currencies and gold crashing: flight into the USD?

[grapejelly]

http://www.marketwatch.com/news/story/dollar-surges-vs-major-counterparts/story.aspx?guid={E6984FFC-A3B3-4082-B256-45261F8F468C}&siteid=yhoof

As I type this, gold is down US$42, silver US$1.17, Euro down 2.42%, Swissie down 3.2% etc.

Underscoring the reluctance to lend in the overnight market, euro-zone commercial banks deposited more than 44.35 billion euros, a record, in the ECB's overnight deposit facility on Monday, even though the facility pays an interest rate more than a full percentage point below the overnight market rate.


Meanwhile, banks borrowed 15.8 billion euros from the ECB's overnight lending facility at a 5.25% interest rate.

Reliance on overnight lending and deposit facilities confirms "banks are unwilling to lend to each other and that the ECB has so far failed to restore confidence in the interbank market," wrote economists at BNP Paribas. "A similar picture applies for other money markets."

[idianov]

Re: currencies and gold crashing: flight into the USD?

The money is coming home. I suspect somebody big is about to go bankrupt, so the funds are dumping assets and covering shorts to get liquid. The stress in money markets and interbank lending is getting worse.

Igor

[Tulpen]

Re: currencies and gold crashing: flight into the USD?

Europe just catched the US's cold.

[ocelotl]

Re: currencies and gold crashing: flight into the USD?

We are so far into the day with a 1.12% rise on the MXN value against USD... Will have to wait to see what happens next, after yesterday's 2.4% loss.

[BrianL]

Re: currencies and gold crashing: flight into the USD?

I thought gold was simply returning to its value before yesterdays chaos.

[phirang]

Re: currencies and gold crashing: flight into the USD?

I thought gold was simply returning to its value before yesterdays chaos.

The trade is clear: when stability returns, the money leaves treasuries and floods back into inflation hedges.

Let AD decline enough where you can shock M0 and still avoid inflationary spiral, and voila, you've got Ben Bernanke!

p.s: gold is NOT an inflation hedge. Gold reacts to credit crises. I think gold is most correlated with LIBOR shocks.

[BrianL]

Re: currencies and gold crashing: flight into the USD?

Most of that makes sense, though the 'gold is not an inflation hedge' bit throws me. That is counter to most of the material I've been reading recently (Browne, etc). I may be behind the times.

What do you consider an inflation hedge at the moment and why? TIPS?

[phirang]

Re: currencies and gold crashing: flight into the USD?

Most of that makes sense, though the 'gold is not an inflation hedge' bit throws me. That is counter to most of the material I've been reading recently (Browne, etc). I may be behind the times.

What do you consider an inflation hedge at the moment and why? TIPS?

No: back into oil and industrial inputs. You'll be surprised how quickly the whole beast can roar again once a few nubile virgins are sacrificed.

Question: when is it time to start shorting 3-mth? The yields are asenine.

p.s: inflation in commodities only further weakens Asia's vendor economy. I wonder if the BHP-RIO merger has some supporters in the EU and the US, since it'd absolutely slay the chinese...

[BrianL]

Re: currencies and gold crashing: flight into the USD?

Thanks for the followup.

Thats what I was curious about. Between the US trade deficit and long term rising cost to transport goods, it seems like the US will need to reindustrialize.

If we plan for the long term, this would ideally be in highly distributed (ie trade efficiency for less cost moving goods) or or with a huge amount of infrastructure to meet transportation in an oil short world). Either of those options would consume a great deal of raw materials and energy.

At least have a bit of a foothold in that direction. Not as good as holding oil or inputs more directly but I have a decent amount in energy fund holding (VGENX).

[phirang]

Re: currencies and gold crashing: flight into the USD?

Thanks for the followup.

Thats what I was curious about. Between the US trade deficit and long term rising cost to transport goods, it seems like the US will need to reindustrialize.

If we plan for the long term, this would ideally be in highly distributed (ie trade efficiency for less cost moving goods) or or with a huge amount of infrastructure to meet transportation in an oil short world). Either of those options would consume a great deal of raw materials and energy.

At least have a bit of a foothold in that direction. Not as good as holding oil or inputs more directly but I have a decent amount in energy fund holding (VGENX).

I'm convinced that the the natural gas reserves in thsi country will be used to power trucks and maybe cars. Battery tech for trucks simply isn't feasible b.c. of power/torque constraints.

NG trucks + hybrids = weeee! I'm still long industrial materials(ok, only copper and Mo and integrated steels), and i've been getting my ass reamed recently. I do not expect copper to crash if hybrids take off: you need 2-3x's more copper per car for hybrids than otherwise, let alone the alt-e bubble forthcoming when, inshallah, obama wins.:cool:

The US can crush the trade deficit by letting commodities rip and force the "evil corporations" to relocate production domestically. US still has tons of resources: hell, new mines are still opening out West, and we've BARELY touched our gas reserves.

[rj1]

Re: currencies and gold crashing: flight into the USD?

I'm convinced that the the natural gas reserves in thsi country will be used to power trucks and maybe cars. Battery tech for trucks simply isn't feasible b.c. of power/torque constraints.

NG trucks + hybrids = weeee! I'm still long industrial materials(ok, only copper and Mo and integrated steels), and i've been getting my ass reamed recently. I do not expect copper to crash if hybrids take off: you need 2-3x's more copper per car for hybrids than otherwise, let alone the alt-e bubble forthcoming when, inshallah, obama wins.:cool:

The US can crush the trade deficit by letting commodities rip and force the "evil corporations" to relocate production domestically. US still has tons of resources: hell, new mines are still opening out West, and we've BARELY touched our gas reserves.

My company Cummins makes natural gas engines. It's a niche business and the only customers are really Western U.S. mining outfits because cheap natural gas is plentiful out there.

[GRG55]

Re: currencies and gold crashing: flight into the USD?

My company Cummins makes natural gas engines. It's a niche business and the only customers are really Western U.S. mining outfits because cheap natural gas is plentiful out there.

Actually, one of the major issues for underground mining operations is air quality management. It can be both complex and expensive to properly ventilate an underground mine. There are considerable attractions to using natural gas engines [instead of diesel engines] in such mines for that reason. This is also the reason that natural gas powered forklifts are so popular in enclosed warehouses.

The first step in what phirang is talking about is the relatively simple conversion of conventional Otto cycle (spark ignition) engines to liquified petroleum gas (e.g. propane).

This is already widespread in selected parts of the world [Italy and Turkey for example], requires minimal modification of the existing engines, can be retrofitted to the current fleet of gasoline engine vehicles [in other words we don't have to replace vehicles as we would to convert to electricity or hybrids], and uses a fuel [as T. Boone Pickens reminds us incessantly] that is readily available from domestic sources in the USA/North America.

[iTuliper's please note that liquified petroleum gas, LPG, is not the same as liquified natural gas, LNG, or compressed natural gas, CNG. The latter two require more complex conversion and fuel handling facilities to implement on a widespread basis than LPG, which could be a good interim step as the existing fleet gets replaced over the next 15 years]

[kingcopper]

Re: currencies and gold crashing: flight into the USD?

And how much will it end up costing us Northeasterners to heat our homes in the winter?:mad: