The US Dollar is "Contained"

[GRG55]

Time to watch out. The Fed says the "Dollar is contained"

Fed's Fischer says dollar appreciation won't last much longer

WASHINGTON, APRIL 16

(Reuters) - The appreciation of the U.S. dollar will likely come to an end in the "not too distant future," Federal Reserve Vice Chairman Stanley Fischer said on Thursday...

[DRumsfeld2000]

Re: The US Dollar is "Contained"

How do you see the Dollar going?

[jpatter666]

Re: The US Dollar is "Contained"

How do you see the Dollar going?

Often depends on how calm the waters are -- Grexit, China hard landing or Japan finally getting its inflation (and then some) and we could get a spike that might make late-2008 look tame.

[GRG55]

Re: The US Dollar is "Contained"

How do you see the Dollar going?

With the divergence in Central Bank policy between the Fed and all the others it would seem the secular trend remains in favour of the US Dollar for now.

I have been convinced the Yuan is overvalued for several years now, and I don't think the PBOC can hold the band where it is much longer unless there is a miraculous recovery in the Chinese economy. The Euro moved a lot recently, so may see a cyclical bounce, but does not seem the troubles are over for it yet. EM currencies are getting slaughtered as they deal with the "free money" excesses in the aftermath of the 08/09 financial crisis - Brazil and Russia being the poster children. Sign of the times below.

Despite the ruble's dramatic fall, and all the noise about Putin and China outmaneuvering Obama and the USA, I don't sense a lot of westerners are clamoring to invest in businesses or buy property in Russia or mainland China, move their families or put there kids into Russian or Chinese universities. Seems instead there is a rather steady flow of capital (and people) OUT of those two countries (and many others) seeking a safe haven somewhere. Anywhere. And no small amount of that is probably going into US Dollars and US tangible assets: stocks, bonds, property (all of the rest of that money seems to have a magnetic attraction to Toronto and Vancouver luxury condos, apparently ).

Airlines slashing flights to Moscow

Originally published April 17, 2015 at 12:50 pm

Updated April 17, 2015 at 5:10 pm

Bloomberg News

In 2012, British discount airline easyJet beat Virgin Atlantic Airways in a fierce competition for the rights to fly from London’s Gatwick to Moscow’s Domodedovo airport...

...Now, easyJet has scaled back its London-Moscow service, from two daily flights to only one in each direction. The move, which took effect in late January, “was in response to the reduction in demand to and from Russia in recent months,” an airline spokeswoman says...

...On Wednesday, Delta Air Lines announced it will suspend service to Moscow during the final three months of this year, meaning that no U.S. passenger carrier will fly to the Russian capital during that period...

...Hong Kong-based Cathay Pacific says it will end service to Moscow in June. And Air India, which had resumed flying from Delhi to Moscow in 2014 after a 15-year hiatus, cut back service to two flights a week in February after filling an average of only 47 percent of seats on the route. Others scaling back include Middle Eastern carriers Etihad and Qatar, as well as Czech Airlines, which is scrapping plans to serve the regional cities of Kazan, Kaliningrad, Perm, and Ufa this summer.

“We have been relocating the capacity freed in the Russian market, which has been experiencing a significant drop in demand,” the company said in a statement.

Russian-based airlines are taking even more drastic steps, as the ruble’s sharp decline has led to a more than 50 percent drop in the number of Russians traveling abroad, according to the government. The country’s air-transportation agency reported on March 24 that Russian carriers were abandoning 71 international routes linking Russian cities to such destinations as Barcelona, Dubai, Tel Aviv, and Vienna...

[don]

Re: The US Dollar is "Contained"

Is The Credibility Bubble Bursting?

by John Rubino on April 19, 2015 · 6 comments

In a fiat currency system, perception is, by definition, everything. Paper money has no intrinsic value. So the people saving it and accepting it in exchange aren’t expressing faith in the money itself but in the competence and honesty — and power — of the institutions managing it. Let that faith erode and those slips of colored paper and ephemeral computer bits revert to their intrinsic value.

And on the credibility front, the trends aren’t encouraging. Consider the coverage of this weekend’s Washington DC meetings of the International Monetary Fund and World Bank, two global financial institutions that the US dominates. From the New York Times:

At global economic gathering, concerns that US is ceding its leadership role


This article is available only to subscribers, but a similar one from India’s Business Standard makes many of the same points:

US primacy seen ebbing at global meet

As world leaders converge here for their semiannual trek to the capital of what is still the world’s most powerful economy, concern is rising in many quarters that the United States is retreating from global economic leadership just when it is needed most.The spring meetings of the International Monetary Fund and World Bank have filled Washington with motorcades and traffic jams and loaded the schedules of President Obama and Treasury Secretary Jacob J Lew. But they have also highlighted what some in Washington and around the world see as a United States government so bitterly divided that it is on the verge of ceding the global economic stage it built at the end of World War II and has largely directed ever since.

“It’s almost handing over legitimacy to the rising powers,” Arvind Subramanian, the chief economic adviser to the government of India, said of the United States in an interview. “People can’t be too public about these things, but I would argue this is the single most important issue of these spring meetings.”

Other officials attending the meetings this week, speaking on the condition of anonymity, agreed that the role of the United States around the world was at the top of their concerns.

Washington’s retreat is not so much by intent, Mr. Subramanian said, but a result of dysfunction and a lack of resources to project economic power the way it once did. Because of tight budgets and competing financial demands, the United States is less able to maintain its economic power, and because of political infighting, it has been unable to formally share it either.

Experts say that is giving rise to a more chaotic global shift, especially toward China, which even Obama administration officials worry is extending its economic influence in Asia and elsewhere without following the higher standards for environmental protection, worker rights and business transparency that have become the norms among Western institutions.

And check out this exchange on CNBC’s Fast Money traders roundtable:

Bernanke’s hedge fund gig ‘wrong on so many levels': Adami

Suddenly it’s okay, even on CNBC, to question not just Fed policy but the character of its governors.

What’s important here isn’t the sentiment but the source. Peter Schiff or Gerald Celente can point out America’s moral and technical dysfunction all day long, but by now they’re mostly just preaching to the choir. The New York Times and CNBC, however, are virtual branches of the US government, trading in access to the folks running the big institutions and profiting from the latter’s machinations. If the government loses them, it loses everything.

Nevertheless, without a productive base, it remains a beauty contest in a glue factory . . .

[jk]

Re: The US Dollar is "Contained"

"washington's retreat" from global leadership doesn't seem to be hurting the dollar or dollar-based markets - stocks, bonds, real estate. of course london's values seem to be doing ok in spite of the u.k's loss of global leadership early in the 20th century, approximately 100 years ago.

there's no denying that china is taking an increasingly prominent role in global affairs. but as the most populous country, and one with the 2nd largest economy in the world [albeit not a rich country measured in gdp per capita] shouldn't it be taking a larger role in global affairs? if not, why not?

[touchring]

Re: The US Dollar is "Contained"

I have been convinced the Yuan is overvalued for several years now, and I don't think the PBOC can hold the band where it is much longer unless there is a miraculous recovery in the Chinese economy. The Euro moved a lot recently, so may see a cyclical bounce, but does not seem the troubles are over for it yet. EM currencies are getting slaughtered as they deal with the "free money" excesses in the aftermath of the 08/09 financial crisis - Brazil and Russia being the poster children. Sign of the times below.

Despite the ruble's dramatic fall, and all the noise about Putin and China outmaneuvering Obama and the USA, I don't sense a lot of westerners are clamoring to invest in businesses or buy property in Russia or mainland China, move their families or put there kids into Russian or Chinese universities. Seems instead there is a rather steady flow of capital (and people) OUT of those two countries (and many others) seeking a safe haven somewhere. Anywhere. And no small amount of that is probably going into US Dollars and US tangible assets: stocks, bonds, property (all of the rest of that money seems to have a magnetic attraction to Toronto and Vancouver luxury condos, apparently ).

I don't know how Russia and China has in common.

I've never seen a Russian firm or even a Russian citizen in Singapore, but there are more Chinese citizen owned firms in Singapore than Canadian or even American owned firms. I'm sure the situation is not that much different in some places of Canada such as Vancouver?

The reason why Westerns or foreigners didn't buy property in China in 1995 when it was only 10% of what it now costs today is still the same reason why foreigners aren't buying property in China in 2015. They don't trust the Chinese government or the Chinese law, and not to mention the severe restrictions on foreigners owning property in China - http://www.maxxelli-consulting.com/h...ouse-in-china/

China is not a free market, there are a lot of curbs and restrictions on foreigners owning property and businesses in China. The Communist party is paranoid of losing control. You can't open a shop in China selling newspapers and hotdogs for example. There are countless restrictions and taxes, even for Chinese citizens, that's why the Chinese Premier Li Keqiang, a PhD in economics, said that China has many tools to boost growth - he only needs to remove some of the taxes and restrictions.

Generally speaking, foreigners who have worked or studied in China for at least a year are permitted to buy their own property. Specific requirements, however, vary from region to region. For example, in Shanghai, foreigners have to be married and be able to provide the local authorities with tax receipts for 12 of the past 24 months in order to purchase a house. The Beijing government requires foreigners to have paid social security and taxes for at least 5 years before they are allowed to buy a house. Despite the municipal differences, foreigners can only own one property across China, and the property has to be residential. Foreigners are also required to use their purchased property for dwelling purposes only and are banned from renting it out.

Nonetheless I agree that the RMB is overvalued against the Dollar.

[gwynedd1]

Re: The US Dollar is "Contained"

Has not Mr Janszen been saying there has been a controlled currency depreciation but in a rotating turned based style? Though on the other hand petroleum was one of the main sources of dollar cash flows for the rest of the world. So I am not at all surprised that dollar liquidity is rather more viscous these days.

[charliebrown]

Re: The US Dollar is "Contained"

I cant see the fed going on a multi year rate hike regime with other countries still in QE. Wouldn't that make the dollar soar?
bad for trade and all those foreigners who have loans in USD. I think a few token rate hikes and then on hold, or even go back to zirp when the finance bubble blows up. I don't know if that will wake the world out of their sleep that the debt will be repaid and the realization that it is zirp forever, until something really blows up.

Another thing that bothers me. Why does it take the fed one year of jaw boning to raise interest once? they are afraid of something. If you look at t-bill rates, I dont see the rate increase coming. Bills in July are fetching .02% and December .11%

[Southernguy]

Re: The US Dollar is "Contained"

I cant see the fed going on a multi year rate hike regime with other countries still in QE. Wouldn't that make the dollar soar?
bad for trade and all those foreigners who have loans in USD. I think a few token rate hikes and then on hold, or even go back to zirp when the finance bubble blows up. I don't know if that will wake the world out of their sleep that the debt will be repaid and the realization that it is zirp forever, until something really blows up.

Another thing that bothers me. Why does it take the fed one year of jaw boning to raise interest once? they are afraid of something. If you look at t-bill rates, I dont see the rate increase coming. Bills in July are fetching .02% and December .11%

+1

[dcarrigg]

Re: The US Dollar is "Contained"

it is zirp forever, until something really blows up.

I think you're right on the zirp forever bit. You may or may not be right on the "until something really blows up" bit. Even another financial/economic crisis of any kind will not cause them to hike interest rates again. Only thing that will conceivably bring up interest rates is a massive write-down of existing debt. And there's only one way that tends to happen in recent history ----- when things REALLY blow up.

Truth is, ZIRP has already done a hell of a job destroying pensions and retirements and anything other fund that thought 5% would be an easy minimum on the upside when it was conceived. That purpose is served. It might drive a few more munis into the haggard arms of Chapter 9, but who cares? Nations and alliances are on the line if rates rise much. Labor's in the lurch, and will always be without anything short of a miracle at this point, so wage push inflation ain't happening. Cost-push inflation might have been a worry for a while, but commodities are lower again. Can't see them needing to push rates to go too far north.

[thriftyandboringinohio]

Re: The US Dollar is "Contained"

I think you're right on the zirp forever bit. You may or may not be right on the "until something really blows up" bit. Even another financial/economic crisis of any kind will not cause them to hike interest rates again. Only thing that will conceivably bring up interest rates is a massive write-down of existing debt. And there's only one way that tends to happen in recent history ----- when things REALLY blow up.

Truth is, ZIRP has already done a hell of a job destroying pensions and retirements and anything other fund that thought 5% would be an easy minimum on the upside when it was conceived. That purpose is served. It might drive a few more munis into the haggard arms of Chapter 9, but who cares? Nations and alliances are on the line if rates rise much. Labor's in the lurch, and will always be without anything short of a miracle at this point, so wage push inflation ain't happening. Cost-push inflation might have been a worry for a while, but commodities are lower again. Can't see them needing to push rates to go too far north.

That is a good description of what has happened.
The concern that Finster often raises is that forcing interest rates down is, by definition, price-fixing.
Price-fixing for one of the most important items in an economy, the price of borrowed money.

My understanding is that the main difference between a "free market economy" and a "centrally controlled command economy" is whether price and production signals move easily and accurately between buyers and sellers, each actor making his own decision. In a free market economy the crowd votes with its dollars for a transaction price, and many good things happen up and down the supply chain.

Right now interest rates are clamped at about zero and have been for years on end.
The central banks have, quite literally, removed the free market economy and replaced it with a centrally controlled command economy.

There are degrees of everything, and we have accepted and encouraged central banks to push interest rates a little bit for a little while to adjust course.
But a decade of ZIRP is a different thing all together.

[gwynedd1]

Re: The US Dollar is "Contained"

Why not ZIRP forever? Gold and silver was ZIRP forever. I have also since come to realize that there is only one gold mine in the world now, the federal budget deficit. It is also quite clear to me interest rates are more the result of existing credit standards. Why would low interest rates increase borrowing anyway? Too much attention is paid to the attitude of the borrower. A low interest rate does not sweeten the pot for the lender at all; and unless the risk is low, why bother?


So again monetary policy and interest rates just don't really mean much, especially when most of the assets that people want to use to secure debt are already saturated with it. So what we have here are houses that are fully paid off with equity owners refusing to use to secure debt. The ones that were willing to use them to secure more debt are already saturated with it. What is an interest rate going to do to change that?

[thriftyandboringinohio]

Re: The US Dollar is "Contained"

Why not ZIRP forever? Gold and silver was ZIRP forever....?

I don't think it is correct that using gold and silver as money meant that people could borrow without paying interest.
In most times and most places, a borrower paid back more than the principal.

[jk]

Re: The US Dollar is "Contained"

I don't think it is correct that using gold and silver as money meant that people could borrow without paying interest.
In most times and most places, a borrower paid back more than the principal.

somewhere i posted an article about loans in the netherlands - banks now PAY borrowers, and CHARGE depositors.