Dollar Crash: Compared To What?

I got to thinking about the chatter that comes up each time things seem to be getting worse. Pumpers fire up their keyboards and bold red fonts to proclaim this is the big one!

Tonight I wondered, a dollar crash would mean that it would have to significantly drop in purchasing power to all other stuff. But with the dismal state of other currencies of the world and the bear market in any commodity but land, to what currency or commodity would the dollar fall?

Silver is getting down to the value of a fancy door stop. Don't get me wrong, i'm still a believer, but a crash?

 

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Even with all of our economic problems I think the US Dollar still sucks the least, so it will continue to be a store of value of choice for the foreseeable future. At least we have only one dysfunctional government controlling our currency. Just think what it would be like if every region of the country had its own economic policy, with some like Germany and others like Greece. I wouldn't bet on the Euro crashing either though, because the benefits of keeping it together outweigh the chaos that would ensue if it broke apart.

Other currencies such as the Swiss franc have their advantages, but their "market caps" are probably much too low to absorb the bulk of the world's investment holdings. The same goes with silver and gold. I may be in the wrong forum to say this, but I don't think there are enough precious metals to serve as the primary store of value in today's economy. Credit would be way too constricted. I agree that our current system of fiat currency is subject to eventual failure, but the alternative is even worse. I also agree with Winston Churchill that capitalism is the most evil economic system on the planet except for all the other ones...

 

The last crash that I recall was when an armored service wrecked and spilled several thousand dollars in nickels on I-95. People were scrambling everywhere!

Chris

 

Our Dollar is getting stronger and stronger. By the end of the year the Dollar could be equal to the Euro. Right now it takes $1.10 to buy a Euro. Not too long ago the Euro was much stronger than the Dollar.

If you have any money invested in a stock market based fund like the SP500 you have see very strong growth.

 

The entire reported gold reserve for the US could be cashed in, and it would pay the interest on the national debt for about 15 months, or the actual finances of the government for less than 30 days.

 

With the downturns in Greece and China's massive recession there will be less need for silver . They're also saying $10 silver and $7-800 gold . Well if it gets that low I;ll buy more and finally get all the gold Double eagles I've needed for my Type set . With the dollar getting stronger it might be the best place to keep your wealth for awhile .

 

Does China still hold a huge part of the US debt paper?

Chris

 

Last time you posted that (about two weeks ago), I replied that "what Americans sometimes seem to forget, however, is that the EUR-USD rate has varied widely in the past 15+ years: between 0.825 ($ per €) in October 2000, and 1.599 in July 2008." The latter was definitely difficult for export oriented businesses here. But I agree, while crashing currencies may be a welcome scenario for some gold and silver bugs, I certainly do not see the US dollar anywhere near such a crash.

Christian

 

China holds the MOST US debt but as a percent to total, it's not that big. From Wikipedia..........I think it's a misconception that China holds most of the $18T+ debt that the US has out there. Much of it is held by US banks and other US concerns as well......I love it when people say China will just call that debt in.....don't get me wrong, I'm not for $18T+ debt, but it's pretty judiciously spread around. Interesting to see just who has increased or decreased their level of US debt over the last year and what the trends are there.

 

If a person checks, very very little if any of foreign debt ( by any country ) is callable ( able to demand payment at any time), but only if at specific times if payment ( as specified by the bond or instrument ) is in default. Countries have defaulted on their debts in many ways, and still continue on, they do not become the holding country's property. Trust in that payments will be made properly is what determines the value of the bonds, etc., and the US is very high in that area. I could see in the future when a ruling political party might wish to default rather than pay, but that is a way in the future. The chart indicates the bonds each country has outstanding, but not the value each holds in other countries bond debt, some going back for decades.

 

With all due respect in 2008 the American economy was on the verge of a national collapse and the very weak Dollar at that time was symptomatic of that. Today our economy is much stronger than in 2008 and our Dollar is also much stronger.
Compare the stock market in 2008 to what it is now.

Back in 2008 if I wanted to buy an item on Italian Ebay for 100 Euros it would have cost me $160. Dollars. Today an item costing 100 Euros will only cost me $110. Dollars. That's a big difference in the buying power of the American Dollar. By the end of the year that item costing 100 Euros could cost me only $100. Dollars or less.

As an American a like a strong Dollar over a weak Dollar.

 

And all this could change in the course of a single weekend.

What could change it?

China opening a precious metals exchange? China's currency being accepted as a reserve currency?

Something else?

All of the above.

 

What is likley to happen is what you should base your financial decisions, not some crazy subset of any and all possiblities. The example you listed are just way too small a possibility to be concerned about.

 

Acceptance of a currency as a reserve currency doesn't happen over a weekend. It is based on market consensus and trust. The Chinese yuan is the currency of a communist nation that gives massive loans to favored state owned enterprises at low rates. As a result there are huge commercial real estate developments that are nearly empty. I don't know about you but I don't want my savings in yuan when that house of cards comes crashing down.

 

Would China kill the American Golden Goose ?????

 

Sure. And back in 2000, you would have paid 82.50 US dollars for a €100 item. That is my point - parity is nothing new, 15 years ago you paid even less than a hundred.

 

I think the Dollar has done very well, coming back from the very weak level it was at in 2008 . And we just might return to that strength the Dollar had back in 2000.
Who would want to return to that 2008 Dollar and that 2008 American economy.

In my mind the stronger Dollar is headed in the right direction.

 

I want to be smoking what everyone else on this forum is smoking. Our dollar appears strong but all is not what it seems and by the end of the year we may see a new World Reserve Currency from China. China Russia and India have more Gold than us and our dollar is backed by nothing. We are 17 Trillion in debt. When are we going to pay that down. As long as the FED keeps on printing dollars it like it was Disney dollars everything we buy costs more, that's just the way it is.

 

"Nothing to see here folks...move along, move along......"