Tag Archives: U.S. Dollar

Over the next couple of months everything should generally rise together but once the dollar puts in an intermediate bottom sometime in March or April, commodities and gold will move down into an intermediate correction as the stock market completes its final blow off top. After the stock market parabola collapses later this summer it will be time to put the pedal to the metal in the commodity markets, and especially the precious metal markets as the Great Inflation begins in earnest.

Do you think the USD is still on top? What makes a currency strong isn’t necessarily what makes it popular or valuable, as you’re about to read.

Finance executives in Asia see the writing on the wall. They can see that the dollar is in a period of terminal decline, and that the Chinese renminbi is going to take tremendous market share away from the dollar - and they want a big piece of the action. To that end representatives of the Hong Kong Exchange and the Singapore Exchange, THE two dominant financial centers in Asia, have signed an agreement to combine their forces in rolling out more financial products denominated in Chinese renminbi. This has massive consequences for the global financial system - and the future of the U.S. dollar.

China, Russia and other nations are exiting their dollar-denominated holdings in favor of gold. This action should put pressure on the dollar and U.S. treasuries, pushing not only central banks, but mainstream investors towards the safety of precious metals and other tangible assets that cannot be defaulted on. There will be a rush out of dollars and into assets with no counter-party risk, it is just a matter of how soon it happens.

If the U.S. national debt continues to grow then the U.S. dollar system will collapse in 2017 suggests a Russian lawmaker in submitting a bill to the country’s parliament that would ban the use or possession of the American currency.

Frankly, I cannot see how one can distinguish the Fed from the European banking system and looking at things in this way provides a very different picture of the international landscape. The Fed is dependent upon euro printing in order to ramp up dollar printing, yet they are both one and the same. All of the GS boys running over to Europe after the Fed banks defaulted on the OTC derivatives takes on a new light in retrospect. It was a family reunion!

Lately, the dollar has been making a comeback and, as usual, gold is tanking...[That being said,] however, the timing of the dollar’s resurgence is a bit curious. Perhaps not coincidentally, gold began tanking just as the dollar was advancing against the yen. [Why do I say "Perhaps not coincidentally"? Read on.]

Nearly all markets except the dollar reacted rather badly to Ben Bernanke's news conference – even though it actually contained no news - Treasury yields soared, stocks were whacked, and so was gold. While the charts certainly don't look good in the short term, though, it should be pointed out though that investors with a longer time horizon probably won't make a big mistake by buying on weakness. That being said, however, in the short term all the tentative evidence that a bottoming process may be under way has by now been eradicated. Below are a number of charts illustrating the situation.

Stocks are up. Bonds are expensive. Dollar cash is unlikely to preserve purchasing power in an environment of negative real rates. Diversifying to a basket of hard currencies might help to mitigate some of the risks out there. It clearly adds currency risk but in an environment where there may not be such a thing as a risk free asset, it might be a risk worth pursuing...

Year-to-date, the dollar index, a trade weighted index comparing the U.S. dollar to a basket of six major currencies (Euro @ 57.6% weight, Japanese yen 13.6%, Pound sterling 11.9%, Canadian dollar 9.1%, Swedish krona 4.2% and Swiss franc 3.6%) is up 2.95% as of April 29, 2013 - but the U.S. Dollar Index is not the U.S. Dollar. To ascertain what may happen to the U.S. dollar, let’s look at the greenback from a couple of different angles