[NoWorries]

http://www.cnbc.com/id/44310840

I had to read this twice to be sure I wasn't seeing things.

I had come to the conclusion in recent years that the stock market was moving in a way that was irrational and incomprehensible to me. But this item I find even harder to fathom.

Strange days indeed.

[prajeshbhat]

An appreciating dollar is not necessarily a good thing for the American households. They are very deeply indebted. A strong dollar means the big banks will have a free ride on the interest that the people are paying them. Many households will default.
The best hope for the american households is that there is an across the board wage increase followed by an across the board price increase which will devalue the currency and lower the burden of their debts. A strong currency will kill that hope.

[steam_cannon]

$200 plus or minus doesn't sound like it will make much difference.
The article is saying that if gold goes down from $1800 to $1600,
that will mean the dollar rises 30% by their maths?

So that makes me wonder, if gold has went from $200 and cranked up to almost $2000,
then how much has the dollar already lost in value?

Also the end of the article sounds about right.

The dollar slipped against major currencies on Monday, with investors speculating that Federal Reserve Chairman Ben Bernanke will resort to more monetary easing despite a rise in core inflation.

An appreciating dollar is not necessarily a good thing for the American households. They are very deeply indebted. A strong dollar means the big banks will have a free ride on the interest that the people are paying them.

Yep, on the other hand if the article is right then it's a banks wet dream.

Who has most of the gold and dollars, the banks and the rich. Who has most of the dept, poor people. Dollar goes down, gold goes up and rich win. Gold goes down, dollar goes up, rich win. Either way, everybody else loses.

[americandream]

I had to read this twice to be sure I wasn't seeing things. ... But this item I find even harder to fathom. Strange days indeed.

Not that hard to fathom. The Euro was never really a serious second reserve/haven currency. No one in their right mind is going to park all their holdings in gold. Swissie has it's uses for short term uncertainty. The greenback is backed by the world's strongest and most influential government (irrespective of all of it's shortcomings.) Who is going to trust the Yen or Yuan?

[smiley]

So we should all put our money in greenbacks because its backed by Obama, Biden and a bunch of folks who have been throwing mud at each other for the past couple of months an yet have to produce a budget for this year? Not a very compelling argument.

And why would we need a single "reserve" currency. Most countries are currently diversifing in a basket of regional strong currencies. That might work just as well as a financial model.

[PrestonSturges]

If you read Theautomatic earth, they called this last year. If you read ZeroHedge, you are probably reading this in the library because you lost your house.

[stephankrasner]

This article makes sense, especially when you consider the current economic crisis in Ireland where they lost 20% of their economy despite extreme austerity measures. That could destabilize all of Europe except France and Germany. If that happens you will see investors looking to the only relatively stable place to invest, that would be the dollar.

[copious.abundance]

If the dollar appreciates 30% over the next 6-12 months, it's time to head for the hills.

[prajeshbhat]

If the dollar appreciates 30% over the next 6-12 months, it's time to head for the hills.

What they mean is that gold could fall 30%. I don't think any fiat currency can ever rise. They can rise relative to other currencies or gold but not relative to their purchasing power in the past.

[Outcast_Searcher]

If the dollar appreciates 30% over the next 6-12 months, it's time to head for the hills.

What they mean is that gold could fall 30%. I don't think any fiat currency can ever rise. They can rise relative to other currencies or gold but not relative to their purchasing power in the past.

You have no idea what you're talking about. This is EXACTLY what has been happening to the Yen as a trend since 1990. Deflation is so persistent in Japan that many Japanese won't spend, because they EXPECT prices to fall. Deflationary expectations can get strongly ingrained into an economy in the longer term, just like inflationary ones can.

Or are you going to claim that this is a MSM conspiracy, and Japan hasn't really been experiencing a deflationary trend for a couple of decades?

I'm NOT saying this will happen to the dollar, BTW -- I am saying it CAN, and that's what the doves in the Fed are worried about.

[prajeshbhat]

You have no idea what you're talking about. This is EXACTLY what has been happening to the Yen as a trend since 1990. Deflation is so persistent in Japan that many Japanese won't spend, because they EXPECT prices to fall. Deflationary expectations can get strongly ingrained into an economy in the longer term, just like inflationary ones can. ...
I'm NOT saying this will happen to the dollar, BTW -- I am saying it CAN, and that's what the doves in the Fed are worried about.

Let me rephrase that. I don't think any fiat currency can ever rise in a healthy growing economy.

[evilgenius]

If you read Theautomatic earth, they called this last year. If you read ZeroHedge, you are probably reading this in the library because you lost your house.

+1

[crude_intentions]

Holy Crap

If this is true it means that the markets have created a De Facto Gold Standard.

My guess is that Obama and the Fed would start gold confiscation before they let it threaten dollar. Which of course would probably cause open revolt a crisis not seen since the civil war.

[The Practician]

If you read Theautomatic earth, they called this last year. If you read ZeroHedge, you are probably reading this in the library because you lost your house.

+2

It's complicated stuff, and I certainly don't claim to understand all of it, but if you want to read a convincing and rational case for a deflationary depression The Automatic Earth is the place to go.

[PrestonSturges]

+2 It's complicated stuff, and I certainly don't claim to understand all of it, but if you want to read a convincing and rational case for a deflationary depression The Automatic Earth is the place to go.

And they aren't trying to sell you anything. Plus they have been warning people not to be fooled by the EU for years, which is why they have been saying there would be a flight back to the dollar.

[smiley]

If this is true it means that the markets have created a De Facto Gold Standard.

If they did, gold would be doing about a million dollar per bar by now, I reckon. Just look at how much money has been created after abandoning the gold standard, and compare it to the amount of gold mined.

Even if you would extract all the value from the gold market and put it in the dollar, I don't think that it would allow for a 30% increase in value of the dollar. The reverse might be true. If you extract all the value in the dollar related markets and put it in gold price might explode. Certainly when you demand physical delivery.

Not that I would encourage everyone to buy gold. Without a gold standard, it is just a shiny metal with little to no use.

[stephankrasner]

For anyone who doesn't believe that there is going to be a bank run in Europe leading to a huge inflation in the dollar, listen to the most recent Planet Money podcast... http://www.npr.org/templates/archives/a ... =127413729

[copious.abundance]

If the dollar appreciates 30% over the next 6-12 months, it's time to head for the hills.

As of today, this is most definitely *not* looking good.

[Cog]

@OF2

Aren't we due to make another annual bet on GDP or something? I know you have beaten me like a dog on our last two bets but hope springs eternal that doom will triumph over cornucopia.

[copious.abundance]

Gee, I dunno Cog. Now that one of my Indexes of Doom started flashing warning signals today, I'm not too inclined to make optimistic bets. Sorry. You should have asked me a month ago.