Continuing Cracks - Part 4

If you have been reading these “Crack” blogs you know that I am anticipating a sudden and dramatic drop in the value of the US dollar that will have dramatic and perhaps even cataclysmic consequences. This could be it. The necessary conditions may be about to converge. Watch out in tomorrow’s stock market.

11p ET Wednesday, March 9, 2005

Argument over excessive holdings of U.S. dollar reserves has broken into the open again at the highest levels of an Asian government. The other day it was South Korea. Tonight, as you’ll see by the news stories appended here, it’s Japan. Whatever governments and central banks end up doing about it, their nervousness about their growing expropriation by the United States through the devaluation of their dollar reserves is on display almost everywhere.

CHRIS POWELL, Secretary/Treasurer, Gold Anti-Trust Action Committee Inc.

Koizumi Says Japan Needs to Mull Diversifying Reserves
By Mayumi Otsuma
Bloomberg News Service Thursday, March 10, 2005
TOKYO—Japan should “in general” consider the necessity of diversifying the investment of its foreign reserves, Prime Minister Junichiro Koizumi said. ”I think it’s necessary to diversify the investment destinations” of foreign reserves, Koizumi said today at the budget committee of the upper house of parliament in Tokyo. “At the same time, we have to make a judgment in general, considering what’s profitable and what’s stable.”

Japan’s official reserve assets, the world’s largest, totaled $840.6 billion at the end of February. The government projects that unrealized losses in its foreign reserve holdings will reach about 11.4 trillion yen ($110 billion) by March 31. U.S. dollars account for a majority of the world’s foreign-exchange reserves, which are holdings of foreign currency at central banks. The dollar share was 63.8 percent at the end of 2003, down from 66.9 percent two years before, according to International Monetary Fund figures released in April last year.

The yen was at 104.05 to the dollar at 11:49 a.m. today in Tokyo, compared with 103.93 late yesterday in New York.

Japan Finance Minister Tanigaki: Be Very Cautious On FX Reserves
By James Simms
Dow Jones Newswires

Thursday March 10, 2005 TOKYO—Japanese Finance Minister Sadakazu Tanigaki said Thursday that the government must be very cautious when discussing the issue of the nation’s foreign exchange reserves portfolio. ”With (foreign exchange) reserves this large, we must consider various factors, and we must take serious consideration of the markets as well,” Tanigaki told reporters after an Upper House budget committee session. ”We have been very cautious in the decisions we have taken on foreign exchange reserves,” he added.

Tanigaki was speaking shortly after Prime Minister Junichiro Koizumi told a parliamentary committee that in general, it is better to diversify investments. The finance minister said the prime minister’s remarks may have been taken as meaning there has been a change in Japan’s policy regarding foreign reserves. The dollar fell against the euro and the yen following Koizumi’s remarks. The dollar, which was trading above Y104.00 before the comments, tumbled to a low of Y103.70, while the euro rose to $1.3458 from just around $1.3400. But the U.S. currency regained ground a bit after that. As of 0316 GMT, it was trading at Y104.02 and $1.3409.