US dollar about to pop?

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The second anniversary of the credit crisis has arrived and, in the light of the plethora of fiscal and monetary policy initiatives, it makes for interesting reading to reflect upon how the US economic landscape has changed since the start of the crunch.

• Fed funds rate: down from 5.25% to zero

• Fiscal deficit: up from 2% to 13%

• Mortgage rates: down from 6.5% to 4.7%

• Home affordability: 70% improvement

• Fed’s balance sheet: up from $850 billion to $2 trillion

Yes, the Fed has tried just about everything, and yet real GDP growth is negative at about 5% and the unemployment rate has doubled to almost 10% over the past two years.

David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, points out that there is one policy tool that is practically unchanged since two years ago … the US dollar. “It is the only policy tool that has not budged one iota since the crisis erupted two years ago. But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, it would make perfect sense for a country that always operates in its best interest – even if it may not be in everyone’s best interest – to sanction a US dollar devaluation as a means to stimulate the domestic economy,” he said.

It follows that Rosenberg is of the opinion the greenback has significant downside potential. He therefore suggests that investors should start thinking about protecting their portfolios against a declining dollar by taking positions in commodities, gold, the Canadian dollar, resource stocks and US sectors that have high foreign exposure (materials, industrials, staples, health care).

For more on the most likely short-term direction of the US dollar, Adam Hewison’s ( short technical analysis provides valuable insight. Click here to access the presentation. (Adam also covered the outlook for gold bullion in a recent analysis. Click here to view his outlook for the yellow metal.)


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2 comments to US dollar about to pop?

  • People in America need to realize jus what got America in this shape…”cheap” yes so-call cheap items from a foreign land.

    quote*Wal-Mart firmly believes in local procurement. We recognize that by purchasing quality products, we can generate more job opportunities, support local manufacturing and boost economic development. Over 95% of the merchandise in our stores in China is sourced locally. We have established partnerships with nearly 20,000 suppliers in China. *end quote!

    Now! if there be 182 country’s making items for the world to buy and they have only 5% of the pie in China…duh! This company makes the nice people of China support their currency(yuan) by keeping it in their country working for the people there…. but with the “yuan” going up in value and the US dollar going down…all the foreign items that the American consumer buys thinking it is cheap has went up in price.

    People…its all about the currency and to keep a currency strong you got to keep it floating around the country you live in so it can work for you. For the past 12 years all them US dollars are being shipped overseas to a foreign bank and with the American worker not making anything for the foreigner to buy the “we the people” have to turn to the “second” largest employer in America(Uncle Sam) to sell “we the people” debt in order to get all them dollars back!

    50 years ago a foreigner would had given their left nut for a US dollar or a Hershey’s chocolate bar and today the same foreigner has got Uncle Sam and the American consumer by both all the while Hershey is moving the chocolate factory to Mexico. Wake up! America and think “MADE IN AMERICA.”

    quote*”Considering that there are over 30,000 ships at sea this morning,” writes James Carlton, director of the Williams College-Mystic Seaport Maritime Studies Program, in an e-mail, “the total number of organisms and species in this global ‘bioflow’ on the morning your readers read your piece could be staggering – billions of individuals, and thousands of species.”

    Indeed, scientists have long considered ballast water the primary way invasive aquatic organisms are introduced. From the zebra mussel’s arrival in the Great Lakes, to an American jellyfish severely disrupting Black Sea fisheries, the potential costs of accidental introduction of a species to new homes can be tremendous. Aquatic invasives cost the US $9 billion yearly, according to estimates by David Pimentel, professor emeritus of ecology and evolutionary biology at Cornell University in Ithaca, N.Y. Zebra and quagga mussels (a cousin to the zebra) alone cost the $1 billion annually.*end quote!

    tat is $9 billion a year in hidden taxes to all Americans…
    cheap ain’t chic and it cost America…………jobs!

    “Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what’s in the best interests, and we should make sure that trade is not only free, but fair too.”

    and when it comes to all them ther turnips in D. C. ….they all need to red…oops! read George Washington’s farewell address after only eight years of serving his country…

    Retail makes nothing! ….and until the American people get off their lazy @ss and start to demand…”made in America”….all the retail jobs will be sitting in a foreign land.

    The dang government makes only debt…like all it knows is spend…spend…spend. The turnips ain’t never past a dang “saving” bill. They go up on tat big hill and play banker with my dang tax dollars and every dang one of them is one sandwich short of a picnic when it comes to balancing their dang check book.

    National Debt from 1776 to 1910 wus only $2.6 billion and tat wus without a income tax. After the stiff-shirt “my sh!! don’t stink” bankers met in 1910 at Jekyll Island tat debt wus put in high gear in 1913 and even with a income tax and now a tax for every dang thig a person touches…even the air he/she breaths tat debt has mushroom to over $10 trillion in 2008.

    Now….we the people in the past 7 months has taken on another $1 trillion and tat person in tat big white house is saying the car is going to slow…well…maybe he needs to get out off the dang thig and walk.

    And with America being over $57 trillion in debt….a little walking wouldn’t hurt them either. People….it ain’t no place in the Constitution tat states the government is suppose to take care of you….not one dang sentence. The word “cheap” ain’t no place to be found either. If you don’t buy American made…you don’t have jobs cause RETAIL makes nothing.

    Quit thinking in terms of a jack@ss and elephant….they the ones tat put US in tis mess….think in terms of character, faith in God, love of Country, your State, your town, your family and your dang job. Spend a month…maybe two red…oops! reading Michael Hodges “Grandfather Economic Report” series and learn how the people in D. C. have pull the wool over the eyes of “we the people” for the past 96 years.

    “Our constitution was made only for a moral and religious people. It is wholly inadequate for the government of any other.” – John Quincy Adams, 6th President of USA.

    “I hope our wisdom will grow with our power, and teach us, that the less we use our power the greater it will be.” – Thomas Jefferson

    “No generation has a right to contract debts greater than can be paid off during the course of its own existence.” – George Washington to James Madison 1789.

    “support your town…shop around.” – madmilker

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