Archive for the ‘US Dollar’ category

Be aware – don’t panic

April 1, 2017

There are some forecasts out there that call for a careful foresight. Some of very wealthy investors have sold all their stock market investments. The value of gold and silver shall be kept under the magnifier glass now. The total volume of any currency in circulation is very high. The major Central Banks are coming close to their limits to buy “bad debt” like in the EU it is set to 30%, which might lead to rising interest rates, less investment, lower economic activity, and in the worst case to a downturn.

Even worse than that is a horror scenario that starts with the housing market that would collapse in China, then the stock market would collapse globally. Every stock market value, property value, other exchange values, derivatives etc. would lose their value, or at least the major portion of their value. Thereby e.g. retirement funds would loose the savings of people for their retirement globally. The US Central Bank would “print” dollars, and the USA would pay off all their foreign debt by transferring billions of bit money, and at that moment they would shut off the free moving currency called US Dollar. Every dollar on any bank account would become zeroed out. We would end up at barter time period exchanging goods and services without money. One would need water, solar or geothermal power to keep electricity flowing. No gasoline or gas supply nor internet would work, because there would be no one paying for those services. Would you have water wells, grow your own food and have something to give in exchange? You should have no debt to avoid immediate disaster of loosing your property. How to pay taxes in that situation or protect your family? I’m not saying this will happen, but it might happen. It might be wise to learn from Amish, how to live and survive with the help of your community and being independent from technology that depends on energy. Let’s keep this in mind and work towards a better outcome that gives hope for the future.

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What should the USA do?

November 25, 2010

The USA must make a couple of things to hinder an economic disaster: the old good manufacturing must get back to the states. That can be done by giving exemptions from corporate taxes and paying for education and training of new employees – I would go even further and say that in stead of printing dollars and buying bonds that money should flow to education of the citizens.  Corporations should also be able to hire for minimum wage and work free of trade unions – at least for 7 years. That would curb the USA back on track! I haven’t seen any better real proposal, but just the QE2 – printing cash is no real solution at the end of the day! This will certainly help avoiding deflation, but will on the long run increase the interest rates. When the money would flow to the education, schools, colleges, and universities it would increase the know-how and knowledge, but be also in circulation and not handled through banks only! This is a true alternative! Manufacturing and education would generate a lot of new jobs, make people able to earn money and pay bills and buy stuff = consume! This way is the better way.

JP Morgan confirms my humble projections on the value of USD

January 6, 2010

The external value of the US Dollar has increased for a couple of weeks against Euro. J.P. Morgan has however given an interesting prediction that the exchange rate of USD against Euro will start to drop again very soon. They project a ratio of 1,62 USD for one Euro. When that happens also my former projections will come true.  My projection was originally 1,6 but I don’t see even 2,0 impossible then the MZero (M0) value of US Dollars has increased multifold, the foreign trade is still negative, and no jobs have been generated over the number of jobs lost. However, the dropping value of USD is of an advantage to the USA and will help curbing up the economy. The game is on. Happy New Year!

The Chinese Shopping Spree will get stronger

December 18, 2009

The Chinese Ambassador to Helsinki in Finland has confirmed my predictions during his speech at the luncheon meeting hosted by Finland-China Trade Association in December: among other intereting comments he stated that chinese companies will increase their activity to acquire foreign assets. That will put pressure on the value of USD. The best way for China to change the external value of RMB against USD is putting Dollars into circulation – RMB would get stronger against the USD. The same will happen with other currencies, but the ratio of Euro against RMB, however, will remain untouched. That will help US to reduce imports and increase exports. Also the repatriation of foreign profits made by US corporations abroad will get more attractive. This all will benefit the US.  Certainly there is the risk of inflation looming behind the corner, but the weapon is also near – interest rates. When the FED starts to increase the interest rates, more investments will flow to the US again. The seed for growth in the USA  is nurtured by all these measures – intended or unintended.

The path towards protectionism is open

November 26, 2009

The worldwide downturn is not yet over, however US companies show strenght. Also investing has slowly started. A good sample is Texas Instruments in Richardson, Texas.  Another sign about corporate moves can be seen in NCR returning back to the USA with manufacturing. It is good to remember even Jeff  Immelt’s talk about keeping manufacturing in the US – to have jobs and a strong middle class that can consume.  So far so good – if  the jobmarket improves during 2010 or at latest in 2011, the inland market will start to grow again.

Despite of these slight positive notes there are still plenty of issues that make the life complicated. The amount of US dollars printed during this year has increased at least 4 fold like stated in prior comments. The value against other currencies hasn’t dropped in relation to that but much less. This means that someone is hoarding dollars like never before. Let’s assume that Japan, China, and OPEC-countries are holding those dollars now. The pressure to correct exchange rates is increasing. It is expected that China will revaluate its currency RMB during 2010 around 6%. That is not what US expects but anyhow something. The thing is that some Chinese banks need to downgrade their assets at the same time or get the dollars exchanged to stable currencies like Euro prior to the devaluation. This is likely because China’s revaluation will go against USD only. Another alternative is that Chinese companies will increasingly fast acquire lots of assets in foreign locations and pay them with USD prior to the revaluation of RMB. My prediction is that China will continue, also after the revaluation of RMB, investing in US assets and buying natural resources, land and companies around the whole world. That means that sellers of those assets will at the end of the day have dollars in they hands which less value. So, the wise man doesn’t sell assets against USD  outside of the USA.

The US must however keep on printing dollars in order to ease exports, reduce imports, improve cost competitiveness, pay debts, and balance out the trade deficit.  I have already discussed earlier the risk and effects on inflation and interest rates, so I disrecard them here. All these things make the USA an attractive location for manufacturing again. The USA is a growing nation with all resources and knowhow. So, what will happen? If and when the USA can handle energy question through nuclear, wind, water, coal, gas, oil, solar and hydrogen, it can start to live more independently from the world than today. It is essential for the USA to get Canada, Mexico and some South-American countries to form a single currency and free trade zone – to enlarge the NAFTA. I furthermore expect that the USA will start to withdraw its military presence (requiring the EU to step up), repatriate corporations and attract investments in a big way.

When the external value of USD drops enough this game can begin. It causes a situation where the worldtrade and material flows will get changed. Many projections of the future must get revised drastically. My assumption is that the world will see three major blogs – Asia, Europe, and Americas. There are also some other areas which are dealing with these, but it is not yet clear whether they can remain neutral. Mainly they could be the oil producing countries. Asian and European countries cannot keep up exporting to the USA when the value of USD drops enough. The US will boom through repatriating companies and foreign companies investing in the US. That generates jobs and increases consumption – the GDP will grow nicely. With a growing population this will be a huge success story. In turn, jobs are lost in Asia and Europe. The competition gets so hard and tough that the EU must start to protect its industry and common market by setting up custom duties or some kind of sanctions, fees or charges. This will lead to a situation where China and the USA will retaliate and do the same.  My vision is the end of global free trade.  There are only a few things that can be done by corporations: to get established in every geographical area, and to focus only on one georaphical area or a specialty niche.  There are certainly other options as well, but not in a big way.

The banking and monetary system will face a hit that must get discussed separately. My advise: get special knowledge and knowhow that is valuable in all conditons.  Study, learn, get assets, and stay debt free.

More pressure on Greenback – is there any exit in sight?

October 6, 2009

Exit

The price of gold is on the top and the value of USD is down. According to the Middle East Online the Golf states are joining BRIC-countries and France in a move away from dealing oil for US Dollars. This will be a sign to follow carefully.  I therefore see my earlier statements confirmed and keep my projection of long-term devaluation of USD.  It is exactly what is needed in the US to start economic healing and balancing the trade.  USD reserves are melting when measured in foreign currencies. If you haven’t done yet, now is the time to move your USD assets to the US, where the lower value of greenback doesn’t hurt so much – dollar remains a dollar anyhow. On the other hand holdings of other currencies might bring huge wins in the future, when exchanged to USD at a latter day.