Forex Strategies Forum

[Rom]

When dollar goes down for many reasons (getting rid of the trillions dollar debt to China, increasing US companies competetiveness, creating a monetary illusion of rising equity values)... there will be inflation, and bonds will go into free fall.

We all have to protects our assets when faced with hyperinflation.

One way to protect our assets against hyperinflation

1. Open a account with a broker dealing with commodities and forex
2. Choose yen or Swiss franc as account currency
3. Buy Gold, Silver and/or Oil contracts with leverage 3-4, or sell dollar with leverage 3.

If dollar falls 10% this year Gold, Silver and Oil will, as being nominated in dollar, have to increase 10%. That gives us a 30-40% profit this year when dollar falls 10%. If dollar does not fall there may be no profit, in that case our assets are not devaluated and we don't need a profit.

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[Rom]

http://moneymorning.com/2010/10/13/currency-war-8/

The whole idea of trying to build a stronger economy by weakening our currency is idiotic. It is a logical outgrowth, however, of central banks and fiat currencies, and I can't help but feel that if the bankers have their way, they will print more and more money, and use it to buy everything of value before it is totally devalued, leaving us with piles of worthless paper, and little if anything else. I will plan to hold onto my gold and silver, and other real property, for as long as I can, but if they are not stopped, I think we are toast.

- Gordon F.

[Rom]

Silver Short Position Could Cost JP Morgan Billions in Losses

http://inflation.us/silvershortjpmorgan.html

[Rom]

What happens when currency is devaluated?

Exports will increase and unemployment will disappear?

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It continued to play this role until after World War II, when America was forced to prop up Britain's economy with foreign aid – remember the famous Marshall Plan, when we gave billions to help European countries rebuild?

Unfortunately though, Britain pursued a socialist national agenda. The government took over all of the major industries. Like Barack Obama, Britain's leaders wanted to "spread the wealth around." Pretty soon the country was flat broke.

The final straw for Britain came in 1967, when things got so bad the Labour Party (the socialists) decided to "devalue" the British currency by 14%, overnight. They believed this would make it easier for people to afford their debts.

In reality, what it did was make anyone holding British sterling 14% poorer, overnight, and it made everything in Britain, much, much more expensive in the coming years.
And for the country as a whole, it ushered in one of the worst decades in modern British history.
Most Americans don't know about Britain's "Winter of Discontent" in the late 1970s, when the government put a freeze on wages. There were continuous strikes in nearly every sector... grave diggers, trash collectors... even hospital workers. Things got so bad at one point that many hospitals were reduced to accepting emergency patients only.

In 1975, inflation in Britain skyrocketed 26.9%... in a single year!

The government also imposed what was known as the "Three Day Week" in 1974. In short, businesses were limited to using electricity for only three specified consecutive days' each week and they were prohibited from working longer hours on those days. Television companies were required to cease broadcasting at 10.30pm... to save electricity.

The extreme problems in the economy led to Britain being nicknamed, "the sick man of Europe."

Just how bad were things, exactly?

Well, listen to several Brits tell of their experiences. Their stories were collected recently by the BBC television channel...

John Blackburn, from Wetherby said:
"I was a control engineer at Huddersfield Power Station at the time and part of my duty was to switch off the supply to various substations around the town, according to an official rota. On many an evening shift I would have to switch off the power to my own home before going back for a candle-lit supper!"

Richard Evans, from London, recalls:
"My mother had to cross a picket line to get into the maternity hospital (they told her she couldn't come in....). My Grandmother had to bring in food for her to eat, and clean towels and bedding."

David Stoker, Guildford, said:
"I lived in the North East near Newcastle and I vividly remember my grandmother and I walking from one shop to another in search of candles to buy. All were sold out. Innovatively, butchers placed string down cartons of drippings which we bought... These worked although the smell and risk of fire made them less practical than candles."
Imagine... Britain was a global superpower for 150 years. But when they started intentionally devaluing their currency, things went straight down hill.


Maybe you don't think something similar can happen here... but I'm telling you... it's already underway!

In fact, the exchange value of the U.S. dollar has fallen about 8% so far this year. And its rate of decline is accelerating.
What happened to the British currency is now happening to the U.S. dollar.
Not only will the price of gas, oil, and other commodities skyrocket in America, almost EVERYTHING we consume will immediately get more expensive. All the clothing, furniture, and household goods we import from China.

All the food we get from Central and South America... all the electronics, televisions, computers, and cars we get from Asia and Europe.

In fact, it's happening, right now before our eyes: The price of gold is up 85% since the financial crisis. Oil prices have doubled. Soy beans are way up. Copper prices are up more than 170% since 2009. Cotton prices are up 80%... in just the past few months, since July of this year!

As Wesley Card, the head of a clothing company that includes brands like Dockers and Anne Klein, recently said: "It's really a no-choice situation. Prices have to come up."

The chart below shows how much a few key commodities have skyrocketed in price, just since the beginning of 2009...

[Rom]

What happened with hedge advice Oct 9th 2010

EURUSD -3.7%
Gold +5%
Silver +30%

Buying EURUSD leverage 3 would have returned -11% in dollar*
or
buying Gold leverage 4 would have returned 20% in dollar*
or
buying Silver leverage 4 would have returned 120% in dollar*

*Cost of trade exluded

Since dollar became more worth those in US did not lose in any case?

[Rom]

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Worst case scanario
1. Oil to 150
2. Dollar down 50%
3. T-bonds down 50%
4. USA defacto defaulting, but Mugabe solution remaining option
5. Hyperinflation

Under such circimstances debt diminishes because of inflation
Good companies will maintain value
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[Rom]

Why The Debt Situation Is Worse Than You Even Imagined

February 25, 2011 by Porter Stansberry

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There are few things about which history is unanimous. Land wars in Asia, for example… always a bad idea.
Paper money falls into this category. Paper money always fails and wipes out the people who depend on it.
Or as our friend Rick Rule likes to say, paper money’s track record is unblemished by success. The return of paper money to its intrinsic value (nothing) is guaranteed. All we need is time (though politics certainly help move things along).
We would not argue that organizing a system of sound money based on paper receipts is impossible. We would merely point out that keeping such systems sound and reliable has proven elusive to this point in human history.
Paper money is like many other types of idealized virtue humans cannot attain. It’s simply beyond human nature to avoid perdition. Sin, as they say, is part of man.
Every government that has used paper money has succumbed to a fatal level of borrowing. Rather than a restructuring of these debts, paper money systems allow for the rapid expansion of the monetary base to facilitate paying off debts in devalued money.
This is no different than stealing. And yet… that is what happens every time, resulting in a massive crisis and a breakdown of social norms.
It normally happens faster in democracies, where no strong interest group votes for living within the country’s means and repaying its creditors in sound money. No, people vote for more spending and more debt. And they always expect someone else to pay. Case in point… Greece.
Researching problems in the Greek economy is like reading a financial comic book. All the players are clowns.
For example, the national railroad has annual revenues of €100 million… against a wage bill of €400 million and another €300 million in expenses. The Ministry of Agriculture hired 270 people to digitize photographs of Greek public lands… with one digital camera.
In 2001, the Greek government borrowed $1 billion from Goldman Sachs to help balance the budget. The deal relinquished future receipts from the national lottery, national highway tolls, airport landing fees, and even funds promised to Greece in the future from the European Union.
The government was burning the family furniture to pay current expenses. And now, they’re out of furniture. It’s all been burned.
In total, the Greek government owes €1.2 trillion. That’s €250,000 for every adult.
Obviously, Greece cannot repay this money in sound currency. The only way out is for the Greeks to inflate the debt away — effectively stealing from their creditors with a printing press. That they haven’t done so yet is only because they no longer have their own currency, the drachma.
Instead, they are part of Europe’s common currency, the euro. And Europe is making every effort to maintain the mirage of a united economy. Unfortunately, no such thing exists. It’s merely a matter of time before the Greeks default.
The exact same thing is true about the United States — except the numbers are even worse.
Regards,

Porter Stansberry
–Porter Stansberry with Braden Copeland

[marshal]

Hello,
Yes all of you are right. we are loosing our big assets or at risk of loosing them. we give so many debts to other countries.Rom you gave very good information about how to protect all these things.

thanks!!

__________________

[Rom]

SInce EURO is prone to debt problems it may be an idea to diversify with Singpore dollars, Norwegian kroner and Russian Rubles, and put total leverage of such portofolio to 6.
or
Since volatility of Gold is 1/2.8 times volatility of Silver it may be an idea to increase leverage of Gold to 8.
or
Oil and Gas have good potentials for the time being (Saudi unrest?), even if Japan reduces demand for Oil.
Asian stock indices are mostly risky these days, but I am no ekspert.
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[Rom]

http://www.sirchartsalot.com/

The relation between silver contracts on exchanges and physical silver in the world is more like 45 : 1, completely disconnected in other words. In case of any scandal those with silver contracts will be compensated for the money they paid for the contracts
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