My Big Fat Rant: Saudi Arabia Set to ABANDON the U.S. Dollar.

(If you haven’t, you should read this. – promoted by ek hornbeck)

The title of this Essay is taken from one of the many private newsletters that folks like me (a currency trader) subscribe to. In the past three years of trading, however, I have never seen anything like the “Red Alerts” that have bombarded me this week.

International Investors Are Abandoning the Dollar, Driving It Toward  All-Time Lows Fast: The US Dollar Index has just fallen well below critical support levels – to within a fraction of a point of its lowest level in history. And it’s signaling even more dramatic declines ahead….

Do you have any idea how much this is going to impact your life before the end of the year?

Before things start to get worse…?

Investors Are Shunning U.S. Bonds, As Demand Sinks a Staggering 80% in One Month: The U.S. Treasury just reported that purchases of U.S. bonds collapsed from $97 billion to just $19 billion in July alone.

Do you know how this has already affected your life and the well-being of your family?

Read on. You haven’t even heard the bad news yet…

Bad news for the dollar is pouring in fast, but don’t turn on CNBC if you want to hear about it. NBCs corporate sponsors and owners will only allow discussions of how healthy the stock market is; how the Dow is soaring. That’s because NBCs corporate sponsors get rich (as individuals) when the investment money that’s pouring in continues to drive their stock prices up. They also want to keep consumer confidence up — so that the Sheeple keep spending the last of their wealth on widgets.

(Trust me when I tell you that the corporate fatcats are putting the investment money in their right pocket, selling their stock options out of their left pocket, and moving their profits into Euros, Yen, and Swiss Francs. They certainly aren’t dumb enough to denominate anything liquid in Dollars — or Dollar-based investments. You know, the kind of investments your pension fund and 401K are currently invested in?)

Now, let me explain why the Dow is going up:

Because on Wednesday, the day after Ben Bernanke cut interest rates on the Dollar (USD) — the trading floor was flooded with foreign investments. Between Tuesday and Wedesday — that dollar bill you have in your pocket right now dropped in value to only ninety cents. That made investors holding foreign currencies, like me, smile really, really big!

Stuff in the US is cheaper than Mexico now. In fact, the US is now the “new” Mexico — where foreigners can go on cheap vacations, eat really cheap food, and buy American-made trinkets for practically nothing. Remember when a pack of Chiclets sold by those tattered little Indian children was a nickel? This week, when I was tooling around Tijuana buying prescription drugs for my elderly neighbors, those children now want 50 cents (but first they asked for a dollar). Oh, and the drugs went up this week, as well. That is — unless you were lucky enough to hold your wealth in Pesos.

Our ONLY steadfast financial ally in the Middle East — Saudi Arabia — is abandoning the US Dollar.

This is deeply sinister.

For you, in particular.

Until now, Saudi Arabia’s currency – the riyal – was pegged to the value of the dollar. That meant every time our Federal Reserve cut interest rates, the Saudis cut their interest rates, too. And when the Fed inflated our currency, the Saudis had no choice but to inflate theirs as well.

But now, the Saudi money supply is exploding 22 percent per year and inflation is roaring at 4 percent per year — because the USD isn’t even worth the paper it’s printed on. So, Saudi government is refusing to destroy their own economy by lowering interest rates when the US does.

It seems the Saudis don’t want to commit economic suicide like the Bush administration did. This is going to be disastrous because it will trigger a stampede away from the dollar, throughout the Arab region.

Once all Arab currencies are no longer tied to the dollar (like next week, for instance), they’ll be dumping a big chunk of the $3.5 trillion they’re holding in order to protect themselves from the big losses that automatically come with a sinking greenback.

(Oh, and they might also do it because it’s a great way to destroy the American people without firing a single shot. Ah… sweet revenge.)

Okay, here’s what’s happening and how it’s going to unfold, told in excerpts from the Telegraph.

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

“This is a very dangerous situation for the dollar,” said Hans Redeker, currency chief at BNP Paribas.

“Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States,” he said.

The Fed’s dramatic half point cut to 4.75pc yesterday has already caused a plunge in the world dollar index to a fifteen year low, touching with weakest level ever against the mighty euro at just under $1.40.

The danger is that this could now accelerate… leaving America starved of foreign capital flows needed to cover its current account deficit – expected to reach $850bn this year, or 6.5pc of GDP.

Foreigners have funded 25pc to 30pc of America’s credit and short-term paper markets over the last two years.

“They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008,” he said.

Let me stop here for a moment. A quote from the article:

“We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008,” he said.

Do you understand what this means?

It means that if you buy a Euro-based CD (or an ETF, if you know what that is) on Monday, you will have a lot on money in a couple on months with very little risk. (My plutocrat friends and I happen to know the Euro will be at $2.00 in a few months. You can make enough to send your kid to college and still keep your principal.)

Okay, back to the Telegraph:

Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.

The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.

“If Ben Bernanke starts running those printing presses even faster than he’s already doing, we are going to have a serious recession. The dollar’s going to collapse, the bond market’s going to collapse. There’s going to be a lot of problems,” he said.

Former Fed chief Alan Greenspan said this week that house prices may fall by “double digits” as the subprime crisis bites harder, prompting households to cut back sharply on spending.

The pressures are even worse in other parts of the Gulf. The United Arab Emirates now faces inflation of 9.3pc, a 20-year high. In Qatar it has reached 13pc.

Kuwait became the first of the oil sheikhdoms to break its dollar peg in May, a move that has begun to rein in rampant money supply growth.

The entire world is applauding. It takes a dangerous rogue nation (the United States) off the global radar and turns it in to Haiti. If that idea scares you, just repeat:
_________________________________________________________

  The Chant of the Sheeple

Hey, no nation wants to see the US economy hurt.
We own them too much money.
We’re the strongest economy in the world.
(Ignore the contradiction in the two sentences above.)
They would only be hurting themselves.
Whew! I was worried there for a minute.
I’m going back to sleep.
_________________________________________________________

Now, I’m going to end with my Usual Rant:

I’m expatriating because I don’t want to stick around for the revenge that is going to be heaped on the US — and individual Americans here and throughout the world — by its former allies along with the entire Muslim world. I don’t see why I should. I began applying for citizenship elsewhere when the US committed an atrocity even larger than Iraq — the American Sports Bar-driven bombing of dirt and people in Afganistan.

I’m stuck choosing between the haters who have stashed their (your) cash and are blowing this joint — and the Democrats who believe it’s evil and cynical to become rich, and are going to be left holding the bag in this radioactive slave nation.

End Rant [gawd, I enjoyed that…]

So, why do Democrats so love their meme that “Wealth is Evil?”

Someone needs to take that meme and drown it in a bathtub.