In Geithner We Trust.......

Oh boy......


Thanks to Drew Friedman

WSJ

"Absolutely not," Mr. Geithner said in an interview with ABC News's "This Week" when asked about the prospect of the U.S. losing its top rating. "That will never happen to this country."

Judging Geithners past "fabulous" forecasting track record i assume the downgrade is not far away....;-) Even the strongly US influenced rating agencies like Moddy´s & S&P cannot ignore the reality shown at the US National Debt Clock Real Time indefinitely.....Nobody expect them to tell the truth but at least they have to "adjust" ( as usual very very slowly ) to maintain the few percentage points of credibility left.... ;-)

Wenn man die "fantastische" Trefferquote von Geithners Prognosen berücksichtigt dürfte das Downgrade demnächst Realität werden bzw der Realität angepaßt werden.... ;-) Ein Blick auf die Us National Debt Clock Real Time dürfte es selbst den stark unter US Einfluß stehenden Ratingagenturen Moddy´s und S&P schwer machen sich zumindest den Realitäten anzunähern.... Immerhin gilt es die letzten paar verbliebenen Prozentpunkte an Glaubwürdigkeit zu verteidigen.....

UPDATE:
Famous Last Words: U.S. Will ‘Never’ Lose Aaa Debt Rating Mish
The best defense is a good offense, absolutely The Mess That Greenspan Made
USAAA forever FT / LEX


H/T Clusterstock

Got GOLD ?

"China Inc." Deal Premiums.......

Another way to recyle the greenback.... The race to hard assets is speeding up.....Unfortunately China´s deal ethics are more than often non existent & inhuman ( see Oil for China, Guns for Darfur / China and Sudan Fact Sheet ) UPDATE: Says China should buy gold, natural resources, U.S. land

Auch ein Weg wie man die ungeliebten und im Überfluß vorhandenen US $ Bestände wiederverwerten kann..... Die Flucht in Hard Assets wird weltweit sicher noch zunehmen.... Wenig überraschend ist China auf dem Weg zum Ziel im Zweifel jedes Mittel recht ( siehe Oil for China, Guns for Darfur / China and Sudan Fact Sheet ).....UPDATE: Says China should buy gold, natural resources, U.S. land



Is China Inc. Overpaying in Its Merger Deals? WSJ Deal Journal
Deal makers know that to succeed you have to make your assets speak louder than your liabilities. China Inc. is learning that lesson.

Just look at Sinopec’s bid to acquire Swiss oil company Addax, which has a big presence in Africa. The price that China Petrochemical Corp., the Chinese state-owned oil company known as Sinopec, is offering is much higher than usual for the sector, analysts say.

Sinopec’s offer is equivalent to $34 a barrel of proved reserves and $14 a barrel of proved and probable reserves. The African transaction average in 2007, when the average crude price is similar to current prices, was $14.40 a barrel for proved reserves and $9.90 for proved and probable reserves, respectively. On a proved basis, the 2007 average suggests $3.1 billion total value for the deal. Therefore, $7.2 billion implies a 135% premium.

The deal also shows China’s willingness to take risks, as Sinopec would gain a presence in oil-rich but politically sensitive Iraqi Kurdistan as well as offshore West Africa, one of the hottest sectors of the oil world but one that includes Nigeria, where local militants continually harass drillers.

Already this year, Chinese companies have notched 10 deals in the oil & gas space. The total number of oil & gas deals in all of last year was 14

This Sinopec deal, if completed, would be the largest overseas takeover in China’s M&A history in natural resources The deal also would boost the value of Chinese oil & gas mergers and acquisition to $12 billion, up 80% from the same period last year.

> Add this number to the mix ( via WSJ )

> Um das Bild abzurunden sollte man die nachfolgende Summe ebenfalls miteinbeziehen.....

Over the past half-year, China has proffered more than $45 billion in loans to Russia, Brazil, Venezuela and Kazakhstan in exchange for long-term crude supplies.

> Very unlikely that this trend will reverse course......

> Wenn man jetzt noch die Reaktion der kommenden "Elite" mit berücksichtigt halte ich es für extrem unwahrscheinlich das sich dieser Trend demnächst ändert...... :-)

Dennis Gartman

As we reported here, Geithner’s attempts to reassure Beijing authorities that the US government was still upholding a strong US dollar policy were met with loud laughter by an audience of students at Peking university.

Got GOLD....?

Report No Evil....... "Geithner´s Trip To China Edition"

Probably not the way to stop the crashing circulations ( & to rebuilt the lost reputation from the disastrous Iraq coverage )...... I hope the Gartman term " The American media is, and continues to be, “in the bag” for the Obama Administration." is a bit overstated. But after reding reports like Geithner gets passing grade for China trip via Marketwatch i can understand his "concerns".....

Normalerweise wäre die Tatsache das Geithner als er vor chinesischen Studenten über die Werthaltigkeit der chinesischen US$ Anlagen referierte und dabei lauthals ausgelacht worden ist eine dicke fette Schlagzeile ( zumindest in den eingängigen Wirtschaftsnachrichten ) wert..... Komisch nur das dieser "Knaller" de facto kaum erwähnt worden ist. Schlimmer noch... Der Besuch wurde allenthalben als Erfolg gewertet ( siehe stellvertretend Geithner gets passing grade for China trip via Marketwatch ). Sicher nicht der beste Weg um die seit der Irakberichterstattung eh schon stark beschädigte Reputation zu erhöhen bzw. die crashenden Verkäufe zu stabilisieren..... Die ganze Entwicklung ist mehr als bedenklich......



Dennis Gartman via FT Alphaville

Which brings us to Dennis Gartman’s observations regarding US Treasury Secretary Timothy Geithner’s trip to Beijing this week. As we reported here, Geithner’s attempts to reassure Beijing authorities that the US government was still upholding a strong US dollar policy were met with loud laughter by an audience of students at Peking university.

This fact, apparently, went mostly unreported among the US press according to Gartman. As he surmises:

The utter and harsh reality of the US present fiscal circumstance is that the world is laughing at the Obama Administration’s handling of it. Mr. Geithner is the global vicar of the US fiscal policy, and never, ever in our lifetime have we seen or heard of a US Treasury Secretary being laughed at… until now. It is one thing to be derided; it is entirely another to be laughed at, and the US is now being laughed at.

And regarding the US coverage of the event, he writes:

What is even sadder, however, is that the American press missed the importance of this incident completely. As noted, other than the initial one sentence comment that was cursory in nature by The NY Times, nowhere else was this laughter noted by the domestic press.

The American media is, and continues to be, “in the bag” for the Obama Administration. The American media reported only that the Treasury Secretary made his case; explained the Administration’s position; informed China of the safety of its investments in US Treasury securities and moved on to his next meetings with China’s President and Prime Minister.

As far as the US media was concerned, Mr. Geithner’s speech was a rousing success when instead it was a laughable and utter failure.

The American media hid the importance of what happened there in Beijing from the American people, and we believe the media did so cognisant of what it was not reporting… a sin of omission rather than of commission, but a sin nonetheless.

No Limit Specified........

Lets hope they still can find enough buyers of their treasuries ( see Who Will Be Left To Buy US Treasuries...... & China Slashes Lending Rate to Support Slowing Economy ) to finance their daily bailout ( see Breakdown of the Bailout Rescue Efforts & Various Fed Lending Facilities ) with a yield close to 3% .... The bigger issue down the road could be that the "investors" are demanding bonds that are not $ denominated......Got Gold.....?

Bleibt zu hoffen das die USA es weiterhin schaffen genügend "smarte" Investoren finden ( siehe auch Who Will Be Left To Buy US Treasuries...... & China Slashes Lending Rate to Support Slowing Economy ) die bereit sind dies täglichen Bailouts ( siehe Breakdown of the Bailout Rescue Efforts & Various Fed Lending Facilities ) für 3% in US Währung zu finanzieren..... Die US sollten sich schon einmal entfernt darauf gefasst machen das es in naher Zukunft bald Investoren gibt die keine US Anleihen auf $ Basis mehr abnehmen wollen.......Got Gold...? UPDATE: Netter Bericht der FTD 700 Milliarden? Ha! Es sind 8500 Milliarden

WSJ

An even better graph is coming from the NYT

Eine noch besser Übersicht liefert die NYT

bigger / größer

Barry Ritholtz has much more and slightly different data ( but what are a few trillions here and there these days ) and the quote of the day......

Barry Ritholtz hat noch mehr und leicht abweicdhende Daten ( aber was sind heutztage einige Billionen unter Freunden ) zu diesem Thema und ein Zitat das wohl mehr als alles andere die Ausmaße der aktuellen Bailouts beschreibt......

The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion

The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).

Go figure: WWII was a relative bargain.

No wonder the CDS on US Debt are "moving"........ Via FT Alphaville

Kein Wunder das die Absicherung gegen einen möglichen US Bakrott langsam in "Bewegung" kommen..... Dank an FT Alphaville

Who Will Be Left To Buy US Treasuries......

I think this will be one of the most important questions especially after one "natural" buyer after another buyer like China is obviously has to spend lots of their "war chest" at home ( see this excellent piece via naked Capitalism China Announced $586 Billion Stimulus Plan, No Kidding.... Dubai May Need Help To Repay Debt.... & You can’t even depend on the SWFs).....

Ich denke eine der entscheidenden Fragen in naher Zukunft wird sein ob es den USA weiterhin gelingt genügend ausländisches Kapital zu animieren wöchentlich wachsenden Baliouts (AIG, GM, ..... ) und die gefühlten quartalsweisen "Konjunkturpakete" zu finanzieren ( ganz zu schweigen von dem üblichen Defizit.....). Es sieht immer mehr so aus als wenn etliche der bisherigen "natürlichen" Käufer immer mehr Mittel aufwenden müssen um Ihre eigenen Wirtschaft vor einer ( nennen wir es vorsichtig ) Verlangsamung zu retten ( siehe via Naked Capitalism China Announced $586 Billion Stimulus Plan, No Kidding.... Dubai May Need Help To Repay Debt.... & You can’t even depend on the SWFs).....


In the meantime the US is anouncing one baliout a week ( AIG, GM, ..... ) and is discussing another stimulus package almost on a quarterly basis...... On top of this the Fed is close to a zero interest policy and the recent strength in the $ is likely mainly atrributet to the global delevereging..... Probably not the best circumstamces to attract trillions of foreign capital.... Especially when your futue liabilities are close to $ 50 trillion ( see If we are Rome, Wall Street's our Coliseum make sure you don´t miss the Colbert video with the former comptroller Walker )

Es bedarf schon einer gewissen US Arroganz darauf zu wetten das die Ausländer trotz einer Nullzinspolitik, einer Währung die wohl einen nicht geringen Teil Ihrer letzten Stärke allein dem Umstand des weltweiten Deleverering zu verdanken hat, neuen Haushaltslöchern beinahe im Stundentakt sowie der über allem stehenden tickenden Zeitbombe von Social Security & Pensionszusagen etc ( mit nahezu 50 Billion $ , siehe If we are Rome, Wall Street's our Coliseum , besonders empfehlensert ist das Interview mit dem früheren Oberaufseher der US Finanzen.....) weiterhin gewillt und in der Lage sein werden dieses zu finanzieren.....

I don´t want to speculate what could happen if the foreigners have to sell some of their US assets...... Got gold......?

In allen Überlegungen möchte ich leiber nicht damit anfangen zu spekulieren was passieren könnte sollten die Ausländer anfagen aktiv Ihre Positionen zu veräußern...... Got Gold.... ?

Thanks to Contrary Investor

Needless to say that US debt is still rated AAA.......

Überflüssig zu erwähnen das die US Staatsschulden noch immer mit AAA bewertet werden......

Bernanke vs Greenspan

Amazing that everybody wants to believe that Ben "Core" Bernanke has become an inflation hawk over night..... The only reason this guy is talking tough is that the $ is crashing further and the ECB is forcing him to act. But so far the Fed din´t act and i refuse to believe it until i see it confirmed from at least three sources.... :-) Especially in the face of the ongoing recession....... Disclosure : I´m with Mish´s definition on Inflation ( see Inflation: What the heck is it? ) . It seems i´m not the only one who is sceptical... Make sure you read the rant from Tim / The Mess That Greenspan Made Fisher: Silly interest rate talk

Überraschend das irgendeiner zumindest auf dieser Welt die Aussagen von Ben "Core" Bernanke in Sachen Inflationsbekämpfung für bare Münze nimmt..... Der einzige Grund warum praktisch über Nacht der Falke in Ihm erwacht zu sein scheint ist wohl der EZB zu verdanken die die Fed zum Handeln zwingen wird um einen totalen Kollaps des $ zu verhindern. Ich glaube aus Erfahrung keinerlei Rethorik die aus den Mündern von US Notenbänkern kommt und bin gespannt ob den hohlen Phrasen ausnahmsweise auch mal Taten folgen werden. Glaube das erst wenn ich das von mindestens drei unabhängigen Quellen bestätigt bekomme..... :-) Besonders dann nicht wenn die Erhöhungen im Angesicht einer üblen Rezession erfolgen. Hinweis : Bekanntermaßen sehe ich die Definition von Inflation wie Mish ( siehe Inflation: What the heck is it? ) . Sieht ganz so aus als wenn nicht nur ich der einzige ist der eine gewisse Skepsis an den Tag legt..... Empfehle hier den Rundumschlag von Tim / The Mess That Greenspan Made Fisher: Silly interest rate talk

via Calculated Risk Tim Duy: Fed Between a Rock and ...

Bottom Line: The Fed has no one to blame for their predicament but themselves. Bernanke & Co. cut rates too deeply, fighting a battle against deflation that never was. Now they are backed into a corner; either raise rates and risk upsetting a very fragile economy, or stay the path and risk the inflationary consequences.

AMEN!

The Panic About The Dollar / Economist

This cover is just too beautiful to let it pass. Only this cover is fitting the greenback issue better.It also feels like Der Spiegel has had a similar idea for their cover. The story Losing faith in the greenback is also worth the read. Brad Setser has as usual some very insightful views on the currency front.

Diese Cover ist einfach zu schade um nicht gepostet zu werden. Lediglich dieses Cover zum Thema ist einen Tick besser gelungen. Es scheint fast so als wenn Der Spiegel eine ähnliche Idee gehabt hat. Die dazugehörige Geschichte Losing faith in the greenback ist zudem ebenfalls einen Blick wert. Brad Setser hat sich den Economist Bericht noch einmal gesondert zur Brust genommen. Wie immer empfehlenswert!

I especially agree with the first quote.....

Überflüssig zu erwähnen das ichbesonders den Einstig mag....

THE long-run value of all paper currencies is zero. That is a fond saying of Bill Bonner, goldbug and publisher of the Daily Reckoning, a contrarian financial newsletter. So why should the dollar be any different?

Cover Stoy Indicatior....

The $ crash and the strong € (€/$ today 1,4875) is making more and more headlines in Germany and the rest of Europe. Dozends of companies are now warning on a daily basis that the strong € is hurting their business. "Der Spiegel" is the most influential, respected and important news magazine in Germany. So i think it qualifies for the "Cover Story Indicator" and the worst at least for the short term for the $ might be over. Largely thanks to the way overvalued € and the weakening European economy..... Another hint that the € is way overvalued can be seen when you look at the exchange rate vs the oil rich Norwegian Crown.....

Der US $ Crash (€/$ 1,4875) macht mehr und mehr Schlagzeilen in Deutschland und dem restlichen Europa. Dutzende Firmen warnen täglich in Ihren Veröffentlichungen das der starke € ihr Geschäft erheblich beeinflußt. Wenn also der Spiegel als wohl bedeutenstes Magazin dieses Thema auf den Titel hebt könnte einnmal mehr der "Cover Story Indicator" greifen und daraufhin deuten das zumindest kurzfristig das schlimmste vorbei sein könnte. Das basiert aber weniger auf der stärke des $ als vielmehr auf der krassen Überbewertung des € der noch keinerlei Abschwung in der Eurozone diskontiert hat....... Wie extrem der € inzwischen aus dem Ruder gelaufen ist läßt sich am besten erahnen wenn man sich den Vergleich mit der norwegischen Krone vor Augen führt......

One company is follow closely is K+S. They are one the leading fertilizer companies in the world and they have have warned 2 times within a week that the higher $ did hurt earnings significantly and much stronger than anticipated. Even with a complex hedging strategy they were not able to compensate for the slump ( maybe too complex even for the management...). Compare the charts from the US competitor Potash with K+S over the past 6 month. If you now add the 10 percent exchange rate difference during the 6 month to the Potash outperformance the chart would look even more impressive.......

Ein gutes Beispiel für die Problematik ist die bei uns im MDAX gelistete K+S. Sie sind einer der führenden Dünge/Fertilizer Firmen weltweit und mußten binnen einer Woche zwei Warnungen wegen des schwachen $ herausgeben. Trotz einer angeblich durchdachten Absicherungsstrategie waren Sie nicht in der Lage diesen rapiden Verfall auszugleichen. Die Schuld für die zweite Warnung geht klar zu Lasten des Managemenst. Es änder aber nichts an der Tatsache das trotz bommenden Geschäftes die Gewinne pro Aktie durch Absicherungsgeschäfte und den starken € aufgefressen worden sind. Vergleicht den Chart mit dem führende US Konkurrenten Potash. Wenn man jetzt noch die 10% Währungsverfall berücksichtigt ist die Outperformance noch deutlicher....

I could name several other examples for this kind of currency impact also for other currencies like the Yen etc...

Eine ähnliche Beeinträchtigung gibt es auch für anderen Währungen wie z.B. den Yen usw.....

More currency posts

Mish Currency Twilight Zone

Naked Capitalsim Dollar Increasingly Used to Fund Carry Trade

Dollar Slumps to Record on China's Plans to Diversify Reserves

After Rogers, Faber, Gross, Buffet & Giselle now China. Don´t know what will get the most press in the US....... I assume that they will soon find a CPI formula to back out the increased costs that will come sooner or later from the weakening $ . Maybe Bernanke shouldn´t run the Fed via the applause meter ( Fleckenstein ) from Wall Street ........ It will be interesting to see how the "vilgilant" (LOL!) bond market will react to the news... And i expect at least one speech from Paulson & Co that the "strong $ policy is still in place" LOL!

Nach Rogers , Faber, Gross, Buffet & Giselle nun China. Bin mir nicht sicher was in den USA mehr Presse bekommen wird..... Höchste Zeit für die Verantwortichen eine CPI Formel zu finden die getsiegene Importpriese aus den Inflationszahlen herausrechnen...... Evtl. wäre es eine gute Idee wenn Bernanke sich mal nicht von Wall Street diktieren läßt was er zu tun hat...... Bin gespannt wie der angeblich so wachsame Bondmarkt (LOL) auf die Neuigkeiten reagiert. Ich erwarte mindestens eine Rede von Paulson & CO das die "Politik des starken $ " weiter bestand hat.... Slapstick pur!

This cover seems to be timeless..... Dieses Titelbild scheint Zeitlos zu sein........

Introducing the Xera:

Thanks to the suggestion put forth by a reader of my daily column, I have come up with the new name for our currency. Henceforth, it shall be called the xera. That's a combination of Xerox, for the piece of Xerox paper that it is; lira, which in the past was one of the world's chronically weak currencies; and, most importantly, the fact that it sounds like zero. That is ultimately where the xera is headed.

via Fleckenstein ( see Blogroll )

Dollar Slumps to Record on China's Plans to Diversify Reserves
Nov. 7 (Bloomberg) -- The dollar slumped to a record low against the euro after a Chinese official said the government will buy better-performing currencies as it diversifies $1.43 trillion of foreign-exchange reserves.

``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing. The dollar is losing its status among the world's currencies, Xu Jian, a central bank vice director, said at the same meeting.

The dollar fell against 14 of the 16 most-active currencies, declining to the weakest versus the Canadian dollar since the end of fixed exchange rates in 1950, a 26-year low against the pound and a 23-year low to the Australian dollar.

China's Reserves
Chinese investors have reduced their holdings of U.S. Treasuries by 5 percent to $400 billion in the five months to August. China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest to improve returns.

``The world's currency structure has changed,'' Xu from the People's Bank of China said at the conference. ``The dollar has been depreciating.'' Cheng, speaking to reporters after his speech, said his comments don't mean China will buy more euros.

The dollar’s slide: 1/3 down and falling faster / FT

• The US dollar has now lost more than a third of its value (-35%) against a basket of major currencies since Feb 2002.
• The decline is accelerating. The USD has shed -12.5% of its value in the last year, -3.5% in the last month, and -1.5% in the last week alone.
  
  

``Cheng has a history of speaking out on a range of financial market and economic developments, and his comments are not always accurate,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong.

Cheng's remarks on Jan. 30 that China's stock rally was a ``bubble'' caused the benchmark index to fall the most in almost two years on Jan. 31. The Shanghai and Shenzhen 300 Index, then over 2,500 points, has since climbed above 5,300.

The dollar's decline helped drive the price of crude oil to a record and gold to a 27-year high, encouraging investors to buy assets in commodity-producing nations. The dollar's 9.8 percent drop against the euro this year boosted the competitiveness of U.S. exports, helping shrink the nation's trade deficit to $57.6 billion in August, the smallest since January.

`Asset Story'
Against the pound, the dollar declined to $2.0955, the lowest since May 1981. It fell to $1.1010 per Canadian dollar. The currency slid against the Australian dollar to 93.89 U.S. cents, the lowest since April 1984 from 92.87 U.S. cents. The U.S. currency also fell to as low as 1.1347 against the Swiss franc, the lowest since December 2004.

``This is an asset story and shows sentiment for the dollar continues to be quite negative,'' said David Forrester, currency economist at Barclays Capital in Singapore.

The Australian dollar gained after the country's central bank raised its benchmark borrowing cost to 6.75 percent today. Governor Glenn Stevens, announcing today's quarter-point rate increase, said inflation will exceed his target.

> Gold is up over 15 bucks to 835$!

Janszen from iTulip on Gold

Thanks Eric!

Jim Rogers Shifts All Assets Out of Dollar to Buy Yuan

I´m not sure if the Chinese are happy with comments like this...... But there is little doubt that the Yuan is significantly undervalued. I recommend to visit Brad Setser´s Blog to read more about this topic. Lets be clear a rise of the Yuan will change the landscape for lots of regions and will have big implications for all asset classes for years to come. In the meantime the Chinese have to deal with lots of hot money that is chasing Chinese assets.

Ich kann mir vorstellen das die chinesischen Offiziellen solche Kommenate nicht gerne hören.... Aber es besteht kaum ein Zweifel das der Yuan deutlich unterbewertet ist. Mehr Expertise zu diesem Thema gibt es regelmäßig auf Brad Setser´s Blog. Ein schneller Anstieg dürfte zu einigen Verwerfungen führen und dürfte kaum eine Region oder Anlageklasse unbeeindruckt lassen. In der Zwischenzeit müssen die Chinesen damit leben das eine Menge "Hot Money" chinesche Vermögenswerte regelrecht jagt .

Jim Rogers Shifts Assets Out of Dollar to Buy Yuan Oct. 24 (Bloomberg) -- Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.

``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''

Rogers, delivering a presentation late yesterday at an investors' meeting organized by ABN Amro Markets in Amsterdam, said he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium.

The dollar has dropped against all the 16 most actively traded currencies except the Mexican peso this year as slowing growth and the first interest-rate reduction since 2003 last month dimmed the allure of dollar-denominated assets.

Since the Fed lowered U.S. interest rates on Sept. 18, the first cut in four years, the dollar has fallen 2.8 percent against the euro and touched a record low yesterday. Gold rose to a 27-year high and platinum jumped to a record.

``It's the official policy of the central bank and the U.S. to debase the currency,'' said Rogers, a former partner of George Soros.

Reserve Currency
``The U.S. dollar is and has been the world's reserve currency, the world's medium of exchange,'' he said. ``That's in the process of changing. The pound sterling, which used to be the world's reserve currency, lost 80 percent of its value, top to bottom, as it went through the whole period of losing its status as the world's reserve currency.''

The Chinese currency, known as the renminbi, or yuan, is ``the best currency to buy right now,'' Rogers said. ``I don't see how one can really lose on the renminbi in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple.''

> Here is short term outlook from Morgans Stanley on this topic Fasten the Seatbelt

> Hier ein aktueller Kommentar von Morgan Stanley zu diesem Thema Fasten the Seatbelt

China has followed a gradualist approach. In 2006, the renminbi appreciated against the US dollar by 3.4% but against the currency basket (i.e., the NEER) by only about 0.8%. As of last Friday, the cumulative appreciation against the US dollar so far this year was 4%, but against the currency basket only about 1.4%

Since I expect the pace of renminbi appreciation against the US dollar to accelerate markedly for the remainder of the year, I endorse our FX strategy team’s forecast that the USD/CNY rate will reach 7.30 by end-December (see FX Impulse, October 18, 2007). This year-end target implies about 2.7% appreciation of the renminbi against the US dollar for the remainder of the year and slightly less than 7% for 2007 as a whole.

Despite this seemingly aggressive USD/CNY forecast, I estimate – based on our FX strategy team’s forecasts of the exchange rates for China’s major trading partners – the cumulative appreciation of renminbi NEER for 2007 will be only about 3.9%

The yuan strengthened past 7.5 to the dollar today for the first since the central bank ended a fixed exchange rate in July 2005. The currency has gained 10.5 percent since the dollar link was abandoned.

China, growing faster than any other major economy, is ``going to be the most important country in the 21st century,'' he said. China's gross domestic product expanded 11.9 percent in the second quarter, and analysts surveyed by Bloomberg estimate the economy grew by 11.5 percent in the three months to Sept. 30.

> I recommend to read Is the credit squeeze a prelude to a China crash? from John Plender via the FT. I suggest to read the entire link.

> Hier ein weniger bullische Meinung von John Plender Is the credit squeeze a prelude to a China crash? via der FT. Ich empfehle den kompletten Link zu lesen.

The backcloth has invariably been a shift in global power whereby the growth of an immature creditor country wedded to protectionist trade policy has contributed to imbalances of savings and investment. Attempts to manage the currency volatility arising from imbalances have derailed monetary policy and created bubbles in asset markets, leading to crashes and financial distress.

Rogers also is buying Swiss francs and Japanese yen, which he said have been ``pounded down'' because of the so-called carry trades.

Unwinding Carry Trades
In the carry trade, investors borrow in countries with low interest rates, such as Japan, and invest the proceeds where rates are higher. Japan's benchmark overnight lending rate is 0.5 percent, compared with 6.5 percent in Australia and 8.25 percent in New Zealand.

The carry trades in yen and francs will ``unwind someday,'' which will send the currencies ``straight up,'' Rogers said. ``I'm buying the yen.''

The bull markets in bonds and stocks are ``over,'' he said. ``Bonds will be a terrible place to be for many years and will in fact be going down for many years.''

Rogers said he remains bullish on commodities because ``that's where the big fortunes are going to be made in the world in the next five, or 10 or 15 years. The current bull market is going to last until sometime between 2014 and 2022.''

Commodity Prices
Commodity prices have surged as demand for raw materials, especially from China, rose faster than producers were able to increase output. Agricultural prices have led recent gains, including a record high for wheat last month and a three-year high in soybeans.

``The number of hectares devoted to wheat farming has been declining for 30 years, the inventory levels of food are at the lowest level since 1972,'' Rogers said. ``Suppose we start having droughts again. God knows how high the price of agriculture is going to go, so that's where I'm putting more of my money now than in other things.''

He added, ``I think I'm going to make more money in agriculture than I make in precious metals.''

Platinum, gold, silver and palladium will ``be much, much higher during the course of the bull market,'' he said.

Fed Cartoon Special :-)

After Bernanke has "pulled a Greenspan" i think it is time for some Fed cartoons. And often enough there is a little bit of truth in there..... ;-)

If you want something rational about the Fed i suggest to read The Fed: Magical Fairies and Pixie Dust from Hussman or just watch this Chart from Minyanville.

On top of this the post Dollar = Confetti? comes to mind..... Please check the comments for other cartoons, quotes and links.

Nachdem Bernanke gestern nun den "Greenspan gemacht" hat kann es nicht schaden eine Kollektion in Sachen Fed Cartoons auszugraben. Und oft genug verbirgt sich ja in diesen Bildern zumindest ein Fünkchen Wahrheit.... ;-)

Wer es etwas rationeller liebt dem lege ich The Fed: Magical Fairies and Pixie Dust von Hussman bzw. diesen Chart von Minyanville ans Herz.

Keine Ahnung warum mir spontan zu dem Thema noch das Posting Dollar = Confetti? einfällt......... Für weitere Cartoons, Zitate und Links bitte in den Kommentaren stöbern

Thanks to Orangequant

Thanks to Wall Street Follies

Thanks to Cox & Forkum

The following one has nothing direct to do with the Fed but......

Der nachfolgende Cartoon hat zwar nichts direkt mit der Fed zu tun, aber......

Dollar = Confetti?

Dollar = Confetti? That´s the not so serious question Mike Larson is asking. With the US$ Index hitting new historic lows and a nasty US recession in the cards i wanted to bring up this cover from 2004. It looks like the Economist will have multiple years to reuse this image.....Here the US$ Index since 1971 / Chart that shows how significant the break of the 80 level was....

Dollar = Confetti? Das ist die provokante und nicht ganz ernst gemeinte Frage die sich Mike Larson stellt. Da der US$ Index nun täglich neue Tiefen erreicht und eine üble US Rezession unterwegs bzw. schon da ist kann ich mir nicht verkneifen dieses Cover aus dem Jahr 2004 zu posten. Es sieht ganz so aus als wenn der Economist das noch einige Jahre wiederverwenden kann...... Hier der US$ Index Chart seit 1971 der eindrucksvoll zeigt welche jahrentelenage Unterstützung in den letzten Tagen aus dem Markt genommen worden ist......

It is nice to see that Fundamentals Matter (In The End..) / Cartoons :-). And it doesn´t help when on top of this there is a massive capital flight from US investors out of the Greenback as shown here and here

Es ist beruhigend zu wissen das harte Fakten (Cartoons) am Ende doch zählen:-) Es ist auch nicht gerade hilfreich (aber wenig verwunderlich) wenn zusätzlich eine nie dagewesen Kapitalflucht aus dem Greenback von Seiten der US Investoren ( siehe hier und hier) einsetzt.

Oil Closes at Record High (At Least in Dollar Terms)

Keep this is mind when Wall Street is calling a weak $ great news. Too bad that joe sixpack has to pay the price.....Got gold.....?

Ich möchte momentan weniger denn je mit den Amis tauschen. Abseits von Wall Street findet wohl kaum einer den fallenden $ so prickelnd...... Kein Wunder das Gold steigt.

Thanks to Bespoke

Oil closed at a record high today even after news came out that OPEC would increase output. Part of the reason for oil's rise is based on the fact that it is priced in dollars which are falling. So even if global demand is unchanged, the falling dollar results in a higher price.

When priced in Euros, oil is still 8% off its record high of 60.91 set on April 21, 2006.

Disclosure: long Suncor, gold, goldmines (HUI), NAK

If we are Rome, Wall Street's our Coliseum

Somehow Jack Nicholson in "A Few Good Men" with his famous speech "You can´t handle the truth" comes to mind. 50 trillion hole and growing 3 to 4 trillion annually......Please click on the headline to read the entire piece.

Irgendwie erscheint mir bei diesem Thema die inzwischen berühmte Rede von Jack Nicolson aus "Eine Frage der Ehre" über die Wahrheit vor dem gesitigen Auge. Eine Lücke von 50 billion die jedes Jahr 3-4 billion anwächst. Leider kein Tippfehler...Klickt bitte auf die Überschrift um den kompletten Bericht zu lesen.

Maybe you don´t need to handle the truth if you believe in forecasts like this The Triumph Of Hope Over Experience

Aber evtl. verdrängt man die Wahrheit einfach am besten mit Prognosen wie diesen The Triumph Of Hope Over Experience

Should be great news for the Greenback down the road..... Thank god that the Fed is vigilant in fighting inflation ( see chart ) ...... ;-)

Das alles sollten zukünftig "tolle" Neuigkeiten für den US$ sein.... Wie gut das die Fed stets ein entschlossener Inflationsbekämpfer ist ( siehe Chart) ...... ;-)

Thanks to Bud Wood for the excellent Chart!

(Marketwatch) Comptroller General warns (again), we're 'bankrupting America'

What do Cassandra, "Chicken Little," the "Boy Who Cried Wolf" and David Walker, America's Comptroller General and head of the U.S. Government Accountability Office, all have in common?

Nobody pays attention to them!

Except for a short piece in London's Financial Times, Walker's warnings were generally ignored by the American press, by the public and even by the very Congress that hired him and has the power to do something, yet still refuses to heed his warnings. ......

>Here a not so depressing interview with the Comptroller himself with Colbert :-)

>Hier zur Abwechslung ein nicht so ganz deprimierendes Interview mit David M. Walker von Colbert :-)


got gold.....?

The Biggest Dollar Diversifiers Are American / S. Jen

While i not agree that the US $ is sound Stephen Jen puts up some excellent points why the Greenback is facing some "hidden" headwinds. The obvious problems like a slumping US economy, the diversification from Foreign Central Banks away from the $, deficits etc are well known ... He points out several others reason why the $ is losing faith..... He blames the Fed and its "bailout" mentality under Greenspan and probably under Bernanke.... On top of this it isn´t helping the $ when the Fed is the only Central Bank that is targeting the useless "core rate" when others are fighting the headline CPI. Both are not very successful...... But the key point is that the big guys are fleeing or as Wall Street and others would say "diversifying" out of the dollar holdings at a accelerating pace........Make sure you read also this piece from Brad Setzer

Obwohl ich nicht mit der These übereinstimme das die Fundamentaldaten für den $ immer npch gut sein sollen macht Stephen Jen hier einen sehr guten Job und weist auf einige nicht so offensichtliche Punkte hin die einen Teil der aktuellen Dollarschwäche erklären. Die offensichtlichen Probleme des $ wie eine abschmierende Volkswirtschaft, Diversifikation der Notenbanken aus dem $, Defiizite usw. sind inzwischen selbst auf CNBC angekommen. Jen aber arbeitet andere nicht so offensichtliche Punkte heraus, wie z.B. das die Fed dank Greenspan zurecht eine Mentalität unterstellt das im Falle einer Krise immer die Geldschleusen großzugig geöffnet werden. Dazu kommt dann noch das die Fed die einzige Notenbank ist die lediglich die alberne "Core" Inflation "bekämpft". Der wichtigste Punkt aber ist das die Amis selbst aus dem $raum flüchten oder vornehmer ausgedrückt "diversifizieren"..... Kann Euch in diesem Zusammenhang noch empfehlen das von Brad Setzer zu lesen.

The dollar is very weak relative to most currencies. While cyclical factors have played an important role, I don’t believe that cable is trading at 2.05 and EUR/USD at 1.38 due only to these rather innocuous cyclical factors. Other structural factors may be at play. One possible structural reason for the dollar to have had a gradual downward trajectory since 2002 is, I suspect, portfolio diversification by US real money managers.

Cyclical explanations for the weak dollar
There are ample cyclical reasons for the dollar to have underperformed recently. First, the US economy is weaker than almost every other economy in the world. Though we may have seen the trough in the US business cycle in 1Q, the recovery trajectory is likely to be modest, after a surge in 2Q. The rest of the world, however, continues to surprise to the upside, showing no sign of lagged effects of the softness in the US economy from 2Q06 to 1Q07. No longer do investors doubt the ‘de-coupling’ thesis. Monetary policy between the Fed and other central banks is in direct correspondence to this expected divergence in economic growth. As a result, the dollar may sag as long as other central banks remain in motion.
Second, in addition to these central case expectations of the US and the rest of the world, due to the problems with the sub-prime market and the housing sector, the risk to the US outlook is biased to the downside, with limited spillovers expected for the rest of the world. Investors have the collective memory that the Federal Reserve eased interest rates by 75bp in 1998 in response to the failure of LTCM, despite the fact that the general macro conditions were positive and inflation was drifting higher. With this track record, investors believe that the Fed may have difficulties raising interest rates if the sub-prime problem persists.
Third, higher oil prices are positive for EUR/USD. Not only do oil exporters have a marginal propensity to consume European goods that is twice as high as that for US-made goods, but the fact that the ECB targets headline inflation while the Fed targets core inflation may also have encouraged investors to expect EUR/USD to rise with oil prices. ....

Diversification by US real money accounts
While the cyclical factors I mentioned above may help explain why the dollar has depreciated recently, they don’t give a satisfactory explanation as to why the current level of the dollar is so extremely low. In retrospect, since 2002, the dollar has had its ups and downs, but the underlying trend has been downward. I have long argued that the dollar is structurally sound, and provided reasons (such as the ‘de facto dollar zone’, valuation, geopolitical hegemony, dominance in the global financial markets, etc.) justifying why the dollar’s hegemony will be preserved. I am still convinced by many of my arguments. However, I am now taking more seriously the thesis that US real money investors have been steadily diversifying away from USD assets since 2003. ...The dollar may thus still be structurally sound, but not as sound as I had thought.

US real money accounts consist of four key categories of funds: mutual funds, private pension funds, state and local pension funds and life insurers. The Fed’s Flow of Funds data track the sizes of these funds. As of 1Q07, the total assets under management by these four categories reached US$20.7 trillion, up from US$12.6 trillion in 1Q03. At more than US$20 trillion, real money under management in the US is close to four times the size of the world’s official foreign reserves. Any signs of diversification by these real money accounts would have great implications for the dollar. While I don’t have a breakdown of the asset allocation of all four categories, the Boston Fed’s Monthly Mutual Fund Report shows that mutual funds’ allocation to international equities has risen from around 15% in 2003 to 22.5% now. This trend diversification is gradual but determined.

If we apply this outward investment allocation ratio to the total stock of mutual funds, the cumulative outflows of mutual fund investment since 2003 are around US$400 billion. But if we apply this outward investment allocation ratio to the entire stock of real money accounts, the cumulative outflows since 2003 total US$1.16 trillion: US$190 billion in 2003, US$295 billion in 2004, US$324 billion in 2005 and US$352 billion in 2006. These outflows are indeed massive.

Bottom line
Contrary to popular presumption, US real money mangers are the biggest dollar diversifiers, not the Asian central banks. Controlling assets that are four times the size of the total global official foreign reserves, US real money managers have been steadily diversifying out of the US since 2003. My calculations show that cumulative outflows may have totaled US$1.16 trillion in the past four years. This may help explain the downward drift in the dollar in recent years, and why the dollar is so weak now.

Peter Schiff On CNBC

With the $ just around the multi decade bottom at 80 it is especially funny to hear Schiff vs the guy from CNBC. Click on the headline to start the video


Da sich der $ heute anschickt den jahrzehntelang gehaltenen Boden bei 80 zu durchbrechen ist es ein besonderer Genuß Schiff und den ziemlich typisch amerikanischen "Sprecher" von CNBC zu hören. Klickt auf die Überschrift um das Video zu starten.

$ index right now at 80,09......