has reached crisis proportions, approaching $9 trillion in 2007. U.S. Comptroller General David M. Walker has warned that just the interest on the debt will soon be more than the taxpayers can afford to pay. He observed in 2003:

We cannot simply grow our way out of [the national debt]. . . . The ultimate alternatives to definitive and timely action are not only unattractive, they are arguably infeasible. Specifically, raising taxes to levels far in excess of what the American people have ever supported before, cutting total spending by unthinkable amounts, or further mortgaging the future of our children and grandchildren to an extent that our economy, our competitive posture and the quality of life for Americans would be seriously threatened.1

Nearly half the public portion of the federal debt is now owed to foreigners, and they are pulling out of dollars into other currencies as the dollar shrinks in value. Oil-producing countries are also moving to other currencies for their oil trades, removing a major incentive for foreign central banks to hold U.S. government bonds. In an April 2005 article in Counter Punch, Mike Whitney warned:

This is much more serious than a simple decline in the value of the dollar. If the major oil producers convert from the dollar to the euro, the American economy will sink almost overnight. If oil is traded in euros then central banks around the world would be compelled to follow and America will be required to pay off its enormous $8 trillion debt. That, of course, would be doomsday for the American economy. . . . If there's a quick fix, I have no idea what it might be.2
...

..........

 

[James_Newman]

Maybe we just change our phone number, and the collectors won't find us?

 

[Rufus_1611]

Maybe we just change our phone number, and the collectors won't find us?

I understand the PRC has around 200 million skip-tracers.

 

[James_Newman]

Seriously, what would be the result of an economic collapse and the inability to repay the national debt? Would we be sold into slavery?

 

[webdog]

With the decline of the dollar...along with the upcoming amero...and the growing strength of the euro...we are getting closer to the one world currency.

"Even so, come Lord Jesus"

*edited to not offend C4K

 

[Analgesic]

I depend on the dollar/euro exchange rate daily. All of my dollars are converted into euro.

Of course I am very concerned, of course at the exchange rate, there are a couple of things to note:

1) The 2002 price is artificial. The euro was finding its footing. No one though those days would last. When the euro was introduced the price was about $1.16 to the euro. That would be a better base point.

2) I theorise that the Fed is keeping the dollar low for a different reason. In a globalised market it makes sense to keep the dollar weak so that the world is tempted to buy American. A weak dollar makes American products appealing.

The European Central Bank is not strong enough yet to control the world market.

HOWEVER, there is a real danger here for the dollar. If oil were to priced in euro the dollar would lose huge appeal and plummet to a point where the Fed could do nothing about it and America could lose her power to control the world economy.

The Fed are walking a fine line here.

Well said, although there is a #3 on the opposite side: Foreign banks have traditionally relied upon the stability of the American dollar to use as their reserve currency (that's part of the reason why Reagan was able to run such large deficits, since the money simply left the country and was taken out of circulation). With the development and stabilization of the euro, banks began to diversify their holdings, thereby driving its value up further and lowering the dollar as well. The only reason the dollar isn't already lower is China, who have been buying up those excess dollars because it gives them economic (and therefore also political) leverage in the US.

 

[NaasPreacher (C4K)]

BTW folks "euro" is NOT capitalised any more than "dollar" is and the plural for "euro" is "euro".

Sorry. just a pet peeve

 

[Analgesic]

Duly noted and corrected.

 

[LadyEagle]

Snipped:

The US and Saudi Arabia had formed a cooperative partnership in 1945, following meetings between FDR and King Ibn Saud. US oil companies (Exxon, Mobil, Chevron, and Texaco) were already controlling Saudi discovery and production through a partnership with the Kingdom, the Saudi Arabian Oil Company (Aramco). In 1973, the Saudi Government increased its partner's share in the company to 25%, and then 60% the next year. In 1980, the Saudi government retroactively gained full ownership of Aramco with financial effect as of 1976.
At about the same time this was happening (1975), the Saudis agreed to export their oil for US dollars exclusively. Soon OPEC as a whole adopted the rule. Now, as a result, the dollar was backed not by gold but, in effect, by oil. Had the US permitted the Saudis to nationalize their oil industry in return for this extraordinary favor? Because the Saudi royal family and the oil companies are all notoriously tight-lipped, we may never know.

In any case, the oil shock created enormously increased demand for the floating dollar. Oil importing countries, including Germany and Japan, were faced with the problem of how to earn or borrow dollars with which to pay their ballooning fuel bills. Meanwhile, OPEC oil countries were inundated with oil dollars. Many of these oil dollars ended up in accounts in London and New York banks, where a new process - which Henry Kissinger dubbed "recycling petrodollars" - was instituted.

The process worked like this. OPEC countries were receiving billions of dollars they could not immediately use. When American and British banks took these dollars in deposit, they were thereby presented with the opportunity for writing more loans (banks make their profits primarily from loans, but they can only write loans if they have deposits to cover a certain percentage of the loan-usually 10% to 15%, depending on the current fractional reserve requirements issued by the Fed or Bank of England). Since the economies of industrialized nations were in no position to take on much new debt, the banks were faced with a problem: to whom could they loan a boatload of new petrodollar-based money? Kissinger, an advisor to David Rockefeller of Chase Manhattan Bank, suggested the bankers use OPEC dollars as a reserve base upon which to aggressively "sell" bonds or loans, not to US or British corporations and investors, but to Third World countries desperate to borrow dollars with which to pay for oil imports.

http://www.richardheinberg.com/museletter/149

 

[Rufus_1611]

Euro soars as fears of U.S. slump intensify

Euro soars as fears of U.S. slump intensify

FRANKFURT: The dollar sank to its lowest level ever against the euro Wednesday as fears about a steeper economic downturn in the United States intensified. President Nicolas Sarkozy of France, who has been the most vocal leader in Europe in decrying the impact on exports, told his new finance minister to seek an accord among euro-zone countries for managing exchange rates.

The euro, used by 13 countries from Ireland to Slovenia, traded as high as $1.3787 against the dollar, and was also up against the British pound, which hit a new 26-year high of $2.0363. The euro was also up sharply against the Japanese yen, to around 168 yen to the euro.

This picture of global currency gyrations - with the dollar the clear loser and the euro the only clear winner - reflects a similar conviction about economic fundamentals that has taken shape in recent weeks, economists said.

The rapid deterioration of the American housing market is being felt through higher interest rates and a rise in defaults hitting the complex financial instruments used to bankroll shaky mortgages. That has nurtured a view of a weaker U.S. economy.

... (Source: http://www.iht.com/bin/print.php?id=6617257)

..........

 

[Rufus_1611]

Notice too, this quote...

"The whole global economy is doing incredibly well, and oddly enough the only blemish anyone can point to is the United States," said Stephen Jen, global head of currency research at Morgan Stanley in London. "So right now the market is betting on what it knows for sure: a growing economy in Europe and a central bank that is still in motion."

Compare that to, this quote from another thread...

"By any objective measure, ladies and gentlemen, our economy is one of the best in history. By any objective measure: low unemployment, record low unemployment, low inflation – at the same time! ... We have a booming investment climate that's benefiting everybody who is in the stock market." - Rush Limbaugh

 

[Analgesic]

This news seems relevant...

 

[mnw]

This is kind off topic, but I saw this quote and thought of all my friends in the News Forum at the Baptist Board:

"Thanks to TV and for the convenience of TV, you can only be one of two kinds of human beings, either a liberal or a conservative."
- Kurt Vonnegut

 

[LadyEagle]

Notice this quote out of what I linked above:

At about the same time this was happening (1975), the Saudis agreed to export their oil for US dollars exclusively. Soon OPEC as a whole adopted the rule. Now, as a result, the dollar was backed not by gold but, in effect, by oil.

Why does our government (as a whole) bow to Arab nations and play footsy with them and pretend they are our friends (in spite of human rights violations)?

Because should OPEC decide to no longer export their oil for US dollars, the US economy will implode. And, since much of our industrial base has been exported and offshored, and we have the largest trade imbalance and deficit in the history of our nation, yes, I see the day the dollar is doomed. What little bit of gold jewelry I own may end up buying bread one day, at least enough for one day. Hmmmm kinda reminds me of that passage in Biblical prophecy where it says it will take a day's wages to buy a loaf of bread.....hmmmm.....

 

[hillclimber1]

The world wants America to be strong, financially, and for now won't allow a collapse of any kind. I wonder if we are being groomed to convert to a different one world currency, like say, the euro.

 

[billwald]

I think in the long run it would be in our best interest to convert to the euro.

 

[webdog]

I think in the long run it would be in our best interest to convert to the euro.

Do you mean as believers, or as americans? As a believer, I say AMEN, as that means Christ's return is getting closer and closer!

As an american I say NO WAY. We left there 200 years ago to break free from them. I would not want to go back to depending on them!