Dollar, Gold, and Oil and, oh yeah, Australia |

Dollar, Gold, and Oil and, oh yeah, Australia

So many things happened overnight that it’s tough to recognize that each one on it’s own is such a big deal.

For starters, the UK Independent ran a story that has everyone talking: http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html. In the article, Robert Fisk writes that the oil producing countries, along with Russia, France, and China are secretly planning on NOT pricing oil, and presumably other commodities, in dollars. this has obvious negative implications for the USD. For starters, who’s going to want to hold on to their dollars or dollar-denominated Treasuries? China could stop purchasing our debt or even sell off the trillion dollars it owns already. But why? Why would China, instead of assisting the other nations, not just continue to use it’s dollar hoard to buy up commodity and natural resources companies around the world? Kuwait and the Arab nations as well. What does this move portend? The story might be true, but I’m just not sure I understand the motivation behind it at this point, when the dollar is already so weak.

Then, to top it off, Australia raised it’s key lending rate. http://www.marketwatch.com/story/australia-first-among-g20-nations-to-hikes-rates-2009-10-06. In a surprise move, the Australian central bank raised its key rate to 3.25% (from 3%). Well, someone had to do it first. I had wild hopes that Bernanke and Obama would be the ones to start, but no luck. Raising first gives the country a little breathing room, a first mover advantage, and a chance to lower in a couple of months when/if things turn out to be as bad as I fear. Good move, Australia.

In the meantime, Conde Nast is closing 4 titles, Christmas sales estimates came out at down 1% from last year, and the markets world wide are moving up in lock-step. I’m not buying it. There is some massive disconnect occurring. US dollar losing its primacy would add to instability (in my mind) at least in the short term, economic fundamentals are not positive (they are mixed at best, although unemployment is definitely negative), geopolitics are mixed at best (very negative in my mind, but I’m probably biased), and healthcare is going down the tubes. Maybe it’s so much negative news that it’s all priced in. Yes, maybe. Or maybe everyone is getting ahead of themselves.

Last 5 posts by Yaron Sadan

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