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XMFSinchiruna (27.08)

Jim Rogers' starkest warnings yet about the U.S. Dollar - A Must Listen!

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December 16, 2008 – Comments (19)

Even those who don't share his views could stand to hear this interview, as it's critical at this juncture to be watching the dollar closely on a structural level. Our currency is presently on very shaky ground fundamentally, placing our economy at risk from moves by foreign nations -- namely China -- to flea from dollar assets to protect their reserves. Those who suggest that China won't continue liquidating dollar assets (they've already unloaded enormous quantities of U.S. agency debt) because they would be shooting themselves in the foot need to consider an alternate scenario ... where a China has no choice but to liquidate dollars once the U.S. currency slips into technical, sustained, and unfortunately unstoppable decline.

Pay particular attention to his final comment, where he points out that production has been ratcheted down faster than demand ... which echoes recent comments from Nucor, and supports my recent theory offered here. He's living in Singapore and is very keyed into the Asian markets ... and I think he also sees a big recovery for Asia sooner than many anticipate.

The USDX dipped below 80 this afternoon right after the markets closed ... punching through technical resistance and suggesting, in my view, a quick return to 71 to 72.5 area ... where we might expect some sideways movement at least if technicals indeed remain at play under the circumstances. Once the USDX breaks below that 70-mark ... watch out below. The reason the dollar rallied and gold declined when they did is because the Fed ./ Treasury knew that 70-mark was key technical support for the dollar ... perhaps a threshold past which foreign entities informed them they would no longer support the USD as reserve currency.

For anyone who didn't catch it the first time, here is my radio interview on NPR 

/**/

Here is Jim Rogers' interview. Sorry the subject matter isn't more uplifting, but I strongly believe every Fool must follow this.

19 Comments – Post Your Own

#1) On December 16, 2008 at 6:43 PM, alstry (36.27) wrote:

I actually disagree with Mr. Rogers on this issue.  I expect other  countries to rapidly try to devalue to counter act American  policy.  It is now a race to devaluation.

You should not be surprised if the dollar actually gains strength in upcoming months.

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#2) On December 16, 2008 at 6:54 PM, XMFSinchiruna (27.08) wrote:

alstry

no way my friend! :) Rogers is spot on ... the rally was created by forced liquidation, which will now give way to flight to non-dollar assets or dollar-hedged assets like commodities. Today's dollar decline was historic ... a 2% move is a major rarity for 'the reserve currency of the world'. The USD will not emerge from this as the world's preferred fiat.

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#3) On December 16, 2008 at 6:59 PM, nuf2bdangrus (< 20) wrote:

FXA is where I will hide.  FXF is 20% backed by gold I've read....

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#4) On December 16, 2008 at 7:03 PM, kdakota630 (29.71) wrote:

Alstry makes a decent argument based on some of his past writings, but I'm with Rogers on this one.

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#5) On December 16, 2008 at 7:05 PM, MarketBottom (29.34) wrote:

Current foreign debt holders, and their current positions.

 http://www.treas.gov/tic/mfh.txt

The selling in debt has revolved around freddie, fannie, and corporate debt more than in US treasuries

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#6) On December 16, 2008 at 7:45 PM, XMFSinchiruna (27.08) wrote:

MarketBottom

so far... until today perhaps

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#7) On December 16, 2008 at 7:57 PM, MarketBottom (29.34) wrote:

The huge drop in the dollar today was based on the decline in interest rates to 0 percent. They cannot go any lower, so going forward it will be based more on perceived strengh and weakness between different countries, and the safehaven preception of the dollar.

The majority of the US debt is held domestically, therefore a decline in the value of the dollar does not hurt US consumers, but it would impact foreign holders. We presently have falling domestic prices, which means the dollar is appreciating domestically.

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#8) On December 16, 2008 at 8:00 PM, kdakota630 (29.71) wrote:

The majority of the US debt is held domestically...

I don't have proof to show here, but I don't believe that is the case any longer.

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#9) On December 16, 2008 at 8:00 PM, XMFSinchiruna (27.08) wrote:

MarketBottom

What I'm saying is ... the 'safe haven' perception of the dollar is no more. The declining value of the dollar does INDEED endanger U.S. consumers, without question. The cost of goods will skyrocket as the dollar weakens further.

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#10) On December 16, 2008 at 8:08 PM, MarketBottom (29.34) wrote:

The link I posted is for foreign holders of Treasury Debt.

http://www.treas.gov/tic/mfh.txt

Here is a chart for domestic debt


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#11) On December 16, 2008 at 8:11 PM, MarketBottom (29.34) wrote:

Only on imports

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#12) On December 16, 2008 at 8:46 PM, Clint1010 (< 20) wrote:

US dept, Ouch!!!The ten trillion dollar figure works out to $32,895 for every man, woman and child in the United States.

The United States Public Debt Tops Ten Trillion Dollars for the First Time

October 2, 2008                                                                                            http://www.rushprnews.com/2008/10/02/the-united-states-public-debt-tops-ten-trillion-dollars-for-the-first-time/

(Where is the EMERGENCY exit? 

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#13) On December 16, 2008 at 9:18 PM, jesusfreakinco (28.97) wrote:

Chris,

Nice interview and nice post.

Thanks,

JFinCO

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#14) On December 16, 2008 at 9:46 PM, XMFSinchiruna (27.08) wrote:

kdakota630

MarketBottom is correct ... while a very major part of the pie, the total foreign holdings of U.S. debt remains smaller than domestic holdings. All the same, any major foreign holder could strike a fire sale in USD at any time with a sudden unloading of USD. This is the precipice on which the USD presently sits... where one event can send the thing spiraling downward out of control.

This is ultimately a crisis of confidence, and the world is fast losing confidence in the USD. China is projected to increase its reserves to $2T by the New Year, and $2.5 trillion in 2009. I predict that incoming USD assets will systematically be converted out of USD, perpetuating ... or perhaps only accelerating ... the devaluation of the USD against other fiat currencies. In my opinion, there is very real danger of a snowball effect once confidence is breached.

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#15) On December 17, 2008 at 12:11 AM, zygnoda (26.94) wrote:

But how does china kill us and not kill themselves?

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#16) On December 17, 2008 at 2:16 AM, AnomaLee (28.72) wrote:

Valuing the dollar:
If you complain about short-selling bans then stay away from Forex trading. The currency market is the 'most efficient market' because it is the most controlled market.

The U.S. is no worse than any other nation in the OECD or rest of the developed world.

Offficial debt held by foreigners:
I pointed out in a few of my blogs months earlier that the Carribean banking centers are not central governments but are comprised of shadow accounts which are controlled by the U.S. govt.

Today, the annual growth rate is even more astounding since I wrote about it.

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#17) On December 17, 2008 at 7:46 AM, djemonk (< 20) wrote:

But how does china kill us and not kill themselves?

 

With things like a $600 billion investment in their own infrastructure.  They're gearing up to become a more consumer economy where they actually use the products that they make rather than sending them to us.

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#18) On December 17, 2008 at 10:18 AM, XMFSinchiruna (27.08) wrote:

zygnoda

Killing themselves would be to hold onto their dollars. The crucial point is that the USD has fallen into untenable structural weakness. Whether a China or some other major holder decides to unload their USD reserves will not dictate the path of the USD ... but only the speed of travel. The path has been laid by Paulson, Bernanke, and every crooked bankster who dreamed up those toxic derivative "assets" in the first place.

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#19) On December 24, 2008 at 1:55 PM, tfirst (25.38) wrote:

The only reason the dollar is as weak as it is, is because those in power want it to be. A strong dollar hurts exports, causes US consumer prices to drop, and cause unemployment because exports go down. Somebody wants the weaker, smalller countries to be able to compete on the same playing field. The only way they can do that is with a weak dollar.

I tell you this....the dollar is not weak and will rally strong once the printing presses break..they,ve been running non-stop since June....Let the market decide!

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