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Author Topic: Abandoning the US Dollar
WeAreAllJust LooseChange
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When I see 2 articles discussing this on the same day, I'm starting to get scared:
Buffet sees dollar weakness

DAEGU, South Korea (Reuters) - Billionaire investor Warren Buffett said on Thursday he expected the dollar to weaken further, adding that South Korean stocks offered better value than other world markets.

Buffett, worth $52 billion according to Forbes magazine in March, said his Berkshire Hathaway (BRKa.N: Quote, Profile, Research) company is still on the hunt for bargains as the U.S. subprime mortgage crisis plays out.

"We are still negative on the dollar. We bought stocks in companies that are earning their money in other currencies," he told reporters during a visit to Berkshire's Korean cutting tool maker subsidiary, TaeguTec.
...

U.S. "undoubtedly in recession": Jim Rogers

LONDON (Reuters) - The United States has entered a recession, according to highly-regarded investor Jim Rogers, who told Britain's Daily Telegraph newspaper on Wednesday he was switching out of the dollar and into yen, the yuan and the Swiss franc.
...
Rogers, who co-founded the Quantum Fund with billionaire investor George Soros in the 1970s, said it made sense to desert the dollar.

"All other things being equal during the next six months, that's the way I will go," he said. "But if the Swiss franc goes through the roof, I probably won't put money into the Swiss franc."

--------------

What is the alternative?
The only US bank I know who allows you to deal with foreign currency is EverBank (www.everbank.com), but their finance charges and other not very attractive. What are your plans of diversification away from the "mighty" dollar?

[ October 25, 2007, 11:02 AM: Message edited by: WeAreAllJust LooseChange ]

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Lobo
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Foreign stock.
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Dave at Work
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Did you know that there are benefits to a "weak" currency? The foremost one that comes to mind is that your goods and services become relatively less expensive on the world market which drives up demand therefore propping up exports. So if the dollar becomes weaker for an extended period of time, demand for goods and services from the U.S. will go up. Of course, the flip side is that those goods and services that we like from overseas become more expensive as well. You never know, Walmart might have to look for their cheap suppliers a little closer to home.

"Where the strength or weakness of the dollar is concerned, all the clouds have silver linings." --Me

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Rallan
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I dunno, I'm liking my mighty Australian dollar at the moment. Our housing boom ground to a halt a fair while before America's sub-prime mortgage crunch, so apart from some crazy-go-nuts temporary dips in the share price of big banks, our economy wasn't really affected. Meanwhile Asia's demand for raw materials has fuelled a period of sustained economic growth so ridiculous that we're still coming out ahead despite an agriculture sector devastated by the longest drought on record, and it looks like demand for the mineral exports that are paying our bills won't be drying up any time soon.

Plus it turns out that Australia, led by our very own Macquarie Bank, is the biggest foreign investor in US real estate at the moment (apparently we didn't just beat out Germany and Japan in 2006, we also beat the combined buying power of the entire middle east), and bad times for America could well mean good prices for big investors with good credit.

At the moment our dollar's usually trading at around 88-89 US cents (highest it's been in a loooong time, and the general trend is still up), and if it weren't for our crippled agricultural sector we'd probably be a good three or four cents higher.

Right, I just checked a currency conversion site and the aussie dollar is now trading at 90.55 US cents, a little higher than I thought. Apparently two weeks ago it got up to 90.61 US cents, which is the highest it's been since 1984.

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LoneSnark
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The Dollar has already fallen quite a bit. It has fallen far enough to already be correcting the imbalance (exports grew 13% in the last year; imports grew only 3%). This is an unsustainable long term situation as I do not believe a trade surplus makes sense for America in the World economy. At least, not a prosperous America. As it appears the current low exchange rate for the dollar is unsustainable in the long run, seven to ten years, an even lower exchange rate would be even less sustainable.

But if all you are looking for is a short term investment, a year or less, then it might be a wise bet to assume the dollar will fall further. But certainly don't bet your retirement.

[ October 25, 2007, 11:57 AM: Message edited by: LoneSnark ]

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IrishTD
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quote:
Plus it turns out that Australia, led by our very own Macquarie Bank, is the biggest foreign investor in US real estate at the moment.
Don't you mean our highways and toll roads rather than "real estate"? Stupid politicians [Mad]
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WeAreAllJust LooseChange
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The questions were more intended towards personal investment diversification, short term, and not towards macro economics.
Rallan, It's not the Australian dollar that is strong - it is the US Dollar that gets weaker and weaker compared to all world currencies [Wink]

Having lived in an economy going through a hyperinflation for couple of years (which I don't think will happen in US anytime soon) makes me a bit more cautious when people start talking how good for the US economy (which heavily relies on imports) the falling dollar is.

What if China finally decides to allow it's currency to appreciate? After all that's what US gov't has requested for a long time...
Will we be able to easily move our imports to a different country, or the US population will just have to settle for higher prices and inflation?

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LoneSnark
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Not to be contrarian, but the U.S. dollar has appreciated against numerous currencies over this same time period, the most significant being the Mexican Peso.
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RickyB
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Wow, currency of country A beating the currency of a country, half of whose population at least would move into country A at the drop of a hat if only allowed, many of whom doing so allowed or not. Success!
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Rallan
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quote:
Originally posted by IrishTD:
quote:
Plus it turns out that Australia, led by our very own Macquarie Bank, is the biggest foreign investor in US real estate at the moment.
Don't you mean our highways and toll roads rather than "real estate"? Stupid politicians [Mad]
And your malls and stadiums and office buildings and so on and so forth. But yeah, toll roads seem to be one of Macquarie's trademark investments wherever it goes.
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LoneSnark
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Well, at least the DEA is praising the weak dollar. As the dollar has slid against the Columbian peso it has suceeded is raising the street price of cocain, something billions in drug-war money had failed to do.

[ October 26, 2007, 09:51 AM: Message edited by: LoneSnark ]

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WeAreAllJust LooseChange
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So LoneSnark - we should expect more burglaries from people on crack, to be able to pay up for those higher prices?

Or crack is a "white-man's" drug only? Then higher price might not be that bad of a thing in this case?

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LoneSnark
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As I understand it, the vast majority of drug related crime is committed by the black market dealers, not users. And if I am right and this is a supply cost push then the impact should be negligible. Drug lords fight over profits and this price increase should actually reduce their profits as addicts cut back consumption or switch to substitutes such as pain medication. As such, crime may actually fall as a result.

That said, if we really wanted to eliminate prohibition related criminal activity then we should legalize it. As the profit margin is quickly bid down to 4% from 60% dealers will stop killing each other over it.

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Colin JM0397
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Goodbye dollar, hello inflation
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JohnLocke
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In the present day, the world is threatened by a devastating economical crisis. The United States government is using unimaginable economic means to defend a right that violates the sovereignty of all the other countries: to keep on buying raw materials, energy, advanced technology industries, the most productive lands and the most modern buildings on the face of our planet with paper money.

Fidel Castro Ruz
September 18, 2007.
6:37 p.m.

Not necessarily related link.

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LoneSnark
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I read it, saw no facts or figured that would lead me to conclude the opinion in the blog is valid. So some investor is bearish on the dollar; why? Because the Fed. Res. has eroded the value of the dollar? HA! Chinese inflation is twice America's peak last year. As of right now American inflation is paltry, less than 1%.

What people do not realize is that "Exchange rates" and "inflation" have very little to do with each other in the short term. Inflation is a monetary effect, exchange rates are a balance of trade effect.

Sure, the dollar will fall further as the US lowers interest rates. But it is doing so to boost the money supply and drive out the risk of Deflation.

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Ronwe
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quote:
Originally posted by JohnLocke:
In the present day, the world is threatened by a devastating economical crisis. The United States government is using unimaginable economic means to defend a right that violates the sovereignty of all the other countries: to keep on buying raw materials, energy, advanced technology industries, the most productive lands and the most modern buildings on the face of our planet with paper money.

Fidel Castro Ruz
September 18, 2007.
6:37 p.m.

Not necessarily related link.

That and the threat of a nuclear equiped military.
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LoneSnark
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JohnLocke, what a fascinating read. I had no idea. But I don't understand why so much of it is in quotations. Is all of that him quoting from other sources? What are those sources?

And does anyone here understand what Castro is getting at with the quoted statement? What "unimaginable economic means" is the US supposedly using? Best I can figure every nation on Earth is using paper money, so would not his statement be hypocritical?

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JohnLocke
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I think the whole page is a mildly accurate translation and I too found the quotation marks disconcerting.

And he does ramble quite a bit.

Unimaginable economic means is a bit hard to describe. Perhaps he was shooting for 'immense'.

As to hypocrasy I'm not sure the apple compares to the orange on this one. America is a debtor nation.

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LoneSnark
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Really? That is what Castro was calling "unimaginable economic means"? It still sounds too mundane even for 'immense'. I think he must have some diabolical theory in mind, not something so common as debt. Maybe he think we are forcing the poor to lend us the money? How else could you explain the Chinese buying up U.S. debt securities if you refused to recognize the actual reasons.

Not to put too fine a point on it, every nation on the planet owes money to someone and is thus a debtor nation, Cuba included. Then again, you saying it does imply it to be a commonly held myth that America is somehow special in this regard; so I will accept your suggestion until I find another.

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RickyB
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LoneSnark - I ain't saying his word is gospel, but did you really just dismiss Warren Buffett as "some investor"?
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LoneSnark
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Ok, would "some big investor" have worked better for you?

My point is that the market price for something is an amalgamation of what all speculators feel the present value of something is, which includes the future value. If enough investors really believed the dollar was going to fall much further in the future, then it already would have fallen. That it has not implies Warren Buffett is a minority.

In retrospect, at least Catro recognizes that America has "advanced technology industries, the most productive lands and the most modern buildings on the face of our planet". If Cuba had not revolted then it too would have some of that.

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Rallan
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I think you meant to say "if Cuba hadn't implemented land redistribution reforms and other socialist shenanigans that alienated the US government, then it too would've had some of that". Fidel was quite a popular guy in some parts of DC until the Cuban revolution got under way and everyone realised that he leaned too far to the left.
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RickyB
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"That it has not implies Warren Buffett is a minority."

Your portfolio must rock, huh? [Smile] I dunno. Again, He can be wrong, but rarely is. I'd give some serious thought to the notion that the other show just hasn't dropped yet.

As for Cuba - yeah, right, cause Cuba was a paradise for the masses before Castro came along... If not for Castro, maybe after 1989 Cuba would have begun some sort of progress towards prosperity, but until then we'd have continued supporting whatever thief did our bidding and let us rape the island in peace. Not that Castro brought prosperity, but he didn't actually prevent it either.

Rallan - nobody likes a guy who nationalizes their investments. Not the mob, not even us libruls [Smile]

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RickyB
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OK, I should clarify. Of course Castro's policies hindered prosperity. What I meant is that the alternative would not have been prosperity, but despotic kleptocracy.

[ October 27, 2007, 06:18 PM: Message edited by: RickyB ]

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LoneSnark
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Rallan, Cuba's poverty has nothing to do with US Government condemnation and everything to do with communist idiology. Or are you under the impression that communism is an effective means of organizing an economy?

Ricky, is it your assertion that since I dislike communist dictators that I must enjoy totalitarian dictators?

What the Cubans needed was secure property rights and the rule of law. In other words, Cuba needed a revolution, just one in the opposite direction from Castro.

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Jesse
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Opposite? Not so much.

Different? Yeah.

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LoneSnark
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Well, Castro took a corrupt totalitarian state and turned it into an honest totalitarian state; so I too subscribe to the "different" sentiment. Thanks for the correction Jesse.

So, to correct my statement: "Cuba needed a revolution to replace its corrupt totalitarian state with an honest liberal state."

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erik the awful
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Bump.

I'm all spooked. Gold's at 834.1 and sliver is at 15.82.

Now I'll return to my typical lurking :>

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Jesse
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Oh, and the looney is worth a buck and eight cents.

Cats and dogs living together, mass hysteria....

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