HSBC Reveals Days of the Dollar are Numbered

Reddit

A report from the world’s biggest bank, HSBC, tells us the dollar’s days are numbered.

“The dollar looks awfully like sterling after the First World War,” said David Bloom, the bank’s currency chief.

“The whole picture of risk-reward for emerging market currencies has changed. It is not so much that they have risen to our standards, it is that we have fallen to theirs. It used to be that sovereign risk was mainly an emerging market issue but the events of the last year have shown that this is no longer the case. Look at the UK – debt is racing up to 100pc of GDP,” he said

The Telegraph reports:

“Crucially, China and rising Asia have reached the point where they can no longer keep holding down their currencies to boost exports because this is causing mayhem to their own economies, stoking asset bubbles. Asia’s ‘mercantilist mindset’ of recent decades is about to be broken by the spectre of an inflation spiral.

“The policy headache was already becoming clear in the final phase of the global credit boom but the financial crisis temporarily masked the effect. The pressures will return with a vengeance as these countries roar back to life, leaving the US and other laggards of the old world far behind.

“A monetary policy of near zero rates – further juiced by quantitative easing – is completely incompatible with circumstances in most of Asia, the Middle East, Latin America, and Africa. Divorce is inevitable. The US is expected to hold rates near zero through 2010 to tackle its own crisis.

“What is occurring is an epochal loss in the relative wealth and economic power of the old G10 bloc of rich countries compared to rising regions of the world. The euro, yen, sterling, Swiss franc and other mature currencies will be relegated along with the dollar in this great process of rebalancing, but the Greenback will bear the brunt.”

That said, we repeat a headline from Seeking Alpha:

“Dollar shorts should look out.”

We agree with HSBC and the Telegraph: the dollar will probably slide – especially against Asian currencies – for the next few decades.

But that’s the long term. In the relatively short term we still face the shock of another leg down of the credit contraction crisis. Risk is likely to make a comeback. When that happens – and it could happen in a ‘Red October’ – the dollar will seem like a relatively solid refuge. This is what happened last year. We wouldn’t be surprised by a replay of that ‘flight to safety’ we saw at the end of last year.

But we know what you’re thinking: what? When did the dollar become a ‘safe currency?’ Of course, it’s not safe. But when the end of the world approaches, it will seem safe.

For a while.

Until tomorrow,

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Reddit

Leave a Reply

10 Comments on "HSBC Reveals Days of the Dollar are Numbered"

Notify of
avatar
Sort by:   newest | oldest | most voted
Ned S
Guest

Which would seem to support a thought I had a while back that the inflation/deflation debate just could depend on what country you in.

Dan
Guest

I predict the elimination of all currencies and the replacement with an international unit of money, but not precious metals based. It’ll be fiat again but totally regulated. Probably even cashless.

The death of the US dollar (and the crippling of the US economy) seems to be a necessary event for this to come about.

Julie
Guest

I heard last week the UN is calling for a global currency…wonder if ‘Aunty Helen’ is in the thick of it ?

Of course New World Order conspiracy theorists and followers of the Bilderberger meetings predicted decades ago that eventually we would see national currencies disappear and a one global unit take it’s place…and yes, they speculated it being a cashless currency as well. Am new to your forum here, but hope to learn a lot :)

Lachlan Scanlan
Guest

I dont think the dollar will rebound strongly this time. The dollar dumpers will be standing ready to offload.

Ross
Guest
Lachlan, I have signed onto Bill’s latter lines on the USD some time ago as you know. My trading equity money gets pulled the minute the USD starts going backwards and in my longs I am seeking those where I have as little hot money investors alongside me. I am myopic on these hot money flows, they have created liquidity in the US but it isn”t being lent by banks into the US domestic economy. It is therefore central banker induced funny money, your US central bankers as one stop combined off balance sheet&ratings agency vehicles. While it all hangs… Read more »
Ross
Guest

Lachlan, got a call on this post. I meant the minute the AUD goes significantly backwards (not usd) I will sell my equities that are known to have hot money in them (appreciated quickly in parallel with the AUD).

Lachlan Scanlan
Guest
Hi Ross Im not as hot money literate as you’ve come to be. I see you’ve studyied money flows closely to guide your investment decisisions. It must be difficult to decipher whats going where with precision, but then your obviously hard at work on it. When you post I often read your posts several times in order to grasp the full meaning so I have some Q’s below.. Ive had a eye out for a dollar bounce and actually since back in June when the markets had been off for a while and the USDX was beginning to rally. When… Read more »
Ross
Guest
Lachlan, on 1? yes absolutely. On 2? No, rather bailout money into merchant banking liquidity and the merchant bankers have been index trading to make the broader equity markets and front run from them, but that hasn’t required much liquidity in the scheme of things, the liquidity has mainly been shipped offshore. For goldphiles, the great fed conspiracy theory is oulined here: http://www.zerohedge.com/article/fed-hiding-gold-swap-arrangements-foreign-central-banks If there is an ounce of truth in this you can be sure all the reserves are worried by a general fiat currency collapse led by the usd. But then again the IMF is just a US… Read more »
Dan
Guest

Ross, the ‘conspiracy theory’ is no theory: http://finance.yahoo.com/news/Federal-Reserve-Admits-Hiding-bw-2550373789.html?x=0&.v=1 – smells like a dead possum in the roof.

Ross
Guest

Dan, it is still an allegation by an interested party. lets see before we all set about buying ammo as our post crash currency. Remember too there are many claims on each ounce of physical gold in the markets and a desperate & determined govt is an ugly thing.

wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au