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Leading Economist: Dollar Faces Outright Collapse

Financial experts issue dire warnings as Fed and Treasury continue to say they are "committed to a strong dollar"

Steve Watson
Infowars.net
Friday, March 14, 2008


Another prominent economist has warned that the bottom may soon drop out of the dollar completely as the currency hits fresh lows and continues to sink worldwide.

Peter Schiff, a dollar-bear at Security Pacific Capital, told the London Telegraph that the greenback faced the danger of outright collapse as countries in Asia and the Middle East mull plans to break their dollar pegs, which are fueling inflation across the region.

"The decline could accelerate rapidly. The world is still holding a lot of dollars it doesn't need," he said.

Schiff is well respected amongst the major financial publications, primarily due to the fact that over two years ago he accurately forecast that the U.S. housing market was a bubble that would soon come to bust, and also that the crisis would extend to the credit card lending industry.

Schiff is also the economic advisor for Ron Paul's Presidential campaign.

The greenback reached a record low of $1.5651 against the euro yesterday, meaning it has lost 15 percent against the euro since September alone. It also dipped below 100 yen, its lowest level in 12 years, and fell below parity with the Swiss franc for the first time in history today.

Other analysts share Schiff's fear of a total dollar collapse. Mitul Kotecha, head of currency strategy at Credit Agricole, said: "The real risk remains that we get a dollar rout. The news from from the US is consistently negative and investors are actually not overly long euros."

The Negative dollar sentiment is now becoming global, with nations who have traditionally accepted the dollar as equal to or better than local currency now rejecting it outright. Reports suggest that the once mighty dollar is no longer good enough even for Manhattan flea market traders:

In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.

"Whip out dollars at the French flea market now, and they'll shoo you away," he said at his store near apartment buildings where Europeans are snapping up units because they've become dirt cheap. "Before it was like the second coming of Christ, but now they don't want it or if they do take dollars, they're going to take their pound of flesh."

Other nations mulling a turn away from the dollar peg are likely to be influenced by the fact that the Chinese yuan has risen to the highest level since the end of its dollar link in 2005.

As the Financial Times reports, analysts are in no doubt that the weakness of the dollar is being caused by Fed rate cuts and injections of liquidity, which it says constitute efforts to steady markets.

Executives, investors and politicians say they're becoming increasingly worried. Dollars are ``printed on toilet paper,'' Marc Faber, managing director of Marc Faber Ltd., said in an interview with Bloomberg Television.

Yesterday U.S. Treasury Secretary Henry Paulson again repeated the now engrained mantra that he backs a "strong dollar'' and refused to elaborate when questioned at a press conference in Washington.

"The "strong dollar" message is so familiar, and is uttered with such unfailing regularity, that market observers often roll their eyes when they hear it, and short-term traders pay it little heed," reports Market Watch.

In the wake of the news that the G7 nations may intervene to shore up the dollar, analysts have stated that such action may now be futile considering that the Fed is seemingly unfazed by the currency's total degradation and has the ability to effectively "pull rank" over policy makers who may be genuinely worried about the decline.

Supporting the dollar may also prove futile, as its decline partly reflects the Fed's cuts and the ECB's decision not to follow, said Chris Turner at ING Financial Markets.

The Fed has cut its main rate by 2.25 percentage points since September to 3 percent, while the ECB's rate is still at a six-year high of 4 percent.

"Failed intervention is worse than no intervention,'' said Turner, ING's head of currency research in London. "Policy makers have their hands tied and will defer to the global priority of the Fed slashing interest rates.''

Meanwhile the corporate media in the US continues to echo the Bush administration's snowjob policy on the dollar crisis by ludicrously citing "experts" who claim that the unprecedented plunge of the greenback is "not necessarily a bad thing for the U.S. economy."

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Richterscale

We've been living in a house of cards since 1971, and there's a strong wind getting ready to blow. Enjoy your superpower status while you can, because we, like the U.S.S.R. will soon be known as a "former" superpower.

I was never a Ron Paul supporter, but one of the things he is absolutely right about is our insane economic structure. And every few days now, when I hear another story about how the Fed is releasing another couple hundred billion dollars or so, I now see it for what it is. A further weakening of the dollar. it's like adding more water to a pitcher of Kool-Aid.

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DRS112

It's not much of a surprise that Schiff says this...it's pretty much what he's always been saying...doesn't make him wrong...but it also doesn't make an economist who didn't believe this was going to happen...and then changed their mind because of recent events..

aloysious

Don't want to say "I told you so", but...

ppatt

Bush took his shiny new toy, America and drove it into a ditch. Those of you who voted for him should pay extra tax for 20 years to get us out of this mess. C'mon, stand up and be counted...you once stood proud and tall. You never shrunk from your duty before.

You weren't fooled by them...you've been them for over 7 years. Too late to change now. No do-overs allowed.

Chuckweirdstone

In Nov 07 I took our money out of the medium risk stock portfolio. I believe we had already lost $1,000 by then and the word was that sub prime loans were in big trouble. That it was likely many people would loose their homes and the Christmas sales were likely to be bad at best. I changed my risk factor to almost 0 and for the time being but kept the 10% of wages going and of course the matching. Were almost back to where we were before the shit started. I can`t imagine what has happened to anyone that stayed pat. They say don`t jump the ship because the stocks take a dive, but this is not a dive. This is serious shit. Bush has driven the truck into the ditch as PPATT put it. Hell he drove it of the mountain got control of it for a second or two only to drive it off the bridge, managed to keep it afloat just long enough to realize it was about to go off the Great Falls. As we all sit at the bottom of the river with bubbles swirling all about, the silence is broken by the sound of ticking.

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Dianekkdi

LoL, I know very few people who are willing to admit they voted for bush. I do know a few who have apologized for voting for bush. Many are sincere...some are simply following repugnican tradition...fuck everybody then apologize later.

Kind of answers any questions about repugnican masturbation: they most definitely do like to fuck themselves.

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DRS112

CNNMoney.com staff writer
Last Updated: March 18, 2008: 5:32 PM EDT


Gold plummets on dollar strength
The shiny commodity sees a sell-off after Fed cuts interest rates by a less-than-expected three-quarters of a percentage point, sending the dollar up


Gold sunk below $1,000 as the lower-than-expected rate cut sent the dollar sharply higher Tuesday.
Go west for gold

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NEW YORK (CNNMoney.com) -- Gold prices sunk below $1,000 Tuesday as the dollar roared back after the Federal Reserve's announcement that it would cut a key interest rate by three-quarters of a percentage point

The markets had been anticipating a full-point cut.

COMEX gold for April settled at $1,004.30 an ounce in floor trading Tuesday. But after the Fed announcement, the commodity lost $24.70 to $977.80. Gold settles at 1:30pm ET, but it continues to trade electronically around the world.

A sharp rise in the dollar gave investors hope that the economy is due for a turnaround, helping to send gold prices lower. Traders sold their gold, which they have stockpiled as a hedge against the sinking dollar, and bought stocks. The stock market saw impressive gains Tuesday, closing up 420 points.

"Investors saw the very, very strong dollar movement, which made them think that maybe we are heading towards a recovery," said Mark Hansen, director of trading at commodities firm CPM group.

The dollar moved higher against several major currencies Tuesday as the Fed's decision to lower the federal funds rate by only three-quarters of a percentage point was a disappointment for some investors who were hoping the central bank would act more aggressively by cutting rates by a full percentage point.

The 15-nation euro traded at $1.5715, down from $1.5731 late Monday. But prior to the Fed's decision to cut interest rates, the euro was trading $1.5792. The dollar also moved higher against the British pound.

"Investors are looking to take profits if the dollar stabilizes," said Hansen, who believes that gold could correct to $910 if the Fed is successful in boosting the economy.

Gold has risen sharply in the past weeks, hitting a record $1,033.90 Monday, as investors poured their money into gold to ward off inflation.

But when the economy ends its current downturn, gold prices should eventually fall, as they did 28 years ago. After hitting the $847 mark in January 1980, gold futures fell 70% to $253 in August 1999.

But if the dollar does not continue to grow stronger, worried investors could buy up gold again like in 1980. Gold is near record highs now, but the $847 level 28 years ago would be worth $2,170 in today's dollars, more than double gold's current price

VKMHVM2

The dollar is going TO THE MOON!

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