Mr. Mercedes

Ok guys, just thought it would be interesting to find out what currency most of you are keeping your cash in and for what reasons?

There has been considerable speculation that the US dollar will face significant devaluation, particularly if Iran, Russia, Venezuala et al. decide to pursue the trade of oil in Euros as opposed to the US Dollar. Are you concerned about a potential devaluation of the US dollar and are you doing anything to hedge against this risk, i.e converting to Euros or Sterling or commodities? Or do you see all this talk as nonsense and scare mongering?

I am really interested in reading your oppinions. Below is an email sent to me that I found an interesting read. I dont necessarily agree with it, but do you believe there is grounds for even some concern?

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HYPERLINK
"http://www.businessreport.co.za/index.php?fSectionId=553&fArticleId=3263480
%20target="http://www.businessreport.co.za/index.php?fSectionId=553&fArticle
Id=3263480 target=

What are we to make of the growing chorus of fears about the possible
collapse of the dollar? Is it a case of crying wolf again?

Those fears link four elements: Iran’s stated intention soon to open its own
electronic International Oil Bourse; its resolve to sell oil there in euros,
not dollars; the expectation that the price of oil will rise to over $100 a
barrel, triggering world recession; and the demand for gold, rather than
dollars, as a store of value.

Since the US is deep in debt, nationally and internationally, the dollar’s
value depends entirely on the fact that it is a reserve currency for other
nations. We all have to keep reserves in dollars for two reasons. First, by
an agreement made in the 1940’s, the oil producing countries of OPEC agreed
to sell oil only in dollars. That meant everyone had to hold dollars if they
wanted to buy oil, resulting in two-thirds of all central bank reserves
being in dollars.

That in turn means that the Americans have the privilege of producing the
international currency. Creating money is nice work if you can get it. It is
the equivalent of having a mint in your backyard. You can buy what you want
with the new money, without having to supply the equivalent value of goods.
America has been financing its annual deficit with the rest of the world –
it borrows over $2 trillion a day - by simply making new money and spending
it into circulation.

They will not be able to do that if we no longer have to buy our oil in
dollars. Its value would fall as nations switch to other currencies to buy
oil or to gold as a reliable store of value. The creation of dollars would
not be available as a mechanism to cover the huge international debt. If
that process began, there could be the kind of flight from the currency that
has wrecked the economy of many nations within the past decade.

Even more alarming are suggestions that to avoid this possibility the
American government is planning to invade Iran. The fact that the invasion
of Iraq was preceded by unwarranted accusations of weapons of mass
destruction, and that Hussein had threatened to switch sales of oil from
dollars to euros, gives credence to such fears. The fact that Iraq’s current
chaos makes it a net importer of oil seems not to deflect American resolve.

What is the evidence for the possible imminence of this scenario? Associated
Press on May 5 quoted top Wall Street analyst Bill O’Grady of A.G.
Commodities: ‘If one day the world’s largest oil producers allowed, or worse
demanded, euros for their barrels, it would be the financial equivalent of a
nuclear strike.”

On May 8, an editorial in right-wing Forbes Magazine, written by Bush
supporter Jerome Corsi, predicts: “If Iran wants also to seriously threaten
the dollar’s position as a dominant foreign reserve currency, a war becomes
almost certain. The Iranian oil bourse may never be mentioned by US
policy-makers as an official reason the US decides to go to war with Iran,
but it may end up being the straw that broke the camel’s back.’

A UK network on sustainable development
HYPERLINK "http://www.yahoo.groups.com/index.php"
- ONLY REGISTERED AND ACTIVATED USERS CAN SEE ALL LINKS - CLICK HERE TO REGISTER has collected the evidence that this
scenario may be round the corner. It claims the Western media has up to now
self-censored on the issue – sounding alarm bells as the gold price soared
to nearly $700. It records Al-Jazeerah, on April 30, reporting that ‘Oil
producing countries such as Venezuela…and a few of the larger oil consuming
countries, notably China and India, have already announced their support for
the Iranian bourse’ An article : Petro-Euro: a reality or distant nightmare
for US’ quotes US security expert William Clark saying ‘If Iran threatens
the US dollar in the international oil market, the White House would
immediately order an attack against it’.

Gold is now at a 20-year high against the dollar, and the dollar at a
one-year low against the euro. The Financial Times of May 16th, under the
headline: “Fears for Dollar as Central Banks Sell US assets” reported that
‘central banks sold a net $14.4 billion during the month, the largest sale
since August 1998.’

At the opening of the IMF meeting on April 21, Russia’s Finance Minister
said his country ‘could not consider the dollar a reliable reserve currency
because of its instability’. The same day the Swedish Riksbank halved its
dollar holdings to buy euros.

At that IMF meeting the 2006 World Economic Outlook was launched, warning of
a dollar collapse – due to global trade imbalances, spiraling US debt and
the demise of the petro-dollar reserve standard. In the language beloved of
obfuscating economists who hope thereby to soften the truth, it stated:
‘Global current account imbalances are likely to remain at elevated levels
for longer than would otherwise have been the case, heightening the risk of
sudden disorderly adjustment.’

‘Sudden disorderly adjustment’ is the current bankers’ euphemism for the
consequences of a dollar collapse. Others, including Morgan Stanley
economist Stephen Roach, as well as financiers Soros and Warren Buffet,
refer to it as ‘economic Armageddon’. How close are we to that?

notic

some of that is true, but a lot still has to do with the fed and what bernanke decides to do with the interest rate. the recent american housing boom seemed to give the u.s economy a good run, but now it really seems like that has come to an end (homebuilder stocks have recieved a recent wave of downgrades). foreign nations that hold large sums of trade surplus with the americans are also trading in their dollar assest for gold. i posted an article in the gold thread about how china is looking into boosting its gold reserves due to forecasts of a weak usd. apparently there was some news about russia buying gold as well this, i'll try and dig up the article.

edit: here's the article - ONLY REGISTERED AND ACTIVATED USERS CAN SEE ALL LINKS - CLICK HERE TO REGISTER

EnI

We had the same debate 3 months ago in this forum.

HERE

Mr. Mercedes

Thanks for the posts and articles.

It seems a bit unwise then to be keeping large sums in US dollars dont you guys think? Even if nothing comes of all this, there's no harm in converting to a potentially more stable currency.

drronh

As soon as I get a dollar, I go exchange it for Uruguyan New Pesos, unless its a Tuesday in an odd numbered month, then I get Vietnamese Dongs.

Zonda

haha

klier

LOL

Giannis

As for me, since my euros don't stay for a long time in my pockets, i don't care to turn them into dollars, pounds or even Uruguyan New Pesos...

YoungWarrior

I hope the dollar gets really weak compared to sterling so I can buy stuff from the states on the cheap.

450SEL6.9

Well, gold is finally going down somewhat and it fell below $640, which I did not think it would.

I would hold Swiss Franc and Swiss government bonds. I think some of the higher yielding currencies like the Kiwi dollar and Aussie have had their run already. The Canadian dollar is a favourite amongst some currency pundits, but I think it is too strong for its own good.