US Dollar collapse

[Springbok]

From the website of Jim Sinclair:

This is the real thing. What has occurred is “The End of the Beginning,” and now we are facing “The Beginning of the End.” That is the big picture. From micro vision this phase will in all probability be a two section move. Most likely the battle of dollar survival at or around 0.8050 on the US Dollar index (USDX)could cause a downward reaction in gold, but it will be both limited in size and time.

Gold is heading to US$1,000+.

Jim Sinclair’s Commentary

A little background on "Our Crowd":

Jesse Seligman = James Sinclair in another incarnation.

My Father, Bertram J. Seligman, is off the line of David Seligman. My mother was Abby's Irish Rose, Margaret O'Halpin.

I am half Irish and half Jewish so I love to fight and make $$$. I never did well with the Irish curse but be assured I tried.

The Seligman Family: In The Civil War And After

by Seymour "Sy" Brody

Jewish financial contributions to the Civil War were overshadowed by the more dramatic and significant battles. Yet, the Seligman family's role in obtaining financial aid for the North is compared to the victories of the Union forces at Gettysburg and the contributions of Haym Salomon to the American Revolution by the Dictionary of National Biography.

When the Civil War began, the South had no problems in getting European credit while the North had trouble. Union bonds could not be sold abroad and the North was hurting financially.

The Seligman brothers, through their international banking firm, J.&W. Seligman and Company, were able to break this "no credit" wall when their Frankfurt, Germany, branch sold over $200 million worth of bonds. This was the opening that enabled the North to be financially sound in the continuation of the Civil War. As a result of being able to sell the United States bonds in Frankfurt, the government appointed all of their European branches as their fiscal agents in selling U.S. bonds.

At this time, the North owed the Seligman family over a million dollars for clothing purchased from them in their dry goods business.

Fanny and David Seligman had eight sons and three daughters and their eldest son, Joseph, immigrated to the United States from Germany in 1837. Joseph worked hard and he sent for his seven brothers as he accumulated enough fare. Jesse and Henry opened up a dry goods store in Watertown, New York, in 1848.

It was here that Jesse became friendly with a young lieutenant named Ulysses S. Grant, who was stationed there, and who was to become a great general in the Civil War. Jesse Seligman recalls in his writings that he was learning the English language and smoking penny cigars when he and Grant were having long conversations.

In 1850, Jesse and Leopold Seligman went to San Francisco with merchandise and established a lucrative business taking care of the needs of those involved in the gold rush. They returned to New York, where they had a large import and clothing firm. It was this firm that sold merchandise to the North during the Civil War and gave them over a million dollars of credit.

Jesse Seligman was a vice-president of the Union League Club of New York, but he resigned in 1893 when his son was blackballed be cause of his religion. He was for over 20 years the president of the Hebrew Benevolent and Orphan Asylum of New York and he was selected by Baron de Hirsch in 1891 as an original member of the board of trustees of the Baron de Hirsch Fund.

Jesse Seligman enjoyed the confidence and esteem of President Grant and some of his successors. Joseph Seligman was active in finance and he submitted a plan to the government on how to fund their operations. His plan was selected and he joined with the House of Rothschild in this undertaking.

Joseph Seligman was offered the position of Secretary of the Treasury by President Grant, but he refused the prestigious offer. He was very active in charity and Jewish affairs. Prior to his death in 1880, he was considered to be one of the leading Jews in the country.

[Ray51]

O.K. , not unreasonable ;

but , with the imminent dollar , bonds and shares collapse , can we at least expect a return to semi-decent interest rates - e.g. above misreported inflation ?

[JohanK]

Springbok, what would this mean for the R/AU$ ?

[Springbok]

Springbok, what would this mean for the R/AU$ ?

weaker USD = stronger EUR = stronger AUD. ZAR as an emerging market currency is a bit different, should also strengthen as USD weakens, but then again you never know when our esteemed politicians make some idiotic comment, sending the ZAR into a tailspin. ZAR/AUD should be relatively stable, as both are "commodity" currencies, but I'll have a look at a few trends tonight and upload some charts. In the end, gold will once again reign supreme as the ultimate currency. So make sure you hold some gold coins as "insurance" against currency devaluation during the next few years, if you have the means.

From Jim Sinclair today:

Dollar woes poised to carry over into next year

"Jim Swanson, chief investment strategist at MFS Investment Management, expects the dollar to drop 10% against the euro and 15% against the yen in the next 12 months."

Stormy end to November may spell disaster for the dollar

"Many market watchers had been anticipating the dollar's slide for months, none more so than Paul Volcker, former Fed chairman. He said: 'It's incredible people have gone on so long holding dollars.' "

The age-old message: ingot we trust

"It is common wisdom that the US dollar is stretched to snapping point by the deficit/debt debacle, but less understood that ageing Europe and Japan are too fragile to absorb the shock of a dollar slide, one that is perhaps already starting. 'It's now a matter of competitive devaluations. Countries are all debasing their currencies, so the question is which one debases fastest,' he said. How high will gold go in the currency Götterdämmerung ? With a smile of approval, Mr Hambro notes the $4,000 to $5,000 forecast by the Swiss guru Dr Martin Murenbeeld. Formally, he is sticking to a cautious $750 in 2007, then we'll see. Mr Hambro predicts that the rising reserve powers of China ($1 trillion) and Russia ($273bn) will top up their holdings of gold in a slow, relentless switch away from dollar dependence."

[Springbok]

can we at least expect a return to semi-decent interest rates - e.g. above misreported inflation ?

depends what you mean with "semi-decent" - for working people with debt, that is low interest rates, while pensioners and retired people want high interest rates.

The US and Europe appear to be near the end of their tightening cycle (rising rates), while South Africa hasn't seen the end of rising rates yet. The latest CPI figures were higher than expected (5.0% vs. 4.9% expected) while PPI growth for October hit double digits (10%)! Much worse than expected. So rates will go up next Thursday by about 50 basis points, and then again in Feb. and probably AGAIN in April if consumers don't reign in their spending. Which could bring us to prime above 13% by April. Should lead to a slowdown in property prices and less vehicle sales.

[Springbok]

Springbok, what would this mean for the R/AU$ ?

The R/AU$ doesn't look too good - seems we have a floor at 5.40. The AU$ however looks much better against the Euro (1.67) and US$ (1.27). It has been quite stable against the euro the last few years, but gaining a lot of ground against the US$.

Comparing the AU$, EUR and ZAR against the US$ over the last 5 years, we see the following:

- except for 2005, the currencies gained against the US$;

- the ZAR gained the most on average from 2002 - 2004, simply because it was massively undervalued in 2001;

- 2006 is the first year that the ZAR (-15%) moved opposite to the AU$ (+8%) and the EUR (+10%) against the US$.

[Springbok]

more US$ / gold / China news:

Plunging dollar will set world markets reeling

"I think the dollar's going to hell in a handbag," said David Bloom, currency strategist at HSBC. "The market is starting to think that the US is going from a soft landing to a hard landing."

China should increase gold holdings

"China's Central Bank says that China has 600 tons of gold holdings, equal to about 19.29 million ounces. This figure has not changed since December 2002. China's gold reserves account for only 1.3 percent of its total foreign exchange reserves, far lower than the 3 percent that is standard in other countries. With the rapid growth of foreign exchange reserves, which now exceed US$1 trillion, the ratio of gold in China's foreign exchange reserves is even lower. In the long term, China should raise its gold holdings."