The Golden Truth: There's Just NO Reason To Be Long The U.S. Dollar

Wednesday, April 20, 2011

There's Just NO Reason To Be Long The U.S. Dollar

Unless someone has a gun to your head. China has been firing warning shots at the U.S. Government/Tim Geithner for a while now and they are starting to come from higher up the food chain in the Chinese Ruling Party and more frequently as well. Here's the latest: PBOC governor says foreign reserves excessive. The "PBOC" of course is the People's Bank of China, or China's Federal Reserve, if you will. In so many words, this fine gentleman is telling us that China is going to accelerate its U.S. dollar selling:

Foreign exchange reserves have exceeded our country's rational demand, and too much accumulation has caused excessive liquidity in our markets, adding to the pressure of the central bank's sterilization," Zhou was quoted by the official Shanghai Securities News as saying "The State Council has required a cut in excessive accumulation and good management of the funds accumulated, including diversification of investments," Zhou was quoted as telling a forum at Tsinghua University in Beijing.

Here's the link to the article: http://www.chinadaily.com.cn/bizchina/2011-04/19/content_12355149.htm

Here's the chart of the U.S. dollar:

I actually thought that we would get more of a "trading bounce" at the 75 level, but we have not. In fact, the index today even lower, currently at 74.64 and has been as low as 74.46.

The price action in precious metals and in the U.S. dollar is sending us the signal that the United States financial system and economy is in big trouble. The fact that China and some of the Middle East "rogue" countries so openly defy U.S. geopolitical will is telling us that our Government is losing credibilty quickly. The fact that countries like Iran and Libya no longer run away from U.S. military force tells me that either the U.S. is losing its super power status quickly or that the U.S. will soon intensify its military pursuits in order to defend its "right" to contol oil and global commerce using the Fed confetti known as the dollar.

I worry quite a bit about the former two issues - economic/political collapse - I live in fear of the latter (world war). If you have read "Atlas Shrugged," please go see the movie. It is a brilliant screenplay adapatation of the book, as it condenses a very complicated "text" and plot scheme efficiently and with good direction and projects this "text" onto the screen in a manner that reflects the "essence" of the story. The acting is superb. If you have not read the book, it will make a good project for you if you decide to save your money for food and gas instead of taking a vacation this summer, as I do believe the movie is lost on anyone who has not read the book and understands it. Many of the reviewers of the movie have not read the book. I can't wait for Part 2 of the movie.

Oh, and don't be surprised if at sometime down the road the Government does indeed hold a "rule of law" gun to our collective heads and forces us to use the dollar and invests our retirement funds for us into Treasuries, as I believe that the retirement fund asset base in this country will be the "buyer of last resort" to keep your Government operating and well-fed.

9 comments:

JDWednesday, 20 April, 2011
Dave,

Regarding holding physical precious metals. I have about 100 oz of silver for every 1 oz of gold. It has worked out amazing as you know silver has outperformed pretty much everything. Going forward though do you think it would be wise to shift more towards gold. My thinking is that as wti continues to climb & food prices the global economy is going to move back into recession thus forcing a major liquidation in most assets again and silver will tumble where as I expect gold to hold up fairly well. Thanks in advance for your opinion!
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Dave in DenverWednesday, 20 April, 2011
was just looking at the myself. i'd ride it. where do you think the gold/silver ratio is going?

if you think you might might want the flexibility of mobility out of the country in the next few years, i'd probabaly move 30% of the silver into gold. nothing majic about the 30%, just using it as an example.
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MammothWednesday, 20 April, 2011
Was the percent decrease in Gold much less than the % decrase in Silver back in late 2008?

(Sorry, too busy to do the research but would like to know the answer to this question.)
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AnonymousWednesday, 20 April, 2011
http://www.zerohedge.com/article/eric-sprott-expect-gold-silver-ratio-hit-single-digits.

Hold the silver.
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EconomicDisconnectWednesday, 20 April, 2011
"forces us to use the dollar and invests our retirement funds for us into Treasuries, as I believe that the retirement fund asset base in this country will be the "buyer of last resort" to keep your Government operating and well-fed."

I have long thought this as well. Unreal. How they do it will be tricky; I can imagine a program where 401k's that hold X$ of treasuries would be FDIC like guaranteed but if you go another route it is not safe. Some others come to mind but I don't want to give them any ideas.
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AnonymousWednesday, 20 April, 2011
Dave, Don't look now, but the dollar is falling off of the cliff...
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Mark SWednesday, 20 April, 2011
Regarding "Atlas Shrugged", I had an encounter with Objectivists in college. Due to a family crisis I had to get a room in the Dorm at NYU. There was only one spot left so I took it. After I moved in I found out why that spot was available. The other three roommates were Objectivists, followers of Ann Rand. One was the president of the Objectivist Society, one secretary, and one regular member. What a dead bunch! We were 20, in college, living in Greenwich village and these guys spent every night in the dorm. I lived with them for 9 months in 1969 and never once did we have a memorable conversation. They lived in their heads and ideas and everything else passed them by.

Of course it wasn't until much later that I heard about Ann Rand's infatuation with a serial murderer and her lack of human compassion. Society can be judged on how it treats its old, and sick, and its children. I shudder to imagine Ann Rand's ideal society.

But I've heard that she accepted Social Security benefits when she was old. Like her student Alan Greenspan, Ann Rand apparently was willing to abandon her principles for a price.

BTW one of the Objectivists from my dorm found a girl friend late in the year. It didn't last long and he spent the remainder of the term moping in his bed heartbroken. I learned one important thing from the Qbjectivists. Ideas are dandy but life in its mercy and compassion sinks them sooner or later.

I won't be going to see Atlas Shrugged but I'll be back here enjoying your work.
thanks,
Mark
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DonThursday, 21 April, 2011
Dave,

Do you have any time frame or estimate for when any government move to nationalize 401K/IRA assets might occur? Are there any pre-move signs to look for? Thanks.
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Dave in DenverThursday, 21 April, 2011
No idea Don. Watch Congress and watch what people in the Administration say. And watch blogs like this. If I see any indication I'll write about it. There have already been Congressional hearings with academic presentations on the idea.
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.