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tisonlyi · 03-21-2008, 07:38 PM

The Euro is a major, perhaps the major, contributing factor to the downfall of the Dollar.

After the initial attempts to grind the currency out of existence - as all the individual currencies were much easier to create runs on and thus large profits for forex traders - it's value has increased dramatically, year on year, since it's lows of roughly 1e = $0.80 in 2000 and, as this graph from yahoo shows, over the past 5 years there has been a steady fall in the value of the dollar vs euro down to the current rates in the region of 1e = $1.55.

The graph demonstrates that we're right on trend at this moment for a line of best fit, start to finish of that 5 year period. extend it back, and the trend suggests the dollar should be even weaker than it is currently.

Reserve currency.

If you follow that link you can see that world governments, financial institutions and markets need to keep vast stores of currency for a variety of reasons, and the currency on the top of the wishlist since the end of WW2 has been the Dollar.

The preference for the dollar has given the US tremendous economic leverage over other nations, preferential rates for dollar denominated credit, and marginally preferential rates on the purchase of commodities.

This story: The Financial Times, reporting the relegation of the dollar into 2nd places as the world's preferred currency from December 2007, and the subsequent rise in the strength of the Euro, is a symptom of the enormous problem that the dollar has.

But why is it the Euro that is the cause of this dramatic depreciation in the Dollar?

The Euro, at it's inception and the monetary fusion of 12 countries (now officially 13, but there are several other currencies to all intents and purposes pegged to the Euro and likely to be sucked in 'soon'), had a total value in close proximity to the dollar. This made it an extremely attractive choice as a reserve currency, given the difficulty markets have in gaming such largely held and used currencies - though they tried their best to kill it in 2000, came close, but failed.

So suddenly, we have a currency of equal strength with the Dollar. For nations who aren't 100% convinced that US hegemony over resources, credit, world monetary policy, etc... The move away from the Dollar seems logical, and indeed this is what we see:

Iran - trading in Euros, mainly, with the following nation the major customer.
China
- "If China attempted to diversify its holdings, it could cause a collapse in the value of the Dollar and higher inflation in the US.

That would also lower the value of China's own reserve assets - so China is only slowly moving out of Dollars and into other currencies such as the Euro. "

The key point to take from this, and you can google to find plenty of supporting evidence, is that China is heavily exposed in it's VAST currency reserves to the Dollar. They are righting that imbalance towards an undisclosed aim, in a managed, controlled and predictable fashion as any central bank, financial institution or other interested party would.

Selling Dollars, buying Euros (and a minority of others).

Now look at the image of relative percentages of reserve currencies held in central banks and other interested institutions again(albeit from wikipedia, but it's easy to locate):

The fluctuations in the Dollar and Euro are in clear, undeniable opposition.

The trends seem to corroborate the position of the Chinese - the biggest dogs in this fight - and other central banks and institutions delicately, slowly selling off dollars to buy Euros, with the thought not to provoke a global panic and crashing of the Dollar.

So, the demand for dollars is decreasing all the while as they are being sold, on trend.

What happens to a commodity, any commodity, for which the amount of supply to the market increases as the demand decreases in synchronous opposition? What if this is planned? What happens in a market when it is known that the value of that commodity is going to drop?

Add into this mix, a sudden glut of the commodity that is being undermined.

Fed auctions $200bn, $50bn more, $30bn more and and and...

The total value held in dollars is not increased when you pump in more greenbacks, hence the value of each dollar decreases further and faster than it was already decreasing due to restructuring of reserve and commodity markets in the new reality of the Euro and over dependence internationally on the Dollar.

Bonfire, allow me to introduce gasoline.
- "in the meantime, pension funds and hedge funds are betting on higher commodities prices."

Why? They know that the value of the dollar is heading down still further, it must, for a considerable time to come, so naturally, the prices of commodities denominated in dollars will rise commensurate.

All of this takes time to filter into the economy and for people to truly feel it and then react to it. The overshoot, Wile E Cayote(?) running in the air til he looks down, effect among others.

For the future history of implications, I suggest you look up the history of Sterling in the 20th century.

This Daily Telegraph article is a good, quick overview... Though with distinct right-wing bias.

The old, OLD empires strike back.

Point? It's going to get rough in the US over time.

China's rise will accelerate, Europe's "soft power" will increase in it's sphere and India? I have no clue. Rogue element.

Expect the Dollar to decrease over any given 3-5yr period going forward, to it's ultimate collapse.

Buy Gold, Ameros

and Euros

I still don't think the rest of the world will allow the Dollar to crash, it would be an unpresidented economic disaster, but these sorts of things could precipitate an unexpected collapse...

BTW, The Daily Telegraph is a very, very right wing newspaper in the UK.

03-21-2008, 07:38 PM	#35 (permalink)
tisonlyi Nothing	The Euro is a major, perhaps the major, contributing factor to the downfall of the Dollar. After the initial attempts to grind the currency out of existence - as all the individual currencies were much easier to create runs on and thus large profits for forex traders - it's value has increased dramatically, year on year, since it's lows of roughly 1e = $0.80 in 2000 and, as this graph from yahoo shows, over the past 5 years there has been a steady fall in the value of the dollar vs euro down to the current rates in the region of 1e = $1.55. The graph demonstrates that we're right on trend at this moment for a line of best fit, start to finish of that 5 year period. extend it back, and the trend suggests the dollar should be even weaker than it is currently. Reserve currency. If you follow that link you can see that world governments, financial institutions and markets need to keep vast stores of currency for a variety of reasons, and the currency on the top of the wishlist since the end of WW2 has been the Dollar. The preference for the dollar has given the US tremendous economic leverage over other nations, preferential rates for dollar denominated credit, and marginally preferential rates on the purchase of commodities. This story: The Financial Times, reporting the relegation of the dollar into 2nd places as the world's preferred currency from December 2007, and the subsequent rise in the strength of the Euro, is a symptom of the enormous problem that the dollar has. But why is it the Euro that is the cause of this dramatic depreciation in the Dollar? The Euro, at it's inception and the monetary fusion of 12 countries (now officially 13, but there are several other currencies to all intents and purposes pegged to the Euro and likely to be sucked in 'soon'), had a total value in close proximity to the dollar. This made it an extremely attractive choice as a reserve currency, given the difficulty markets have in gaming such largely held and used currencies - though they tried their best to kill it in 2000, came close, but failed. So suddenly, we have a currency of equal strength with the Dollar. For nations who aren't 100% convinced that US hegemony over resources, credit, world monetary policy, etc... The move away from the Dollar seems logical, and indeed this is what we see: Iran - trading in Euros, mainly, with the following nation the major customer. China - "If China attempted to diversify its holdings, it could cause a collapse in the value of the Dollar and higher inflation in the US. That would also lower the value of China's own reserve assets - so China is only slowly moving out of Dollars and into other currencies such as the Euro. " The key point to take from this, and you can google to find plenty of supporting evidence, is that China is heavily exposed in it's VAST currency reserves to the Dollar. They are righting that imbalance towards an undisclosed aim, in a managed, controlled and predictable fashion as any central bank, financial institution or other interested party would. Selling Dollars, buying Euros (and a minority of others). Now look at the image of relative percentages of reserve currencies held in central banks and other interested institutions again(albeit from wikipedia, but it's easy to locate): The fluctuations in the Dollar and Euro are in clear, undeniable opposition. The trends seem to corroborate the position of the Chinese - the biggest dogs in this fight - and other central banks and institutions delicately, slowly selling off dollars to buy Euros, with the thought not to provoke a global panic and crashing of the Dollar. So, the demand for dollars is decreasing all the while as they are being sold, on trend. What happens to a commodity, any commodity, for which the amount of supply to the market increases as the demand decreases in synchronous opposition? What if this is planned? What happens in a market when it is known that the value of that commodity is going to drop? Add into this mix, a sudden glut of the commodity that is being undermined. Fed auctions $200bn, $50bn more, $30bn more and and and... The total value held in dollars is not increased when you pump in more greenbacks, hence the value of each dollar decreases further and faster than it was already decreasing due to restructuring of reserve and commodity markets in the new reality of the Euro and over dependence internationally on the Dollar. Bonfire, allow me to introduce gasoline. - "in the meantime, pension funds and hedge funds are betting on higher commodities prices." Why? They know that the value of the dollar is heading down still further, it must, for a considerable time to come, so naturally, the prices of commodities denominated in dollars will rise commensurate. All of this takes time to filter into the economy and for people to truly feel it and then react to it. The overshoot, Wile E Cayote(?) running in the air til he looks down, effect among others. For the future history of implications, I suggest you look up the history of Sterling in the 20th century. This Daily Telegraph article is a good, quick overview... Though with distinct right-wing bias. The old, OLD empires strike back. Point? It's going to get rough in the US over time. China's rise will accelerate, Europe's "soft power" will increase in it's sphere and India? I have no clue. Rogue element. Expect the Dollar to decrease over any given 3-5yr period going forward, to it's ultimate collapse. Buy Gold, Ameros and Euros I still don't think the rest of the world will allow the Dollar to crash, it would be an unpresidented economic disaster, but these sorts of things could precipitate an unexpected collapse... BTW, The Daily Telegraph is a very, very right wing newspaper in the UK. __________________ "I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place." - Winston Churchill, 1937 --{ORLY?}-- Last edited by tisonlyi; 03-21-2008 at 09:20 PM..