We Can Guarantee Cash...

Monday, April 04, 2005

If you ever wondered what the future will bring for the US dollar, stop wondering. One just has to listen to the Federal Reserve (that's the agency printing them). "We can guarantee cash, but we cannot guarantee its purchsing power", said Fed chairman Alan Greenspan in his latest testimony to congress. Very reassuring!

I am astonished that this quote, which can be viewed at c-span's website, never made it to the newswires. Seems they like to stick with the propaganda of the Bush regime. While we hear a lot about the urge to reform social security by putting people's retirement at the risk of market fluctuations (that fluctuation is DOWN for the last four years), media remain silent about the much bigger risk of not reforming Medicare and Medicaid, a problem several times the size of social security and approaching much faster then it. Remember, social security does not pose a problem until 2040.
But who cares as long as Globocop brings freedom and democracy to the oil rich country of Iraq - heard anything about the actual outcome of the elections yet? Please inform me!


adlib. said...

is this sight new? would like to hear more...what is your insight on with the U.S bond market. When do you believe the Asian backed buying will diminish and evaporate?

04 April, 2005 03:27

The Russian central bank announced in late March that they were shifting their foreign currency reserves in favor of the Euro. Until now they held 90 percent dollars and 10 percent Euros. Now they will move this ratio to 80:20.
South Korea had announced a little earlier that they were going to diversify out of the dollar. They are the third biggest holder of dollar reserves behind Japan and China.
The muslim nations are buying up the gold the western central banks have been selling in the last years.
India is the biggest gold purchaser in the world.
This all spells trouble for the US bond market. As affinity for the dollar vanishes, the Federal Reserve will have to raise rates and the US government's borrowing will become more expensive as they have to make their bonds more attractive.
Only problem for foreign holders of US bonds is the falling dollar that outweighs any higher interest they would get paid. The dollar lost 45 percent of its value against the Euro since 2001. This might be the reason why China keeps the Yuan pegged to the dollar - otherwise they'd see their reserves melt away like a cone of ice in the sun. more to follow in my next blog entry

04 April, 2005 11:29

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