Debasing Of The Dollar - Out Of Control!

Good day… And a Wonderful Wednesday to you! I’m having technical difficulties from the road this morning, so I have no idea when this will finally get to you. This hotel I’m in calls their Internet service “high speed”… I call it worse than dial up!

So… This will be short-n-sweet this morning, as I’ve got limited information that’s in my computer, but I can’t access anything due to this awful Internet service! There’s no crying in newsletter writing though, so I carry on despite these problems!

WOW! The currencies came back strong yesterday, but played second fiddle to the commodities and commodity currencies that did the ole’ Super Ball bounce. Aussie (AUD), loonies (CAD), kiwi (NZD) all gained back between 1.3% and 1.5% against the dollar! WOW! Good Show!

The Canadian loonie is within spittin’ distance from its all time record versus the green/peachback… That is post Bretton-Woods. The Bank of Canada doesn’t like this one bit, but what are they going to do about it? Well… Let’s hope they take a line from Edwin Starr and do Nothing, absolutely Nothing, say it again!

And Aussie is getting additional fuel from a report overnight that inflation is pushing the 2% ceiling target of the Reserve Bank. Inflation hit 1.9% in annual terms in September. I don’t know if this is enough for the Reserve Bank to hike rates. But I do know that it is enough to keep them from cutting rates, and that means Aussie dollars get to keep their positive interest rate differential to U.S. dollars.

You know… Somebody with their head screwed on right, figured out that China is still in demand of raw materials as their economy acts like the Energizer Bunny and keeps going, and going. This “revelation” allowed the commodities to rebound like this. Glad whomever it was decided to have a V-8!

With stocks settling down, the carry trade was back to, “Game On!” which also helped fuel the Aussie and kiwi currencies higher. You can see the carry trade illustrated as it carries over to pound sterling (GBP) too.

I was talking to someone yesterday about pound sterling, and said that 2.05 looks to be the “top” for the currency… But then, you never know just how deeply rooted the dollar decline is going to be… And even if pound sterling doesn’t have the yield it once had, due to rate cuts that are coming, it could continue on through the night and move higher.

BUT! THE BIG STORY THIS MORNING IS…. Jim Rogers, for whose views I have so much respect, said last night that the Fed’s debasing of the dollar was out of control… And that he was moving all of his dollars to Chinese renminbi (CNY)! WOW! I know, I’m full of WOWS this morning… But when you see moves like that in commodities, and you see words like that from someone as well respected for his investment knowledge as Jim Rogers, you have to say WOW!

And look at the Chinese renminbi! It’s trading below 7.50!

On a side bar… Last Friday I said this… “Today… We’ll have to listen to Big Ben Bernanke and William Poole speak right here in good ‘ole St. Louis! I wonder if… Nah… That won’t happen… But maybe, you never know! Maybe… Big Ben will skip out to our office to get some good advice! HAHAHAHAHAHA! But hey! Jimmy Rogers made the trip out to see us when he was in town… Why wouldn’t Big Ben?”

On Saturday, I received this email… “I had rather than see you in St. Louis rather than BB and Poole combined.”

Jim Rogers

Isn’t that great? I absolutely loved it!

Even as late as this is going out this morning… I still don’t have the data on existing home sales. Well… I’m sure they will be awful, probably falling to a six-year low… And still falling, my friends… Still falling.

I’ve got to get this out… I finally have some connection down at the booth! Everyone else is going to Café du Mond this morning… I’m at the booth… Poor old me! HA!

Currencies today: A$ .9010, kiwi .7550, C$ 1.0335, euro 1.4250, sterling 2.0490, Swiss .8525, ISK 60.78, rand 6.6420, krone 5.4450, SEK 6.6420, forint 176.10, zloty 2.5640, koruna 19.07, yen 114.30, baht 31.50, sing 1.46, HKD 7.75, INR 39.58, China 7.4880, pesos 10.82, BRL 1.7920, dollar index 77.60, Oil $85, Silver $13.60, and Gold… $761.20

That’s it for today… I had a great time yesterday with some readers from Kansas… Great stories! And then a wonderful dinner last night with my friend, John Mauldin, who by the way… Has excellent knowledge about wine! He picked us out some real tasty ones! It was great seeing a lot of old friends here yesterday… The people are so nice to make sure they stop by to ask how I’m feeling… Makes me feel good! And Pam and Mary Anne Aden were so wonderful to see! Hugs all around! So… Let’s see if I can get this sent… Here goes… I hope your Wednesday is Wonderful!

Chuck Butler
October 24, 2007

The Daily Reckoning