Economic and financial situation are deteriorating. And, in spite of the worldwide attempt to alleviate markets and revitalize augmentation, it is only a matter of time before weak confidence opens doors to panic yet again. Signs of establishing damages are noticeable in economics, market operations and surely price. Examining the market’s more usual asset classes, the sense of risk aversion is instantly recognizable. The FTSE 100 has closed pushed to 6 year lows, the Dow Jones Industrial Average has outpaced its fall in the great recession to close for 12 year lows and the Nikkei 225 is just off of levels not seen in a quarter of a century.

Foreign exchange development history - exchange market evolution foreign exchange development history - exchange market evolution gold remittance system and Bretton woods agreement

In 1967, a Chicago bank rejected to provide pound loan to a professor named Milton Friedman, because his purposed was to use this fund to sell short the British pound. Mr. Friedman realized excessively that the price ratio from the British pound to US dollar at that time was high, he wanted first to sell the British pound, after the British pound fell he buys back the British pound to repay the bank again. This family bank rejects the loan offer based on the "Bretton woods Agreement" which was established 20 years ago. This agreement has fixed the various countries' currency to US dollar exchange rate, and the price ratio between the U.S dollar and the gold is also fixed to 35 US dollars to each ounce of gold.

The Bretton Woods Agreement was signed in 1944, the purposed was to prevent the currency to escape between countries, and also to limit the international speculation, thus to stabilize the international currency. Before this agreement was signed, the gold remittance standard system which was widely used since 1876 - was leading the international economy system until the First World War. In the gold remittance system, the currency was at the stable level under the support of the gold price. The gold remittance system has abolished the old time king and the ruler which depreciates the currency value unlawfully, which will lead to inflation.

But, the gold remittance standard system is certainly imperfect. Along with a country economic potentiality enhancement, it can import massive products from overseas, until it exhausts the gold reserve of certain country. It resulted the supply of the currency reduces, the interest rate raises, the economic activity will start to decline until it reaches the recession limit. Finally, the commodity price falls to the valley, gradually attracts other countries to stream in, massively rushes to purchase this country commodity. This will pour gold into this country, this will increase this country currency supplies quantity, and it will reduce the interest rate, and will create the wealth. This is so called the "the prosperity - decline” pattern and is the circulation of the gold remittance standard system, until the trade circulation and the gold freedom was broken by the First World War.

After several catastrophes wars, the Bretton Woods agreement has appeared. The countries which signed the treaty agreed to maintain the domestic currency to US dollar exchange rate, as well as the necessity of the corresponding ratio of the gold, and only allow a small fluctuation. Countries are prohibited to depreciate the currency value for the gain trade benefit, only allows the country to depreciate not more then 10%. Enters the 50's, the continuous growth of the international trade causes the fund large-scale shift which produces because of the postwar reconstruction, this causes Bretton Woods system which establishes the foreign exchange rate to lose stability.

This agreement was finally abolished in 1971, US dollar no longer could convert to gold. Until 1973, each major industrialized nation currency exchange rate fluctuation has been more freely, mainly regulates by the foreign exchange market through the currency supplies and demand quantity. The business volume, the transaction speed as well as the price variability, have achieved a comprehensive growth in the 1970's, come along with the emerge of price ratio fluctuation, the brand-new financial tool, then only the market liberalization and the trade liberalization could be achieved.

In the 1980s, along with the published of the computer and correlation technology, the international capital has flow rapidly, and strongly related the Asia, Europe and America market. Foreign exchange business volume from 80's rises daily from 70 billion US dollars to 150 billion US dollars after 20 years.


European market inflation
One of the reasons why the foreign exchange developed rapidly was the rapid development of the Euro dollar market. In a Euro dollar market, US dollar is stored beyond the border of America banks. Similarly, the European market is refers to property depositing outside the currency rightful owner country market. A Euro dollar market was formed at first in the 50's, at that time Russia deposited its petroleum income beyond the US border, avoid being freeze by the US government. This has formed a large offshore US dollar national treasury which is beyond the control of the US government. The American government has formulated a law to prohibited US dollar from lending money for the foreigner. Because the degree of freedom of the Euro dollar market is bigger and the rate of return is bigger, therefore it has large attraction. Starting from the 80's, the American company starts to borrow loan from the offshore market, they discovered that the European market is a wealth center which consists of large amount of floating capital which could provide short-term loan.

London once was (until now still is) one of the main offshore market. In the 80's, the Bank of England in order to maintain its global finance industry center dominant position, using US dollar as England pound substitution to make loan, thus to become a Euro dollar market center. London's convenient geographical position (is situated between Asian and Americas market) also helps to maintain the European market as the dominant position.

The Foreign Exchange market, ("FX or Forex") as we know it today, originated in 1973. However, money has been around in one form or another since the time of Pharaoh. The Babylonians are credited with the first use of paper bills, and receipts. Middle eastern moneychangers were the first currency traders exchanging coins of one culture for another. During the middle ages, the need for another form of currency besides coins emerged as the method of choice. These paper bills represented transferable third party payments of funds; this made foreign exchange much easier for merchants and traders and caused the regional economies to flourish.

From the infantile stages of Forex during the Middle Ages to WWI, the Forex markets were relatively stable and without much speculative activity. After WWI the Forex Markets became very volatile and speculative activity increased ten fold. Speculation in the Forex market was not looked on as favorable by most institutions and the public in general. The Great Depression and the removal of the gold standard in 1931 created a serious lull in Forex activity. From 1931 until 1973, the Forex market went through a series of changes. These changes greatly impacted the global economies at the time. Speculation in the Forex markets during these times was little if any.

The Bretton Woods Accord

The first major transformation, the Bretton Woods Accord, occurred toward the end of World War II. The United States, Great Britain and France met at the United Nations' Monetary and Financial Conference in Bretton Woods, New Hampshire to design a new economic order. This location in the U.S. was chosen because, at the time, was the only country unscathed by war. Most of the European countries were in shambles. Up until WWII, Great Britain and the British Pound had been the major currencies by which most currencies were compared. This changed when the Nazi campaign against Britain included a major counterfeiting effort against its currency. In fact, WWII vaulted the US dollar from a has been currency after the stock market crash of 1929 to the benchmark by which most currencies were compared. The Bretton Woods Accord was established to create a stable environment by which global economies could re-establish themselves. The Bretton Woods Accord established the pegging of currencies and the International Monetary Fund ("IMF") in hopes of stabilizing the global economic situation.

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Major Currencies were pegged to the US dollar. These currencies were allowed to fluctuate by one percent on either side of the set standard. When a currency's exchange rate would approach the limit on either side of this standard, the respective central bank would intervene, thus bringing the exchange rate back into the accepted range. In addition to this, the US dollar was pegged to gold at a price of $35 per ounce. Pegging the dollar to gold and the pegging of the other currencies to the dollar brought stability to the world Forex situation.

The Bretton Woods Accord lasted until 1971. Ultimately, it failed but did accomplish what it's charter set out to do, which was to re-establish economic stability in Europe and Japan.
The Beginning of the free-floating system

After the Bretton Woods Accord came the Smithsonian agreement in December of 1971. This agreement was similar to the Bretton Woods Accord but allowed for greater fluctuation band for the currencies. In 1972, the European community tried to move away from their dependency on the dollar. The European Joint Float was established by West Germany, France, Italy, the Netherlands, Belgium and Luxemburg. This agreement was similar to the Bretton Woods Accord, but allowed a greater range of fluctuation in the currency values.

Both agreements made mistakes similar to the Bretton Woods Accord and, by 1973, collapsed. The collapse of the Smithsonian agreement and the European Joint Float in 1973 signified the official switch to the free-floating system. This occurred by default as there were no new agreements to take their place. Governments were now free to peg their currencies, semi-peg or allow them to freely float. In 1978, the free-floating system was officially mandated.

Europe tried, in a final effort to gain independence from the dollar, by creating the European Monetary System in July of 1978. This, like all of the earlier agreements, failed in 1993.

The major currencies today move independently of other currencies. The currencies are traded by anyone who wishes. This has caused a recent influx of speculation by banks, hedge funds, brokerage houses and individuals. Central banks intervene on occasion to move or attempt to move currencies to their desired levels. The underlying factor that drives today's Forex markets, however, is supply and demand. The free-floating system is ideal for today's markets. It will be interesting to see if in the future our planet endures another war similar to those of the early 20th century. If so, how will the Forex markets be impacted? Will the dollar be the safe haven it has been for so many years? Only time will tell.

Review
"…is a concise, easily digested snapshot of the currency market. It is a solid introduction to a trading specialty and probably a better fit for investors already well versed in stocks or futures and looking for a new market opportunity. Chen's edition is a Forex 101, a helpful base that is likely to encourage investors to pursue further study." (SFO Magazine, June 2009)

"…has written this guide to trading in the foreign exchange (forex) market for both novices and experienced professionals. The author explains the fundamental mechanics of the forex markets before launching into the various strategies and insights that have been proven successful in the field." (Book News, May 2009)

"The book is very well suited to the novice trader. The primer on technical analysis offers a great review for CMT candidates. More experienced traders in stocks, bonds, or commodities will benefit from the book's comprehensive explanation of the mechanics in the market. (mta.org (market technician's association), April 28th, 2009)

"Chen's book is the perfect source of knowledge for those who haven't ever traded currencies. Clearly explained, Chen's easy to read style show that he knows what professional currency trading is, focusing on the important aspects that every trader should know. The book covers all important Forex trading related topics." (fxstreet.com, March 11, 2009)

"The book is very well suited to the novice trader. The primer on technical analysis offers a great review for CMT candidates. More experienced traders in stocks, bonds, or commodities will benefit from the book's comprehensive explanation of the mechanics in the market. (mta.org (market technician's association), April 28th, 2009)

"Chen's book is the perfect source of knowledge for those who haven't ever traded currencies. Clearly explained, Chen's easy to read style show that he knows what professional currency trading is, focusing on the important aspects that every trader should know. The book covers all important Forex trading related topics." (fxstreet.com, March 11, 2009)

Product Description
This currency trading book provides readers with real, practical information on how to trade the foreign exchange market effectively. It begins by covering introductory information on the forex market, including basic trading mechanics and the benefits of forex trading, and then goes on to describe specific currency trading methods and skills in step-by-step detail. This includes highly practical information on technical and fundamental analysis, risk and money management, and powerful forex trading strategies. These strategies have proven extremely effective in helping traders play the forex game to win.

JAMES CHEN, CTA, CMT (Montville, NJ) is Chief Technical Strategist at FX Solutions, a leading foreign exchange broker. An expert on forex trading and technical analysis, he is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT). Mr. Chen writes daily currency analysis, leads forex trading seminars, and has authored numerous articles on currency trading strategy and technical analysis for major financial publications. These include Forbes.com, Futures Magazine, Technical Analysis of Stocks and Commodities Magazine, and Stocks, Futures and Options (SFO) Magazine.

I have spent 20 years researching and trading stocks and bonds, and was interested in currency trading. I purchased a number of books on foreign exchange. I read this book first, Essentials of Foreign Exchange Trading, and I found it an excellent choice. It has also been a good companion to my experimentation and trading on one of the major FX trading websites.

It starts off with a good introduction to the principles of currency trading and includes a discussion of a wide range of trading approaches to help understand which best fit your personality and style. The chapters that dive in on technical analysis (using candlesticks, moving averages, fibonacci/pivot point, elliott wave) are especially good; it is obviously the author's specialty. That was good for me since my background is in fundamental analysis and the author's treatment of technical analysis was comprehensive and helpful. The sections on fundamental analyses were good too, although I went through them quickly given my familiarity. My primary focus was to "expand the toolbox" with technical analyses and this book served that goal. Also, importantly, the book is written in an entertaining and fluid style. It was easy to read and absorb.

Great read - definitely recommend it
I traded forex a couple of years ago and I've just gotten back into it recently. Got this book right when it came out because I've been following the author's daily currencies analysis and attended a few of the webinars he gives. From the title of the book I was thinking that it might be a bit basic for me since I've traded forex pretty extensively before. But it's turning out to be extremely helpful because it has a lot of really useful strategies and techniques. The book pretty much goes all the way from beginner to advanced and explains everything really thoroughly and clearly. I have two other books on forex trading that I bought in the past, but this one is by far the most complete and useful one. For me, chapter 5 on forex trading methods and strategies was one of the most comprehensive descriptions of trading strategies that I've seen. Also really liked the technical analysis chapter. Definitely recommend this book.

First-rate forex book, worth its weight in any currency!
I've either read or skimmed through pretty much all of the books available on forex and technical analysis. I rank this book among the best because it provides all of the most practical information on trading forex that someone needs without holding anything back. And it doesn't contain a bunch of hype like many other books on trading do. It's also very clearly written. I've already taken a bunch of ideas from this book that are helping me become a much better forex trader.

The foreign exchange industry is one of the newest niche of the financial markets, where the traders first began exchanging currency from different countries and groups.



In 1944 a multinational conference held at Bretton Woods, New Hampshire to established the postwar forexign exchange system, which remained intact until the early 1970’s. The forex market as undergone a dramatic transformations. At this multinational conference, where was taken part from 45 nations to discuss the future of the exchange system. One of the results from this conference was the formation of the International Monetary Fund(IMF). Another agreement was that the fixed currencies in an exchange rate system would tolerate 1% currency fluctuations between U.S. Dollar and gold values, which was known previously as the “gold standard”. This system was called pegging.
After that in 1967 Milton Friedman was refused a college professor by a Chicago bank a loan in pound because he wanted to use the funds to short the British currency. The bank refused to grant the loan to the Bretton Woods Agreement, which fixed the dollar and national currencies, this set the dollar at a rate of $35 per ounce of gold.



After World War Two, the Bretton Woods Accord was introduced to the FOREX market to stabilize the devastated world economy. The history of the Forex begins before 1971 and still exist in our days,The Bretton Woods Accord to reflect a radical change in Universal fixed exchange rates.
The next agreement called Smithsonian agreement came in the end of 1971. This agreement was similar to the previous one, the difference was to allow greater fluctuation band for currencies. The big European countries tried to escape from their dependency on the dollar in 1972. This both agreements were mistakes, because they collapsed and in 1973 Europa signified the official switch to the free-floating system.
Europe tried, in a final effort to gain independence from the dollar, by creating the European Monetary System in July of 1978. This, like all of the earlier agreements, failed in 1993.

Now we see the Federal Reserve drain its reserves which are Treasury DEBTS, of course. The US government has, as per usual, lied about budget matters and now it turns out we are running up to HALF A TRILLION in the red if not much worse. Congress is busy voting to spend more billions trying to run over Iran Kitty and control Iraq, our own Tar Baby from Hell. Half a trillion in US homeowner wealth has vanished into thin air. Or rather, the US government is busy turning it into government debts. This leads to bankruptcy. Of course, the Fed ignores raging inflation and drops interest rates another 25 points. Argentina is going bankrupt yet again and for the same reasons we are going bankrupt. Will we learn before it is too late? Nope.


Here is a graph I decorated. Click on the image to enlarge. The colors represent interest rate levels. The red line is the real inflation rate. It is obvious that we are in very great trouble and the 'cures' of the late 1970's to the early 1980's, courtesy of Volcker, may have killed inflation only for a while. Not permanently.


Note the red arrow pointing to the inflation rate red line in both 1976 and 2003: These two times are the only two times in the last 60 years that the real inflation rate has been over 500 points higher than the official interest rates. There are several significant periods when the Fed dropped interest rates below the rate of real inflation: In 1960, to boost the economy and thus show Commie Russia and Commie China that we were a worker's paradise, in 1972 when Nixon pretended to be ending the Vietnam War via kissing Commie Chinese ass, in the mid seventies we had 'stagflation' as the price of everything we needed to eat or use shot way up in price, then we had another session of fake interest rates after the Gulf War I victory. Then there was 'stability'. This was supposedly a time when inflation was 'under control'.


Government spending dropped, for example. But was our economy healthy? Or DYING? Unfortunately, it was dying. Our trade deficit which began during the fake interest rate regime under Nixon, took off! So did the stock market. When the stock market bubble popped, rates went far, far below the rate of real inflation. The infamous Housing bubble ballooned. Rates were shoved upwards rapidly to deal with the flood of red ink from the US government and our consumer economy. We ran up over $4 trillion in government debt AND another $4 trillion in trade deficits. Nearly $10 trillion in all! This has only one end: bankruptcy.


So the Fed, today, voted to drop interest rates to the cellar where it last was, in a realistic sense, during Eisenhower. When we were a creditor nation and had an industrial base. Looking at this chart, I must say, we will see DOUBLE the hyperinflation of the 1975-1985 decade if the Fed keeps dropping rates and keeps them low in a misguided and insane effort in preventing Wall Street from panicking.


$536 Billion Worth of Household Assets Evaporated in February?

Paul L. Kasriel
plk1@ntrs.com

It sure is a good thing that $150 billion of checks from the IRS are in the mail to U.S. households because these same households experienced an evaporation in paper wealth in February to the tune of about $544 billion according to my admittedly back-of-the-envelope arithmetic. It was reported today that the Case-Shiller house price index for 20 major metropolitan areas fell 2.66% month-to-month in February. Applying that percentage decline in house prices to the fourth- quarter value of $20,154.7 billion for household residential real estate from the Fed’s flow-of- funds data yields a decline of $536 billion. Now, this is a very rough approximation for at least two reasons. Firstly, the Case-Shiller price index is for only 20 metropolitan areas, not the whole country. So, the Case-Shiller index captures the decline in house prices in the Manhattan, New York area but not the Manhattan, Kansas area. Second, the value of residential real estate in the Fed’s flow-of-funds accounts is based on the OFHEO house price index. But even with these qualifications, I feel confident in saying that the value of households’ residential real estate assets fell in February by some multiple of the aggregate value of the checks households will receive as part of the Economic Stimulus Act of 2008.

This stupid, ridiculous hand out designed to keep people spending: it is insane. It is stupid. It is a hand out. It is America the Welfare Queen From Hell time. It is also bankrupting the nation. Right now, our stupid geniuses who came up with this obvious scam are running in circles, screaming, 'Who, who, WHO is going to buy all our bonds we must issue to cover the gaping Federal deficits?' Of course, if Ron Paul suggests we stop spending $109 billion bombing Sadr City, the media and our flag pin lapel wearing political operatives will go nuts. 'Traitor! Treason!' they will shout. 'Ron Paul is a nut. He isn't serious! We are serious!'


So it goes: Hillary Clinton and McCain who are two warmongering peas in a pod people plant, both are suggesting we no longer collect gasoline taxes! This will free up money, as ABC TV said tonight, 'So people can buy FOOD!' My god. The head spins! I saw on TV all these big, fat, SUVs sucking down huge amounts of gasoline. Since we decided to ignore reality for two decades, we are stuck with these behemoths. I always bought gas misers. I loved my little Geo Metro. Drove it for over 200,000 miles at 55 miles to the gallon. A very unpopular car over here.


Americans don't want to make any serious changes. Everyone with gas guzzling monsters should park them and start carpooling or riding bikes or walking, god forbid. And if they can't do this, they should ditch these ridiculous machines and buy cheap, used Geo Metros. Actually, I sold mine! The kid rebuilt it. Still runs. The point is, we can't have endless gas. This is bankrupting America. It is making our trade deficit stink to high heaven. It is treason. It weakens our nation and anyone driving these things should reflect on how they have destroyed our great nation, all so they could drive about arrogantly and hassle little Geo Metro drivers.
Posted by rahil at 5:30 AM 0 comments
Forex Charts : AUD vs Major Currencies : 10 Years
Historical Foreign Exchange Rate Comparisons - Australian Dollar (AUD) vs GBP, USD, Euro and SGD

Although history is not an absolute guide to the future, historical foreign exchange rates should be one of the factors considered when deciding whether and when to make significant money transfers, or whether to take out a foreign currency loan to purchase an asset (eg. property in Australia or elsewhere).

Provided below are four charts comparing AUD exchange rates against the GBP, USD, Euro and SGD over the ten year period to July 2009. Should you wish to explore other historical periods and other forex currency pairings then these are available on the Ozforex website - see Long Term Charts on the home page.

AUD vs GBP - 10 Years to July 2009

AUD vs USD - 10 Years to July 2009

AUD vs Euro - 10 Years to July 2009

AUD vs SGD - 10 Years to July 2009

The Fed’s action, lowering short-term rates to 2 percent from 2.25 percent, followed new indications that the American economy remained fragile, expanding by 0.6 percent on an annualized basis in the first quarter, not an overall downturn that would have indicated a full recession had begun.
The poor record of economic growth, reported by the Commerce Department on Wednesday morning, reflected what most Americans have been experiencing since late last year — declines in consumer spending, housing prices and business investment, along with spreading unemployment.

Wall Street gave up sharp gains after the Federal Reserve announcement. The Dow Jones industrial average, which was up about 120 points and moved higher after the announcement, was up less than 30 points about an hour later.

Wednesday’s interest rate action was accompanied by a parallel decision to lower the Fed’s discount rate, the rate the Fed charges banks and thrift institutions, from 2.50 percent to 2.25 percent.


I sense fear on the streets. I certainly see fear all around me in stores, at gas stations, in the schools, everywhere, people notice inflation is eating away at our precious funds. They know deep down, that the present 2% rate of the Fed is utterly, totally insane and will only make inflation worse. The older people my age and older know perfectly well, what the cure is. But people hate this and want free Funny Money™. People who are savers are hoping Volcker will throw Bernanke from a helicopter, take over and repeat what he did in the past. Buying bonds that have an 18% return is GREAT if one is a saver! Right now, savings are collapsing since one makes more money by borrowing rather than saving.


NYT:

“My view is that the Fed is back doing the silly things it did in the 1970s, of trying to make judgments that have long-term consequences based on short-term data,” said Allan H. Meltzer, professor of political economy at Carnegie Mellon University. “It should get back to the period of 1985 to 2003 known as the Great Moderation.”
The Fed’s recent move, coupled with the uncertain performance of the economy, appeared likely to deepen the partisan impasse in Washington over how to respond to joblessness, the mortgage crisis, energy costs and other problems.


Meltzer is like Volcker: he remembers things. He knows better. He can read graphs. He can grasp reality. Bravo. I am glad the Times is quoting people like these two. By the way, the 1985-2003 period was NOT moderate at all. It saw our economic state collapse! GAH! Why can't they see the obvious? Why? Why???


The US trade deficit grew worse and worse. The budget deficit went from $1 trillion to $6 trillion during that time. Interest rates moderated because we stopped inflation via the method of OUTSOURCING AND OFFSHORING our economy! And even with all this, the US had to devalue the dollar via the Plaza Accords and the Louver Accords.


First: the numbers above are riddled with lies, evasions and fraud. The main thing is, we are in the red. And there is no end to the foolish choices being made from top to bottom.

The U.S. Treasury said on Wednesday it will resume issuing 52-week bills after a seven-year break, as budget deficits swell due to slowing revenues and higher spending in a sluggish economy.
The Treasury, announcing its quarterly refunding plans, said it would sell $21 billion of 10-year notes and 30-year bonds. It also said it would pay down about $53 billion of maturing debt in the auctions next week.
The Treasury retired the 52-week bills in February 2001, when the United States was running budget surpluses after a decade-long economic expansion.

It is now adding the bill to its debt offering lineup just one year after it retired the 3-year note amid better-than-expected tax revenues produced by booming corporate profits and capital gains.


The Japanese and Chinese just can't wait to buy these. Eh? They will buy ONLY if the US lets them flood us with exports and they gain a good profit return. How will we do this if our own consumers are being consumed by inflation? Warning: here comes the Horns of Dilemma. We are trapped. We can't just inflate our way to happiness and wealth. We can't lure the nations destroying our industrial base into buying our bonds if we have rates that are 500 points below the real rate of inflation! As well as weakening the dollar tremendously. Japan has kept their own rates 700 points below the real rate of inflation. I read about various things like noodles or gasoline shooting up 40% in price this last six months over there! Noodles that went for 100 yen are now suddenly selling for 140 yen, just for example. Wages are falling and this is a terrible mess for the people there.


The Treasury cited spending on tax rebates associated with the government's $152 billion fiscal stimulus plan as a key reason for raising borrowing expectations over the next year.
The Treasury Borrowing Advisory Committee -- made up of 22 primary government bond dealers -- said in a report to the Treasury that a recent survey showed the deficit for fiscal 2008 will average a record $414 billion, with some economists forecasting the gap would exceed $500 billion -- more than tripling last year's $163 billion deficit.

In addition to lower revenues from a slowing economy and increased spending, the Federal Reserve has redeemed Treasury holdings and made some outright sales in recent months to support its efforts to boost financial market liquidity and ease the worst credit crisis in decades.

This has resulted in an additional $200 billion in bills and coupon issuances so far this fiscal year, the Treasury said. Municipal bond issuers are also buying fewer State and Local Government Series securities, or SLGS, forcing the Treasury to increase issuance of higher-yielding bills, notes and bonds.

The Treasury said it may also consider other moves such as increasing coupon issuance and reintroducing the 3-year note or other maturities, if borrowing needs continue to grow.


The banking collapse is now becoming the infinitely more dangerous government funding collapse. The Chinese are in a very foul mood right now and demanding they bankroll our $1600 hand out to all Americans while screaming about how terrible Chinese goods are means China won't buy our debts! Japan is selling, China won't buy. So who will? Argentina?


US Fed Selling Treasuries as Federal Budget Deficit Doubles

By Paul L. Kasriel

The non-partisan Congressional Budget Office is projecting that the fiscal year 2008 federal budget deficit will increase to $396 billion from $162 billion in fiscal year 2007. So, federal borrowing in this fiscal year is projected to be 2.4 times as much as last year. And on top of this increased federal borrowing, we now have the Federal Reserve providing $601 billion less support to the Treasury securities market at an annual rate. Is it any wonder why the yields on Treasury securities are rising now? You might want to put your IRS tax-rebate manna into some sort of saving account for your children so that they can pay the higher taxes needed to service the public debt that is being incurred to bailout imprudent borrowers and lenders in the recent housing bubble.

How can our official interest rate be 2% under these circumstances? Isn't it painfully obvious? I saw a TV commercial today. It was all about how people could get unsecured loans. Because I am a speed reader as well as typist, I was able to read the fine print at the bottom of the commercial that flashed on screen literally for less than a second. The rate was 99.25%. WOW. And we have no inflation? I guessed it would be 33% and that rate had me totally astonished! Talk about blatant usury. But then, the real cheats here are the Federal Reserve officers who think interest rates are all about goosing the economy, not tracking inflation. They can't say, 'We will notice inflation next year or maybe ten years from now.' It is very much 'now' now!

Argentine bonds show growing speculation that the country will default for the second time this decade as inflation and anti-government protests swell.
The nation's $10.8 billion of floating-rate dollar bonds due in 2012 yielded 7.20 percentage points more than Treasuries of similar maturity at 5:43 p.m. in New York. That implies an almost 20 percent chance of Argentina halting payments in the next two years, according to Credit Suisse Group. No other emerging-market government securities have as high a probability of default.

The 19 percent decline in bond prices since President Cristina Fernandez de Kirchner took office in December shows investors are losing faith even as record commodity exports spur the longest economic expansion in at least two decades. Confidence waned after statisticians accused the government of fabricating data to hide an inflation surge and farmers alienated by a tax increase staged a nationwide strike that caused food shortages last month.


So, Argentina will collapse and go bankrupt because the government is lying about inflation? Oh my. The US gets away with this only due to foreign powers propping up our corrupt politicians who pull this exact same stunt here. But we can't do this forever. It is obvious after a decade of inflation lying, the lion of inflation has risen and is now stalking us. By the way, if Argentina goes belly up, this is going to drag us downwards, too. We are way too fragile with a dead banking system, to fake it much longer if other nations let go and fall off the cliff. THIS IS HOW THE GREAT DEPRESSION DEVELOPED.


Investment Outlook

Bill Gross

Minsky, McCulley, El-Erian, Gross, Feldstein, Summers, and a host of others would likely argue that additional policy measures are required to support home prices which have fallen by 10% over the past 12 months and are set for a repeat by this time in 2009. Lower Fed Funds? They would, in PIMCO’s opinion, likely do more damage than good from this point forward. Foreign and domestic investors are being fleeced with negative real interest rates, and the weak dollar, stratospheric commodity prices and steadily rising import inflation are the result. The better alternative is to initiate a limited mark-to-market write-down of private mortgage debt as envisioned in the Dodd-Frank Congressional proposal combined with government-subsidized loans at below market rates. Look at it this way: you can allow a home to fall in price from $400,000 to $300,000 and force an upside-down "short sale" foreclosure, or you can reduce the homeowners’ $400,000 mortgage to $350,000, refinance the loan through the FHA at 4% and stabilize the neighborhood and its home prices. Surely Republicans, Democrats, AND Wall Street mortgage holders (PIMCO included) can recognize that stability as opposed to freefall market clearing is the better alternative, especially if the pain is shared by all parties. It is our best chance to cushion Minsky’s asset-based deflation.

The problem is, the vanishing wealth. No one in their right mind is going to put their money into anything that is losing value and this emphatically includes the dollar itself. No one giving advice or peering into the future can see reality if they refuse to understand that we are in a negative wealth cycle now in the West. And there is no magic charm or easy out. There is one and only one way out: to save money and work for profits which get plowed back into value-added labor output. Not Funny Money™ making schemes. But rather, real industrial output. I see Germany and Japan cutting back on industrial output. The last local factories here in Berlin, NY, my dying town, are cutting shifts and no longer running day and night but are running at a half staff. We can't be a nation of bankers, property flippers, gamblers and therapists. We have to produce something tangible and real. And the profits must be generated here, not fly off to Japan or Germany! And we will never save any money if interest rates are 500 points below the rate of inflation!

Consumers and Business
Consumers typically come into contact with currency exchange when they travel or purchase items from foreign vendors.

Travelers must go to a bank or currency exchange bureau to convert one currency (typically, their "home currency") into another (i.e., the currency of the country they intend to travel to) so they can pay for goods and services in the foreign country.

Consumers may purchase goods in a foreign country or via the Internet with their credit card, in which case they will find that the amount they paid in the foreign currency will have been converted to their home currency on their credit card statement.

Although each consumer currency exchange is a relatively small transaction, the aggregate of all such transactions is significant.

Businesses
Businesses typically need to convert currencies when they conduct business outside their home country. For example, if they export goods to another country and receive payment in the currency of that foreign country, then the payment must typically be converted back to the home currency. Similarly, if they have to import goods or services, then businesses will often have to pay in a foreign currency, requiring them to first convert their home currency into the foreign currency.

Large companies convert huge amounts of currency; for example, a company such as General Electric (GE) converts tens of billions of dollars each year. The timing of when they convert can have a large affect on their balance sheet and "bottom line, and many businesses use hedging strategies to ensure they do not incur losses over time due to currency market volatility.

Investors and Speculators
Investors and speculators require currency exchange whenever they trade in any foreign investment, be it equities, bonds, bank deposits, or real estate. For example, when a Swedish investor buys shares in Sun Microsystems on the NASDAQ, she will have to pay for the shares in U.S. Dollars and likely have to convert Swedish Krona to U.S. Dollars. Similarly, a Japanese real estate investor who sells a New York property may want to convert the proceeds of the sale in U.S. Dollars to Japanese Yen.

Investors and speculators also trade currencies directly in order to benefit from movements in the currency exchange markets. For example, if an American investor believes that the Japanese economy is strengthening and as a result expects the Japanese Yen to appreciate in value (i.e., go up relative to other currencies), then she may want to buy Japanese Yen and take what is referred to as a long position. Similarly, if an American investor believes that the Euro will go down over time, then she may want to sell Euro to take a short position. Interestingly, investors and speculators can profit equally from currencies becoming stronger (by taking a long position) or from currencies becoming weaker (by taking a short position).

Speculators are often day traders, trying to take advantage of market movements in very short time periods; buying a currency and then selling it again within hours or even minutes. They are attracted to currency trading for numerous reasons, including (i) the size and daily volatility of the market, which provides some individuals with an unparalleled level of excitement, (ii) the almost perfect liquidity of the currency exchange market, (iii) the fact that the currency exchange market is "open" 24 hours a day, and (vi) the fact that currencies can be traded with no brokerage charges.

Commercial and Investment Banks
Commercial and investment banks trade currencies as a service for their commercial banking, deposit and lending customers. These institutions also generally participate in the currency market for hedging and proprietary trading purposes.

Governments and Central Banks
Governments and central banks trade currencies to improve trading conditions or to intervene in an attempt to adjust economic or financial imbalances. Although they do not trade for speculative reasons—they are non-profit organizations—they often tend to be profitable, since they generally trade on a long-term basis.

1. Be informed and stay aware
Since it's your money, it's your responsibility to know the ins and outs of Forex trading, including the most common scams now going the rounds. You wouldn't blindly hand over your money to someone who walks up to you in the street and says he's going to make you rich... would you? No, you'd instantly have all sorts of alarm bells going off in your brain. You'd at the very least ask for ID, references and qualifications. So keep your antenna out and your awareness up.

2. Remember what Grandma told you
Didn't she say: "If it seems too good to be true, then it probably is." This has always been a good first rule of thumb for gauging "offers" that come seeking you out. And it will be a good rule for many years to come, so use it. Don't let some sweet talker con you into handing over your hard-earned money. Sometimes a broker may try to convince you he's going to help you turn your money into an enormous bundle almost overnight by using their services. A good question to ask is "Really? Why? And why me?"

3. Listen to your gut feelings
If you get a sneaking hunch that someone may be trying to take advantage of you, then don't hand over your money. Period. Always run checks on anyone you're thinking of dealing with. Simply contact the consumer affairs authorities in your country or get in touch with the registry for brokers and dealers in your own currency exchange market. Be sure you know which company the person works for and contact them to double check what you've been told.

It's your money, and it's your responsibility to keep it safe, no matter what a nice guy that salesman seems.

4. Don't allow yourself to be pressured
There's no rush. Never, never forget that the "deal of a lifetime" comes along about once every two weeks, so never let yourself be hurried into leaping now. The faster a broker wants to part you from your money, the more risk there is that he's got an ulterior motive - your money. Don't listen to stories about 'the next big thing' in Forex trading. If he starts telling you that this is an opportunity to make huge profits but that you've absolutely got to act now or you'll lose it forever, just slow down. Another good deal will come along in a couple of weeks - count on it. Refuse to go along with any time frame that would throw you in over your head. You'll soon see if the broker is applying unnecessary pressure or if he is willing to wait for you to be comfortable.

5. Companies that guarantee no risk ARE a risk
It's a fact: You'll run into risk in any kind of investments, whether stocks or bonds or real estate, and this includes Forex trading. Keep a healthy distance from any company that claims:

* "We promise to restore any losses for you."
* "You can't lose; your investment is always secure."
* "Even with a $5,000 deposit, you won't ever lose more than $200 per day."

No company can guarantee such things. Never, ever deal with one that waves unrealistic promises around. Such claims mark them as either fools or con artists. Either way, it's a good idea to keep your distance.

6. Stay away from anybody that guarantees big profits
Don't be tempted by anyone who claims they'll guarantee you huge profits. You'll find them making statements such as:

* "Make $5,000 per week or more, every week."
* "Our company always offers the most successful Forex trading on the market."
* "You will receive a guaranteed minimum 30% return within your first two months."

Now just stop and think about it for a second. Are these statements likely to be true? More likely they're opportunities to sharpen your judgment and avoid Forex scams; otherwise, you could easily lose your shirt - and your money - extra fast.

Here are 7 sensible things you can do to cut your losses in Forex trading before they happen.

Tip 1. Lose Your Fear of Experiencing Losses

Losses are simply part of the ups and downs of any market, and it's important to accept this idea so that you can begin to factor it into your planning and your trading strategy. Reckless Forex traders who deny this reality tend to have more losses than profits

Tip 2. Never Hang on to a Losing Position

As soon as it's clear you're in a losing position, get out and move on. Never let your failing trades die a slow death, and never try to bring them back to life with "just a little more money." Kill 'em off quick. Then treat each one as a learning experience by reviewing what went wrong and decide how to avoid a repeat.

Tip 3. Have Your Broker Close Losing Positions

Issue standard instructions to your broker that all losing positions must be closed. There is never a good reason to let losses waste perfectly good money. A reliable broker will make the margin calls necessary to stop your losses, thus protecting your account from being drained.

What is a margin call?

When you open a trading position, you can designate part of your deposit as a collateral deposit - your margin - which will be set aside to be protected. On a $3,000 account, for example, your margin might be set at $750. You will use the $2,250 to trade, and if your losses ever reach that level, the broker will close your position, thus protecting you from losing the remaining balance. This prevents your account from going into negative figures, which you would be required to repay.

Tip 4. Caution Is Just Good Sense

Especially when you're just beginning, trade only with the market trends. Newbie traders don't yet have the experience or the judgment to predict how prices will move. Even veteran traders experience more losses when trying to predict trends. Try to find the wave of an upward trend and ride it when it's already underway, then exit trading when it begins to turn negative. That may sound boring, but it's much, much safer.

Tip 5. Loyalty Is a Bad Thing in Forex Trading

When it comes to trades, a loser is a loser is a loser. Loyalty to a particular trade, or falling in love with it, is very unwise. No trade you ever make will be loyal to you, and it's important to understand this at the gut level. Forex trading is a volatile and fickle environment, with positions shifting constantly. What brings you success one day might drop you cold the next. In fact, it has been said that Forex trading is the world's worst place for emotions because they cloud your judgment. It's simple, dump the failures and ride your successes - and only your successes.

Tip 6. This Is Not the Place to Get Rich Quick

Ignore stories of overnight millionaires. They're usually apocryphal. Success in Forex trading requires you to minimize any loss that occurs and to behave as you would with any business. Plan on being in business long term, and discard stories of making it big overnight (somebody's usually trying to sell you something when you hear one of those stories). Jumping into Forex trading like a gung-ho warrior is setting yourself up to lose big and fast. The real, consistent winners are the ones who use common sense, patience and a businesslike attitude.

Tip 7. You're the Only One Responsible

If you try to rely on advice from strangers (and possible sharks), it's not their responsibility when you lose. It's yours, and yours alone. Invest the time necessary to learn what's needed to keep your losses in Forex trading as small as possible. Use every trade, whether loss or gain, to increase your knowledge.

This also means, of course, that it's your responsibility - and only yours - both when things go wrong and when they go right. Since you're going to end up with both the blame and the credit for results, it's a good idea to work toward more good trades, more profits and more security. Once you accept all responsibility, you're no longer a victim. When the market doesn't go your way, you never need to look for somebody to blame. You simply dust yourself off, learn something from the situation, make adjustments, and go try it again.

There is no profit in dwelling on your losses, but there is a great deal of profit in learning from them. Losses happen and that's that. But you can cut losses in Forex trading. Learn what you can from them, understand what happened, then move on. Remember, the more quickly you move on, the more quickly you'll have a chance to recover those losses and move firmly into profit.

When it comes to money, success is never guaranteed. And since money is extremely important in our society, risking it can involve some serious hazards. Forex trading, as with any other business, brings risks, so you will need a strategy or system for meeting those risks and dealing with them. Below are 6 simple tips that, over time, will help you develop your own Forex trading system.

What Is a Forex Trading System?

A Forex trading system is a set of strategies used to forecast how a currency is likely to behave in the market. Forex trading newbies - beginners - should never start right in investing until they have learned some kind of trading system to guide them. And preferably, the system should have been designed by one or more experienced traders, based on their understanding of currency data and signals. Such systems are often programmed into complex computer software and can guide you in making your buy and sell decisions.

1. Get an Automated Forex Trading System

When you first start out, you won't be very sure of what you're doing in Forex trading, so it's a very good idea to start with an automated Forex trading program. You can use it like you would use training wheels on a bicycle, or a paint-by-the-numbers canvas. The system will guide you while you're learning the basics and putting together your own understanding of what works best.

2. Start Training Your Intuition

At the beginning, your intuition has no experience to work from, but after a while you'll develop a feel for Forex trading. Once you've made a number of profitable trades (and also had some losses along the way), you'll start to grasp how it all works, not just with regard to the numbers, but also how certain events and trends interact to coincide with the rising and falling of the currencies. Pay careful attention to the news. Start trying to see if you can predict which events might cause a rise or a fall in a country's economy. Cautiously apply your developing intuition in light of the information you have, and you'll start to gain sharper insights into how you can make profits the next time you see the same situation shaping up.

3. Study, Study, Study

Forex trading is a very complex subject, although the hype-masters will try to hide that "unpleasant" fact from you. Spend time with high quality information and gain some mastery of it before you start betting your own money. Use one or more practice accounts - they're available at most brokers' websites. Learning is an ongoing process, so never assume you know it all.

4. Never Gamble Money You Can't Afford to Lose

Money is another aspect of life where, if you can't afford to lose, you shouldn't be playing. Period. Losses are a normal part of Forex trading, and you need to learn strategies that will minimize your losses. More importantly, you should minimize any damage that losses could do by trading only with discretionary money. When you bet money but you don't know exactly why, that's gambling. When you do know why, that's investing. Losses can still occur, but with knowledge you minimize their likelihood.

5. Trade Only in Popular Currency Pairs

Don't try to be a lone wolf. Stay with the crowds... in this case it's the safe thing to do. When you're not sure what you're doing, ask for advice and, even better, stay with the safest options. By trading only popular currency pairs, you'll keep yourself in a zone where it's relatively safer to learn what you're doing. The five most popular currency pairs are:

* USD/EUR - US Dollar/Euro,
* USD/JPY - US Dollar/Japanese Yen,
* USD/GBP - US Dollar/Great Britain Pound,
* USD/CHF - US Dollar/Swiss Franc, and
* EUR/JPY - Euro/Japanese Yen.

6. Plan to Stay with Trading for the Long-Term

If you only think of your Forex trading system as a gimmick, a get-rich-quick trick, so that you can snag a big bundle, so you can go off sailing... you're doomed to failure. Major world events can trigger currency markets to change hour by hour, sometimes with massive highs and lows that sweep away the reckless, while at other times things can level out and seem to be peacefully resting. Every different situation requires a different strategy or approach. If you consider your Forex trading as a long-term career, you're more likely to develop insights into how things work in a variety of situations and degrees of volatility.

These six simple tips have proven over the years to be the most dependable "secrets" for safe, sure investing.

Forex trading requires a healthy amount of focus and attention, the ability to handle details, a steadily growing understanding of how currency markets work, and much patience. You'll also need a plan to guide your moves. Just as you wouldn't head out to sea without a compass, never try to tackle currency trading without a good, well tested Forex trading system.

In order to trade Forex, you need to first find a Forex broker. Forex is still a relatively unregulated market and as a result there are many Forex brokers available each with different levels of service and reliability. Perhaps the best thing a Forex trader can do is to make sure they pick the right Forex broker for them.

Honest & Reliable
Before picking any broker, make sure you examine their company and background as thoroughly as you possibly can. Some good signs of a reliable Forex broker are the length of the time they have been in operation and if they are a member of any financial regulating bodies found in various countries that currently try to regulate the Forex market. You need to find a broker that you are comfortable with and not need to worry about them closing up shop without warning.

Leverage
One of the attractions of trading Forex is that traders can use leverage. Leverage allows a trader to trade with more money than they may physically have in their trading account. This allows traders to gain enormous profits with just a small amount of capital. Just how much leverage brokers offer varies.

Leverage can range from 1:1, where there is no leverage, to 1:400, where you can trade with up to 400 times the amount of capital you may physically have. To make the most of your trading, be sure to pick a broker that offers the amount of leverage you require.

Spend some time researching brokers before you make the final decision to open a live account and begin trading Forex. Doing so may pay off in the long run.

Forex trading, like any other form of trading, is about planning your strategy in advance. In other words, you must know exactly how are you going to profit from the stock market before you even think about putting money at stake.

There are many ways to achieve the goal of having a trading strategy:

1. You can device one yourself.
2. You can take a Forex course and learn from an expert.
3. You can use a signal service and simply execute a strategy provided by a third party; or
4. You can use an EA or Forex software with the ability to manage your trading account automatically.

Any of these options will be a good one, although I you will be better off if you have a little bit of everything.

What I mean by this is that even if you have the best Forex software in your trading platform, or you use the best Forex signals service, having an understanding of the Forex market will always be a plus.

Therefore, if you want to actually make money Forex trading, you must always keep your arsenal of trading tools and resources growing, along with your knowledge of the Forex market.

Also, once you have a strategy in place (whether it is via Forex courses, services or software) always put that strategy to the test on paper money for at least two months, because as they say: only practice makes perfect, and even if you are using signals or a software, you have to make sure your are doing everything by the book.