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Discussion Starter · #1 ·
If you have dollar savings/retirement, you better get out..

Traders are warning of a dramatic change in dollar selling. They fear central banks from the Middle East may force their Asian rivals to more aggressively drive the dollar down.

Too Many Dollars

In 10 months, the Dollar Index has lost 14% because the world keeps accumulating dollars it doesn’t want and sells them. Asian central banks are key.

Many Asian central banks have been forced into waging wars to keep their currencies from appreciating because of the influx of investors to emerging markets. They sell waves of their own currencies into the market in an attempt to keep exports competitive.

In return they often receive dollars. But with the Federal Reserve printing dollars and the greenback’s value continually falling, the Asians sell those dollars in order to preserve the value of their reserves.

“Asia Pacific banks are renowned for their strict diversification” says Neil Mellor at BNY Mellon. “They hold a level with China in order to be competitive. Beyond that it’s very strict ratios. They need to swap-out of dollars.”
Euro Benefits

When they sell dollars they often buy euros.

“China and Taiwan have tried looking further afield in their diversification, to the Australian and South Korean bond markets” says Mellyor. “But there are only two places that are deep enough to absorb reserves of this magnitude: the Euro Zone and the US. When ever you see emerging markets perform well you will see the euro perform well.”

Three months ago central banks in Latin American joined the Asians as “currency wars” became more widespread.

Euro/Dollar [EUR=X 1.4478 0.0179 (+1.25%) ] is now up 19% in 10 months. In fact there’s a growing realization that the ascent of the euro more to do with Asian bank diversification than anything happening within the Euro Zone.

“Euro/Dollar is trading without reference to the underlying debt markets” says Mellor. “In fact it’s our contention at BNY Mellon that the entire move in the Euro since 2001 have been driven by the Asian central banks need to diversify.”

Importantly however some believe the banks have deliberately sought to control the speed of the dollar’s decline by passively working bids to simply add liquidity on existing moves.

“They have been working bids below the market, relying on the market to come to them, as Europe’s sovereign debt fears and interest rate differentials trigger bouts of temporary dollar strength,” says Douglas Borthwick at Faros Trading.

But Borthwick says the Asians may be forced to abandon that because of fresh, aggressive dollar selling from the Middle East.

Middle East

US crude prices have risen 30 percent since Libya’s “Day of Rage” Feb. 14 above $100 a barrel. The International Energy Agency says OPEC nations will net one trillion dollars a year. The political tension also demands petrodollars are sold and the proceeds increasingly repatriated, as Saudi King Abdullah’s $93bn-worth of handouts demonstrate.

If the Arabs keeps “front running” their orders the Asians may be forced to abandon their passive approach and raise their euro/dollar bids.

“If Asian central banks are passive, they miss buying the EUR/USD at 1.4040,” says Borthwick. “Through frustration the they are moving from set bids to rolling bids...i.e. set a bid 50 pips below today's high.”

Analysts say that would prove even more toxic for the dollar.

“Euro/dollar is massively overvalued but we keep calling the top and it doesn’t work,” says Paul Bednarczyk at 4-Cast. “We could top out at 1.50. And then wait to see what the Fed does with QE.”

Correction: US crude prices have risen 30 percent since Feb. 14. An earlier version of this article incorrectly had them rising 54 percent.

31,366 Posts
Discussion Starter · #2 ·
During his Bretton Woods II weekend conference, billionaire financier George Soros has issued many bold statements, not the least of which included claiming that the Dollar had already fallen as the world’s reserve currency, and is now reduced to sharing the role, in an interview with Bloomberg:

The big question is whether the U.S. dollar should be the reserve currency; it no longer is, it shares that role with the euro, other currencies, and commodities. But it’s not just gold being used as a substitute, but oil too, which is putting upward pressure on the market.

Soros has convened the Bretton Woods II event in hopes of leading financial reforms and formulating a replacement to the dollar on the world market. He has argued that the original Bretton Woods agreements, which also created the World Bank and International Monetary Fund (IMF), have been outmoded and are in need of new arrangements.

Meanwhile, Soros prescribed more debt for the U.S., urging against calls to shrink the budget. “There is very a strong push to tighten the budget as a way to reduce government spending… In my opinion, the country could actually absorb some more debt in order to get the economy going,” he said.

“If you have a growing economy, you can tolerate a higher level of debt.”

Perhaps Soros’ comments reached Washington in time, as their budget cuts only amounted to a paltry $38 billion, a literal drop in the bucket to mounting national debt.

In other matters, Soros estimated that despite the risks of inflation in China, it had emerged as the the ‘big winner’ of the financial crisis. It had been largely immune to the collapse due to its ‘isolation,’ he indicated. Indeed, ‘China was the main beneficiary of globalization,’ Soros said.

Soros also commented on other matters, like the ECB interest rate hike. Further statements are expected to emerge from him and other figures attending the Bretton Woods II conference after it concludes.

31,366 Posts
Discussion Starter · #3 ·
Use the Dollar or Else

Look up the phrase "a unique form of domestic terrorism" on a search engine and you will turn up a story about a man whom the US government is trying to cage from now until the time of his death.

And his crime? His unique form of terrorism? He minted silver and copper coins and sold them. In other words, he did what innumerable entrepreneurs from the beginning of time have done. He attempted to provide consumers with a store of value. No one was forced to buy. He met a market demand, and that’s it.

Whom did he hurt? No one. Unlike illegal drugs, which the government bans on grounds that it doesn’t want us to hurt ourselves, these silver coins did not endanger their users. They only gave people an option on what to do with their money. Did the proprietor attempt to claim that these were legal tender for monetary exchange? No, he sold them for what they are.

Could people use them for money? Yes, but people can use anything for money: shoes, shells, flash drives, or books. Whether something is money or not depends on the intentions behind the exchange. Do you acquire something to consume it? It is not money. Do you acquire something in order to trade it for something else? In that case, it takes on money-like properties.

It is wholly understandable that people have doubts about the future of the paper dollar. Many people are seeking alternatives, in their own financial interest. What this proprietor did was provide something that turned out to be a possible alternative to the dollar. And for that, and that alone, he is being hounded and destroyed.

His name is Bernard von NotHaus and he is 67 years old. In the course of the proceedings, he was called every name imaginable. He was called a crook, a terrorist, a crank, and a crazy man. What he actually did, however, should be fully legal and encouraged in any nation, in all times and all places.

A nation that is confident about its money’s future would not fear currency competition. A nation with a dying money uses every possible means to crush the competition. That is precisely what is happening in the case of the so-called Liberty Dollar.

What’s striking here is that no one believes there is any reason to argue the point. It is obvious to his persecutors that he is a criminal. "He's playing on a core idea of the radical right, that evil bankers in the Federal Reserve are ripping you off by controlling the money supply," said Mark Potok of the Southern Poverty Law Center. "He very much exists in the world of the anti-government patriot movement, whatever he may say. That's who his customers are."

And what is the interest of the SLPC in this case? This is a group that claims to be about stopping hate and racism – and this has something to do with opposing poverty. And yet here they are intervening in a case in which a man is actually trying to prevent people from being impoverished. As for the Fed, it is not exactly an act of hate to point out that the Fed controls the money supply. Bernanke himself admits this!

The government has made no bones about the foundation of its case. Citing a Civil War-era law, prosecutors say that it is a crime to compete with the official dollar. Note that they are not citing the U.S. Constitution, which nowhere prevents such a thing. In fact, private coinage has a rich history in the U.S. It was essential when the West was being settled. Providing coinage services was as common as any other trade.

But since 1971, when the dollar became all paper, there has been a sense that its viability needs the backing of federal guns in order to thrive. This attitude is inconsistent with freedom. The right of private coinage is an essential part of free enterprise. Currency competition, especially in a digital age, is something that every country needs.

As Seth Lipsky wrote in the Wall Street Journal, "it's a loser's game to suppress private money that is sound in order to protect government-issued money that is unsound."

Precisely. As Lipsky points out, NotHaus operated very close to the line in terms of legality. He put the dollar sign on his coins, for example, and sold them with numbers. I can’t comment on his business dealings or the integrity of his operations. But this much is clear: the grounds on which he is being hounded are egregious and tyrannical.

Allowing for alternative currencies is not terrorism. It is a path to monetary reform, merely an application of the principle of free enterprise to a sector that should have never fallen so completely to government control. The people who are working to provide alternatives should not be jailed; they should be celebrated in every country that values freedom.
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