Several Major world Currencies may eventually collapse

Jim Rogers foresees the collapse of several Major

Several Major world Currencies may eventually collapse Investment guru Jim Rogers has no shorts in the stock market for the first time in about 1987 , he says the government is printing so much money it could carry stock prices to elevated levels and that would also spark a currency crisis “I have no shorts I am worried about the currency market I expected to be a currency crisis later this year or may be next year ” said Jim Rogers question “In what currency ” Answer ” I wish I was that smart , may be the US dollar , it might start right here in America it might start with the pound sterling I am not quite sure

http://forums.delphiforums.com/sunkopitiam/messages?msg=30877.1

The end of Obama’s maneuvering room?

The end of Obama’s maneuvering room?
June 10th, 2009
By David Goldman
Is Obama’s Economic Maneuvering Room Already Exhausted?
Wednesday, June 10, 2009, 3:55 PM
David P. Goldman

Between the election of Barack Obama and the afternoon of June 10, the yield doubled to 4% from 2% for 10-year Treasury notes, the benchmark for long-term yields in the U.S. economy. Part of the sharp rise in yield was a snapback from levels that reflected fear of a deflationary breakdown of the banking system in the aftermath of Lehman Brothers’ failure last August. The improvement in the economic outlook from hysterical misery to ordinary happiness, paraphrasing Freud, add about six-tenths of a percentage point to the Treasury yield, as measured by the increase in the yields of inflation-indexed Treasuries. Most of the two percentage point rise in Treasury yield stemmed from rising fear of inflation or decline in the dollar, which amount to the same thing.

Obama’s stimulus package and associated handouts to the auto industry, banks, and so forth have endangered the credit of the US and damaged the standing of the US dollar.

With the Treasury’s annual deficit financing requirement approaching an unheard-of $2 trillion, the largest international investors in Treasuries have expressed dismay about the threat to the long-term value of their investments. Although the measures taken to date by America’s creditors are purely symbolic, they also are without recent precedent, and bode ill for the recovery prospects of the US economy. Today several foreign central banks announced plans to purchase International Monetary Fund bonds denominated in a basket of currencies, as a diversification away from dollar reserves. Bloomberg News reported, “Russia and Brazil, seeking to reduce their dependence on the dollar, announced plans to buy $20 billion of bonds from the International Monetary Fund and diversify foreign-currency reserves. Russia’s central bank said it may cut investments in U.S. Treasuries, currently valued at as much as $140 billion, a week after China said it may reduce reliance on the dollar and American bonds. Brazil’s Finance Minister Guido Mantega said his country will purchase $10 billion of debt sold by the IMF, China will buy $50 billion and India may announce similar funding.”

Just how does America finance a $1.8 trillion deficit? The most that overseas investors ever have invested in the US in a year is $400 billion, and it is unlikely that foreign governments will purchase this quantity of Treasury debt under present conditions. Assuming (optimistically) that foreigners buy $300 billion worth of Treasuries per year, that leaves $1.5 trillion to finance. For the American private sector to finance $1.5 trillion worth of Treasury debt, or about 11% of GDP, presumes a savings rate of 11% of GDP, something America has not seen since the early 1980s. The present recession has pushed the personal savings rate up to 6%, with painful economic consequences.

But even a return to the very high savings rates of the early 1980s would barely cover the Treasury’s financing needs. There would be nothing left over for corporate debt, mortgages, or any other financing requirements.

The economy, of course would crash under these circumstances. To make up the gap, the Federal Reserve has increased its balance sheet to provide credit to the economy by over $1 trillion since last August, including $600 billion of securities purchases.

The Federal Reserve can’t keep monetizing debt, that is, printing money in order to buy securities. The perception that it is coming close to the end of its tether is the proximate cause of the jump in interest rates.

Whether this results in more deflation (collapse in demand in the US resulting in lower asset prices, lower wealth, and ultimately lower prices for goods and services) or inflation (money printing by the Fed, a collapsing dollar, and an exchange of paper for stores of value in the form of commodities or other tangible assets) is difficult to predict – the market seems to be betting on the latter. In either case, Obama’s maneuvering room has been exhausted only a few months into his administration.

http://forums.delphiforums.com/sunkopitiam/messages?msg=30845.1

China caught in US money trap

China stuck in ‘dollar trap’

By Jamil Anderlini in Beijing

Published: May 24 2009 23:30 | Last updated: May 24 2009 23:30

China’s official foreign exchange manager is still buying record amounts of US government bonds, in spite of Beijing’s increasingly vocal fear of a dollar collapse, according to officials and analysts.

Senior Chinese officials, including Wen Jiabao, the premier, have repeatedly signalled concern that US policies could lead to a collapse in the dollar and global inflation.

But Chinese and western officials in Beijing said China was caught in a “dollar trap” and has little choice but to keep pouring the bulk of its growing reserves into the US Treasury, which remains the only market big enough and liquid enough to support its huge purchases.

In March alone, China’s direct holdings of US Treasury securities rose $23.7bn to reach a new record of $768bn, according to preliminary US data, allowing China to retain its title as the biggest creditor of the US government.

“Because of the sheer size of its reserves Safe [China’s State Administration of Foreign Exchange] will immediately disrupt any other market it tries to shift into in a big way and could also collapse the value of its existing reserves if it sold too many dollars,” said a western official, who spoke on condition of anonymity.

The composition of China’s reserves is a state secret but dollar assets are estimated to comprise as much as 70 per cent of the $1,953bn total and China owns nearly a quarter of the US debt held by foreigners, according to US Treasury data.

The collapse of Fannie Mae and Freddie Mac, the US mortgage financiers, last summer prompted Safe to adjust its strategy and start buying far more short-term US government securities, instead of longer-maturity bonds and notes.

This approach is widespread in the market because of expectations that the US will have to raise interest rates in the medium term to deal with rising inflation, as a result of all the money that it is printing.

http://forums.delphiforums.com/sunkopitiam/messages?msg=29860.1

The Pound is Terribly Flawed

Jim Rogers on Sky News
The Pound is Terribly Flawed

Leading American investor Jim Rogers is certain Britain’s economy will be downgraded in the forseeable future.
Speaking exclusively to Sky News Business, his gloomy outlook comes just a day after premier ratings agency Standard and Poor’s revision of Britain’s AAA rating to a negative outlook.

“Of course it’s going to come, it’s going to come in the US as well,” Mr Rogers told Sky’s Nina de Roy.

“The US should be downgraded already if you ask me, and the UK as well.”

Singapore-based Mr Rogers, 66, has generated billions for his clients investing with hedge fund legend George Soros – who later made a billion betting against the pound.

“Both the US and the UK unfortunately both have gigantic debts, and both sets of politicians are making mistakes,” Mr Rogers said.

“They’re pouring huge amounts of money into the economy which is going to make some things look better for some people for a while, but it won’t last.”

Crucially, Mr Rogers believes the famous rating agencies are scared of revealing the dire state of American finances.

“I’m still not that optimistic about sterling or the US dollar, I find both of these currencies terribly flawed”
“I think the rating agencies are probably afraid to do it because Congress will come down hard on them and maybe the same with the UK,” he said, adding that traders know the true state of affairs.

“It’s not going to have that much of an effect because the market knows the situation so it doesn’t matter whether I say you’re AA or AAA or A.”

Although the pound has rallied recently against the dollar, Mr Rogers insists problems are endemic for both currencies.

“We’ve already had a very nice rally over the last three or four months, if you compare to the US dollar – not necessarily compared to other currencies,” he said.

“Even in 1930 the stock market went up 50% on it’s way to going down 90%, but rallies are normal and I don’t think that it’s much more than just a normal kind of rally in a bear market.”
Mr Rogers simply cannot get enthused for the pound.

“I’m still not that optimistic about sterling or the US dollar, I find both of these currencies terribly flawed,” he said.

The banking system bailouts have saddled both countries and Mr Rogers insists it needs to stop.

He added: “The poor US and UK taxpayers have stupendous debts being forced on them and we are going to be faced with gigantic tax and debt problems very, very shortly because of what the politicians in Washington and in Whitehall are doing.”
http://forums.delphiforums.com/sunkopitiam/messages?msg=29502.1

All Currencies are Fiat , the Dollar will fall off the cliff

All Currencies are Fiat , the Dollar will fall off the cliff

Quantitative easing is money printing will cause hyper inflation and the collapse of the dollar …
The stock market may hit new lows this year or the next as the current rally has been largely caused by the money printed by central banks and fundamental problems remain unsolved, legendary investor Jim Rogers told CNBC Wednesday
jim Rogers opinions concord with those of renowned bear Marc Faber aka doctor Doom , who told CNBC last week that the rises in share prices did not mean the world was embarking on a path of sustainable economic growth.

“I’m not buying shares if that’s what you mean. Not at all,” Rogers told “Squawk Box Asia.” CNBC
Governments have not solved the core of the problems that caused the crisis but instead they “flooded the world with money,” added Rogers. Trying to solve the problem of too much consumption and too much debt with more consumption “defies belief” and will not work, he said.

The price of oil is also likely to remain high despite the fact that the recession is taking its toll on demand, he said.

“You know supplies worldwide are declining at the rate of anywhere from 4 to 6 percent a year, yes, demand is down at the moment but in longer term, unless somebody discovers a lot of oil very quickly, the surprise is going to be how high the price of oil stays, and how high it eventually goes,” Rogers added.
The next financial meltdown will be in the currency markets, as central banks around the world have been printing money, giving the appearance of massive government intervention to weaken their currencies, legendary investor Jim Rogers, chairman, Rogers Holdings, told CNBC Wednesday.

“At the moment I have virtually no hedges, I suspect it is going to be the next problem, big crisis will be in the currency markets, I’m trying to figure out what to do there,” Rogers told “Squawk Box Asia”.

“If I am right, you’re going to see a lot of currency problems in the next decade or two,” Rogers said. Governments around the world are doing their best to destroy currencies, many currencies in fact. And people need to understand that; if they don’t understand it now, they’re going to find out, they’re going to find out the hard way,” he added.

http://forums.delphiforums.com/sunkopitiam/messages?msg=29464.1