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Banking Games

May 14th, 2008

One of my readers reasonably asked my thoughts on the recent revaluation of the dollar.

Easy answer! I have not a freaking clue!

Todays exchange rate of about ¢511.41 / ¢518.71 makes absolutely no sense whatever and to me, smacks of some serious manipulation.

I am not the only one who is raising questions about changes that fly in the face of logic. Sadly, Central Bank manager, Roy Gonzalez, rather than reply directly to the many questions, has stated more or less that we must defer to the vast experience of other central banks. Say what?? News flash! The dollar is DOWN. Just which central banker are you listening to? Certainly not the Federal Reserve as they most assuredly know the dollar is down.

Economist and expresident of the Central Bank, Rodrigo Bolanos, thinks that this strong growth that has occurred within the past few days due mainly to a change in the expectations of people. More people having dollars accounts. Say What #2 ??? Let me get this straight! The people decide the value of currency here? Well maybe if the colon were traded internationally in the currency market, but the colon has not yet attained the status of the Euro. Another news flash! There has ALWAYS been far more investment in dollars than in colones. That is why the Central Bank was so worried about “dollarization” in the Costa Rican economy.

The dollar is horribly overvalued here and probably should be floating arount the ¢470 area. The fact that it is not and is in fact being set at levels not reflective of how the dollar is really faring world wide indicates to me some serious hanky panky. Que sorpresa!

One the other hand, this is great news for those who ignored my warnings to get out of dollars (last fall) and later took it in the shorts when the dollar fell. Of course now that the people who DID heed my words are taking it in the shorts… though as they made a nice windfall last December, they actually have made money as they presumably earned interest on their wind fall.

My advice? Pay no attention to me. Take your best guess.

As logic (and the world economy) are clearly not what is affecting the US dollar, there is no point in even trying to make any sense of a system clearly controlled and manipulated by forces that we know not.

Me? As the colon is not reacting normally, I’ll probably split my $$$ equally in colones, dollars and euros, and try to figure out who really is manipulating the currency in Costa Rica.

6 Responses to “Banking Games”

  1. Mark Stewart on May 14, 2008 1:25 pm

    I’m quite sure that manipulation is the correct word. The stock markets in the US have been manipulated for years!

  2. Doug Ward on May 16, 2008 9:02 am

    All bankers and their systems are the scum of the earth.
    Especially in the M-pyre’s.
    Stick with precious metals… PHYSICAL holdings ( not paper)……

  3. Jack on May 21, 2008 4:58 pm

    Hey Doug! Now that was some sound advice. Gold and Silver = the only true currency(has no debt against it). In a few years, pecious metals will be the main topic at the cocktail parties….when gold is around $2,500 an ounce. Betcha (:>)

  4. Jack on May 21, 2008 5:04 pm

    Oops…Please change that to PRECIOUS. Thanks

  5. wayne flaska on May 23, 2008 12:57 pm

    Been hearing talk about the USA lobbying EU & Asian countries to SUPPORT the dollar so it doesn’t drop further. I presume this means buying dollars to drive price up. I read CR actually released bunch of dollars in the CR economy saying the lack of dollars caused the higher exchange rate. hmmmm
    I thought (perhaps incorrectly) the weak dollar policy did help USA manufacturing base and perhaps after 5 or 10 years the mfg jobs will re-appear. Course at the rate the dollar is falling there won’t be an economy to re-inflate. Analysis I’ve read (Barrons) indicates historically the dollar moves in 6-10year cycles and that barring natural or man-made disaster, the dollar is at the trough and will start heading up. No way it can rise all way back up with our deficit. If the next administration signals they are going to spend their way out of this MILD recession or increase entitlements to those whom choose not to work (free healthcare) than all bets off – or better to say – make your bet against the dollar by buying colonies.
    Current entitlement programs such as medicare, social security and now drug prescription will be a dollar killer. So any bounce (6-10yr) of the dollar is temporary. And of course the market always does the opposite of what majority expect.

  6. Phill donahue on January 9, 2009 8:32 pm

    Listen folks the Central Bankers in CR are just sitting around a poker table and saying well if the dollar is strong in CR …the #1 industry …Tourism!! by attracting more Americans!! will keep our economy strong!!….but they are betting on the wrong horse…once they figure out American travelers have been there done that in CR…and are disenfranchised with the whole …most expensive country in Central America….stigma….they will be left with one resolve ….push a directive throughout the tourism industry to cut prices 30% country wide and let the dollar fall……Costa Rica needs to find a safe harber for its economy and make a stand…