"Weakness in the US dollar, which is causing everything to go up—including gas prices, food and stocks—is unlikely to go away soon as a selling frenzy hits the currency market.
The greenback is approaching pre-financial crisis lows and threatening to smash through its all-time low when measured against the world's predominant national currencies.
A combination of factors accounts for the weakness, with the Federal Reserve's easy-money policies, huge national debts and deficits and the consequential possibility of a debt downgrade because of the financial mess in Washington leading the way.
In short, as trader Dennis Gartman noted Thursday, "the rout of the US dollar" is in full effect.
"Panic dollar selling is setting in," Gartman, a hedge fund manager and author of "The Gartman Letter," wrote in his daily commentary. "This may carry farther than any of us dream of or, worse, have nightmares of.""
"China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.
The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.
China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.
Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves."
"Gold hit a record high, while silver surged more than 5 per cent to within a whisker of its all-time peak, as the dollar continued its decline and inflation concerns drove haven flows.
Driven also by government debt concerns, gold rose 1 per cent to $1,518.20 a troy ounce, the seventh-consecutive trading session in which it has hit a record high. Silver surged 5.5 per cent to $49.17 an ounce, having hit a 30-year high of $49.80, within sight of the landmark $50 level."
"For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.
And it’s a lot closer than you may think.
According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.
Put that in your calendar."
It's going to be a really bumpy ride this year. If you think that your going to need it, buy it now. Things like food, clothing and medicine, because the prices are going to shoot up if nothing changes. Once the dollar ceases to be the world's reserve currency, as it looks more and more likely to with each passing week, our economy will most likely collapse. And even if it doesn't we're going to be in a world of hurt.
The other thing to think about is that out here in the Mid-West where so much of our food is grown we're looking at a spring of incredible rains and flooding which will impact, in a significant way, the yields from the fields. So on top of the dollar problems and the pressure it puts on food prices, supply and demand will be pushing the cost up, too. That, and the fact that we're growing so much corn for fuel which is about the dumbest thing I ever heard of. It takes more energy to produce ethanol than ethanol produces. But the farmers just love the welfare and the way the government edicts artificially inflate the value of their crops. Not to mention all the tax dollars that are flowing into the pockets of the corporations building the refineries.
So get ready. My guess is that an awful lot of the problems that we've kept hidden through "quantitative easing" over the last few years will start to become apparent to more and more people this year and panic will start to set in a bit. Just enough to drive some more irrational responses from the government which will only go to further the problem.
It ought'a be interesting.
But wait, there's more!
I just read a post at The Market Ticker that addresses this problem and it's well worth the read. Click on the link to read it.