Chile Forum

Yea, I am looking at these markets and thinking the World markets are about to be whacked really hard one more time before we push higher. It might even happen this week.

I have been reading a lot lately about the dollar holdings in Asia. It is not even China that is so much of concern, but the smaller countries that started the Asian crisis have been building up big reserves of dollars even though it is not in their interest in the long-term to keep their prices competitive for export. None of the politicians want to shoot their economy in the foot at the moment, even to the point of risking a regional fire later.

I also seen a trader today on bloomberg point out something really obvious. Everyone keeps going around saying China will not drop its dollar debt, because it needs trade with the U.S.. He stated the obvious, there is no good reason why China can not just unload them, and load up on more Euros, commodities, or whatever.

It is like everyone knows this is going to end badly, but no one wants to pull the rip cord.

I think the Chinese Govt. will bide their time until the right moment. They have already been unloading USD's in a systematic fashion, just not in large enough amounts to panic anyone. They don't want to start the stampede, that would hurt them a lot to be left "holding the dollar bag." By buying all the hard assets (such as commodities) that they can get their hands on and paying African countries in dollars for all the joint ventures (mining, infrastructure etc.) they have going on there allows them get rid of quite a bit of USD's. China's incursions into Africa were the major reason for the US military forming Africom or whatever it's called. China has a growing influence in Africa and pretty much keeps some of those little African countries floating with their $. The Chinese leadership doesn't strike me as being prone to taking a lot of risks. I think they're more of, to use a boxing term, counter-punchers. Just biding their time hanging around throwing jabs and then just at the right, or worst moment, depending on your point of view, they'll smack you upside-the-head with a right-cross that knocks you on your a** like Mike Tyson in his prime smacking down the latest chump of the week.

They don't have to do anything really but wait. I think after some more US banks fail and and we hit the next circle around and down the drain could be the moment the Chinese act and say, "well, look at you clowns, we can't hang on to all these dollars anymore all your banks are failing." So they dump dollars on a large scale thereby triggering the exit by everyone else out of dollars. And that would be the headshot to the US economy. Goodnight.

Here is a very interesting list. http://www.lewrockwell.com/chris/banks/banks.html A list bankers wouldn't want you to see. A list of US banks and their "Texas Ratio." http://en.wikipedia.org/wiki/Texas_ratio And here is the story explaning what it means. http://www.lewrockwell.com/blog/lewrw/archives/40739.html

I see a lot of GA, FL and IL banks ready to go under.

I could be completely wrong about this as a trigger. But I do know that something will trigger the exit out of dollars. Just a matter of time.

If the dollar falls faster then the price of oil rises, countries will want dollars so they can purchase oil at a discount. That will raise the value of the dollar as its' demand increases. Which will lower the cost of oil as oil is priced in dollars though there is a move to price oil in Euros.
The issue is if we here in the USA can afford higher oil prices and a lower dollar for the short run. Of course, we need to know what the short run will be.

That is why I have some of my investments in energy companies (BP and Chevron among others).

I got an observed dollar today of 528.89 on the central bank web site.

You know, it would be nice for once (just once) to not get beaten over the head by a strong pesos going in to our high season when all the gringos are trying to decide where to go for the summer. If this keeps up, I am going to buy a printing press. I can print, "Backed by the full faith and credit of allchile.net" on the new currency.

On the other hand, my gold stock went up 10% today and I don't even own a gold wedding ring (lost it years ago).

Hi Admin

Do not know if you will allow this link (not sure I have enough posts yet!)
Makes for interesting read offering a different view......??
http://www.moneyweek.com/investments/co ... 94507.aspx

admin wrote:I got an observed dollar today of 528.89 on the central bank web site.

You know, it would be nice for once (just once) to not get beaten over the head by a strong pesos going in to our high season when all the gringos are trying to decide where to go for the summer. If this keeps up, I am going to buy a printing press. I can print, "Backed by the full faith and credit of allchile.net" on the new currency.

On the other hand, my gold stock went up 10% today and I don't even own a gold wedding ring (lost it years ago).

No worries. Where are us gringos gonna go? Europe? Australia? The euro and the aussie $ are kicking the USD's butt even more than the peso. The fed held firm at 0% - 0.25% interest rate (bank rate) yesterday, so let the $ free fall continue. Good thing I have frequent flyer miles. At least the flight to Chile will be reasonable.

Pat Mc

527.850 right now on xe.com

If people haven't hedged by now, it may be too late unless another artificial dollar and bond pump and gold and commodity smash comes along. If that happens, I do believe it will be the last one before unstoppable natural economic forces assert themselves or TPTB unveil a new Bretton Woods type system.

Still counting: The Federal Reserve Dollar, 1913 to _____ . RIP!

CYA because no one else can or will.

It was that big purchase by India of Gold from the IMF that is going to set off the stampede of Asian nations to unload their dollars they have been holding to keep their exports competitive with China. At some point China will likely have to go with the flow also, and they have been stocking up on Gold and other commodities themselves.

This is all going to end very badly.

I am hanging on to as few dollars right now as possible, for as short a time as possible. Even at that, it has got to be doing something seriously disconnected from the U.S. economy such as investment in U.S. stock but seriously unhitched from the dollar or commodity related.

Well, that poll's looking about as inconclusive as it gets! Probably a fair reflection of the state of things. For now I'm following Admin & EEUU and cutting my losses. Can't really hedge against my USD salary though .

James.

jehturner wrote:Well, that poll's looking about as inconclusive as it gets! Probably a fair reflection of the state of things. For now I'm following Admin & EEUU and cutting my losses. Can't really hedge against my USD salary though .

James.

Probably a safe hedge if you can do it. The Fed made no changes to the uber-low interest rates this week, so that's probably why India threw in the towel and hedged long on gold. Once we are into 2010 it is an election year, and interest rates never go up in an election year, so the magma chamber of inflation will continue to build pressure and bulge the mountain. If inflation (and the soon to follow interest rates) erupts in the states, all bets are off and the dollar will shoot up as dollar denominated treasuries will bring high interest returns to foreign investors and central banks. That won't help US residents, whose cost of living will shoot up in an Argentin-esque debacle.

If this scenario plays out, look for 750-1000+ pesos/dollar, but few in the states who have disposable dollars to spend. Chile exports should benefit greatly though.

By the way, I hope I'm wrong.

Pat Mc

I see the UK has announced continued "quantitative easing", there goes any reason I had to hang onto my remaining GBP reserves.
http://blogs.telegraph.co.uk/finance/ed ... %99s-over/