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Schiff: Get out of the U.S. Dollar NOW

Peter Schiff: Get out of the U.S. Dollar NOW

http://www.youtube.com/watch?v=sjbgdg2_7XI

 



Even the Fed Doesn’t Want to Hold U.S. Dollars

Even the Fed Doesn’t Want to Hold U.S. Dollars

Seeking Alpha
Friday, October 23, 2009

This is the scariest image in finance:

The above chart shows the dollar’s performance since the Fed announced its Quantitative Easing program in March. This chart tells us two things:

1. Americans just got 15% poorer on the world stage thanks to Ben Bernanke
2. A currency crisis is in the works (and perhaps already starting)

Regarding #1: When the financial crisis hit, the Fed realized it would need to keep interest rates low while it attempted to bail out the banks (80% of the $200+ trillion in derivatives sitting on commercial banks’ balance sheets are related to interest rates).

The problem with this is that it makes Treasuries very unattractive to foreign investors (China & Japan) who want a higher yield. Consequently, the Fed decided to pick up the slack by buying $300 billion worth of Treasuries through the now famous Quantitative Easing program.

As I noted last week, the Fed is now the largest buyer of US debt (it bought more debt than the next three largest buyers combined in 2Q09). China and Japan are no one’s fools. And they’re not going to fund a monetary policy that is both profligate and likely to erode the value of their dollar holdings.

Which brings us to item #2: the coming dollar crisis.

I am not a huge fan of technical analysis, but it is a useful tool for navigating a trader-heavy, liquidity driven, manipulated market such as today’s. On that note, I want to point out that the dollar began forming a falling bullish wedge pattern starting in June (see above chart). This pattern entails an ever-tightening range of lower highs and lower lows and typically precedes major breakouts to the upside.

Except it didn’t.

As you can see, the dollar broke down out of this pattern in late September. It then rallied back up into the trading range before breaking down again. This is bad news. The next line of support (place where the dollar could bounce) is 76. We’ve already broken that one too.

Now the next line of support is 72. Now, the dollar has only fallen to this level once in the last 30 years (Summer 2008, see the chart below). If we fall below that, then we’re in uncharted territory and a major dollar devaluation is in the works.

Perhaps it’s already happening.

To review a point made earlier, the dollar has lost 15% of its value since March 2009. On an annualized basis, we’re talking about the dollar losing almost a third of its value in one year (30%). That is an absurd level of devaluation. And China, Japan, etc. have had enough. It is now clear that a flight from the dollar has begun; the Fed buys more US debt than the next three biggest buyers combined.

However, what most people don’t realize is that even the Fed itself is shifting away from the dollar. Everyone knows that China and Japan hold massive foreign reserves (the dollar). But the US Federal Reserve does this too (we own euros, yen, etc.). And for some reason the amount of foreign reserve assets (non-dollar assets) on the Fed’s balance sheet skyrocketed by 50% to $133 billion at the end of August.

Now, $133 billion in foreign reserves is nothing compared to China and Japan’s ~$3 trillion. But a 50% increase in one week is an astounding rate of change.

The culprit?

A 500% increase in SDRs: the “global” currency issued by the IMF. The blog ZeroHedge caught this story first and pointed out that SDRs are the IMF’s means of maintaining a “super reserve” currency for the world. SDRs are defined as: a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar.

Now, one has to wonder why the US Federal Reserve decided to suddenly buy $40 billion worth of SDRs overnight. The answer is that the IMF decided to massively increase the amount of SDRs outstanding from SDR 21 billion to SDR 204 billion in late August.

This came as part of a G20 decision made in April 2009 to stabilize the global financial system. Interestingly, of the countries involved in buying SDRs, the US bought the most at SDR 30 billion, compared to Japan (SDR 11 billion), and China (SDR 6 billion).

I realize this is getting a bit technical. But in simple terms this means that the US Fed intentionally participated in a world reserve currency scheme that devalued the dollar.

Folks, even the Fed doesn’t want to own dollars. It’s time to look for a currency that can’t be devalued.

 



Cash For Golf Carts

$5,500 Golf Cart Tax Credit in Obama Stimulus Bill

Taxprof
October 22, 2009

We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama’s stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart. The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart.

This golf-cart fiasco perfectly illustrates tax policy in the age of Obama, when politicians dole out credits and loopholes for everything from plug-in cars to fuel efficient appliances, home insulation and vitamins. Democrats then insist that to pay for these absurdities they have no choice but to raise tax rates on other things—like work and investment—that aren’t politically in vogue. If this keeps up, it’ll soon make more sense to retire and play golf than work for a living.

Read Full Article Here

 



Dems Looking To Raise Debt Ceiling To $13 Trillion

Dems Looking To Raise Debt Ceiling To $13 Trillion

Washington Post
October 22, 2009

Within the next few weeks, probably as soon as the votes on health-care reform have been taken, the Senate faces the painful duty of once again raising the statutory limit on the national debt, as the House already has done.

It is never fun for the party in power, but this year will be harder than ever on the Democrats. The final accounting on the just-ended fiscal year, delivered last week, showed a record deficit of $1.4 trillion, a gap that is the largest since the end of World War II when measured against the size of the overall economy.


This is what $1 Trillion dollars looks like. The Obama administration spent One-Trillion-Four-Hundred-Billion dollars in just one year.

The Republicans are poised to pounce. Senate Republican leader Mitch McConnell accused the Democrats of “acting like a teenager on a spending spree with his parent’s credit card with no regard to who pays the bill.”

The Democrats, in turn, blamed the George W. Bush administration for starting the deficit spending and say that they themselves had no choice but to spread the red ink in order to deal with the potential economic collapse they inherited.

The one barely possible benefit from this predictably futile partisan bloodbath is the opportunity it could offer to leverage support for a long-standing bipartisan effort to force Congress to confront the hard steps needed to put the nation on a safer fiscal course.

Read Full Article Here

 



Obama turns to Big Bankers for campaign cash

Obama turns to Big Bankers for campaign cash

WSWS
October 21, 2009

Under conditions of growing unemployment and deepening social misery for working people throughout the US, President Barack Obama flew into New York City Tuesday to raise millions of dollars in campaign donations from America’s financial elite.

He was expected to clear at least $3 million, largely from a Manhattan bash with an entry fee of $30,400 per couple—the maximum contribution allowed by law.

According to the Los Angeles Times, four of the seven co-chairs of the event and about a third of the guests come from the big banks and Wall Street.

Behind all the rhetoric about “change,” this is Obama’s most important constituency. In his run for the presidency in 2008, he captured the lion’s share of donations from Wall Street, taking in $15 million from securities and investment firms, $3 million from commercial banks, and $6 million from other financial institutions.

Read Full Article Here

 



Oil hits $82, Gold $1065, Dollar $1.50 against Euro

ECONOMY: Oil hits $82, Gold $1061, Dollar $1.50 against Euro

Reuters Canada
October 21, 2009

Gold prices clawed back above $1,060 an ounce Wednesday as oil rallied and the euro rose above $1.50 for the first time in 14 months.

The metal continued to take heart from a steadily falling dollar. Investors were turning to gold as the depreciation of global currencies threatened the value of paper assets.

Weak physical demand among jewelers and exchange-traded funds has put gold at the mercy of the currency markets, traders said.

Spot gold was at $1,062.70 an ounce at 3:07 p.m. EDT compared with $1,054.00 late Tuesday in New York.

U.S. December gold futures settled up $4.80 at $1,063.40 an ounce on the COMEX division of the New York Mercantile Exchange.

Prices have been tracking the euro-dollar exchange rate, with gold reaching record highs of $1,070.40 last week as the dollar hit its lowest level in over a year versus the single currency.

“Gold does not seem to have a mind of its own,” said Afshin Nabavi, head of trading at MKS Finance in Geneva. “It all depends on the euro.”

The dollar touched a one-month low against sterling and the euro broke above $1.50 as expectations for low U.S. interest rates weighed on the greenback.

Oil jumped more than 3 percent toward $82 a barrel on Wednesday, its highest level in a year, due to a drawdown in U.S. refined oil inventories and as a rise in U.S. equities which showed optimism about the economy and a potential rebound in energy demand.

However, physical demand for gold remained slow as high prices put off buyers. In India, the world’s biggest gold consumer last year, buyers stuck to the sidelines as demand linked to last week’s festival period petered out.

Among other precious metals, spot silver was at $17.75 an ounce against $17.45.

 



Truth Movement De-Programming Obama Supporters

Truth Movement De-Programming Obama Supporters