Total Collapse of the Dollar?
Posted by Brittany Stepniak - Monday, August 8th, 2011
Emotions are high and the economy is low. To say things are hectic within the U.S. markets is an understatement.
Our nation is having a tough time trudging through our debt crisis. Investors are hedging inflation with gold. The dollar is losing steam, as its purchasing power diminshes, as it has been for quite awhile now...
Now, more than ever people are losing faith in our paper currency...
The dollar slid to the lowest level since August 2008 against a basket of six major currencies. Greek two- and 10-year government bond yields reached euro-era records amid speculation the nation won’t be able to avoid restructuring its debts. Fighting in Libya and Japan’s nuclear crisis helped gold, which typically moves inversely to the greenback, to gain 6.1 percent this year. “The key element determining gold’s near-term direction right now is the U.S. dollar,” Edel Tully, an analyst at UBS AG in London, said today in a report to clients.
Will the dollar be able to pick itself back-up after falling on the downgrade? One public radiostation speculates on all the dollar disappointment and S&P criticisim, following up with a somewhat optimistic viewpoint that the dollar will only stay down for a few days.
The dollar fell against the Swiss franc to 0.7570 franc from 0.7671 on Friday. It also lost ground against the yen to 78.01 yen from 78.38 on Friday.
The move by S&P drew criticism from some of the world's largest investors.
"Obviously, we're going to get freaked out a little bit and the dollar will get hit, but it's only going to be for a couple of days," said John Taylor, chairman and chief executive officer of FX Concepts, the world's largest currency hedge fund.
Gold: $1700 and Climbing!Posted by Brittany Stepniak - Monday, August 8th, 2011
Back in April gold spiked to prices hovering around the $1500 range. At that time, Goldline International Inc. predicted gold would surge to $1700 per ounce by 2015...
Fast foward just about three months later, and we've already hit the spot. Today, Monday, August 8 2011: gold reached $1700, and is properly positioned to hike even further in response to Standard & Poor's slashing of the U.S. credit rating on Friday.
Despite the obvious conspicuousness of today's gold record, NewsNow indicates that gold hasn't quite peaked in the same manner as it did back in 1980 when gold jumped to $850 an ounce. Adjusted for inflation, that amount would be equivalent to $2,400!
$2,400 for an ounce of gold; is it possible? With all the fiscal dilemmas today? And maybe (most likely) more financial rekclessness tomorrow? Perchance.
Already, gold has gained 21 percent in the year 2011. The uncomfortable medley of market risks, credit downgrades, debt crises, currency fatigue, and an overall shaky economy create an overwhelming abundance of uncertainty. Investors are feeding that uncertainty with gold.
Here's a visual highlighting this year's gold gains up to August 5, 2011:
Gold futures for December delivery rose $51.70, or 3.1 percent, to $1,703.50 an ounce by 8:22 a.m., after earlier jumping as much as 4 percent to a record $1,718.20 an ounce on the Comex in New York. That was the biggest intraday gain since Nov. 4. Silver for September delivery rose 3.9 percent to $39.69 an ounce in New York.
S&P cut the U.S.’s long-term rating one level to AA+ from AAA on Aug. 5, describing the outlook as “negative,” and criticizing the nation’s political system for failing adequately to address deficit reduction. Equities sank today, extending the market’s rout, as oil slumped.
This complicated combination of negativity initiatally created a lot of fear. That fear has produced some pretty remarkable results for gold. In the past month alone, investors have bought more gold than the previous six. The downgrade just before this past weekend was the final straw for many investors that were holding off on running to gold for some sort of comfort in these tumultuous times.
"Everyone was talking about Armageddon at the weekend and this morning, it's held the rot but doesn't remove the themes that have been driving the stock markets," said Saxo Bank senior manager Ole Hansen.
Amidst the Armageddon discussions, a feeling a woe regarding paper currencies presented itself as the dollar plummeted to record lows. Meanwhile, this idea seems to be permeating throughout the minds of analysts and investors: gold isn't just "a safe-haven," it is "the safe-haven"
“There’s just a pessimism or nervousness that’s associated with economies and currencies of these major nations,” Gavin Wendt, director at Sydney-based Mine Life Pty Ltd., said by phone. “At a time when investors are nervous of currencies, they’re nervous of equities, they’re nervous of everything, the only place for them to park their money is gold.”
About $5.4 trillion in global equity value has been erased since July 26, according to Bloomberg data, after Europe’s debt crisis worsened, reports on U.S. manufacturing and consumer spending showed the world’s largest economy was slowing and a political impasse over the budget deficit brought the American government to the brink of default. The S&P 500 slumped 7.2 percent last week for its worst plunge since November 2008.
Even Treasuries are losing a bit of their appeal as investors just aren't confident enough in them either. Gold maintains its strong potential to advance as investors look for bullion over U.S. Treasuries as a haven. Gold is still the only true "anchor of stability."
Nobody trust anything else. A shiny lump of metal seems to be the only hope for investors.
Gold records weren't just set here in the States. Gold futures in China and India surpassed all previous records as well.
At the moment, there's really nothing holding gold back, nothing at all..
Defiant Geithner: S&P Has "Lack of Knowledge" for Downgrade
Posted by Mike Tirone - Monday, August 8th, 2011
With the U.S. credit downgrade, many people are looking for heads to roll, specifically those in power in Washington.
Treasury Secretary Timothy Geithner has been one noteable name that people believe should be asked to resign and/or fire. After Friday night's downgrade of the U.S. credit rating from AAA to AA+, Rep. Michelle Bachman -- Republican presidential candidate-- feels President Obama needs to fire Geithner.
"This president has destroyed the credit rating of the United States through failed economic policies and his inability to control government spending by once again raising the debt ceiling," said Bachman. "President Obama is destorying the foundations of our economy one seam at a time. I call on the President to seek the immediate resignation of the Treasury Secretary Tim Geithner."
Instead, Geithner responded by staying put and sitting down for an interview and throwing Standard and Poor's under the bus. Here are some noteable quotes from Geithner:
"We're not growing as fast as we like."
"We've got a lot of work ahead of us though."
"S&P has shown really terrible judgment and they've handled themselves very poorly. And they've shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement."
"Our country is much stronger than Washington. We have a very resilient economy. We are a very strong country. and I have enormous confidence in the basic regenerative capacity of the American economy and the American people."
"And the judgment by S&P-- changed nothing. It added nothing to what people know about this country. Again, there's no risk the U.S. would never meet its obligations. We've got some challenges ahead of us, but we'll be able to work with those challenges. We'll get through this."
"There's no surprise that the U.S. has a long-term and unsustainable fiscal position."
In response to China saying the U.S. is addicted to debt and if he is worried that they're going to stop lending money to the U.S.:
"Nothing-- no, absolutely no-- no concern about that. And-- they've always-- they've been very strong and I'm sure they'll be strong investors in the U.S. going forward, as will investors around the world."