Dollar 'world's strongest currency': Japanese minister

From: Yahoo Financial Service

TOKYO (AFP) - – Japan's finance minister said Tuesday that the dollar was still the world's strongest currency and it was natural for Tokyo to keep large stockpiles of the greenback.

"It is clear that the dollar is still the world's strongest currency," Finance Minister Hirohisa Fujii said at a press conference.

"It is a matter of course that the country keeps its foreign exchange reserves in a strong currency."

This in turn "also supports the dollar," he added.

Japan has the world's second-largest forex reserves after China. Tokyo gives no breakdown of the currencies, but most are believed to be held in dollars as a result of past intervention to sell the yen against the greenback.

Fujii said countries should not seek to artificially weaken their currencies to boost the competitiveness of their exports, but also reiterated that he was not necessarily in favour of a stronger yen.

"It would have a negative impact on the world's economic and political conditions if each nation engages in a race to devalue their currencies," he said.

Japan has not intervened in the foreign exchange market since March 2004, allowing the yen to find its own level against the dollar.

Fujii has said on several occasions since taking his post last month that in principle he opposes action to curb the strength of the yen, which hurts Japanese exporters' earnings.

But he has also said Tokyo does not rule out stepping into the market to sell the currency "in an abnormal situation."

The dollar hit an eight-month low against the Japanese currency last month, dropping below the 89 yen level, as the greenback came under broad pressure.

But it has since recovered some ground, striking a five-week high of 92.33 yen early in Tokyo trade on Tuesday.


*There is something wrong with the facts of this article, can you spot it? If you can't then you would probably want to read the older posts in this blog.

INDIA also questioning US $ Dominance

Sunday, 05 July 2009 19:00
BLOOMBERG

Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6-billion foreign-exchange reserves and hold fewer dollars.

“The major part of Indian reserves is in dollars—that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview in Aix-en-Provence, France, where he was attending an economic conference.

Singh is preparing to join leaders from the Group of Eight industrialized nations—the United States, Japan, Germany, Britain, France, Italy, Canada and Russia—at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representative to the summit.

As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.

“There should be a system to maintain the stability of the major reserve currencies,” Former Chinese Vice Premier Zeng Peiyan said in a speech in Beijing, highlighting China’s concerns about a global financial system dominated by the dollar.

Fiscal and current-account deficits must be supervised as “your currency is likely to become my problem,” said Zeng, who is now the head of a research center under the government’s top economic planning agency. The People’s Bank of China said June 26 that the International Monetary Fund should manage more of members’ reserves.

Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar’s future as a global reserve currency. Russia’s proposals for the Group of 20 major developed and developing nations summit in London in April included the creation of a supranational currency.

“We will resume” talks on the supranational currency proposal at the G-8 summit in L’Aquila on July 8-10, Medvedev aide Sergei Prikhodko told reporters in Moscow. Bloomberg

Singh adviser Tendulkar said that big dollar holders face a “prisoner’s dilemma” in terms of managing their holdings. “That’s why I’m telling them to do this,” he said.

He also said that world currencies need to adjust to help unwind trade imbalances that have contributed to the global financial crisis.

“The major imbalances which led to the current situation, the current account surpluses and deficits, have to be addressed,” he said. “Currency adjustment is one thing that suggests itself.”

For all the complaints about the dollar, emerging markets such as India remain dependent on the currency of the United States, the world’s largest economy and a $2.5-trillion export market. The International Monetary Fund said June 30 that the share of dollars in global foreign-exchange reserves increased to 65 percent in the first three months of this year, the highest since 2007.

Tendulkar said that the matter needs to be taken up in international talks, and that it emphasizes the need for those talks to go beyond the traditional G-8.

“They can meet if they want to,” he said. “The G-20 has a wider role, has representation of the countries that are likely to lead the recovery process.” (Bloomberg)

*And the dollar goes tumbling down as nations call the rethinking of the global currency reserve.

Buffett's good news for gold

OMAHA -
Author: Alec Hogg*
Posted: Monday , 04 May 2009

In the 44 years he's been building a reputation as the world's savviest investor, Warren Buffett has rarely offered any good news on gold. Until now.

The two key messages he delivered to 35,000 shareholders at Berkshire Hathaway's AGM in Omaha over the weekend were inflation is coming back; and the US Dollar is headed lower. Both predictions, if fulfilled, are powerfully positive for gold.

Buffett, who has delivered compounded returns exceeding 20% a year to shareholders for more than four decades, did not mention gold by name. But that will matter little to the yellow metal's continuously growing group of supporters. They are sure to interpret this as further evidence that gold's best days lie ahead.

After dabbling in precious metals in the 1960s, Buffett ignored them until a well publicized (but poor) trade in silver between mid-1997 and early 1998. The decision to accumulate 130m ounces was based on factors specific to silver's supply and demand at the time.

Once he'd closed out the position, Buffett jokingly describing it as "the perfect trade - except that we bought too early and sold too late." Since then he has publicly and consistently shunned precious metals, mainly because he prefers assets which generate dividends.

Despite his gloomy forecasts for inflation, Buffett hasn't exactly signed up to gold-supporting groups like GATA. Rather, he suggested to Berkshire shareholders their best protection was "invest in yourself; and as a second option, buy stock in a well run company."

Buffett explained that in the wake of the global financial sector meltdown, State officials have been forced to take the world into uncharted territory. Nobody knows the exact impact of unprecedented bailout and stimulation packages.

But he is convinced of one definite consequence: "You can bet on inflation." History suggests that higher inflation is an important trigger for a rise in the gold price.

During Saturday's six hour question and answer marathon, Buffett (78) and Berkshire Hathaway's vice chairman Charlie Munger (85) once again belied their advanced years through sharp wit and focused minds. They also referred often to their view that the US Dollar is headed south - another bull factor for gold.

Buffett believes US Government Bonds are one of the poorest choices for investors today, especially non-Americans. As he put it: "Anybody who holds (US) Dollar obligations from outside this country is going to get back less in purchasing power in future."

In his view the US is following policies that are bound to have inflationary consequences. Heading these is the heavy borrowing from, especially, the Chinese to fund the bailout and stimulus packages.

Says Buffett: "It's wrong for politicians and others to keep saying they're using (US) taxpayers money. My taxes haven't gone up and neither have yours. What we are doing is borrowing from the rest of the world and building up Government debt. The classic way of reducing the impact and cost of foreign debt is by reducing the value of the dollars you're going to repay them with."

He added: "The people who are really going to pay (for the bailouts) are those who are buying fixed interest (US) Government bonds that will be worth less when they redeem them. The AIG bonuses," he quipped, "were actually paid by the Chinese."

While warning that shareholders should expect to see "plenty of inflation", Buffett said there was no need to despair: "The best protection against inflation is your own earning power. If you are the best at what you do, you will get your share of the national pie no matter what inflation does. The second best protection is owning a wonderful business that does not need capital. With these guidelines, I'd say invest in yourself. It's always been the best investment you could make."

*That is why Filipinos who are keeping large sums of dollars and pesos in their accounts will tend to lose a lot when that crucial time when a hyperinflation sets in. It is our opinion that in holding precious metals in their relatively low price nowadays, one can be insured and would be able to hedge against inflation and preserve and leverage buying power in difficult time ahead."

What are the BIG BOYS up to?

for GoldSilver.com (April 07, 2009)

“The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the VALUE OF EVERYTHING PRODUCED in the country last year.”

- Bloomberg

Again - that’s $12.8 TRILLION – in only a half year’s time.

So, where are we headed? How about $25 trillion - perhaps that amount will solve the crisis?

Unfortunately the worldwide problem of debt cannot be solved by creating more debt.

Meanwhile last week The G20 met in London. The political leaders from the 20 major nations blasted images and press releases across the globe assuring everyone that they and their central banks have answers for the crisis they helped create.

Any documented proposals to a solution?

No, just more money pledged for the IMF ($750 billion additional) and a picture of 20 politicians with a globe behind them.

Look and you will find vague promises of joint action while on the sidelines countries are covertly making plans to assure that they are not left holding the dollar bag.

"The People's Bank of China has agreed to provide 650 billion Yuan ($95 billion) to Argentina, Belarus, Hong Kong, Indonesia, Malaysia, and South Korea through so-called currency swaps. More such arrangements are being planned so importers can avoid paying for Chinese goods with dollars, the central bank said."

- Bloomberg



Countries are looking for less exposure to the dollar. The above nations are publicly taking the necessary steps to insure their wealth against a very possible dollar collapse.

This makes us wonder, are there other countries doing this behind the scenes as well?

Who else doesn’t want to be left holding greenbacks when the dollar crumbles?

Well ---> WE DON’T!

Here at GoldSilver.com every dollar we make is converted into precious metals. We refuse to allow bailouts, The G20, or debased currencies to dilute our wealth.

It used to be that governments backed their currency by gold and/or silver. This gave the currency real legitimacy as it could be exchanged for something of true scarcity (it was a TRUE store of value). Governments and central banks consequently could not be print their currencies into extinction.

Well, the U.S.A. cut its final link to gold in 1971 and no other currency is backed by anything tangible either.

All are paper.

This has been tried many times before by governments around the world throughout history and it has ALWAYS led to the same disastrous result for the currency.

There however is a very bright side and an opportunity for those who understand what is going on today and take the appropriate actions.

We hope to lead by example and we encourage everyone to become YOUR OWN CENTRAL BANK and hold true wealth during this crisis period.

The New Currency Trade: Gold Vs. All Else

Posted by David Gaffen (Wallstreet Journal)

Investors have taken to terming the flight from risky assets into gold a new currency trade. The ongoing concern about the enormous task of getting the world’s banks on track — bedeviling investors across the globe — has produced a safe-haven trade into the likes of Treasurys and the dollar. However, the dollar’s success is, in some ways, a mirage, improving only because other major world currencies have been dreadful. The dollar has strengthened in the last couple of months, along with gold, which is an odd occurrence, and speaks to the dearth of worthy investments around the world. But the shift to gold has picked up as “everyone is trying to devalue their own currency against everyone else,” says Sean Peche, manager at BlueAlpha Investment Advisory Limited in London. That explains the dollar’s strength of late, one founded on risk aversion. Since the beginning of the year, the dollar has gained 9.5% against the euro and 2.3% against the pound, while gold, in dollar terms, is up 9.4%. The yellow metal closed up $25.50 to $967 an ounce Tuesday, highest since July 17, 2008. “Gold is telling you the dollar’s rally is not going to continue,” says Lance Lewis, fund manager at Lewis Capital Partner.

*Gold as we speak is continuing it's climb up the price ladder and we see amad bull in the making.