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Old 08-01-2020, 05:16 AM   #41
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Originally Posted by samm View Post
Here is the official reserves data & chart from the IMF.

Peter Schiff is ALWAYS on the news saying the $USD will collapse. He is the go to guy for alarmism, which the media wants.

He has been saying this for 20-30 years with NO EVIDENCE at all.
Besides Peter Schiff there are *lot* of other people who are saying it lately.
That include Goldman Sachs and Ray Dalio (Founder of largest US Hedge Fund).

Dollar is attacked from all sides. By our policies to weaponize it and also by the fact that Fed has
no tools left to deal with our economy. The only tool it now has is *Printer*. You can call it Quantitative
Easing. (They have no other choice)

It also attacked by things like Bitcoin. Bitcoins are limited to 21 Million. In few days we will print another
3-4 Trillion Dollars. What would you rather have? Bitcoin that nobody can devalue or USD?
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Old 08-01-2020, 10:01 AM   #42
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... I am interested to learn more about this topic from the "FX experts" here.
Well, I am no expert but in @TechLead's absence I can give you a few pointers to guide your own research:

Compared to Forex, the US stock market is a calm and predictable place.

Start with spot rates: Currencies are basically commodities in this view. If a lot of Euro-holders want to buy dollar-denominated products or assets, the value of the dollar will rise. Lately the spot dollar is down like 9% from March; people with dollars are bidding against each other to buy other currencies, driving the spot dollar rate down. IIRRC the Euro was $1.12 when we were traveling in central Europe last year. Now a Euro costs $1.18. That is a big move.

Next: PPP. Purchasing power parity. This is a different way of valuing currencies based on what they can buy. For example if I can buy a bushel of a grain for $5 in the US and that same bushel costs 10 rubles in Russia, then we would say that a dollar is worth two rubles. PPP rates can vary quite a bit from spot rates.

Next: The Big Mac Index. 35 years ago this was a tongue-in-cheek PPP exercise by The Economist magazine but is now taken somewhat seriously. Instead of looking at bushels of grain, they look at the price of a Big Mac in 30+ countries and calculate a PPP on that basis. Example If a Big Mac costs $5 in the US and 50 ringgit in Malaysia, then a ringitt is worth ten cents. (These are totally bogus numbers). There is a great discussion of "burgernomics" here: https://www.economist.com/news/2020/...-big-mac-index

But forex is not just about buying and selling. Politics has a huge impact on values. Some countries peg their currencies to the dollar or the Euro and others actually use someone else's currency as their own, like Ecuador. Poor countries' debts are often based on dollars because buyers do not trust the debtor country's currency. Currency values affect trade, too, so often we will see "currency manipulator" governments trying to drive their currency values down in order to boost exports by making their exports cheaper. China has been the subject of heated criticism as a manipulator, though less so in recent years.

So, you can go off and start studying this stuff. Maybe take a year or two, figure it out, and come back to explain it to us.
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Old 08-01-2020, 10:24 AM   #43
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I keep a little in gold. Always have. But its not a huge part of my portfolio. I figure I can always melt it down someday and turn it into a bunch of earings.
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Old 08-02-2020, 03:23 PM   #44
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Growing up with inflation in the 1970's and early 1980's I have been conditioned to expect inflation in my financial planning, and every year without it is a bonus of sorts. My best hedge currently is some rental land (farm) and REIT stocks, and an equity heavy portfolio, which probably needs some more international exposure. Commodity driven stocks are also a good bet against this risk.
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Old 08-05-2020, 11:07 AM   #45
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Interesting Reuters article today on this subject: https://www.reuters.com/article/us-u...-idUSKCN2511ID Bottom line, of course, remains: "Nobody knows."

Late to the party I know, but I just saw this:

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... all the stuff produced here (food) would remain the same price. ...
Not true. Most food is priced and traded on international markets. Soybeans and pork are popular examples but corn/maize and beef are there too. So the world price in dollars would definitely rise. Sugar may be an exception, since the sugar lobby already has us paying well over the world price.
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Old 08-05-2020, 11:53 AM   #46
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Interesting Reuters article today on this subject: https://www.reuters.com/article/us-u...-idUSKCN2511ID Bottom line, of course, remains: "Nobody knows."

Late to the party I know, but I just saw this:

Not true. Most food is priced and traded on international markets. Soybeans and pork are popular examples but corn/maize and beef are there too. So the world price in dollars would definitely rise. Sugar may be an exception, since the sugar lobby already has us paying well over the world price.
Certainly gold and oil are world priced, but food produced here maybe not.
I think it is subject to export controls which would strongly limit how much leaves the country, forcing food prices to remain pretty normal.
If this was not true, since we have a high dollar, why is not all food imported since it's 25 -80 percent cheaper from other countries ?

This is how Canada is, with a 25-30 percent drop in the CDN to USD, over the past 8-9 yrs, the price of food while always expensive didn't go up 30% for what they produce, as their production costs remained constant.

Maybe I'm totally wrong, and need to hoard food
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Old 08-05-2020, 12:21 PM   #47
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Agricultural products are far and away the most distorted international markets due to subsidies, export controls, tariffs, etc. but underneath all that there are still world markets: https://fred.stlouisfed.org/categories/32217

AFIK the US has no export controls on agricultural products. USDA promotes exports, actually. https://www.usda.gov/topics/trade/exporting-goods Attempting to add export controls in order to reduce prices in the US would be a political circus, pitting the farmers against consumers. Considering that senators from agricultural areas have been very successful in subsidizing agriclulture it doesn't seem likely to me that they would abandon that in favor of forcing prices down. AFIK our only export controls are on weapons and nuclear technology. https://2009-2017.state.gov/strategi...view/index.htm

Re actual exporting/importing we produce more food than we can consume; a quarter of production is exported: https://www.fb.org/newsroom/fast-facts. Another reason that export controls on food won't work. We need that income.

If the dollar declines, food prices will go up. How far, how fast, is beyond anyone's crystal ball.
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Old 08-05-2020, 01:28 PM   #48
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Agricultural products are far and away the most distorted international markets due to subsidies, export controls, tariffs, etc. but underneath all that there are still world markets: https://fred.stlouisfed.org/categories/32217
Agreed. A prime example is converting corn to ethanol. Making no judgements (here) on whether that makes sense. Just sayin' that it distorts the markets. I'm originally from "corn country" and have heard corn prices on the radio since I could understand English (well until I moved away.)

I think the whole market system is so convoluted that it would be difficult to hedge all the possible bets. My fear is not a significant dollar devaluing, but an outright collapse - that is, the dollar no longer remaining the world's reserve currency. That would be devastating to the country. No idea what that would look like but it wouldn't be pretty. YMMV
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Old 08-05-2020, 01:35 PM   #49
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... My fear is not a significant dollar devaluing, but an outright collapse - that is, the dollar no longer remaining the world's reserve currency. That would be devastating to the country. No idea what that would look like but it wouldn't be pretty. YMMV
Definitely not pretty. The mitigating factor (to an unknown degree) is the foreign direct investment and the foreign ownership of US debt both public and private. All those investors have a huge stake in making the downhill ride as short and gentle as possible.
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Old 08-05-2020, 02:26 PM   #50
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I think the whole market system is so convoluted that it would be difficult to hedge all the possible bets. My fear is not a significant dollar devaluing, but an outright collapse - that is, the dollar no longer remaining the world's reserve currency. That would be devastating to the country. No idea what that would look like but it wouldn't be pretty. YMMV
This is a very low probability scenario. Only the Euro area, Japan and China have the scale to be a reserve currency. Japan and the EU most definitely do not want that. China does not meet the requirements and is not likely to change over the next decades. The IMF created Special Drawing Rights, which is a basket of currencies, but a half century later there is still little interest.

The “reserve currency” does not mean the biggest economy or money supply. The reserve currency means the sponsor is willing to provide liquidity to finance economic activity beyond its borders, allow a freely floating currency, and maintain completely open capital markets with free access to all. No other country is willing to do that.

This makes the US Central Bank the “go to guys” in times of stress, which is why the US$ strengthens whenever there is economic or financial crisis. It also means countries everywhere can export their excess savings and invest them in US capital markets, which pretty much ensures the US will incur deficits.

Even significant devaluation (vs major currencies) is unlikely. For the US$ to devalue another currency needs to gain an equal amount, and none of the other major currencies have allowed that to happen.

A more likely scenario is all the major currencies lose value as governments continue to spend and central banks monetize the debt. This would mean global inflation, and debt holders would suffer.
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Old 08-05-2020, 02:49 PM   #51
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You better believe it. I hedge by having Index ETFs, especially International Index ETFs which go up with dollar going down.

I should had bought some gold. (Hindsight 2020)
+! My Target Retirement has International Index. Plus some gold, silver and platinum coins in the deposit box from ancient times when I collected coins.

heh heh heh -
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Old 08-05-2020, 03:16 PM   #52
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+! My Target Retirement has International Index. Plus some gold, silver and platinum coins in the deposit box from ancient times when I collected coins.s

heh heh heh -
Yep, I recall looking for the "bottom" before buying most of my (limited) stash of PMs. Didn't quite hit it exactly, but pretty close. One could argue that I would have done better in other investments, but the "sleeping through the market downturns" has been worth the price of admission. The added "crisis" (say, dollar devaluation) insurance has also added value. Not recommending this route, but it has made me feel better and allowed me to invest "normally" without sleepless night. YMMV
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Old 08-05-2020, 09:53 PM   #53
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It would depend on one's future time frame,date of initial hedge and hedging vehicle. for example since April 2008 the dollar is up about 30% (based on the DXY),Since March of this year it is down 10%. Over the past 18 years Bitcoin is the obvious winner as a hedge. However, if you look at smaller fractals during the crypto winter of the past few years, it obviously under performed.
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Old 08-06-2020, 08:42 AM   #54
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This is a very low probability scenario. ...
You've said that repeatedly. But low probability is not zero probablity. So if the cost to mitigate is low or zero then it's silly not to do it. That's our case. VTWAX and TIPS, not chosen in particular for protection against devaluation. And really not "hedged" either since VTWAX just holds the world at market cap.

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Even significant devaluation (vs major currencies) is unlikely. For the US$ to devalue another currency needs to gain an equal amount, and none of the other major currencies have allowed that to happen. ...
-9% since March. What is "significant?" My straw man, totally arbitrary is 20%.

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A more likely scenario is all the major currencies lose value as governments continue to spend and central banks monetize the debt. This would mean global inflation, and debt holders would suffer.
Another not-impossible scenario. Our portfolio protects us pretty well against that one too.
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Old 08-06-2020, 09:43 AM   #55
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It would depend on one's future time frame,date of initial hedge and hedging vehicle. for example since April 2008 the dollar is up about 30% (based on the DXY),Since March of this year it is down 10%. Over the past 18 years Bitcoin is the obvious winner as a hedge. However, if you look at smaller fractals during the crypto winter of the past few years, it obviously under performed.
Tired last night, that should have said over the past 12 years!
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Old 08-06-2020, 12:45 PM   #56
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You've said that repeatedly. But low probability is not zero probablity.
Yes, low probability, where the cost to insure against a collapse of the US$ or the loss of reserve currency status is not worth the benefit.

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-9% since March. What is "significant?" My straw man, totally arbitrary is 20%.
The US$ lost 9% since March looks like cherry picking data to make a point. March was a multi-decade year high for the US$. Probably even longer, but the St Louis Fed data series only goes back now to '06.

Surely everyone agrees it is more useful to look at the longer term. The US$ is still stronger than it was a year ago, above it's previous high of last year and well above its midpoint value over the past 15 years. Here's a FRED graph showing the value of the trade weighted US$ since 2006. If one looks at the data and not the media reports, it's clear the US$ has strengthened in the past couple of years and continues to be quite strong.

This is still unanswered. What part of that statement is "not true"?

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Neither Europe nor Japan (nor anyone else) want the role of reserve currency.
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Actually not true.
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“Not true”? Just to be clear, are you saying that Europe (or Japan) wants to be the global reserve currency?
Below is a graph from the St Louis Fed showing the US trade weighted dollar since 01/2006
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File Type: jpg US trade weighted $.JPG (74.7 KB, 18 views)
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Old 08-06-2020, 04:10 PM   #57
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Yes, low probability, where the cost to insure against a collapse of the US$ or the loss of reserve currency status is not worth the benefit.
That's your opinion. I got it the first time or two. We may differ on other opinions, too. For all I know you may like Brussels sprouts and turnips.

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The US$ lost 9% since March looks like cherry picking data to make a point.
If using a headline from the last couple of days' news is "cherry picking" then I'll plead guilty.

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Surely everyone agrees it is more useful to look at the longer term. The US$ is still stronger than it was a year ago, above it's previous high of last year and well above its midpoint value over the past 15 years. Here's a FRED graph showing the value of the trade weighted US$ since 2006. If one looks at the data and not the media reports, it's clear the US$ has strengthened in the past couple of years and continues to be quite strong.
Agreed, a longer term view is worthwhile but it is not necessarily predictive. Inductive reasoning has its risks.

Exhibit One: Taleb's Turkey: https://www.businessinsider.com/nass...turkey-2014-11

Exhibit Two (exercise for the reader/Who said this?: “... in all my experience, I have never been in any accident … of any sort worth speaking about. I have seen but one vessel in distress in all my years at sea. I never saw a wreck and never have been wrecked nor was I ever in any predicament that threatened to end in disaster of any sort.”


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This is still unanswered. What part of that statement is "not true"?
You said "Neither Europe nor Japan (nor anyone else) want the role of reserve currency." I don't think that is true in the case of the EU. Maybe Japan. Russia was even angling to get into the game a few years before Crimea. Such a move would be of huge benefit to a country's banking system and it would reduce or neuter the weaponization of US megabanks.
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Old 08-06-2020, 04:30 PM   #58
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We each have a different understanding of what the reserve currency is, so there’s no point in continuing this discussion.
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Old Yesterday, 06:56 AM   #59
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For all I know you may like Brussels sprouts and turnips.
Funny, I hated Brussels Sprouts as a kid and for most of my life as an adult. For some strange reason, under COVID I someone ended up with some and made them using my convection toaster oven. Quite tasty with Mrs. Dash (soon to be just Dash) and now I find myself getting some with just about every grocery order.

Regarding the US $ as reserve currency, while I hope it remains so I can't believe the rest of the world will just sit and watch as the buying power of dollar reserves get destroyed by our actions. I also believe that if the run against the dollar happens, it will occur much quicker than most could believe.

As someone (you?) earlier pointed out, it isn't just the United States doing actions to debase the currency, it seems like it is almost all of the major countries in a race to the bottom. Perhaps this keeps things as they are for a longer period of time.

As a saver and investor I don't have a lot of options, other than to hold my nose and buy precious metals, try to have some fixed income hedged in some way (e.g. TIPS, iBonds), have some investments in companies who I think either have secular growth or pricing power, and at the bottom of the needs pyramid have a good supply of those things in the "basics" category. On the PM front, I had a little pre-COVID (slightly under 1% of my wealth), in April/May bought a number of things to increase this. With the updraft in PM prices it is now about 2%. I'm not happy with myself in that I should have been much more aggressive legging in purchases over the last few months.
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