Dollar

[cottonpicken]

The us dollar has been having a bad few days.A major decline is on the horizon.If you think todays ag prices are good "you aint seen nottin yet".

p.s-you can kiss oil and gold goodbye

[kamichel]

Generally as the US dollar index goes down our dollar is going up cancelling any benefit.

[rain]

cotton are you saying oil and gold are taking off or going down. I assume you feel they will move to the upside from the low US Dollar Index?

[cottonpicken]

A very small amount is lost when our currency rises(purchasing power is gained).Our currency is rising because of a strength in commodity prices.This is good for commodity producers but very bad for canadian manufactures(very very bad).

Commodity prices are rising due to speculaters betting on inflation.Inflation comes from increased money supply.Money supply comes from credit creation of central banks.Which is controlled through interest rates.

This is of course a short simplistic explanation of a very very complex system.

All of this has occurred in the past,remember the seventies.

This will of course piss some older guys off but i'll say it anyway.
At the start of the eighties many farmers were buying land at double the price it is now but with interest rates at 18%.Just imagine the payments.Then grain prices collapsed.The leverage the farmer had to make those payments was gone and so began the worst commodity bear market in human history(yes all of human history).

The farmer if he had knowen how things work could have avoided this.Why would anybody with capital buy into the grain markets when he could get 18% in the bond market?Using the rule of 72 he was getting his money back in 4 years.

The banks jacked the rates to stem inflation.

Thee most interesting thing in the world to me(and lots of economic guys)is how does the central bank play its cards now.There is so much debt out there that a spike in interest rates would KILL the overall economy but loose monetary policy would add to inflation.The term a rock and a hard spot is throwen around quite a bit in many analysts news colunms.

And of course all eyes are on the us dollar because it is the worlds reserve currency.Yes oil and gold will go up in value if the dollar goes down.

[TOM4CWB]

CP,

If oil goes up, so does Grain.

China is tied to the US$, unless they cut this tie, they will "win" double as the US$ drops. $1 Trillion ownership of US now.

Can CHina continue at 12% growth?

If CHina revalued its currency they could get off the growth tred mill. But they are on the currency/growth drug... and addicted. They think they are the big winners... linking the US and Chinese economies.

What will happen?

$200/sq ft is an inexpensive house built in Edmonton. 1000sq ft = $300K house!

With a $.70 Dollar that house was $100K... a few years ago, that means it is now a $400K house in real terms!

And we have not had run away inflation in Canada?

$6 Canola would be $12 in terms of real cost increases?

What is driving these changes... the 1 Trillion spent on the Iraq war? NO WAY.

[kamichel]

Ok so I am wrong, our and the US dollar index dropped together the last couple days.
And Tom the Chinese Yuan is now tied into several currencies if I am correct not just the US dollar. Hmmm 12 dollar Canola I could do a lot more fishing, relaxing.
Cotton do you really think a lot of our prices are do to speculation right now? Actually I think they are due to tight supply and consumers need them. And another thing I am old enough to have witnessed the high prices paid for land along with the high interest rates and the fact that banks borrowed the money with very little collateral. Today we have to put up collateral to purchase, not saying that high interest rates would not hurt us, just wondering where are these interest rates going, the floating rate has been my friend the last five years except the last one.