Category Archives: 4.22.12 Banks allowed to short sell dollar

4.22.12 Banks allowed to short the dollar

Dear Readers:

I received this from a  friend (Thanks Jill) and it only confirms what I have been saying for a while now.  The dollar is going to devalue after the RV.  Some reports are saying by as much as 40%.  I am not sure of the loss we will experience but I do believe we will feel it across the markets – stocks – bonds and other investments relating to the US and its holdings.   This is not a doom and gloom article in fact I think those seeking truth find it enlightening and a heads up.  It makes us aware and able to better judge what to do post RV or for those not involved, how to protect what is your nest egg.

I personally was never going to cash into dollars more than I needed to take care of things.  If the world is going to hinge off of Iraq as it appears, then it may be good to keep it in Dinars – no tax unless cashed in and you still have the leveraging power of its full value.  

I know some say it is way to volatile to leave in Dinars and I agree one should diversify it out amongst other “Safe” currencies but I am simply saying that I do not believe that Iraq’s currency is going to be as volatile as some think.  The world is setting up over there and that should say something.

I would never advise people what to do and please do not take this as such.  I have people ask me all the time what they should do and people that is all dependent on how much you have, what your debt load is, what your goals are and your age and further more your Risk level as a person.  I play hard and I have fallen hard but it is in my nature to be on the edge so that would not play well with an ultra conservative investor.

I do believe the publishing of this article brings into light one other thing and that is we are very close to this popping.  Why would they talk about it and print it if it were not close.

Prepare my friends as time is actually on our side for this event so that we can prepare.

I am also including in this anthers opinion of this article.  I do not know this Michael but it appears he and I are on the same page.

Banks open to shorting dollar

Global Times | April 17, 2012 22:18
By Wang Fei’er
China’s banks will be permitted to hold overnight long positions in the yuan, a move that also allows them to short sell dollars, according to an announcement made late Monday by the State Administration of Foreign Exchange (SAFE), the nation’s foreign currency regulator.
This move shows the government’s confidence that the yuan is balancing, and reinforces China’s commitment to allowing market forces to sway the price of the nation’s government-capped currency, experts told the Global Times.Forbidding banks, major participants in the foreign currency market, from short selling dollars reduced supply and demand pressures on the yuan, which allowed the government to control its price more easily in the absence of market dynamics, Chen Xuebin, deputy director of the Institute for Financial Studies at Fudan University, told the Global Times.But when China stopped pegging the yuan against the dollar in July 2005, this put pressure on Beijing to stave off the yuan’s appreciation, as allegations that the yuan was undervalued were rampant in the world’s major economies at the time, Chen said.The slowdown of China’s economic growth and the slump in the country’s once mammoth trade surplus has lent credence to Beijing’s argument that the yuan is not undervalued, and has taken some of the pressure off the yuan’s appreciation, said Xue Zhaofeng, chairman of Peking University’s Institute of Law and Economics.”This is the right moment for the country to free up control of the yuan’s price because the two-way volatility of its price has made investors less likely to profit from yuan appreciations,” added Xue.According to SAFE’s announcement, banks with annual foreign exchange turnover above $1 billion last year will be allowed to short sell a maximum of $10 million; those with annual forex turnover between $100 million and $1 billion are entitled to short positions of dollars up to $5 million; while banks with turnover below $100 million can short sell up to $3 million.

Michael’s comments from the Vista Group:

What this means is, as the dollar is shorted by Chinese banks and investors, the value of the USD will plummet closer to parity with the Chinese Yuan. This has been a long-standing goal on several sides as a way of balancing out the trade deficit between China & the US. Even though we may lose value in the USD, our jobs will return back to USA shores. A rapid appreciation of the Chinese Yuan would severely disrupt the Chinese economy. The US has a fallback with the creation of the Treasury dollar backed by assets. Time will tell just how well this will all play out, but I am confident the RV of the IQD is part of the equation which will help stabilize markets and personal portfolios during the upcoming shifts in global currency values.