What happens to the Dollar in a crash? - page 3

New comment
 

Deflation

Since so few opinions have been offered, here is mine. There are several possible triggers for a crash; here is one. The FED is printing money like crazy under QE. If a large holder of US currency such as China becomes annoyed and decides to sell their dollars, hyper-inflation in the US would become realty. There would be so much outrage from the public that the FED would cease QE. Shortly thereafter a crash would occur. Why?

The four largest banks in the US are severely upside down. The only way they stay in business is because the FED is printing money and loaning it to them interest free. If the FED quit printing money and loaning it interest free, one or more of these banks would go under. This would cause a financial crises like nobody alive today has ever seen. The equities and commodities markets would fall like a boulder through the air. The dollar would sky rocket. The remaining question is would all the other fiat currencies also rise with the dollar. In my opinion, if the FED quit QE, the dollar would spike upward relative to most other currencies.

As you can see, the results above hinge on the actions of the FED. There are several other possibilities with different results. What think ye?

 

elevator down...........pls.,

more sellers than buyers.........bend over and kiss it all bye bye

see ya' all at zero..........:)

s

 
shoplogix:
more sellers than buyers.........bend over and kiss it all bye bye

see ya' all at zero..........:)

s

Must not look at charts much lately

 

Flawed Theories

There were some flaws in my previous post. I was just presenting one scenario being put forth by people pushing products to sell to buffer you against a crisis. One flaw is that nobody would suddenly sell off even 10 percent of their dollars because that would cannibalize the other 90 percent of their investment....EXCEPT that they may try to funnel their dollars away by purchasing other things with their reserve of dollars (such as China is doing right now). That would also lead to hyper-inflation but, over a longer period of time.

The see-saw motion of the dollar and euro is because people can't decide which is worse: US quantitative easing (printing money) or European debt crisis in four or five countries. Quantitative easing will take its affect over time but, the European debt crisis could explode very quickly, hence the current weakness of the euro but, every time there is some good economic news in Europe the euro rises. The British pound is bouncing back and forth because the British banks hold so much of the European debt.

Movement has become so irrational that I mainly stick to my technical indicators, avoid trading in large time frames (4 hours or more), and don't trade the news. Though I do use the large time frame to see the long term trend. The good thing is that volatility is providing lots of opportunities for trading.

 
shoplogix:
more sellers than buyers.........bend over and kiss it all bye bye

see ya' all at zero..........:)

s

It's not about how many sellers or buy there are, it's about how much is being sold and how much is being bought.

 
shoplogix:
more sellers than buyers.........bend over and kiss it all bye bye

see ya' all at zero..........:)

s

I presume you were talking about the dollar since that is what this thread is about...or were you talking about equities? or both?

 
gcgman:
Please explain this theory and share your opinion as to what would happen to the dollar in the event of a crash.

Thanks,

gcgman

Hmm, I'm not an expert on it. I just read it here: The Dollar Smile Theory | The U.S. Dollar Index | Learn Forex Trading

Pretty interesting stuff though.

 

Dollar Smile Theory

littlebopip:
Hmm, I'm not an expert on it. I just read it here: The Dollar Smile Theory | The U.S. Dollar Index | Learn Forex Trading Pretty interesting stuff though.

Interesting theory. If I understand it correctly, option A of my original post would kick in if there were a crash and the theory held up. Thank you for the link.

kind regards,

gcgman

 
homestudy:

Hi Homestudy,

I am truely sorry Homestudy but it was not my intention to laugh with the US or get down on the US.

The measures the FED took is to make it easier for people to lend money or buy on credit.

When people lend money it is to buy goods.

The more they buy the more the economie will grow again.

That was why I said that they should buy and lend and borrow because if they don't that will create no counter weight to the 600billion dollar they are going to print.

That will cause a hyper inflation in the US. And if it rains in the US then it drips in Europe.

I hope this clarifys and that I did not want to bash on the US.

Friendly regards...iGoR

Here is a video that explains what I tried to say with my posting (about the FED's decision to print more money). It is as scary and shoking as the previous video link I posted.

YouTube - Quantitative Easing Explained

Regards...iGoR

123
New comment
Reason: