Maggie's Farm

Wall Street Jopurnal ..today

Dollar Plummets Against Yen
By YUKA HAYASHI
March 13, 2008 8:37 a.m.

TOKYO -- The rapidly falling dollar marked a milestone in Japan as it fell below ¥100 for the first time in 12 years, threatening Japan's exporters and increasing the likelihood that the world's No. 2 economy would slow down significantly.

The dollar dropped to as low as ¥99.80 during Asian trading Thursday. It crossed the psychologically important threshold of ¥100 for the first time since November 1995, when it also reached ¥99.80.

The dollar also sank to all-time lows of $1.5625 per euro and flirted with parity against the Swiss franc, sinking to 1.0045 francs. Against the British pound, the U.S. currency fell to $2.0375.

more
http://tinyurl.com/3xlp6x

WSJ..

Valuing the Dollar
By BOB MCTEER


When I was president of the Dallas Fed, Alan Greenspan wouldn't let me, or other members of the Federal Open Market Committee (including himself), talk about the dollar. The dollar was so sacred, or so fragile, that only Treasury secretaries were allowed to discuss it -- but convention silenced them too.

Treasury secretaries always retreated into ritualistic claims of having a strong dollar policy to maintain a strong economy, although economic theory doesn't necessarily support that causation. Reporters, presumably for sport and amusement, occasionally lured one of them into the dollar-talk trap, so they could then write about his naiveté for going there.
more

http://tinyurl.com/2qo7sw

In yesterdays thread, Finally, something to laugh about on Wall Street I offered several pieces.

There was, at the end of the day a rather spirited Lutherism aimed at my motives. So I explained to Luther what I was attempting. It's worth a look at how frustrating money talk can be. Not to mention reading about me getting the riot act thrown in my face.

It's an interesting look at the psychology of money and panic, strictly from a layman's point of view.

Want the unvarnished truth. Lower your standard of living or the government will do it for you.

Begin to live as far under your means as you can. Downsize everything, house,car etc. If you have any debt pay it off as quickly as possible including a mortgage. Buy a smaller home or one being foreclosed on..it cost banks about $50,000 to do a foreclosure so you might be able to find a deal .. but debt is a killer cause if it gets depression bad the bank will still want it's money.

If the government bails out the homeowners who should be living in tents then inflation can not be avoided so after you've downsized and saved buy some silver or gold. Learn to squeeze every drop out of every item you purchase.

I didn't gain my wealth by magic. I worked hard and remained in the same 1000 sq foot house for the past 28 years,( and it was already an old place when we bought it, built in 1959) and I paid it off early. We use coupons and look for bargains. Nobody in my family was rich. I worked at it......I had one chance to be fabulously wealthy but I was young and spent my huge paychecks on having fun. Had I saved just 10% of what I made from 1970-1980 I'd be a multi-millionaire and I would even touch this computer, I'd be doing something fun.

How Americans spend their money, by income level

From the information I'd say air conditioning and microwaves did nicely...looks like a Saturn V launch.

Accumulated headlines from today’s “What’s News” section of the Wall Street Journal ..... I'm looking for the pony in the room.

• U.S. to Revamp Credit Rules
• Retail Sales Boost Recession Fears
• Credit, Economic Fears Hit Futures
• Dollar Plummets Against Yen
• Carlyle Capital Nears Collapse
• Voters Lean Toward Democrats

Fallon out of line ..fired..good

While I do not yet see it in today's syllabus it is worthy to note that CentCom's Commander Admiral "Fox" Fallon was "retired by the Pentagon. the stories vary but it is apparent that the Admiral was at odds with POTUS on many ME issues and was becoming very vocal in the popular press about it. In the military you follow orders , you don't renegade out to the press UNTIL you retire...Bush facilitated what the Admiral fully expected. G O N E.

President Bush did the Truman thing and fired his ass. I say great. Fallon was against even the talk of bombing Iran which the most recent reports say will have fissile material for a bomb by the end of "08 or early '09. The previous NIE , as I mentioned a few weeks ago was a bogus CIA cover up to thwart President Bush.

Fallon was also verbose in slamming General Petraeus surge success, about the only bright spot we've had in Iraq in some time.

Fallon was placing POTUS in a position where Iran would be able to acquire the bomb through our non action, which is unacceptable.

It's damn good he's gone.


EU projection counters NIE: Iran could have nukes within a year

LONDON — The European Union has conducted a simulation that found Iran could assemble a nuclear bomb within a year.
The European Commission Joint Research Center, based in Ispra, Italy, completed an exercise to determine Iran's nuclear weapons capabilities. The center, assuming an Iranian arsenal of at least 3,000 gas centrifuges, projected that Teheran could produce sufficient amount of enriched uranium for its first indigenous atomic bomb, Middle East Newsline reported.
more

http://tinyurl.com/22wcrc

How Low Can The Dollar Go? Zero Value

The corporate controlled media is finally starting to talk about the economic problems that the alternative media and assorted precious metals advocates have been talking about for years now. We are facing a potential inflationary depression. Independent estimates of the M3 money supply show that we are seeing an annual increase in the M3 money supply by around 16 to 17 percent. The Federal Reserve chose to stop producing this report right around the time when these figures began going parabolic on their chart showing a massive increase in the money supply. An increase in the money supply results in a devalued currency and that’s one of the primary reasons why we are seeing the price of gold flirt with the $1,000 an ounce mark and silver explode past the $20 an ounce mark. The U.S. Dollar Index is now treading water around the 72 to 73 mark and it is becoming increasingly clear that the role of the world’s reserve currency is shifting from the U.S. Dollar to the Euro. Some ask how low the U.S. Dollar could go and that answer is simple. The U.S. Dollar could go to zero because it is a fiat currency with no real tangible backing. Every fiat currency in the history of man has been replaced or collapsed and there is nothing fundamentally different between the U.S. Dollar and these other fiat monetary systems of the past.

more
http://tinyurl.com/2qyso6

My thoughts.

That we will not get the monetary effects of the sub prime mess worked out in time to stave off inflation after this period of deflation.

That the world now has other currencies they can allocate to to spread their risk , which they will. The USD will no longer be the currency to primarily hold. The trusted world currency.

That precious metals (gold futures topped $1000 this morning) will be you only hedge against losing all your value The dollar will buy 1/100th of what it buys today in five years if we can't (and I don't see how) avoid a depression.
Wheat alone is uo 14% this year nad it's only March 13th.

To avoid runs on banks the Treasury will simply print more money and hand it out. Of course by the time you leave the building it'll have already lost 2-3% of it's value.

We are in a pickle with no easy fix in sight, just pain. It won't last forever but nothing ever does,but the pain will be deep and last perhaps a decade or more.

As occurred in the Depression the wealthy will not get hurt as badly, just the use-to-be-working-stiff. The wealthy,smart people who pull the levers got us here but believe me they don't care. Their money is all over the world, in the Caymans,Geneva, etc...That's not class envy ,just the sociological "mens rea" of the wealthy.

Here's fun for the whole family.

THE INFLATION CALCULATOR
It's easy to use and very informative.

http://www.westegg.com/inflation/

Example:

What cost $1000 in 1960 would cost $7039.79 in 2007.
Also, if you were to buy exactly the same products in 2007 and 1960,they would cost you $1000 and $146.03 respectively.

See how devalued money can get.

Do some calculations..just fit in some numbers and years and hit the button.......way kool.


Lets say you were born in 1973 and are 35 years old ...take a peek.

What cost $1000 in 1973 would cost $4905.27 in 2007.
Also, if you were to buy exactly the same products in 2007 and 1973, they would cost you $1000 and $209.57 respectively.

It's good to have faith and help your fellow man. We're gonna need it.

But economic history has it's ups and downs and right now we're quickly losing gobs of altitude. Not all economic laws are immutable but Sir Isaac Newton conclusively proved that gravity exists here on Earth and our aircraft is currently being powered right now ,not by it's engines, but by gravity.

Oh look..the Dow is only down 100 points...lets look for a rally this afternoon..Berbecke could whip up another $200 billion in support ...good for a day's trading to the positive.

A great laugh to break up the hard new...but totally other worldly.

NEWS ALERT
from The Wall Street Journal


March 13, 2008

*The U.S. has finally slid into recession*, according to the majority of economists in the latest Wall Street Journal economic-forecasting survey, a view that was reinforced by new data showing a sharp drop in retail sales last month.

The survey, conducted March 7 through 11, marked a precipitous shift to the negative from the previous survey conducted five weeks earlier. For example, the economists now expect nonfarm payrolls to grow by an average of only 9,000 jobs a month for the next 12 months--down from an expected 48,500 in the previous survey. Twenty economists now expect payrolls to shrink outright. And the average forecast for the unemployment rate was raised to 5.5% by December from 4.8% in the previous survey.

FOR MORE INFORMATION, see: http://online.wsj.com/article/SB120534519452630845.html?mod=djemalertNEWS

Dollar losing clout around the world

Even in South America workers prefer euros, other local currencies
William Leroy
Hit by a free fall with no end in sight, the once-mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad: Its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.

Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.

more
http://www.msnbc.msn.com/id/23616851/

Early in my brokerage career I remember reading one of Charles M. Schwab's books. Always on the lookout for a simple way to explain things to clients I read a good deal over the years. One of the things that stuck in the hippocampus of my brain was his statement that of all the factors that went into the equation of "the markets" behavior, the greatest by far was is human psychology.

The above posting on the USD losing clout worldwide is toxic.
We know there was a good deal of financial coverage last year about the world "decoupling" from the US currency. Fortunately this did not materialize, although some assumptions made in most of the articles have proved false.

Let's just hope that what we see now, an acceleration in various markets to deal in Euros and not in dollars doesn't become the reigning psychology. That said many US firms are now beginning to suggest that developing foreign markets are the place to make some money....and they deal in Euros. You can bet the farm that the big WS firms are hedging more and more of their cash into the Euro, but so as not to dilute their holdings they'll with hold that from the public at large....nothing like dilution of an item to make it less valuable....eh.

The above is purely speculative on my part but the known aspect of the dominant world currency battle is currently being engaged at the vendor level (and perhaps behind the currency trading desks of WS firms). Lets hope it doesn't creep up the food chain.