Bob Chapman: US Dollar Will Collapse at end of 2010

Bob Chapman: US Dollar Will Collapse at end of 2010

Lindsey Williams: U.S. Dollar Will Collapse in 2012


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

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


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.


Study Says World’s Stocks Controlled by Select Few

Study Says World’s Stocks Controlled by Select Few

Inside Science News
August 29, 2009

A recent analysis of the 2007 financial markets of 48 countries has revealed that the world’s finances are in the hands of just a few mutual funds, banks, and corporations. This is the first clear picture of the global concentration of financial power, and point out the worldwide financial system’s vulnerability as it stood on the brink of the current economic crisis.

A pair of physicists at the Swiss Federal Institute of Technology in Zurich did a physics-based analysis of the world economy as it looked in early 2007. Stefano Battiston and James Glattfelder extracted the information from the tangled yarn that links 24,877 stocks and 106,141 shareholding entities in 48 countries, revealing what they called the “backbone” of each country’s financial market. These backbones represented the owners of 80 percent of a country’s market capital, yet consisted of remarkably few shareholders.

“You start off with these huge national networks that are really big, quite dense,” Glattfelder said. “From that you’re able to … unveil the important structure in this original big network. You then realize most of the network isn’t at all important.”

The most pared-down backbones exist in Anglo-Saxon countries, including the U.S., Australia, and the U.K. Paradoxically; these same countries are considered by economists to have the most widely-held stocks in the world, with ownership of companies tending to be spread out among many investors. But while each American company may link to many owners, Glattfelder and Battiston’s analysis found that the owners varied little from stock to stock, meaning that comparatively few hands are holding the reins of the entire market.

“If you would look at this locally, it’s always distributed,” Glattfelder said. “If you then look at who is at the end of these links, you find that it’s the same guys, [which] is not something you’d expect from the local view.”

Matthew Jackson, an economist from Stanford University in Calif. who studies social and economic networks, said that Glattfelder and Battiston’s approach could be used to answer more pointed questions about corporate control and how companies interact.

“It’s clear, looking at financial contagion and recent crises, that understanding interrelations between companies and holdings is very important in the future,” he said. “Certainly people have some understanding of how large some of these financial institutions in the world are, there’s some feeling of how intertwined they are, but there’s a big difference between having an impression and actually having … more explicit numbers to put behind it.”

Based on their analysis, Glattfelder and Battiston identified the ten investment entities who are “big fish” in the most countries. The biggest fish was the Capital Group Companies, with major stakes in 36 of the 48 countries studied. In identifying these major players, the physicists accounted for secondary ownership — owning stock in companies who then owned stock in another company — in an attempt to quantify the potential control a given agent might have in a market.

The results raise questions of where and when a company could choose to exert this influence, but Glattfelder and Battiston are reluctant to speculate.

“In this kind of science, complex systems, you’re not aiming at making predictions [like] … where the tennis ball will be at given place in given time,” Battiston said. “What you’re trying to estimate is … the potential influence that [an investor] has.”

Glattfelder added that the internationalism of these powerful companies makes it difficult to gauge their economic influence. “[With] new company structures which are so big and spanning the globe, it’s hard to see what they’re up to and what they’re doing,” he said. Large, sparse networks dominated by a few major companies could also be more vulnerable, he said. “In network speak, if those nodes fail, that has a big effect on the network.”


Trader: Market is manipulated and volumes ‘fictitious’

Trader: Market is manipulated and volumes ‘fictitious’