How Does the Value of the U.S. Dollar Fit Into the Big Picture for the Economy?
Robert Prechter discusses his views on the credit crisis and the U.S. dollar
More credit is denominated in U.S. dollars than any other currency. What does this mean for the value of the dollar as the credit crisis continues its strangle-hold on the world economies?
Enjoy this video clip of Bob Prechter from an October interview with The Mind of Money host Douglass Lodmell, in which Bob discusses the debt implosion and the value of the U.S. dollar.
You can watch Prechter’s full 45-minute interview here — no sign up required!
 | Watch the full 45-minute interview FREE Get even more valuable insights as Mind of Money host Douglass Lodmell interviews Elliott Wave International’s President, Robert Prechter, about how to keep your money safe, the deflation versus inflation debate, and many more topics that are critical to your financial future. Start watching the free 45-minute interview now — no sign up required! |
Rick Rule: “Bet against the dollar as a store of value”
In this excerpt from the Casey Summit When Money Dies, seasoned resource investor/broker Rick Rule discusses risk management and explains why the greatest risk you face as an investor is located to the left of your right ear and to the right of your left ear.
Listen to Rick’s complete summit speech – plus those of nearly 30 other renowned financial experts – from the comfort of your home. More than 20 hours of audio recordings on CD or MP3, including the experts’ top stock picks. Learn more.
Michael Maloney: “We pay tax for the privilege to have currency”
In this video excerpt from the Casey Summit When Money Dies, Rich Dad advisor Mike Maloney explains how currency is created, “fractional reserve banking,” and why our banking system is a pyramid scam of epic proportions.
Is the US Monetary System on the Verge of Collapse?
By David Galland, Casey Research
Tune into CNBC or click onto any of the dozens of mainstream financial news sites, and you’ll find an endless array of opinions on the latest wiggle in equity, bond and commodities markets. As often as not, you’ll find those opinions nestled side by side with authoritative analysis on the outlook for the economy, complete with the author’s carefully studied judgment on the best way forward.
Lost in all the noise, however, is any recognition that the US monetary system – and by extension, that of much of the developed world – may very well be on the verge of collapse. Falling back on metaphor, while the world’s many financial experts and economists sit around arguing about the direction of the ship of state, most are missing the point that the ship has already hit an iceberg and is taking on water fast.
Yet if you were to raise your hand to ask 99% of the financial intelligentsia whether we might be on the verge of a failure of the dollar-based world monetary system, the response would be thinly veiled derision. Because, as we all know, such a thing is unimaginable! Continue reading
Currency Strength Can Sap Returns
London is a money town. It has been the center of the whole Western world’s currency transactions for three centuries. Until 1945, the British pound sterling was the world’s primary reserve currency. The pound is less popular than the dollar or euro now. But whatever currency is king, London is likely to bank it, trade it and exchange it.
London bankers and brokers were old in the business when the New York Stock Exchange was born under a buttonwood tree on Wall Street. London bankers and fund managers were master investors when U.S. stock markets could barely support the capital needs for the greatest new technology boon known to man, that force of creative destruction that changed a continent… railroads.
When it comes to money, London knows the ins and outs.
That’s why I was so interested in a study from London Business School and ABN Amro Bank that I found recently about the effects of strong and weak currencies on the stock market. Continue reading
A Thousand Pictures Is Worth One Word
By Jeff Clark, BIG GOLD
In spite of constant headlines about debts and deficits, most Americans don’t really believe the U.S. dollar will collapse. From knowledgeable investors who study the markets to those seemingly too busy to worry about such things, most dismiss the idea of the dollar actually going to zero.
History has a message for us: No fiat currency has lasted forever. Eventually, they all fail.
BMG BullionBars recently published a poster featuring pictures of numerous currencies that have gone bust. Some got there quickly, while others took a century or more. Regardless of how long it took, though, the seductive temptations allowed under a fiat monetary system eventually caught up with these governments, and their currencies went poof! Continue reading
Pressures Mount on Bank of England (BOE) to Devalue Pound
October 7, 2010
By Chris Ciovacco
The Bank of England (BOE) is due to make a statement today at noon in London (7:00 a.m. ET U.S.). The BOE’s actions in the next 45 days may be important to investors in the U.S. and global commodity markets. All things being equal, a weak U.S. dollar tends to provide favorable headwinds to both U.S. stocks and commodities, such as oil (USL), copper (JJC), gold (GLD), and silver (SLV). With the BOE facing more bad news on the housing front today, political pressures to join the money-printing parties in the United States and Japan are mounting.
As shown below, the U.S. Dollar (UUP) and British Pound (FXB) tend to be negatively correlated. Should the Bank of England decide to stimulate further in the coming weeks and months, in the form of more quantitative easing, it could impact investors in the S&P 500, Dow, and NASDAQ, as well as those using commodities as a hedge against a weak dollar.
With exports impacted by stronger currencies, Japan (FXY), the U.S., and England are all looking to prevent their medium of exchange from appreciating too much. Japan recently announced additional plans for asset purchases and the U.S. Fed is hinting strongly at following along at their November 3, 2010 meeting. The BOE has a decision to make over the next few weeks. It is widely expected no significant changes to BOE policy will be announced this morning, but it is something investors should keep on their radar.
The daily CCM 80-20 Correction Index closed Wednesday at 604, which keeps us at a point of relatively low-risk for a major market correction. Roughly 80% of the corrections we studied occurred from points when the 80-20 values were greater than 604. The CCM Bull Market Sustainability Index (BMSI) closed Wednesday at 2,807. Markets Downside Risk Mitigated By Fed, Economy, and Technicals contains a BMSI table which shows historical risk-reward ratios for BMSI values.
Originally Published by Ciovacco Capital Management
How You Can Help Take Money Creation Out of the Hands of the Government
Updated March 30, 2011
We all whine and complain about it but usually there isn’t much we can do about inflation.  About our only choice is to vote with our feet, we can move our funds from one doomed currency to another. This is what the Forex industry is all about. The only other alternative to fiat currency is hard assets like gold.
As I’ve said many times, the value of our money is based on the supply and demand fundamentals. Right now the demand for U.S. dollars is falling and the supply is rising because the government has the ability to create them out of “thin air”. Based on basic Economics 101 this means that the value of the U.S. Dollar will continue to fall as long as the government has control of the printing presses. On the other hand, at the moment, the demand for gold is rising and the supply is relatively constant so the price of gold is rising. The major problem with gold is that it is difficult to use for day to day physical and electronic transactions. On the plus side, it is beyond the control of government.
Recently, some individuals have decided that the time is ripe to take the control of currency out of the hands of governments and put it into the sphere of private competition. The idea is to Continue reading
Euro Area Inflation Estimated at 4.0%
At 4% Euro Area inflation is very similar to the U.S. Inflation rate.
On June 30, 2008 the Eurozone released what they call a “Flash” estimate of their inflation rate for the month of June. It is provisional and could be modified before the final release. But they claim it is 95% accurate.
Calculating Inflation in the EuroZone is more complex than for a single country. Their individual country inflation calculations are called HICPs (Harmonised Indices of Consumer Prices).
Current Euro Area Inflation Chart (1 Yr)
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| Chart courtesy of www.rivaluta.it |
While the combined inflation rate is called “The Monetary Union Index of Consumer Prices” (MUICP) which is a weighted average of member states using their individual HICPs and combining them based on country weights which are computed every year reflecting the country’s share of private final domestic consumption expenditure in the EMU total.
Here is the basic substance of the June 30th Release:
Flash estimate – June 2008
Euro area inflation estimated at 4.0%
Euro area1 annual inflation2 is expected to be 4.0% in June 2008 according to a flash estimate issued by Eurostat, the Statistical Office of the European Communities. It was 3.7% in May3.
Computation of flash estimates
Euro area inflation is measured by the Monetary Union Index of Consumer Prices (MUICP). To compute the MUICP flash estimates, Eurostat uses early price information relating to the reference month from Member States for which data are available4 as well as early information about energy prices.
The flash estimation procedure for the MUICP combines historical information with partial information on price developments in the most recent months to give a total index for the euro area. No detailed breakdown is available. Experience has shown the procedure to be reliable (14 times exactly anticipating the inflation rate and 10 times differing by 0.1 over the last two years). Further information can be found in Eurostat News Release 113/2001 of 5 November 2001.
- Â The Member States of the euro area are Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia and Finland.
- Â Annual inflation is the price change between the current month and the same month of the previous year.
- Â See News Release 85/2008 of 16 June 2008.
- Â The MUICP flash estimate usually includes early price information representing approximately 95% of the euro area total consumption expenditure weight (see News Release 53/2006 of 28 April 2006).
Issued by Eurostat Press Office
How does the “Falling Dollar” and the exchange rate affect Inflation?
With all the recent talk about the “falling dollar” will that affect the inflation rate?
Let’s start with the basics.
1) Price inflation is primarily caused by monetary inflation. In other words as the money supply increases things cost more. See What is Inflation? for a full explanation.
2) The government controls the money supply to a certain extent through tightening or loosening credit.
3) The economy is extremely complex and many other factors come into play. Such as international exchange and the supply and demand for goods and services.
At first blush it might appear that the falling dollar would cause deflation because the dollar is going down. But if the dollar is going down that means the purchasing power of the dollar is decreasing on a worldwide scale. In other words, a U.S. dollar would buy less if you traveled to another country. That is another way of saying that it takes more dollars to buy the same thing. That sounds pretty much like inflation. Continue reading
