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As Dollars Pile Up, Uneasy Traders Lower the Currency’s Value

13 points by mshafrir 17y ago

mynameishere 17y ago
Freudian slip: http://www.youtube.com/watch?v=znZkxN0Ks0M#t=13m20s http://www.youtube.com/watch?v=znZkxN0Ks0M#t=13m20s Hope you all have your shorts in and your stops tight.
daeken 17y ago
"The United States remains the world’s default reserve currency, these experts add, and Treasury debt is still considered the world’s safest investment." When "experts" make statements like this, it becomes clear why we have the problems we do. The world's safest investment...
- brl 17y ago
  Do you think that US treasury bills are not a relatively safe investment? That would be quite a controversial thing to say.
  - daeken 17y ago
    Relative to what? I'll take precious metals over a fiat currency (any of them) any day.
    - brl 17y ago
      Suit yourself, but the price of gold will go wherever the powers that be want it to go.
      - daeken 17y ago
        Err, this is different from the Treasury how?
        seunosewa 17y ago
        If it's not different, then you have no reason to prefer one over the other.
        daeken 17y ago
        The difference is that the market controls the price of gold, whereas the Treasury's actions directly control the value of T-bonds and the like. Yes, it's possible to impact the price of gold to an extent, but there's no way anyone can argue the degree of control is even comparable. It just baffles me that you can justify Treasury securities by saying you can artificially control the price of gold.
        brl 17y ago
        As it baffles me that you believe the opposite.
        deleted 17y ago
        [deleted]
    - mellis 17y ago
      So would many people (especially in today's economic climate), which is why gold is much more expensive than it was in the 80's and 90's (see: http://goldprice.org/30-year-gold-price-history.html http://goldprice.org/30-year-gold-price-history.html). If today's uncertainty subsides, gold could cheapen considerably, inflicting large losses on anyone who invests in it now. Of course, if you think dollars are even riskier than most people do, it may still be worth investing in gold. But not simply because it's not a "fiat currency".
  - Luc 17y ago
    He's probably referring to inflation reducing the value of a (non-inflation protected) treasury bill investment. Of course they'll honour their obligations, but they may pay using dollars that are worth less.
    - daeken 17y ago
      Yes. It's "safe" in that they're likely not going to fold, but they're worthless for maintaining a relatively stable purchasing power.
  - steveplace 17y ago
    There was a huge bubble in t-bills back in november as the Great Deleverage was occurring, and the bubble has most certainly popped. Now define "safe." There's safe in terms of geopolitical risk, and then there's safe in terms of capital protection/appreciation. The former is not in question (except by few). The latter is the more complex one; as more dollars get printed, there's much less demand for treasuries as they don't protect against inflation and the returns versus the risk-weighted returns you get in other riskier assets make it not a wise choice.
steveplace 17y ago
Why do traders have to be "uneasy?" Financial media needs to stop assigning stories to short term noise. This is one part of the reflation trade: short dollar, short treasuries, long commodities, long risk assets (equities).
- anamax 17y ago
  > Financial media needs to stop assigning stories to short term noise. Interesting. Any comments on the relative weight given to bad economic stories during Bush's last three months and Obama's first three? How about something simple - Obama produced "here's what will happen if the stimulus package isn't passed" predictions during that debate. Some of those predictions had "by" dates that have passed. Did you see a retrospective? Would you have if Bush had done the same and had missed as badly? (We're a little worse off than Obama predicted we'd be if the stimulus wasn't passed. Maybe things would have been even worse, but that tells us that Obama's modeling isn't as good as he thinks.)
patrickg-zill 17y ago
Why are they uneasy? They see the GM bondholders (secured debt) get screwed in favor of the unsecured bondholders. They figure if it can happen with GM under government control, it might happen with USD, which is under the control of the same government.
mellis 17y ago
This seems overblown. If you look at the attached graphic, you'll see that the dollar is back to where it was at the start of October, two weeks after Lehman Brothers declared bankruptcy and started a panic that drove flocks of investors to U.S. Treasury bonds (whose yields fell almost to 0). This seems less an indication of weakening confidence in the dollar than a sign that the fear of putting money into anything but U.S. Treasuries is abating. The article cites a couple of people concerned about inflation, but offers little evidence that it poses a danger. The economy is still vulnerable, but neither inflation nor a weakening dollar should be our biggest worries.
- timr 17y ago
  You win the smartest comment in the thread award. It bums me out that some nonsense rant about the gold standard is at +7, while your comment (with opinion echoed by nearly every currency expert I've read) is down here in the weeds. There was a flight to quality following the bank failures. The drop in the dollar is a good sign that the world's economies are starting to find better places to put their money than US currency.
cellis 17y ago
!hn. flagged.

13 points by mshafrir 17y ago

Freudian slip: http://www.youtube.com/watch?v=znZkxN0Ks0M#t=13m20s http://www.youtube.com/watch?v=znZkxN0Ks0M#t=13m20s Hope you all have your shorts in and your stops tight.

daeken 17y ago

"The United States remains the world’s default reserve currency, these experts add, and Treasury debt is still considered the world’s safest investment." When "experts" make statements like this, it becomes clear why we have the problems we do. The world's safest investment...

brl 17y ago
Do you think that US treasury bills are not a relatively safe investment? That would be quite a controversial thing to say.
- daeken 17y ago
  Relative to what? I'll take precious metals over a fiat currency (any of them) any day.
  - brl 17y ago
    Suit yourself, but the price of gold will go wherever the powers that be want it to go.
    - daeken 17y ago
      Err, this is different from the Treasury how?
      - seunosewa 17y ago
        If it's not different, then you have no reason to prefer one over the other.
        daeken 17y ago
        The difference is that the market controls the price of gold, whereas the Treasury's actions directly control the value of T-bonds and the like. Yes, it's possible to impact the price of gold to an extent, but there's no way anyone can argue the degree of control is even comparable. It just baffles me that you can justify Treasury securities by saying you can artificially control the price of gold.
        brl 17y ago
        As it baffles me that you believe the opposite.
      - deleted 17y ago
        [deleted]
  - mellis 17y ago
    So would many people (especially in today's economic climate), which is why gold is much more expensive than it was in the 80's and 90's (see: http://goldprice.org/30-year-gold-price-history.html http://goldprice.org/30-year-gold-price-history.html). If today's uncertainty subsides, gold could cheapen considerably, inflicting large losses on anyone who invests in it now. Of course, if you think dollars are even riskier than most people do, it may still be worth investing in gold. But not simply because it's not a "fiat currency".
- Luc 17y ago
  He's probably referring to inflation reducing the value of a (non-inflation protected) treasury bill investment. Of course they'll honour their obligations, but they may pay using dollars that are worth less.
  - daeken 17y ago
    Yes. It's "safe" in that they're likely not going to fold, but they're worthless for maintaining a relatively stable purchasing power.
- steveplace 17y ago
  There was a huge bubble in t-bills back in november as the Great Deleverage was occurring, and the bubble has most certainly popped. Now define "safe." There's safe in terms of geopolitical risk, and then there's safe in terms of capital protection/appreciation. The former is not in question (except by few). The latter is the more complex one; as more dollars get printed, there's much less demand for treasuries as they don't protect against inflation and the returns versus the risk-weighted returns you get in other riskier assets make it not a wise choice.

steveplace 17y ago

Why do traders have to be "uneasy?" Financial media needs to stop assigning stories to short term noise. This is one part of the reflation trade: short dollar, short treasuries, long commodities, long risk assets (equities).

anamax 17y ago
> Financial media needs to stop assigning stories to short term noise. Interesting. Any comments on the relative weight given to bad economic stories during Bush's last three months and Obama's first three? How about something simple - Obama produced "here's what will happen if the stimulus package isn't passed" predictions during that debate. Some of those predictions had "by" dates that have passed. Did you see a retrospective? Would you have if Bush had done the same and had missed as badly? (We're a little worse off than Obama predicted we'd be if the stimulus wasn't passed. Maybe things would have been even worse, but that tells us that Obama's modeling isn't as good as he thinks.)

patrickg-zill 17y ago

Why are they uneasy? They see the GM bondholders (secured debt) get screwed in favor of the unsecured bondholders. They figure if it can happen with GM under government control, it might happen with USD, which is under the control of the same government.

mellis 17y ago

This seems overblown. If you look at the attached graphic, you'll see that the dollar is back to where it was at the start of October, two weeks after Lehman Brothers declared bankruptcy and started a panic that drove flocks of investors to U.S. Treasury bonds (whose yields fell almost to 0). This seems less an indication of weakening confidence in the dollar than a sign that the fear of putting money into anything but U.S. Treasuries is abating. The article cites a couple of people concerned about inflation, but offers little evidence that it poses a danger. The economy is still vulnerable, but neither inflation nor a weakening dollar should be our biggest worries.

timr 17y ago
You win the smartest comment in the thread award. It bums me out that some nonsense rant about the gold standard is at +7, while your comment (with opinion echoed by nearly every currency expert I've read) is down here in the weeds. There was a flight to quality following the bank failures. The drop in the dollar is a good sign that the world's economies are starting to find better places to put their money than US currency.

cellis 17y ago

!hn. flagged.