New Dark Age Alert! The Dollar Bubble

Bernanke's Rare Intervention Fails to Calm Fears Over Weak Dollar
With the dollar going into steep decline, with the price of gold rising to record levels, with the US’s huge deficit having to be financed through printing money (or ‘quantitative easing’ as they prefer to call it by way of euphemism these days), with Ben Bernanke talking about the dollar “remaining strong” and a “source of global financial stability”, one really has to question the competence, judgment and ability of the head of the Fed – Ben Bernanke! This is, after all, the age of the resurgence of soup kitchens in America, a country in which fifty million Americans are finding it difficult to get adequate nourishment. It is also an age in which bankers continue to pay themselves ginormous bonuses. Surely, this must be the age of ultimate financial mismanagement. Shame on Ben Bernanke! Shame on them all! – © Mark

THE TELEGRAPH: Federal Reserve chairman Ben Bernanke's attempt to shore up support for the US currency failed yesterday as the dollar fell to fresh 15-month lows.

In a rare moment of intervention into the currency markets from America's leading central banker, Mr Bernanke admitted the Fed is watching the dollar "closely" as part of its focus on employment growth and price stability.

Mr Bernanke stressed the dollar will remain "strong" and continue as a "source of global financial stability". >>> James Quinn, US Business Editor | Tuesday, November 17, 2009

Gold gefragt wie noch nie: Preis pro Feinunze klettert auf Rekordhoch
NZZ ONLINE: Für die Feinunze Gold wird derzeit ein Preis von exakt 1036.40 Dollar bezahlt. Dieser neue Höchstwert überbietet den bisherigen Rekordpreis um 5.60 Dollar aus vom März vergangenen Jahres.

Der Goldpreis ist auf einen neuen Rekordstand geklettert. Die Dollarschwäche trieb den Preis für eine Feinunze (etwa 31 Gramm) in der Spitze auf 1036.40 Dollar. Damit wurde die alte Rekordmarke vom März 2008 bei 1030.80 Dollar übertroffen. >>> sda/dpa | Dienstag, 06. Oktober 2009

Dollar Tumbles on Report of Its Demise
THE INDEPENDENT: Gold price at record high as Independent story sends global markets into a frenzy

The price of gold is surging on world markets amid fears that the old economic order based on the supremacy of the US dollar could be breaking down.

A new spike has sent the cost of the precious metal to a level not seen before. The dollar slid sharply after yesterday's report in The Independent that Gulf Arab states are secretly planning to stop trading oil in dollars, and a senior UN official said that the US should be stripped of its position as the main source of currency reserves for other countries.

The developments come on top of speculation that the Obama administration is operating a policy of benign neglect of the dollar, engineering a devaluation that could help repair some of the economic damage caused by the recession.

Not since the collapse of the Bretton Woods system in 1971 has gold been treated as the equivalent of a world currency, but The Independent reported that it could form part of a basket of currencies that would be used for oil trading by the end of the next decade.

Aram Shishmanian, the chief executive of World Gold Council, said: "The financial and economic instability of the past 18 months has brought gold's historical role into sharp focus and has continued to increase its prominence among policy advisers, central banks, and investors around the world.

Across the world, investors have been reaching for gold as an alternative to the dollar and to other US assets, fearing that the American currency is headed inexorably lower.

The dollar index – which measures the greenback against other currencies – fell 0.7 per cent yesterday and the dollar was lower against all major currencies except the British pound. >>> Stephen Foley in New York | Wednesday, October 07, 2009

Robert Fisk: A Financial Revolution with Profound Political Implications
THE INDEPENDENT: Such large financial movements will have major political effects in the Middle East

The plan to de-dollarise the oil market, discussed both in public and in secret for at least two years and widely denied yesterday by the usual suspects – Saudi Arabia being, as expected, the first among them – reflects a growing resentment in the Middle East, Europe and in China at America's decades-long political as well as economic world dominance.

Nowhere has this more symbolic importance than in the Middle East, where the United Arab Emirates alone holds $900bn (£566bn) of dollar reserves and where Saudi Arabia has been quietly co-ordinating its defence, armaments and oil policies with the Russians since 2007.

This does not indicate a trade war with America – not yet – but Arab Gulf regimes have been growing increasingly restive at their economic as well as political dependence on Washington for many years. Of the $7.2 trillion in international reserves, $2.1trn is held by Arab countries – China holds about $2.3trn – and the nations interested in moving away from dollar-trading in oil are believed to hold over 80 per cent of international dollar reserves.

Saudi Arabia's denials of any such ambitions were regarded by Arab bankers as a normal part of Gulf politics. The Saudis, of course, managed to deny that Iraq had invaded Kuwait in 1990 – even when Saddam Hussein's legions stood along the Saudi frontier, until the US broadcast the news of Iraq's aggression to the world. >>> Robert Fisk | Wednesday, October 07, 2009

Split Widens Over Iran’s Nuclear Plans
THE TELEGRAPH: International divisions over Iran's nuclear ambitions deepened yesterday after the world's nuclear watchdog pleaded for more time for its inspections regime despite admitting international knowledge of Teheran's nuclear programme had diminished.

Mohamed ElBaradei, head of the UN's International Atomic Energy Agency (IAEA), endorsed Iranian pledges to provide better access to its clandestine atomic programme within "several weeks" even though Iran had failed to bridge a "confidence deficit" with inspectors.

But America, which is leading a campaign for a new round of sanctions on Iran, warned that Iran had shown no signs of compliance. "We have seen this before: promises of full co-operation under pressure, selective co-operation and backsliding when the pressure comes off," said Greg Schulte, the US ambassador at the IAEA.

"Despite four years of intensive investigation and the launch of this work plan four months ago, the IAEA remains unable to confirm the absence of undeclared nuclear activities in Iran." Split widens over Iran’s nuclear plans (more) By Damien McElroy

Mark Alexander

Bottom Dollar
TIME: Even a month ago, the global economy seemed poised to weather the U.S. sub-prime crisis with relative aplomb. But, suddenly, something approaching panic has gripped the world's financial community. The headlines are grim. The U.S. housing slump is worsening. Banking giants such as Merrill Lynch and Citigroup are posting record losses. The U.S. dollar is getting pounded by the British pound — and virtually every other currency. Oil has run up as high as $98 per bbl., and gold — the traditional doomsday investment — has topped $800, its highest level since the early 1980s.

But despite the fear, the end is not, in fact, nigh. After an orgy of excesses in the credit and housing markets, a measure of sobriety and restraint may have a useful cleansing effect. That said, tremendous risks remain — not least a mounting threat of a U.S. recession. Surveying this treacherous landscape, Paul Donovan, a global economist at UBS, predicts: "It's going to be very unpleasant but it's not a disaster."

Of course, the "core problem" is the U.S. property market, says Han de Jong, chief economist for ABN Amro in Amsterdam. "In hindsight, the housing market in the U.S. was a bubble." The cause? Superlow interest rates that encouraged lenders to offer loans to virtually anyone, even those with bad credit. Those loans were then bundled together into exotic derivatives and sold off to financial institutions worldwide; when borrowers began to default on their mortgages, money managers from São Paulo to Seoul suffered huge losses. Bottom Dollar (more)

Mark Alexander

No Strong Dollar, No Strong America
Photo courtesy of SpiegelOnline International
SPIEGELONLINE INTERNATIONAL: The dollar crisis has politicians alarmed worldwide. The US currency has lost 24 percent of its value since the introduction of the euro, and now there is even a chance that China could abandon its policy of pegging its currency to the dollar -- a problem the United States should take very seriously.

What do Brazilian supermodel Gisele Bündchen and the People's Republic of China have in common? The answer, as of last week, is that both distrust the dollar.

Patricia Bündchen, the twin sister and manager of the world's top model, announced that Gisele now prefers to be paid in euros rather than dollars. Almost simultaneously, the Chinese central bank predicted that the dollar is likely to lose its status as the world's leading currency.

One could easily overlook a supermodel's currency preferences, but China is a different story. It's the beast breathing down America's neck.

The most important country in the world for the United States isn't Great Britain, Germany, Saudi Arabia, Russia or Iraq. China holds that dubious distinction, because it is also the country the US can least do without. Without its willingness to buy an almost unlimited supply of US treasury bonds, there would be no American spending miracle. Without a spending miracle there would be no economic growth. In other words, without China the US superpower would lose a significant share of its economic clout. A Pearl Harbor without War (more) By Gabor Steingart in Washington, D.C.

TIMESONLINE:
Beauty deals a beastly blow to the US dollar By Gerard Baker

Mark Alexander

Bernanke Says US Economy to Slow Down
Photo of Ben Bernanke, the Federal Reserve chief, courtesy of the BBC
BBC: Federal Reserve chief Ben Bernanke has warned that the US economy will slow noticeably before the end of the year.

He blamed the slowdown on the credit crisis, which has made it harder for banks and individuals to borrow money.

He said that there was likely to be more "financial restraint on economic growth as credit becomes more expensive and difficult to obtain".

In the longer term, he said that the greater premium attached to risk may lead to a healthier financial system. Bernanke says US economy to slow (more)

BBC:
Global credit crunch

FINANCIAL TIMES:
Bank of England holds rates at 5.75% By Chris Giles

FINANCIAL TIMES:
Pound hits fresh high after rate decision By Peter Garnham

NEUE ZÜRCHER ZEITUNG:
US-Banken schockieren mit neuen Milliardenbelastungen: Neue Belastungen in Millardenhöhe angekündigt

LE FIGARO:
Wall Street fébrile De Perrine Créquy

Mark Alexander

Dollar Weakens Still Further
The pound climbed to $2.10 for the first time since 1981 this morning, boosted by speculation that China was preparing to shift its foreign reserves out of dollars.

By 10.30am, one pound was worth $2.1053. The dollar, which has been weakening for several weeks, also hit a new all-time low against the euro of $1.4703.

Analysts said today's falls had been sparked by comments made by Cheng Siwei, vice chairman of China's National People's Congress. He told a Beijing conference on Tuesday that China would "favour stronger currencies over weaker ones, and readjust accordingly". Dollar hits 26-year low against pound (more)

Mark Alexander

”The Sage of Omaha” Had Worries About the Declining Dollar Back in 2004, and Probably Way Before That
NEWSMAX.COM: The Sage of Omaha has real worries about the U.S. dollar.

It is no surprise that billionaire stock investor Warren Buffett continues to flee the U.S. dollar as he pours billions into foreign currencies.

Last year [2003] Berkshire Hathaway, Buffett’s holding company, reported it had placed some $12 billion in foreign currencies.

Now Forbes reports that Buffett continues to exit dollar investments, and Berkshire Hathaway holds some $20 billion in foreign currencies.

Buffett has used foreign currencies as a hedge against his weakly performing U.S. portfolio.

According to the New York Times, the firm reversed a second quarter loss and gained $412 million between July and September, after increasing its share of foreign currency contracts from $12 billion at the close of 2003 to $20 billion now.

Buffett managed to do that by betting the dollar would decline, and it has.

In fact, it has recently hit record lows against the euro, and experts who spoke to the Times believe the decline will continue, possibly for years.

"In 2002, we entered the foreign currency market for the first time in my life, and in 2003 we enlarged our position as I became increasingly bearish on the dollar," Buffett told investors in a letter in last year's annual report.

He remains bearish on the dollar even now.

Recently Buffett spoke with Forbes, who described him as full of “doom and gloom” for the dollar.

For one thing Buffett fears the $10 trillion of the U.S. economy owned by foreigners.

As they continue to exit the dollar, it could wreak havoc. “If lots of people try to leave the market, we’ll have chaos because they won’t get through the door,” Buffett told Forbes.

Buffett believes that a the dollar fall off “could cause major disruptions in financial markets.”

Today, Buffett continues his strong position in the euro, sterling and six other currencies. Warren Buffett Warns of Financial 'Chaos' (more) By Jon E. Dougherty (December 28, 2004)

Mark Alexander

Dollar Plummets to an All-Time Low
THE TELEGRAPH: The dollar has plummeted to all-time lows against both the euro and a basket of global currencies amid growing fears of a disorderly rout as the US property slump spreads to the broader economy.

The greenback dived after the US 'Philly' business index dropped 10.9 to 6.8 in October, with a shock fall in new orders and inventory, raising the chances of further rate cuts by the Federal Reserve this month.

The dollar crossed the barrier of $1.43 against the euro; the broader dollar index fell to 77.478, the lowest since the series began in 1973.

The plunge follows data released this week by the US Treasury showing a record $163bn (£80bn) exodus from all forms of US assets, led by unprecedented levels of US bonds sales by Japan, China and Taiwan.

Bundesbank chief Axel Weber gave the euro an extra lift by hinting strongly at more rate rises in Europe to head off inflation, expected to reach 2.6pc in Germany.

The growing belief the European Central Bank may keep tightening despite the credit crunch has caused traders to shift gear, renewing bets on the euro. But the surging currency has hit confidence in Europe, where industries in France, Italy and some German firms are warning of serious knock-on effects. Dollar dives as US slump spreads (more) By Ambrose Evans-Pritchard and Joe Moulds

FINANCIAL TIMES:
Dollar falls to fresh record low against euro By Peter Garnham


FINANCIAL TIMES:
Oil jumps above $90 a barrel By Javier Blas

Mark Alexander

Bush’s Abject Failure: The Economy – US Debt Woes Pull US Dollar Further Down into the Doldrums
TIMESONLINE: Sterling soared today to levels not seen since 1981 as 'risk aversion' to the dollar grew amid US housing market fears

Renewed worries about the crisis descending on the American sub-prime housing market sent the dollar tumbling to 12-year lows on the currency markets and pushed the British pound to its highest level since 1981.

Sterling leaped to $2.05, a 26-year peak, fuelled by renewed expectations of higher UK interest rates after stronger than expected inflation data emerged yesterday.

Set alongside fresh price highs charged by Britain's retailers, it reinforced predictions the Bank of England would increase interest rates to 6 per cent as early as next month. Pound hits $2.05 as dollar struck by US debt woes (more)

Mark Alexander

Dollar in the Doldrums
THE GUARDIAN: · Wall Street threatened by crumbling housing market
· Pound hits its highest value in 26 years
The dollar remained under strong pressure on the foreign exchange markets last night as fresh concerns were raised about the vulnerability of Wall Street to the crumbling American housing market.

With the pound trading at its highest level against the dollar since 1981, the credit rating agency Moody's said it had placed a new $6bn (£3bn) tranche of securities backed by US mortgages under review for a possible downgrade. The move followed separate announcements by Moody's and a rival ratings agency, Standard & Poor's, on Tuesday, that put $17bn of sub-prime mortgage-backed securities on credit watch, adding to growing concerns about the health of the world's biggest economy. Dollar falls again amid growing US fears (more)


Mark Alexander

Paul Belien, Editor Brussels Journal and Atlas






Mark Alexander

5% Fall in Value of US Dollar Against the Euro and Pound Sterling So Far This Year; Equivalent to a 20% Decline
CHRISTIAN SCIENCE MONITOR: NEW YORK - It's like a summer movie: the incredible shrinking dollar.

Since the beginning of the year, the buck has shrunk 5 percent – the equivalent of a 20 percent annual decline – compared with the pound and the euro.

But the shriveling value of the dollar may eventually help solve one of the most intractable US economic problems: the enormous trade deficit, which hit $63.9 billion in March, the highest level since September of last year.

Already, giant European companies are taking advantage of their strong currency by announcing huge investments in the United States. And US exporters such as Boeing and Caterpillar are getting an order boost as the lower-valued dollar allows them to undercut their competition.

"The forces are in place now to slowly over time cause the trade deficit to shrink," says Jay Bryson, a senior international economist for Wachovia Securities Research in Charlotte, N.C.

The change in the dollar's value also comes with ramifications for US consumers. It's now more expensive for Americans to travel abroad. Italian leather, Belgian chocolates, and English cheddar will cost more. In addition, many Americans may find they have a new boss – one who is based overseas or relocating to the States. Dollar buying ever less of the world’s goods (more) By Ron Scherer

Mark Alexander