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DOLLAR CRASH INEVITABLE / DERIVATIVE RISK PERSISTS
The US dollar is in a perilous position. We are borrowing over 3 billion dollars a day from abroad to stay afloat and bailout our excesses but the rest of the world is also suffering economically. The Interest Rate Derivative market is now the major unresolved market risk as bank failures accelerate : Allen L Roland
US Treasury Secretary Tim Geithner shocked global markets by revealing that Washington is "quite open" to Chinese proposals for the gradual development of a global reserve currency run by the International Monetary Fund.
Geithner later qualified his remarks, insisting that the dollar would remain the "world's dominant reserve currency ... for a long period of time" but the seeds of doubt have been sown and rightfully so. Remember, China holds almost 30% of the world's entire reserves and if China is nervous ~ so are the other creditor nations.
But they have every right to be nervous as Martin Weiss reports in today's Money and Markets ~ " But first, here's the alarming news: According to the fourth quarter report just released this past Friday by the Comptroller of the Currency (OCC), commercial banks lost a record $3.4 billion in interest rate derivatives, or more than seven times their worst previous quarterly loss in that category.
In 1929, derivatives were virtually nonexistent. Not today ! U.S. banks alone control $200.4 trillion and it's mostly the megabanks. Specifically, at year-end 2008;
- Bank of America’s total credit exposure to derivatives was 179 percent of its risk-based capital;
- Citibank’s was 278 percent;
- JPMorgan Chase’s, 382 percent; and
- HSBC America’s, 550 percent
According to the OCC, Goldman Sachs' total credit exposure at year-end was 1,056 percent, or over ten times more than its capital.
What’s excessive? The banking regulators won’t tell us. But as a rule, exposure of more than 25 percent in any one major risk area is too much, in my view "
So, despite Geithner's pledge to the sustain the Dollar's Dominance China is probably going to get very anxious at continuing to buy US debt ( 3 Billion dollars every day ) and either the interest rates the US has to pay is going to skyrocket, or the ability for the US gov’t. to borrow massive sums is going to dry up all together.
The dollar crash will happen very quickly. A hedge fund rumored collapse amid continuing bank failures will be enough for sell orders to start cascading as the bottom falls out of the dollar.
Then we’re going to see rapid devaluation of the US dollar, rapid cost of goods inflation, product shortages, declining standards of living, etc. More and more individuals are going to have refocus back on struggling to meet their basic food, clothing & shelter needs.
Here's a must watch eight minute Video / The Day The Dollar Falls
This is a Dutch (Netherlands) documentary from 2005. It is about a 'Worst Case' scenario where speculation on the currency exchange market plus a substantial sell-off of dollars from a hedge fund cause a chain reaction in the market, the economy and the political system ~ and it very relevant to today's perilous dollar situation . Click on 8 minute must see video ~ http://informationclearinghouse.info/article22305.htm
Allen L Roland http://blogs.salon.com/0002255/2009/03/30.html
Freelance Alternative Press Online columnist and psychotherapist Allen L Roland is available for comments, interviews, speaking engagements and private consultations ( allen@allenroland.com )
Allen L Roland is a practicing psychotherapist, author and lecturer who also shares a daily political and social commentary on his weblog and website allenroland.com He also guest hosts a monthly national radio show TRUTHTALK on www.conscioustalk.net
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