Central banks and smart investors are getting out of dollars, but some very smart and nimble investors are now borrowing them. This is helping slow the decline in the dollar, but like all loans, when repayment date comes, will have the reverse effect. I.e. be part of why the dollar suddenly collapses with a "run against the dollar":

" Dollar Displaces Yen, Franc as Favorite for Funding Carry Trade By Bo Nielsen

Nov. 26 (Bloomberg) -- Using the dollar to pay for purchases of currencies with higher yields is proving to be the most profitable trade in the foreign-exchange market.
...
A basket of currencies including the British pound, Brazilian real and Hungarian forint financed with dollars returned 17 percent this year, compared with 9 percent when funded in yen ... Falling U.S. interest rates and increasing volatility in the yen ... are making the trade even more appealing.
...
Investors are borrowing dollars and using the money to buy assets in countries with higher interest rates even though U.S. borrowing costs are 4 percentage points more than the Bank of Japan's and 1.75 percentage points above the Swiss National Bank benchmark.
...
Speculation against the dollar increased as the worst housing slump since 1991 forced policy makers to cut the benchmark rate twice to keep the economy out of recession. The currency depreciated in five of the past six years leading central bankers from the Arabian Peninsula to China to diversify their reserves and increase holdings of non-U.S. assets. {For more see Billy T's thread on "sovern funds}
...
Investors may switch more than $100 billion of borrowing from yen or francs into dollars in the next two years for carry trades said Jens Nordvig, a strategist with New York-based Goldman Sachs Group Inc., the biggest U.S. securities firm by market value.

{Brazilian}Real, Won, Pesos:
The value of futures contracts held this month by hedge funds and traders betting against the dollar was a record $33.9 billion more than contracts that profit from a gain, according to New York-based Morgan Stanley, the second-biggest U.S. securities firm. Pacific Investment Management Co., which oversees the world's biggest managed bond fund, is selling dollars against the Brazil real, Mexican peso, Korean won and Singapore dollar. ``When we think about currencies on a three- to five-year basis we're very bullish on emerging markets versus the U.S. dollar,'' said Andrew Balls, who helps manage $80 billion for Newport, California-based Pimco. ``That view is only reinforced when you look at interest-rate differentials.'' {Has Billy T not been telling you this for several years?}

The {Brazilian} real rose 18.5 percent this year and Singapore's currency strengthened 6.4 percent, while the won was little changed. The Mexican peso fell 1.4 percent, the only one of the 16 most-traded currencies to do worse in the foreign exchange market.
...
The dollar produced a positive carry, the combined gain from the difference between interest rates and changes in foreign exchange, against 20 of the 24 most actively traded emerging market currencies this year, Bloomberg data show.
...
Using a currency to finance bets can drive down its value. Former Japanese vice finance minister Hiroshi Watanabe said in May that one reason the yen had fallen to a record low against the euro was because it was funding about $500 billion of carry trades. {This is in the "unwinding" phase of a carry trade - i.e. when the "chickens come home to roost" or dollars flood back, that no one wants, to pay off the loans.} ...

FROM:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWMXWN6PFHa4&refer=home

SUMMARY:
This is like the FED cutting rates to avoid the immediate evil of a recession, but only making it sure that depression will come later. See more on this BillyT's thread on the "6L cycle" at:

http://www.sciforums.com/showpost.php?p=1502039&postcount=1

Hey, Billy, has this ever happened before in the history of the USA? And if so, what was the consequences of it?

Baron Max

Hey, Billy, has this ever happened before in the history of the USA? And if so, what was the consequences of it?
Baron Max

The liberals are screeching again. They have a whole list of grievances. Not many people are listening.

Conservatives are listening. Worry over the economy covers the entire political spectrum right now.

No we're not. The economy is fine despite the housing market problems with people who should have NEVER obtained loans. The DOW is near its all-time high. Unemployment is near its all-time low. I see a bright future. Not doom and gloom like most liberals.

You don't represent every conservative. And I shouldn't have been so general in my post.

A good number of conservatives are listening.*

With a $9.1 TRILLION debt, the fall of the US dollar is unreversable.

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http://www.inboxrobot.com/news/airbus
Weekly Newsletter
Tilton's current contract is not due to expire until September 2007. .... Airbus (and I too) initially under-estimated the success of Boeing's 787 program, ...
http://www.thetravelinsider.info/2006/email1006.htm
New Airbus CEO warns of job cuts
"Airbus's principal handicap vis a vis Boeing is the dollar that has collapsed," he said. ... Streiff's departure dealt a fresh blow to crisis-hit Airbus. ...
http://www.cbc.ca/money/story/2006/10/10/airbuscuts.html

Sandy, you can't borrow over 2 billion dollars every day while saying nothing is wrong with the balance on your checkbook for long without running into some kind of trouble.

No we're not. The economy is fine despite the housing market problems with people who should have NEVER obtained loans. The DOW is near its all-time high. Unemployment is near its all-time low. I see a bright future. Not doom and gloom like most liberals.

where in the high hell are you getting your numbers. unemployment is up and job quailty is decreasing both signs of a weaking not an improving economy.

People automatically assume that the reduced value of the dollar is a bad thing; a herald of doom and suffering. This overly simple view is false. Both a high value and a low value dollar have equal, if different, benefits.

A high value dollar allows an American citizen to effectively buy foreign goods cheaper.... at the cost of being unable to manufacture goods for export at any reasonable price. With a low value dollar, the positions are reversed. We might finally get the opportunity to rebuild 'hard' American industries.

Perhaps the dollar should have devalued itself sooner.

No we're not. The economy is fine despite the housing market problems with people who should have NEVER obtained loans. The DOW is near its all-time high. Unemployment is near its all-time low. I see a bright future. Not doom and gloom like most liberals.

Your dollar is tanking despite international attempts to save it, you twit. Get Bush to turn off his fukin presses.

The liberals are screeching again. They have a whole list of grievances. Not many people are listening.
liberal SPAM even on this thread

The US unemployment rate in Oct. was 4.7%. Anything under 5% is considered full employment. This is amazing considering we have 50 million criminal aliens stealing jobs from Americans.

The devalued dollar is not a problem. We are Americans. We can stand anything. Even democrats.

The US unemployment rate in Oct. was 4.7%. Anything under 5% is considered full employment. This is amazing considering we have 50 million criminal aliens stealing jobs from Americans.

The devalued dollar is not a problem. We are Americans. We can stand anything. Even democrats.

Did you read Billy's post? IF the the world finally says, oh well screw the U.S Dollar, you might well still have only 5 % unemployment. So does China. Lots of people working really hard for peanuts. Then some international mogul comes in a buys up all those pretty houses of yours for some extra peanuts. Get it?

Hey, Billy, has this ever happened before in the history of the USA? And if so, what was the consequences of it? Baron MaxI always try to answer question if possible, but do not know my history well enough to be sure. If we think of this "US carry trade" in general terms then perhaps the Marshall Plan is one prior example. By "general terms" I mean taking capital for the US and investing it in foreign lands (even if not done for private gains as the current "US carry trade" is being done).

The Marshall Plan certainly did that. The results (in addition to the humanitarian ones) made a destroyed Europe in to a strong competitor of and market for the US. Probably resulted in net a benefit economically to the US as trade does benefit both parties to the trading (at least if freely entered into, often not however if one side is compelled ot tricked*) It is hard to fairly evaluate the impact of colonial rule. Even the clearly explotative Romans, who mainly supported their empire** with tributes extracted from many concured peoples, did build roads, water systems, establish and secure trade routes etc.

US domination of South American however probably helped keep it from advancing as it is now for more than a century. (Chavez has some reason to think there is a need for a modern Simon Bolivar, but he is not it and not needed now anyway as US has lost the control it once had in South America. (The CIA's installed dictators are past history now, except for two.)
--------------
*Early Americans, "trading with the indians did not often bring any benefit to the indians. The collonial system in Africa and India probably had net benefit when the English were the Europeans, but not when the French were. For example most of the ports and railroads India uses now, were British designs and made, but when the French were forced out of their African colonies, they even took the telephones back to France.

**The US is currently lossing its empire, which IMHO, was the most efficient one man has ever created. While the US, like the Romams, does have the world's most powerful militray it is not the direct means by which the tribute is collected from the dominated nations. The dollar is used instead. I.e. every since the dollar replaced gold as the means for settling trade imbalances, the USD has enjoyed a great "free ride" on the productivity of others. Giving them very easily produced green pieces of paper in exchange for oil, food stocks, clothing, raw materials etc. Rome was never even 10% as efficient in collecting tribute.

Interesting, at least to me, and as as small token of the great changes now taking place globably, the Brazilain trade with Argentina will end 2007 with a favorable balance to Brazil of approximately 3.7 billion dollars, but this will never happen again as starting in Jan 2008, the dollar will no longer be used to settle the imbalance. Each nation will accept the others currency instead. Thus, Brazil will gain pesos, not dollars next year if the trade balance remains in Brazil's favor. Perhaps the consequences of this "acceptibility collapse" (not just in Brazil but global termination of the dollar as a useful currency for others to settle accounts, make contracts in, pay for oil, etc.) i.e. the collapse of the US empire's mechanism for collecting tribute will be even more important than the falling value of the dollar. They are of course very closely related. Governments around the world are no longer trusting the dollar as a secure currency and thus are switching to other means of "storing wealth" Sovern funds owning real assets (instead of US printed paper) are one of the fastest growing new means. (Brazil has just started one, but most other nations have had theirs in existency for at least a couple of years.)

Empires always live better than the people they extract tribute from and the US is no exception. The means by which the US has extraced it tribute from the rest of the world was very clever aqnd efficient but is clearly failling now.

The fall in the value of the dollar IF IT DOES NOT TURN INTO A RUN TO GET OUT, will help the US exporters and curb the excessive replacement of domestic production with imports. (To take simple example: boost California wine production and reduce French imports.) Thus, IF THE RUN ON DOLLAR CAN BE AVOIDED a less valuable dollar will be good for the US.

I do not think it can be avoided as there far too many outside of the US - more than 15 trillion, I think. (Quardaphonics, if reading, will no doubt give me the correct number as best as it is known. I am including all forms of US paper, not just green pictures of George Washingtion.) If the holders of 15trillion dollars see their purchasing power continue to drop as rapidly as it has for the last few years, surely essentially all will try to get something of real value for this US paper. This is self accelerating - causes a "run" to do so - IMHO - The dollar is like every thing else: its value is set by supply and demand. The supply is already huge and the demand as as "store of valve" is rapidly shrinking. To me it is obvious how this ends, especailly now that many hate the US so much that they will not buy US products, even if they were both cheaper and better (rarely the case). For example, My Brazilian wife will not drink free coke even at parties and I dare not bring it into the house, but sneak some still when eating out alone.

SUMMARY: The lose of the dollar's acceptibility (as the global means of setting trade imbalances, expressing the payment terms in contracts, pricing of oil and other internationally traded commodities), is probably much more damaging to the well being of Americans than the fall in the dollars value (but they are related of course) as that is how the US empire collected it tribute. Without tribute from others, the US will need to feed and cloth itself, find fuel for its transportation and home heating etc. - Much harder times ahead when US must pay for its needs with exported goods and services or make them instead of just sending pieces of green paper abroad as it has for more than 50 years. Salaries in the US must come down greatly to make this possible. For simple example: the cost of shirt or shoes made with US salaries vs an Asian made ones the US has imported for several decades (while US was still able to efficiently collect this "clothing tribute" by printing green paper.)

I don't know what a "liberal" is, but our economy is heading towards a downward spiral. There are the converging emergencies of the housing bubble, the energy crisis, and our costly wars in the Middle East.

... The DOW is near its all-time high. ...HI Sandy. Glad to see you are still posting, even it it still the same old stuff.

Here are the correct facts on this:

"Nov. 26 (Bloomberg) -- U.S. stocks fell, erasing this year's gain for the Standard & Poor's 500 Index, on concern that mounting mortgage losses will lead banks to reduce lending. ..."

Read full text at:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aC33xLJQ89.I&refer=home

Actually the real value is down from start of the year by about 18% if you are a European (Dollar has lost 18% vs the euro in 2007 alone. I think it is a total down of about 40% from its peak against the euro.)

Your posted essentially the same thoughtless optimism about a year ago and that caused me to make the thread "DOW not at all time high - dollar is dropping." in which I tried (unsuccesfully it seems) to explain to you that the DOW is essentially the number of dollars that has the VALUE of the stocks making up the DOW index. Hence as the VALUE of the dollar goes down, it takes more (a greater number) dollars to buy the VALUE represented by the DOW so the DOW would go up, if the value of the companies in it did not change.

Even before making that post I had predicted that the DOW would be "flerting" with 15,000 before the end of the first quarter of 2008. The current US economic problems have made the VALUE of the DOW stocks drop also, so I my prediction may not become true. For example, if both the value of the stocks in the DOW and the value of the dollar fall by 30% then the numerical number we call the DOW will not change much. I failed (when mainking my prediction) to anticipate how quickly things would go bad for the US economy. For example, ON AVERAGE the S&P 500 companies LOST MONEY IN THEIR US OPERATIONS for last year and all of 2007 thus far. Their average was of course quite profitable because most have large international operations also. I.e. although the US economy sucks and is going down rapidly (GM domesticly lost 38 Billion last quarter - a historic record!) the rest of the world does reflect your false optimism about the US economy.

I hope you can be more than a typical "dumb blond" and understand this now. - This time when I again explain that a high numerical value for the DOW may (not necessarly does) indicate that the US economy is in BAD shape. I also hope you took my advise and got some dollars out and into other economies via ADRs back when I first suggested that. If you did, you could now come back into dollars now with about a 300% dollar gain, but that would be foolish. Everyone economically smart is getting out of dollars now. Don't wait for the run on the dollar and then do it.

The US unemployment rate in Oct. was 4.7%. Anything under 5% is considered full employment. This is amazing considering we have 50 million criminal aliens stealing jobs from Americans.

The devalued dollar is not a problem. We are Americans. We can stand anything. Even democrats.

The devalued dollar becomes a problem when the international community starts shifting its interest into other currency. It is a very real problem. Rampant borrowing is destroying our country, maybe not now but you cant take forever without giving something back.

HI Sandy. Glad to see you are still posting, even it it still the same old stuff....

You posted essentially the same thoughtless optimism about a year ago.....

I hope you can be more than a typical "dumb blond" and understand this now.....

You lost me after those personal attacks. :(

You lost me after those personal attacks. :(

he didn't attack you.

he didn't attack you.That is correct. I never attack the person - no point in that. I do sometimes, when appropriate, vigoriously attack, even ridicule, the more extreme posted nonsense, but Sandy does not qualify or deserve that*. One can never be sure about somethings. Thus my strong attacks on ideas in post are reserved for matters of physics or obvious internal inconsistencies. For example a recent post by MetaKon which totally ignores the cost of getting objects to the moon and claims it is cheaper for China to launch an attack on US from the moon because the moon's gravity is less than the Earth's etc.
---------------------
*Thus I only corrected her errors, and gave correct information, including a reference to the Bloomberg source of it. I again explained the way the falling value of the dollar can increase the numerical value of the DOW, but she still does not seem to be able or care to understand. As a former professor, I know that some people have such strongly fixed ideas that they are incapable of seeing that they are wrong, even when both referenced facts and rational logic show their error.

To Sandy: I am like "Sargent Friday" of TV fame (if your are old enought to remember that show) As he said: "just the facts" - not any attack on you.

here are some released today:

U.S. Economy: Confidence Drops More Than Predicted (Update1) Nov. 27 (Bloomberg) -- Consumer confidence fell more than forecast in November as Americans struggled with surging fuel costs and falling home prices.
...
The gloomier mood increases the likelihood that holiday sales, which account for a fifth of retailers' yearly revenue, will be disappointing. Federal Reserve policy makers and private economists have cut growth forecasts as the housing slump enters its third year and jeopardizes consumer spending.
...
``This is a strong indication that consumers are going to pull back sharply and growth is going to be very weak,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``The message to the Fed should be that they need to keep cutting rates.''
...
Property prices may keep sliding in coming months as slowing sales and rising foreclosures aggravate the glut of unsold homes, economists said. The housing recession will drive down property values by $1.2 trillion next year and slash tax revenue by more than $6.6 billion, according to a report issued today by the U.S. Conference of Mayors. The 361 largest U.S. cities will experience a combined loss of $166 billion in economic growth, led by $10.4 billion in the New York-Northern New Jersey area, according to the study.

Lower property values make it harder for owners to tap home equity, while gasoline at more than $3 a gallon and higher home- heating bills also sour Americans' mood. A report last week showed the Reuters/University of Michigan sentiment index fell this month to a two-year low.
...
An average of 330,000 workers filed first-time claims for jobless benefits per week in November, up from 306,000 as recently as July. The increase suggests firings are mounting as businesses try to cut costs.

Fed policy makers are counting on wage gains to help Americans maintain spending, according to the minutes of their Oct. 31 meeting. Still, there was a risk falling home prices could ``further sap consumer confidence.''
...
Today's report showed the share of consumers who said jobs are plentiful retreated to 23.2 percent in November from 24.1 percent the prior month. The proportion of people who said jobs are hard to get also decreased to 21.3 percent from 22.8 percent. The proportion of people who expect their incomes to rise over the next six months dropped to 18.7 percent from 19.9 percent. The share expecting more jobs decreased to 10.8 percent from 13.3 percent. The number of people planning to buy a home or an automobile within the next six months fell.

Retailers are bracing for a slowdown through the holidays and into 2008. Target Corp., the second-biggest U.S. discounter, last week reported its first profit decline in two years, and said it expects slowing sales growth through the first quarter.

The National Retail Federation this week maintained its forecast that combined sales for November and December will show the smallest increase in five years even after purchases were stronger than forecast after the Thanksgiving holiday. Americans spent less per person even as more went shopping, the group said.

``Elevated energy costs and the anticipation of further increases continues to impact Americans' ability to spend on discretionary projects,'' Robert Niblock, chief executive officer of Lowe's Cos., the second-largest home improvement retailer, said on a conference call last week. ``Access to mortgage financing is a concern we'll continue to watch.'' ...

Last Updated: November 27, 2007 11:09 EST
For full text see:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aumqahi.htu0&refer=home

IMHO, but you may disagree, GWB by replacing Clinton's surplusses and peaceful era with history's highest twin defficits and wars is directly responsible for the mess the US economy is in and its rapid current decline, which will terminate in a severe depression, probably shortly after GWB is out of office and you can then blame the Democrates for it if you like. As I do not think it can be avoided now (US is already beyond the recovery point) I will vote republican in effort to see that the blame is more fairly placed, but either way history will record GWB as its cause.

IMHO, but you may disagree, GWB by replacing Clinton's surplusses and peaceful era with history's highest twin defficits and wars is directly responsible for the mess the US economy is in and its rapid current decline, which will terminate in a severe depression, probably shortly after GWB is out of office and you can then blame the Democrates for it if you like. As I do not think it can be avoided now (US is already beyond the recovery point)

Wait, I thought you were predicting that it would be the *next* business cycle that would be the fatal one? Are we now back to predicting that the end has arrived?

Wait, I thought you were predicting that it would be the *next* business cycle that would be the fatal one? Are we now back to predicting that the end has arrived?No, no changes in my predictions. The window for the run on the dollar is still 6 years wide, starting in October 2008. I have indicated that because of the current troubles seem to still be growing worse, that I think the chance of that run being in the first three years of the window is greater than in the last three years of it. It is impossible to be more specific or consistent than I have been about when I expect the run on dollar to occur (unless I tell the day of October 2008 which starts the window)*

Also note that the 6L cycles tend to over lap to some extent. I.e. we are well into the first stage of the "next cycle" with all of the Liquidity that the FED and BoE have already pumped out. Perhaps even the second stage (make easy Loans) is just starting, if one views the 7.5billion Dubai used yesterday to help Citi Bank out; but most real banks are still holding tight to their cash, until the full extent of the damage is better known. I.e. few banks are making "easy loans" yet, so one could argue that the second stage has not yet started and that $7.5E9 is just, more of Dubi's "sovern funds" investment. Technically it is not a loan, but buying a part of Citi. On the other hand (economists tend to have lots of "hands" as Harry Truman once complained.) the leveraged buy outs are starting to pick up again and they tend to be loan financed, so with that POV the second stage of the next 6L cycle is just starting.
-------------------
*I have even once or twice come close to that by mentioning Halloween!

Whats so great about October 2008?

Originally posted by Clockwood - 11-25-07, 11:23 PM
People automatically assume that the reduced value of the dollar is a bad thing; a herald of doom and suffering. This overly simple view is false. Both a high value and a low value dollar have equal, if different, benefits.

A high value dollar allows an American citizen to effectively buy foreign goods cheaper.... at the cost of being unable to manufacture goods for export at any reasonable price. With a low value dollar, the positions are reversed. We might finally get the opportunity to rebuild 'hard' American industries.

Perhaps the dollar should have devalued itself sooner.

I hope that such a revitalization of industry occurs. Great perspective. Never thought of it that way.

Your posted essentially the same thoughtless optimism about a year ago and that caused me to make the thread "DOW not at all time high - dollar is dropping." in which I tried (unsuccesfully it seems) to explain to you that the DOW is essentially the number of dollars that has the VALUE of the stocks making up the DOW index. Hence as the VALUE of the dollar goes down, it takes more (a greater number) dollars to buy the VALUE represented by the DOW so the DOW would go up, if the value of the companies in it did not change.

There have been three periods in US history when we had double digit devaluation (inflation) of the currency:

1917-20

1940-1950

1974-81

If you look at the whole decade of the 1970s you can see how three basic investments actually lost value in terms of purchasing power due to the governments devaluation of the currency.

If you had just kept your money accumulating interest in your bank account you would have lost 10.5% in real return over the course of ten years.

Bonds? You would have lost 17.5%

S&P 500 stocks? You would have lost 14% in real purchasing power.

Conversely, if you had invested in gold stocks, your real return adjusted for inflation would be 550.8%.

How about just buying barrels of oil and sitting on them for ten years? Your real return would be a gain of 469.5%

...Conversely, if you had invested in gold stocks, your real return adjusted for inflation would be 550.8%. ...I seriously doubt that as it was in the 70s that I invested in a Canadian gold mining company (Giant Yellow knife) which at the time was well positioned in terms of production, high grade ore etc.. I held on for about 5, years and finally got out with about half what I had invested. Can you support your claim?

While telling investment details on 10 and 11 Jan08 I sold 1000sh each day of my Indian ADR IBN = ICICI bank at $69.34 and 73.73 respectively (73.73 is essentially the all time high.)* Today I used part of the funds realized to buy Citigroup (4000sh) at ave cost of $27.00 (1000 At 27.27, 1000at 27.13 and 2000 at $26.80) I still hold 2000sh of IBN and hope to buy back some at a lower price. (the indian market can be volitile)
------------------
*I do not know if I will be happy with this trading banks, but the IRS sure will be as I bought the IBN about 6 years ago at prices between 5 and $7/ per sh. (I have told the gain of it several times over the years in posts when telling others to buy ADRs. I still hold all my Brazilain ADRs and Tata motors.)

I seriously doubt that as it was in the 70s that I invested in a Canadian gold mining company (Giant Yellow knife) which at the time was well positioned in terms of production, high grade ore etc.. I held on for about 5, years and finally got out with about half what I had invested. Can you support your claim?

That figure represents an average of major gold stocks over the course of ten years from 1970-1980. You know what happened to the price of bullion circa 78-80 right?

Inflation didnt take off into double digits until 1974, so if your five year period was 1970-75 your real return may not have benefited.

That figure represents an average of major gold stocks over the course of ten years from 1970-1980. ...I thought that might be what your comment was based on. Yes, if buy at a low point and sell at the alltime high (1980) gold is a good investment. The current purchasing power of gold, or even at a nominal high of $1000/ barrel is less than half what gold had in 1980.

If you take a SET 100 different of 10 year periods and average them, you will find that gold is one of the worst investments you can make.

When I was younger I did try to "time my investments." (Now I believe more in the "efficient market theory.") Even today, with the conscious knowledge that timing is essentailly only luck (without some insider knowledge) I can not resist entirely. For example, on my recent selling of IBN and buying Citigroup (a swap of bank stocks) fact that IBN had sudden surge to new high and citi was down >50% from peak (lower than any time in last 5 years) influenced me. (There were other considerations also: - Perhaps two most important are that the new Indian CEO had the balls to cut dividend even though his predcessor only two months ago said Citi would not cut it, is selling assets, firing people, etc, AND fact that the sovern funds "saving Citi" will hold the shares they got for many years is almost the same as if the total shares outstanding was reduced with little cost compared to a "buy-back." I also like the not well know fact that more than half of Citi's income is from non-US operations.)

Looks like tiny Iceland make be the first to collapse. One would think that with even the recent trippling of the inflation rate to 8.7% the carry trade of borrowing the dollars and investing them in Iceland at 15.5% (15.5 -8.7 = 6.8% real return, many times even the nominal cost of borrowing dollars, and the real cost of borrowing dollars is neagative now) would be very heavy - a very good deal.

I mention this to show that when a country's currency is falling and that fall is expected to continue (For example the US dollar) not even the carry trade can save it.* - currency flees the country, as it is fleeing the dollar now, with every more rapid rate. The Dollar is doomed ans is the US. Iceland is just showing how it will happen:


"The currency's plunge, which forced the central bank to raise its key interest rate to a record 15.5 percent yesterday...The cost of everything from cars to food and clothing is surging after what Central Bank Governor David Oddsson called a ``speculative'' attack on the currency by ``unscrupulous dealers.'' Yesterday's interest rate increase came after the central bank raised its benchmark rate by 1.25 percentage points at an emergency meeting on March 25.

Inflation, which has exceeded the central bank's 2.5 percent target rate since April 2004, jumped to a six-year high of 8.7 percent last month. Iceland is the world's most expensive country, according to the World Bank.

Investors are selling the krona on concerns that Iceland, the smallest economy with a floating currency, relies too much on foreign money to fund growth. Net overseas debt is 122 percent of gross domestic product, higher than any other country in the 30- member Organization for Economic Cooperation and Development. ..."
FROM:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aYlYil2VO_Bk&refer=exclusive

What I made bold above is no doubt what the US Secretary of the Treasury will also say when the run to get out of dollars gets under way.

----
*The "carry trade" brings money INTO the country with high interest rates. The US is still far from that. First US must get the high inflation, which the FED is now causing with the bail out of Wall Street etc. Then, the fall of the dollar must accelerate a little more before converting into a dramatic run to get out, but it is coming, and closer to the start of the 6 year window I predicted years ago. I.e. any time after 1 October 2008 until October 2014 would be consistent with my prediction.