# The future of the USD?



## Sean K (25 July 2009)

By all this money printing and debt many analysts and ASF members are saying that the USD is doomed.

Not just doomed, but will turn into toilet paper one day.

Is this really the case?

Could it be any different?


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## >Apocalypto< (25 July 2009)

kennas said:


> By all this money printing and debt many analysts and ASF members are saying that the USD is doomed.
> 
> Not just doomed, but will turn into toilet paper one day.
> 
> ...




I am not one to call anything, unlike some of the other self proclaimed fundamental experts.

On the daily chart of the USD Index I can see bullish and bearish arguments so till it breaks up or down I am 50/50. like on the euro and aud to usd as they're in a similar position.

There's a few things under the surface Kennas, Eg. the current stock rally.

Time will tell.


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## gfresh (25 July 2009)

I think that is rubbish talk that it will be "worthless".. it may degrade, but it will always be one of the world's strongest currencies.

Look at the UK pound, once the reserve currency of the world. It is hardly "worthless" these days, even with it's current problems


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## Sean K (25 July 2009)

My main interest in this is the effect on POG.

There's an assumtion that USD will significantly devalue and POG will increase, but that may not be the case.

There may be a way the US maintain their status as the world currency for years and years to come. Many here claim the demise of the USD is imminent and have been buying gold as a hedge for some time. 

I think China will eventually take over, but when will that happend. 10 years? 50 years?

What's he point in getting out of the USD and into gold if it's more than 10 years away?


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## explod (25 July 2009)

> kennas The future of the USD?
> 
> --------------------------------------------------------------------------------
> By all this money printing and debt many analysts and ASF members are saying that the USD is doomed.
> ...




The money printing is just like share issues, it dilutes the total value.

The weimer republic of Germany did just that and yes it turned into toilet paper.  The old cliche, "a barrow load of paper notes to buy a meat pie"



> >Apocalypto<
> 
> I am not one to call anything, unlike some of the other self proclaimed fundamental experts.




Self proclamation, if one has an opinion based on detailed research (funadamental values) and they differ from the main stream or your own view they are "self proclaimed"    Rubbish



> The Wiegfresh Re: The future of the USD?
> 
> --------------------------------------------------------------------------------
> I think that is rubbish talk that it will be "worthless".. it may degrade, but it will always be one of the world's strongest currencies.
> ...




Why?    The US GDP is 70% consumption and a lot of that comes from China.  They have lost meanigful work for value, their entire system is now a giant ponzi and when one does the numbers properly thier dollar can only fall from here.



> kennas Re: The future of the USD?
> 
> --------------------------------------------------------------------------------
> My main interest in this is the effect on POG.
> ...




The US dollar has been falling as a mirror image of the gold price rise from about 2003.

Soon new reporting standards just introduced by the US Government means that liabilities that could be packaged off the ballance sheet will now show companies that Wall Street(Bloomberg et al) say are recovering are in fact broke.  Most counties are broke, schools and health care centres are closing through lack of funds and this is in spite of the money printing.   Of course they will hold off for awhile and jack up the printing presses harder but in view of the last 18 months of action I do not think we will have to wait long for a result from here, in fact the next sic m onths will be telling.

IMVHO of course


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## MRC & Co (25 July 2009)

Currencies like the GBP, EUR are in a similar scenario as far money printing and QEP as is the USD.

The reason I see a problem with the USD, is the interest rate differential and the fact the fed will probably be the slowest to clean up the excess liquidity rate differential going forward).  

If we do get a break, and any disagreement comes into play China (small risk as it's not in the interests of either), the USD has the largest downside risks. 

On that note though, a stabilisation of their economy, the subsequent move towards a higher rate of savings and mopping up of liquidity IF they can avoid a deflationary spiral in doing so, will see the USD regain some strength.

I am also a firm believer of the PPT holding it up in times like this (perhaps evidenced by it's recent resilience despite commodities, oil and equities rallying their t*ts off).


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## explod (25 July 2009)

The real problem for the US is that their debt repayments are now far greater than the income to service it.   The printing press is going faster all the time to cover this.  They themselves will want the US dollar to depreciate to reduce the value of debt against other currencies.  China is the one trying to hold the value of US treasuries up because they are loaded with them.

This was the problem with the German Wiemer Republic and interestingly it was the US they were mostly indebted to.  History seems to repeat.

They have a big problem.


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## MRC & Co (25 July 2009)

explod said:


> The real problem for the US is that their debt repayments are now far greater than the income to service it.   The printing press is going faster all the time to cover this.  They themselves will want the US dollar to depreciate to reduce the value of debt against other currencies.  China is the one trying to hold the value of US treasuries up because they are loaded with them.
> 
> This was the problem with the German Wiemer Republic and interestingly it was the US they were mostly indebted to.  History seems to repeat.
> 
> They have a big problem.




Explod, lately it seems you have been quoting your opinion more often than what is happening.

As far as I am aware, Geithner and Bernanke have been talking of USD stabilization, so they don't want it to continue to depreciate as you state.  They don't care about reducing the value of the dollar against other currenies to pay off their debt, but the fact is that a fall in their dollar won't increase their relative debt in foreign currencies as all borrowing is done in USD?  That is my understanding.  It won't make a difference to their debt servicing.  

Is it not true Europe and GB are in a similar situation as far as QEP (though Europe has been more stealth about it)?  The difference is, since the US is the reserve currency, it actually aids them as stated above.  I.e. the devaluation of their currency has far fewer implications to their ability to service debt.  

The US needs to hold Treasuries up, as with a collapsing USD and UST market, they could not raise debt (i.e. nobody would attend their bond auctions, at least foreign participation would be extremelly low, bid to covers would be poor and this would create a feedback loop which would make QE ineffective.........?).  I don't know why you say China is the one who needs to hold up Treasuries, they both need too.

Unless my understanding of this system is flawed (perhaps you or someone else can point me in the right direction), your points are invalid.


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## explod (25 July 2009)

> Explod, lately it seems you have been quoting your opinion more often than what is happening.




I will please myself as you may too, and it is just my view, and a lot is happening.



> As far as I am aware, Geithner and Bernanke have been talking of USD stabilization, so they don't want it to continue to depreciate as you state. They don't care about reducing the value of the dollar against other currenies to pay off their debt, but the fact is that a fall in their dollar won't increase their relative debt in foreign currencies as all borrowing is done in USD? That is my understanding. It won't make a difference to their debt servicing.




Yes talk, everything they have said over the last two or three years has proved to be wrong.  18 months ago they would not have a bar of a recession, many of us were aware it was coming, they knew too but tried to jawbone through.

The performance of Benanke before the US Senate this week gone saw a man shaking in his boots and avoiding the questions.  A fall in the US dollar will decrease the tangible value of the US debt.  ie the value of the paper against goods.   They will be unable to service debt soon, they are going to reneg, that is what China is concerned about and why they are trying to support the US and its currency till they can work thier way around it.



> Is it not true Europe and GB are in a similar situation as far as QEP (though Europe has been more stealth about it)? The difference is, since the US is the reserve currency, it actually aids them as stated above. I.e. the devaluation of their currency has far fewer implications to their ability to service debt.




Yes,  but they with Japan are the few,  many nations, Russia, India, South America and South East Asian countires are starting to bypass the US dollar and dealing directly with each other.  Many of these countries are rich in material and cheap labour.  You wont read this on Bloomberg but they are in open  discussions to create an alternate reserve currency away from the US dollar.  More and more the US dollar will be marginalised.



> The US needs to hold Treasuries up, as with a collapsing USD and UST market, they could not raise debt (i.e. nobody would attend their bond auctions, at least foreign participation would be extremelly low, bid to covers would be poor and this would create a feedback loop which would make QE ineffective.........?). I don't know why you say China is the one who needs to hold up Treasuries, they both need too.




They are printing money and buying their own treasuries and also soaking up excess Tbonds.  Its a big ponzi, maybe they are following the example of Maddoc.



> Unless my understanding of this system is flawed (perhaps you or someone else can point me in the right direction), your points are invalid.




For years I have subscribed to independant Economists and read them against the ordinary press.  I dont' push others barrows but if you want some references you may pm me and I will let you in on my main one.

What I say are my views only but I do assert only matters that can be backed up by proper sources.

cheers explod


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## Uncle Festivus (26 July 2009)

MRC & Explod, you are both right? The Fed would 'manage' the currency within it's acceptable range, with the help of the treasury & other CB's I would assume, but at the lower range it would help the US at the expense of the rest and vice versa? 

I guess the point being made is that even if every taxpayer paid 100% of their income in tax they still wouldn't be able to pay for current & future unfunded expenses? The current interest bill alone is now $500Billion per year - the government collected $3Trillion in taxes last year.



> Since California ran out of cash early this month, it has issued more than 194,000 IOUs, with a total value of $1.03 billion. They are redeemable in U.S. dollars on Oct. 2, or sooner if the state comes up with the money. The legislature on Friday approved a plan to close a $24 billion budget gap, but officials say it could still take a few weeks to analyze the state's cash situation and resume giving creditors checks instead of promises.


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## MRC & Co (26 July 2009)

explod said:


> A fall in the US dollar will decrease the tangible value of the US debt.  ie the value of the paper against goods.
> 
> They themselves will want the US dollar to depreciate to reduce the value of debt against other currencies
> 
> Yes,  but they with Japan are the few,  many nations, Russia, India, South America and South East Asian countires are starting to bypass the US dollar and dealing directly with each other.  Many of these countries are rich in material and cheap labour.  You wont read this on Bloomberg but they are in open  discussions to create an alternate reserve currency away from the US dollar.  More and more the US dollar will be marginalised.




What do point 1 and 2 have in common?  It doesn't make a diference to them the tangible value of their debt, it will still not mean they want the USD to depreciate.......

Point 3, everybody knows this, it is even on CNBC.  BUT, the Yen, Euro and USD are still, without any close rival, the largest currencies on the globe.


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## explod (26 July 2009)

The answer to your questions is a long and arduous task.  I will work on it gradually, this is a good thread for that.  I am very tired tonight but attach the following.   The chart did not transfer but it can be seen by going to www.suddendebt.blogspot.com   My opinions come from more indepth than here but this is another slant.

cheers explod 



> Wednesday, July 22, 2009
> That's All (Debt), Folks..
> 
> GDP growth and credit creation go hand in hand, at least in modern economies that use fiat currencies. The question is, how much additional debt should be created in order to produce an incremental increase in GDP?
> ...


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## MRC & Co (26 July 2009)

This is all very obvious Explod.

It doesn't answer my question as to why they would want to devalue their currency......


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## cuttlefish (26 July 2009)

MRC & Co said:


> This is all very obvious Explod.
> 
> It doesn't answer my question as to why they would want to devalue their currency......




A decrease in the value of the USD increases the USD value of productivity - thus enabling them to service the debt more readily.

Pure hypothetical so ignore the fictitous valuations but by way of example lets imagine that 1 yen = 1 USD.    A US worker produces something (e.g. some computer software) that is considerd valuable to a japanese consumer.  The Japanese consumer is willing to pay 100 yen for this US created service.  That results in 100 USD revenue for the US which can be applied to servicing debt.

Now the USD devalues so that 1 yen = 100 USD.  Now the Japanese consumer paying 100 yen for the software is resulting in 10000 USD revenue for the US which can be applied to servicing debt.


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## MRC & Co (27 July 2009)

I can see your point Cuttle.

But wouldn't the Japanese consumer now simply pay 0.01 yen, and the US producer recieve the same 100 USD?

Japan would now in all probability, become a net importer from the US (obviously, the US now a net exporter)?  I.e. the theoretical explanation of changes in net trade flows.


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## swm79 (18 August 2009)

I'm of the opinion that the POG will have to rise. Initailly i would have said "without a doubt" but now its not so certain - too many conflicting theories occuring at the same time.

The problem is every currency has USD backing. If it moves down, others will have to follow - i.e. if countires want to trade with the US they will have to have attractive FOREX rates. 

ALSO, the US dumps their bonds etc on to China and Japan - if they want good returns they will also be ramping the USD. 

Hence, China being one of the biggest pushers for commodity backed currency

Which the US will NNNNNNEEEEEEEVVVVVVVVVEEEEEEEEEEERRRRRRRRRR let happen

Just like they didnt let the free oil market happen!!!!!!!!!!!!


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## Temjin (19 August 2009)

I highly doubt, despite how doom and gloom the situation with the dollar is, would become totally worthless.

Remember that there are ALOT of export orientated nations (i.e. China, Japan) who would have a significant vested interest in seeing the dollars to stay as strong as possible. Or at least "prolong" the weakness enough for them to diversify it out of their USD based reserves. 

Now when that reserves are totally gone, and another currency (or basket of currencies), or even a gold denominated currency comes out and become widely accepted, then yes, I would see the USD will be doomed. (at least from the perspective of the US government, not necessary completely collapsed)


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## Tradesurfer (25 August 2009)

rather than predict, follow the charts. Follow price.


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## Zaij (25 August 2009)

Not sure if anyone has mentioned this, but weren't they going to remove tmost of the cash from circulation after things had returned to normal?


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## Buckeroo (26 August 2009)

Zaij said:


> Not sure if anyone has mentioned this, but weren't they going to remove tmost of the cash from circulation after things had returned to normal?




This doesn't sound like a government that is going to reduce spending - check out the news item

http://withintheblackcommunity.blogspot.com/2009/08/fiscal-wake-up-call-you-will-be-hit.html


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## MARKETWINNER (21 June 2013)

US Dollar is very strong now. 

During last couple of days we saw heavy selling in all type of currencies including emerging and frontier market currencies. USD appreciated against most currencies such NZD, AUD, Indian and Sri-Lankan rupees, Malaysian ringgit, Philippine peso etc.  Why?   Currency market is readjusting now.  There are silver linings in these falling currencies. Because some sectors in the economy will benefit lot. 

Both the Brazilian real and South African rand touched four-year lows against the US dollar on Tuesday. The Indian rupee fell to a record low. Even countries like the Philippines and Mexico have been hit by heavy selling. Some central banks have begun to intervene to control the currency slides. If I am correct The FTSE Emerging Markets index fell 1.7 per cent on Tuesday. 

We have to accept USD dollar was underperforming against some currencies both hard and soft currencies such as NZD, AUD, and Indian rupee due to over speculations. As I said before it has become bull currency now. In other words the dollar (USD) has entered a multi-year bull cycle. USD is number one reserve currency in the world. 

Every asset has cycles. We have to identify this cycles before others. Both NZD and AUD have appreciated more than 50% against some south Asian currencies during last five years. Now cycle has reversed and both NZD and AUD should depreciate not only against USD but also some emerging and frontier markets currencies in Asia. Few Asian currencies including India rupee will go up against NZD, AUD and CAD in the coming quarters. They will go down against USD. 

On the other hand USD will appreciate not only against emerging currencies but also against currencies such as AUD, CAD and NZD.

http://online.wsj.com/article/SB10001424127887323893504578556493706245344.html

Indian Rupee Hits New Record Low 

http://www.bloomberg.com/news/2013-...-worst-week-since-2010-on-fed-bonds-fall.html

Philippine Peso Set for Worst Week Since 2010 on Fed; Bonds Fall

http://www.reuters.com/article/2013/06/20/kenya-markets-idUSL5N0EW2BL20130620

UPDATE 1-Kenyan shilling ends weaker, shares inch up

http://www.thejakartaglobe.com/busi...iggest-weekly-loss-in-3-years-on-fed-concern/

Ringgit Heads for Biggest Weekly Loss in 3 Years on Fed Concern

For me above events look like a currency war or currency crisis. Actually we are having a kind of gold and currency crisis now. These new developments will bring fortune for some companies in developed, emerging and frontier markets due to unexpected increase in profits when they convert currencies. So they will have strong balance sheets in the coming financial year when compare with current financial year.

My ideas are not a recommendation to either buy or sell any security,commodity or currency. Please do your own research prior to making any investment decisions. Please note that I do not endorse or take responsibility for material in the above hyper-linked sites.


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## MARKETWINNER (22 June 2013)

I did 10 year analysis on few selected currencies including few frontier and emerging market currencies and how they traded against USD, NZD and AUD.

In 2004 one dollar was equal to 45 Indian rupees and by 2008 it was around 39 rupees for one dollar while having fluctuations time to time. Then one dollar went up to Indian rupee 49 by 2009. Indian rupee has appreciated against USD from 2004 to 2008 and from 2008 to 2009 it has depreciated fast against USD. From 2009 to latter part of 2011 Indian rupee has appreciated from around Rs.49 to Rs.44 against USD. From 2012 to Indian rupee has depreciated against USD gradually while having volatility to around Rs.53 level. During last couple of day Indian rupee depreciated against USD faster than we thought. Now one USD dollar is equal to 59 Indian rupees. 

USD has appreciated around Rs.90 to Rs.116/- against Sri-Lankan rupee form 2004 to 2009 while having minor volatility. From 2009 to 2012. Sri-Lankan rupee has appreciated from Rs.116 to Rs109 against USD. In 2012 there were devaluation of rupee and as a result of that USD went up against Sri-Lankan rupee. Otherwise rupee would have appreciated more. Now USD is appreciating against Sri-Lankan rupee and trading around Rs.129 against USD. 

From 2004 to 2008 Malaysian ringgit has appreciated from MYR 3.8 to around 3.20 against USD.From 2008 to 2009 it depreciated against USD to MYR around 3.50 levels. From 2009 to later part of 2011 again MYR appreciated against USD to MYR around 3 levels. From 2012 to 2103 MYR was trading around 3.06 levels while having volatility and recently it has depreciated to MYR 3.09 to level against USD.

In 2004 NZD dollar was trading around Sri-Lankan rupees 55 and by 2008 NZD appreciated rapidly against Sri-Lankan rupee to Rs.85 levels. Then from 2008 to middle of 2009 Rupee appreciated against NZD to around Rs.60 level. From 2009 to 2013 NZD has appreciated to around Rs.109. Recently rupee started to appreciate against NZD and trading around Rs.99 against NZD.

In 2004 one NZD was around 26 Indian rupees and by 2008 it was depreciated against NZD to around Rs.33 level while having range bound around Rs.27 to Rs.31. From 2008 to 2009 Indian rupee appreciated to around Rs.26 against NZD and thereafter it NZD appreciated rapidly to INR around Rs.45 levels. 

In 2009 AUD was trading around Indian rupee 32 levels and it depreciated against AUD rapidly during last couple of years and was trading around INR 55 against AUD by 2013. In 2009 AUD was trading around Sri-Lankan rupee 80 and it has appreciated against rupee rapidly and by 2013 it was trading around Rs.135 and now it is trading around Rs.118/

Based on the above analysis NZD and AUD has appreciated not only against USD but also against some emerging and frontier currencies  by  more than 80% during last couple of years. On the other hand Malaysian ringgit has traded as a sister currency to both AUD and NZD. Even in emerging world and frontier world they invested more in NZD and AUD during last couple of years neglecting pound, euro and USD. Now currency cycle has changed and emerging world currencies are falling against USD. 

Finally USD has become number one bull currency. AUD, NZD and few emerging currencies have become bear currencies now. I believe Euro and Pound will not go down as other currencies as they have already factored to negative economic indicators. Both NZD and AUD will accelerate their bear journey now.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.


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