US Dollar Headed In Wrong Direction

…tied inexorably to the direction of Chairman Zero’s transformational agenda.

109 Days to go!

July 9.2010

Central banks start to abandon the U.S. dollar

There’s mounting evidence that central bankers have little faith in the greenback these days. Can we blame them?

by Heidi N. Moore, contributor

There are those who would argue that the financial crisis was caused by over-enthusiastic worship of the Almighty Dollar. Call it brutal financial karma, but that church is looking pretty empty these days.

A new report from Morgan Stanley analyst Emma Lawson confirms what many had suspected: the dollar is firmly on its way to losing its status as the reserve currency of the world. We already knew that central banks have preferred gold to dollars, and that they’re even selling their gold for cash; now, according to Lawson’s data, it seems that those central banks prefer almost anything to dollars.

Lawson found that central banks have dropped their allocation to U.S. dollars by nearly a full percentage point to 57.3% from 58.1%, and calls this “unexpected given the global environment.” She adds, “over time we anticipate that reserve managers may reduce their holdings further.”

What is surprising is that the managers of those central banks aren’t buying traditional fall-backs like the euro, the British pound or the Japanese yen. Instead, she suggests they’re putting their faith in other dollars – the kind that come from Australia and Canada. The allocation to those currencies, which fall under “other” in the data, rose by a full percentage point to 8.5%, accounting almost exactly for the drop in the U.S. dollar allocation.

Just last week, America’s debt lept $166 billion in a single day. That one-day run-up is greater than the entire U.S. annual deficit in 2007. And Americans, the world’s consumers, continue much of the behavior that helped the U.S savings rate drop so low.

The other options that reserve managers seem to be taking are also not a surprise. Canada’s rude financial health – and robust banks – were bound to draw more attention. The Australian dollar is near a nine-month high because employment numbers there are strong.

Anybody remember seeing this on July 11th?

Secret gold swap has spooked the market

It takes a lot to spook the solid old gold market. But when it emerged last week that one or more banks had lent 380 tonnes of gold to the Bank of International Settlements in return for foreign currencies, there was widespread surprise and confusion.

The news that a mystery bank has just pawned the family jewels gave traders a jolt – nervous about the sudden transfer of almost 20pc of the world’s annual gold production and the possibility of a sell-off.

In a tiny footnote in its annual report, the bank disclosed its unusually large holding of gold, compared with nothing the year before. The disclosure was a large factor in the correction of the gold price this week, which fell below $1,200 for the first time in more than a month.

Meanwhile, economists and gold market-watchers were determined to hunt down which bank is short of cash – curious about who is using their stash of precious metal for what looks suspiciously like a secret bailout.

At first it looked like the BIS was swapping gold with a troubled central bank. After all, the institution is the central bankers’ bank and its purpose to conduct transactions with national monetary authorities.

Central banks in the troubled southern zone of Europe were considered the most likely perpetrators.

According to the World Gold Council, central banks in Greece, Spain and Portugal held 112.2, 281.6 and 382.5 tons of gold respectively in June – leading analysts to point fingers at Portugal, or a combination of the three.

But Edel Tully, an analyst from UBS, noted that eurozone central banks would be severely limited with what they could do with the influx of extra cash – unable to transfer it straight to governments or make use of the primary bond markets.

She then listed the only other potential monetary authorities with enough gold as the US, China, Switzerland, Japan, Russia, India and Taiwan – and the International Monetary Fund.

This led to musings that the counterparty was the IMF, making sense because the lender of last resort is historically prone to cash shortages and has been quietly selling off gold in the first half of the year.

Renowned gold expert Jim Sinclair adopted this explanation. The panic came when people mistook a lease for a swap, he argues. Far from being a big release of gold into the market, it is simply a commercial arrangement between the IMF and BIS with a favourable rate of interest paid for the foreign currency.

“Gold swaps are usually undertaken by monetary authorities,” he writes on his industry blog, MineSet. “The gold is exchanged for foreign exchange deposits with an agreement that the transaction be unwound at a future time at an agreed price.

“The IMF will pay interest on the foreign exchange received. Historically swaps occur when entities like the IMF have a need for foreign exchange, but do not wish to sell the gold. In this case, gold is a leveraging device for needed currency to meet requirements.

“The many reports that characterise the large IMF gold swap as a sale of gold into the markets do not understand the difference between a swap and a lease.”

However, the day after original reports about the swaps, BIS emailed a statement saying that the swaps had not been conducted with monetary authorities but purely with commercial banks. (emphasis mine)

This did nothing to quell the sense of mystery surrounding the deal or deals. It is almost inconceivable that a single commercial bank could have accumulated so much gold alone. And cynics have suggested that the whole affair still looks like a secretive European bailout that a single country wants to keep quiet.

In this case, one or more of the so-called bullion banks – which act as wholesale market-makers and include Goldman Sachs, Deutsche Bank, JP Morgan, HSBC, Barclays, UBS, Societe Generale, Mitsui and the Bank of Nova Scotia – would have agreed to act on behalf of a monetary authority. (Almost all of these banks received US dollars from the AIG  bailout)

This would add an extra layer of anonymity. “So the BIS swaps look like a tripartite transaction,” writes Adrian Douglas of the Gold Anti-Trust Association. “The commercial bank or banks made a swap with a central bank or banks and then the commercial bank or banks made a swap with the BIS.”

…or what is more commonly known in the real world as “Covering Your Tracks”.

A Message To Loyal Monster Readers…UPDATED

Author’s Update: I originally posted the following item on 12/22/08 and what followed was The Fed series which you can find at the top of this blog; it has it’s own page.  The reason for bumping up this post is that this particular article has now gotten more hits than any other including the “Socialism” series; which I find rather odd and incredibly interesting.  Also of note are two blogs that are hitting this post; Let’s Take The High Road and djd58.  These two blogs are protected and all the hits come from the same 4 IP addresses.  I have been watching both and the hits number in the 1000s.  Also, I have stated that I will let you know when interesting visitors show up.  BEHOLD, my most interesting visitor today, Davis, Polk & Wardell, probably one of the most influential law firms in the world.  Two days ago the U.S. Treasury was on.  Are we full of it kids, or are they getting nervous?  The Republicans better find their cajones and stop that $900 Billion (really 1.2 Trillion) Stimulus Bill.

From Davis, Polk & Wardell’s site:

Lead counsel to the Federal Reserve Bank of New York and the U.S. Department of the Treasury on a series of unprecedented financing transactions for AIG, including (i) the Fed’s $85 billion credit facility and related equity ownership rights; (ii) the Fed’s subsequent participation in up to $37.8 billion of securities lending transactions; (iii) the issuance of $40 billion of newly issued perpetual preferred shares to Treasury; (iv) the creation of two entities capitalized with up to $52.5 billion in senior financing from the Fed to address issues arising out of AIG’s U.S. securities lending program and credit default swaps obligations.

Lead counsel to Citi on its realignment into two businesses, Citicorp and Citi Holdings.

Lead counsel to Citi on its proposed joint venture with Morgan Stanley that will combine Morgan Stanley’s Global Wealth Management Group and Citi’s Smith Barney retail brokerage units in the U.S., U.K. and Australia into a new entity, Morgan Stanley Smith Barney.

Lead counsel to Citi on its agreement with agencies of the U.S. government pursuant to which the U.S. government has provided a package of guarantees on $306 billion of assets, liquidity access and capital, including a $20 billion investment in Citi’s preferred stock under TARP and a $7 billion investment in preferred stock in connection with the above guarantees.

Lead counsel to Citi on its proposed $56 billion rescue of Wachovia, which was the first FDIC-assisted “open bank” transaction to invoke the “systemic risk” exception to the “least cost resolution” principle.

Counsel to the Federal Reserve Bank of New York on the U.S. Treasury’s $250 billion bank capital purchase program.

Counsel to the Federal Reserve Bank of New York on the creation of the Term Asset-Backed Securities Loan Facility (TALF), through which the New York Fed will extend up to $200 billion in non-recourse loans to certain holders of newly issued AAA-rated asset-backed securities collateralized by student loans, consumer loans and small-business loans.

Lead counsel to the Federal Home Loan Mortgage Corporation (Freddie Mac) on a proposed increase in its equity capital, the U.S. government’s conservatorship and financial assistance package, as well as the Department of Justice and SEC investigations.

Counsel to Her Majesty’s Government (HMG) on U.S. bank regulatory and other issues relating to HMG’s plan to provide financial support to the U.K. banking system.

Lead counsel to Citi as the organizer of a multi-bank financing on a potential pre-bankruptcy acquisition of Lehman by Barclays. The firm is also advising several major financial institutions on credit exposure issues relating to Lehman.

I guess a warm welcome is in order for such a prestigious and connected New York law firm, yes?

If you want to get into what they think about the Emergency Economic Stabilization Act, go here, and if you want to learn about how this law firm is tied into everything, check out their Wiki; make sure to take the time to scroll down and look at their alumni, for example, Kirsten Gillibrand – U.S. Senator (D-NY).

Would anyone like to hazard a guess as to why they are visiting on The Monster?  I’m open….

********

Good Evening All,

I wanted to leave a note for y’all to let you know that I had an email sent to me a day ago and what started out as simple research for one article has overturned a can of worms, or snakes as the case may be, and I will not be posting anything for a few days as I research and sift through all the material and connections that are rising to the surface.  I would like to let it be known though, that if half of what I have found is true, Obama is the least of our worries, and if you are a person of prayer, now might be a good time to start again or continue, and that comment coming from a recovering Catholic says quite a bit.

Also, I left a note in my sidebar about converting your currency to silver or gold bullion.  I put that note up before I really started the research and that note holds more true now than ever.  Might be a good idea to do it before The One Ascends.

I am foreseeing another series of articles like the “Socialism” series and will let you know when the first is close to being posted.

Thank you for your patience and please take some time to wander around the site and read some articles that you may have missed.

Many Mahalos and Safe Journeys,

Diamond Tiger

(Shtuey – better make that a case of beer and some whiskey….)

Gold and The Collapsing Dollar

Gold and The Collapsing Dollar

I am still hard at work putting the pieces of another puzzle together that may explain why the Dalai Bama was projected into the White House and it all has to do with the declining dollar.

Until I can get the first article posted, I will continue to leave relevant information on what I believe is the next big crisis we are facing; the collapsing dollar and the Depression that will follow.  This information cannot wait while I follow every subsequent connection I run across down yet another rabbit hole.

Here is a very informative video that the MSM will not share with you, and why I have been telling all those that will listen to put your money into gold and silver bullion, and if you have large savings to open a Swiss bank account and convert your money into a stronger currency – the Swiss franc.

Also, please be advised that as these videos are yanked by YouTube, (and that has already started), I will put them back up because I have them downloaded and saved.

Just another reason to love Thomas Jefferson!

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