X Post: My thoughts on the coming dollar collapse

[Borodog]

I am not a financial type guy, so feel free to rip me to shreads. Both posts are from me in EDGD:

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
please explain how a dollar "collapse" is different that the dollar just continuing to slide down as it has for the last several years?

[/ QUOTE ]

Currently there are trillions of USD being held outside of the US. As the USD slips, those holdings lose value. So all those holding them have a depreciating asset. At some point, the rats are going to desert that ship. This will precipitate the sell-off of USD, and their international value will literally plummet (imho of course).

Once the international value tanks, people are going to be stuck with all these devalued dollars. They will try to recoup their losses. How will they do that? They will buy up anything and everything they can get their hands on that they can buy with USD. But the only place that will be will be the United States. Exports will skyrocket. Foreign investors will buy up American real estate and companies, you name it. The trade deficit will become a trade surplus (which is not a good thing, no matter what Lou [censored] Dobbs thinks). All of those dollars flowing back into our economy will creat massive double digit inflation.

Meanwhile, our inflation-bubbled economy is certainly going to pop at the same time, meaning we will get a massive recession. We'll have massive inflation and a recession, just like the 1970s.

The value of gold will skyrocket as people look to get out of USD that are losing value daily. This happened at the end of the 70s as well. Gold hit $800 per ounce in late '79. In today's inflated dollars that's like $2400. Currently it's at like $735 and climbing _fast_.

Central banks prevented gold form spontaneously remonetizing in 1980 by instituting massive gold dumping to crash the market value of gold and convince people that their inflation hedge bet had failed. It worked. Central banks have been gold dumping off and on for 30 years to control the price of gold.

But my gut feeling is that there is not enough gold left in the central banks of the entire world to prevent it again. So the dollar will crash, we will get a massive recession + massive inflation and a flight to gold. The price of gold will double or triple or quadruple. Central banks will dump gold, but it will fail. If they do try this, and the price of gold crashes, you should buy as much as you can, because when they do this they will be putting real money back into circulation and you want to have as much of it as you can get. Gold will spontaneously remonetize, and the world fiat currency order will collapse.

That's my theory.

[/ QUOTE ]

I realized there is a mistake in my reasoning. That being, everyone else can also follow this chain of reasoning. Why would foreign dollars holders wait until AFTER the dollar tanks to start trying to recoup their losses on their dollar holdings? Why would they sell off dollars for Euros or Yen when that would crash the value of the dollar, and hence their remaining holdings? They wouldn't.

Instead I realized that they will start getting out of dollars now, not by buying other currencies, but rather by buying up US assets, like companies and real estate.

And then lo and behold, what do I find out last night? Dubai is buying a 20% stake in NASDAQ, apparently with only a 5% voting share. I will make this prediction: I bet if you were to look around the market, foreign investors are buying up US companies and real estate left and right, and that the rate is increasing. The trade deficit already took a healthy whack as exports ticked up sharply, and I bet the same is reflected in US hard assets.

I don't really know how to check this prediction, though. Anyone know of any reports on foreign acquisition of US companies and real estate?

[/ QUOTE ]

[ubiestmea]

You're ignoring the forex market, according to the most recent Foreign Exchange Committee Volume Survey there was $12,981,915,000,000 of volume in the 21 trading days in April 2007.
http://www.newyorkfed.org/fxc/volume...survey2007.pdf

If you were a foreigner with dollar exposure concerns would it make more sense to hedge or even get net short the dollar in a very liquid market or start buying US companies and real estate just before the US goes into a serious recession?

How do you consider buying US companies and real estate as “getting out of dollars”, what do you think you will get paid with when you sell them?

[MrBlue]

The Japanese were going to buy up everything in the 80s but we're still here.

It's also not the first time the dollar has dropped like this. A few good years and no one will even remember this 'crisis'.

[Woolygimp]

Borodog, you're retarded for someone who has a higher than average intelligence.

[xxThe_Lebowskixx]

"very liquid market or start buying US companies and real estate just before the US goes into a serious recession?


is a serious recession ever not coming?

[dazraf69]

[ QUOTE ]
Borodog, you're retarded for someone who has a higher than average intelligence.

[/ QUOTE ]

Care to explain why? Though I may not entirely agree with everything OP has stated, I do not have a strong counterargument to be able to say he is "retarded". I am actually looking for a good counter argument.

[Eihli]

Woolygimp, you're retarded for someone that has below average intelligence.



See how pointless posts like these are? What do you expect people to reply with. "I know you are but what am I?". That won't lead this forum anywhere.

Saying your astrologist predicts dollar appreciation due to sunspot locations would be a more productive of a post than your blind dead-end statement.

[Borodog]

[ QUOTE ]
You're ignoring the forex market, according to the most recent Foreign Exchange Committee Volume Survey there was $12,981,915,000,000 of volume in the 21 trading days in April 2007.
http://www.newyorkfed.org/fxc/volume...survey2007.pdf

If you were a foreigner with dollar exposure concerns would it make more sense to hedge or even get net short the dollar in a very liquid market or start buying US companies and real estate just before the US goes into a serious recession?

[/ QUOTE ]

Getting something for your dollars is better than getting almost nothing for your dollars. Owning a company or real estate, especially if you try to bet on companies that are unlikely to flat go under in a recession (like the NASDAQ), is better than holding onto dollars or waiting for those dollars to crash in value before unloading them. And trying to sell of dollar holding for Euro or Yen would likely kick off the crash of the dollar.

[ QUOTE ]
How do you consider buying US companies and real estate as “getting out of dollars”, what do you think you will get paid with when you sell them?

[/ QUOTE ]

But you can sell them much later, once the situation has stabilized. Again, it's not a matter of making money. It's a matter of stopping bleeding.

The scenario I am describing has largely already happened in the late 70s and early 80s. Remember when everyone was hysterical that foreign companies were buying up American companies and real estate? The Japanese owned skyscrapers, companies, you name it. This happened because: There were a lot of dollars in foreign hands, the dollar was weak internationally, and since the US was already *in* recession, there was little direction to go but up for surviving US companies. Hence foreign investment went through the roof.

[Borodog]

[ QUOTE ]
Borodog, you're retarded for someone who has a higher than average intelligence.

[/ QUOTE ]

Possibly.

[TheMetetron]

FWIW, I think Borodog is correct here. This is likely what will happen if the dollar devaluates much more in the short term. This isn't necessarily a bad thing though.