Obama Stimulus Package to Weaken Dollar (Revisited)
Posted on February 14, 2009 by Yohay
Filed Under Forex Opinions | 17 Comments
Barack Obama’s stimulus Package was approved by both Congress and Senate. It narrowed down from $825 billion to 787$, but it’s still huge. Now that the final offer was approved, it’s time to look into it, and see how it will affect the dollar.
On January 26th, I wrote that the stimulus package contains spilling lots of dollars into the economy, something that will weaken the dollar. Well, it sure does.
The stimulus package, that was hardly approved, focuses on creating jobs: 800K in 2009, and 2.3 million up to the end of 2010. More jobs naturally mean more spending.
But there are also direct actions that spill money, or print it if you wish. 400 dollar tax cuts for workers, and a 250 check for old age pensioners. All this money, combined with investments in infrastructure mean lots of money into the economy.
And where will this money come from? Well, America will continue to borrow it’s way out of the crisis, practically print dollars. And too many dollars mean that it’s worth less…
In the previous post about this issue, I mentioned that the price of gold climbed above the $900 mark. Well, it now trades at $940. So, it already made a climb of 4.5% in three weeks. Gold is a solid safe haven when money becomes worthless.
And which currency will benefit most from gold? Well, the Australian dollar. crnow stands at 0.6548. It didn’t make wild moves in the last three weeks. It will be interesting to see if the Australian dollar jumps after trading resumes. I’ll write a technical analysis of the Australian dollar later on.
So, even though Obama’s plan brings high hopes for the revival of the American economy, the dollar will be hurt from it.
If you’re more into technical analysis than fundamental analysis such as this, it’s better to first practice with a forex demo account.
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Yes, You are right the dollar will hurt, I also believe that the economy will hurt. Because you can’t borrow your way out of a crisis. Eventually that money has to be paid back. Being in debt is being a slave to the lender. America is selling itself away. Some day they will have to deal with that.
Thanks Casey. Yeah, someday they’ll have to pay back the debt. In the meantime, I’m not sure how long China can continue buying US treasuries.
Greetings Yohay:
Yohay wrote: “Yeah, someday they’ll have to pay back the debt. In the meantime, I’m not sure how long China can continue buying US treasuries.”
The USA will never pay back its debt. Instead, the USA will inflate, Ponzi, and repudiate its debt. China will keep buying into the t-bond Ponzi scheme as long as doing so gives them influence with the big kids.
Gold to 5000 within ten years seems reasonable to me.
[...] In Europe, German ZEW Economic Sentiment is highly respected figure that impacts the Euro. US data begins to mount with the TIC Long-Term Purchases. It will show big money movements, just before Obama’s stimulus package rolls. [...]
Robert, I don’t recall that the US didn’t pay it’s debt. Do you really think they’ll do such a thing?
You wrote that gold will reach 5000 within ten years. Any short term forecast for gold?
[...] Gold prices are on the rise: Gold currently trades at 943 dollars, rising 7% from the beginning. Solid gold makes gains since money become printed – devalued – Obama’s Stimulus Package devalues money. [...]
America does have the option of defaulting on the loans as did Argentina, Mexico etc in the past. Will that happen?
Who knows… all I know is that America is in debt to the tune of about $53 Trillion and has tens of millions of Baby Boomers retiring in the next 10+ years who were promised a retirement income, not to mention Medicals.
So… gold –> $5,000 is very possible as the train wreck of an American financial system looms.
Russell, thanks for pointing out the Baby Boomers. I wonder how America will encounter it’s huge debt…
It can’t.
[...] last figure of the day is the release of the FOMC Meeting Minutes, due at 19:00 GMT. Together with Obama’s stimulus package, the forecast of the FOMC could give a good indication of the economy. Share and [...]
Australian dollars will have the benefits because of the gold price..i hope the economy of the Philippines will not hurt because of this..
The money is moving to Western Europe (Not England) and Asia. Welcome to the new world.
Don’t blame Obama, he is the best man at the right time. America has had a good run printing fiat money. All roads lead to civil unrest.
Only America can destroy America and unfortunately it will happen.
The currency say’s “In God we trust”
Yet they trust in China,in the S & P 500 and stimulus day dreamers. But you can not expect them to put their hands behind their backs and do nothing.
If it wasn’t for the God given talent of the Jew’s, the American economy wouldn’t be much.
The American Jewish bank’s fell and so did America’s economic health.
Graph the correlation. This is not occult, this fact. Follow the momentum, follow the leaders.
Wealth is a blessing not a short or long position.
I also think that Obama is doing a rather good job. I do believe and hope that he’s doing the right thing in the long term. In the short term, I think that the package weakens the dollar.
[...] forex traders, the question is: how does it impact the dollar. I wrote more than once: Obama’s stimulus plan weakens the dollar. Enjoyed the post? You may want to subscribe to the RSS [...]
[...] Obama’s Stimulus Plan hurts the dollar [...]
[...] Apart from scheduled events, US President Barack Obama will make an important speech in his “State of the Union” address. He is expected to talk about the economy after one year in office. This will prbably include a special tax reduction. Almost a year ago I wrote that Obama’s stimulus plan weakens the dollar. [...]
[...] Apart from scheduled events, US President Barack Obama made an important speech in his “State of the Union” address, where he talk about the economy and other issues after one year in office. Almost a year ago I wrote that Obama’s stimulus plan weakens the dollar. [...]