The Dollar

[jefftheshark]

Like in Frost's Fire and Ice, which speculates upon how the world will end, there've been several discussion on the board about either hyper-inflation or death-spiral deflation with great arguments presented by both camps. So far, I've been on both sides of the equation and find myself probably in the "stagflation" camp which tightropes between the two bad events without actually predicting an "end".

But that being said, the chart below which was presented on a site which is one of the biggest hyper-inflationary proponents is kind of interesting.

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This is a 2 year look at the dollar and shows, for those who are technically bent, what looks like a slightly falling wedge, which in and of itself is not particularly alarming. Almost anybody who looks at this chart if asked to predict which way the lines were going to move next would probably say "up". Right?

So look at the dates when the dollar was at its highest and you'll see that they correspond with when the stock market was at its lowest. Again this makes sense. But you also see that the dollar goes up when fear is at its highest also, the US being the flight to safety option of first choice.

But when I look at the chart and see with all the problems in the ME and then see the dollar trending down at the same time, I have to wonder if something akin to a sea change is afoot.

The dollar is at what I'd consider to be at a pivot point right now. With the unrest around the globe we should see the dollar bounce off this support and head higher. But if it goes down, then it could drop quite a bit.

This isn't Armageddon or anything, but I would think that this would be a huge "tell" that confidence is being lost in the reserve currency, and this would throw a lot more weight into the hyper-inflationary side of the scale.

Thoughts?

JTS

 

[conraddobler]

I do see a relatively decently shaped head and shoulders there with a target of about 62 that will confirm in the 75 and less range.

It's mostly about what choices we make as to the form of our destructor now.

My first gut reaction after I thought about this a couple years ago was the hyper-inflation side, and the arguement for that side is like the Occum's Razor version, since it's too hard to turn back now and return to prudence, our government will continually take the easy way out at every turn, this leads to hyper-inflation.

Trouble is this makes no sense since the Federal Reserve is a cartel for bankers, and it makes no sense to destroy the currency and vaporize all the debts people owe banks, ie a worlds reserve currency is the penultimate control mechanisim, you'd think you wouldn't want to screw that up since you've achieved the ultimate.

Could be this is outside the scope of the FED at this point, that's it's truly gotten away from them, that politically there is no way they can do anything but chase their tail as Congress spends us into oblivion.

I can't help but wonder though that this seems a bit like the tail wagging the dog and that there is something I must be missing.

Other than tinfoil one world government stuff, none of the actions of the FED make a whole lot of sense from the dollar standpoint.

That theory is that the dollar collapse will be so horrific that we'll all go along with a new world currency, which would then be the ultimate, tranfering control of the worlds money from the US to a new UBER central bank.

I just don't see how that could really work, that sounds like a bad James Bond plot IMO.

The Euro can't even hold itself together, I can't see that actually working.

To me I think what we have here is something on the order of an inevitiablity machine that has everyone caught in it.

The only thing you can really be certain of is the ultimate destruction of the dollar and the American empire.

America will live on, but our empire is dying, just like Rome, and so goes the dollar and in that event Rome effectively had hyperinflation all of a sudden, that's what I'd bet on in the end, cause I've abandoned all conspiracy theories for a simple Occum's Razor version.

I hope that's the last flip flop I'll have on this and that dosen't mean we won't visit deflation Japan style on the way there, I think we will saw tooth this one for a while right up until the cliff.

The wildcard as I said in the beginning to all this is our reaction to what's going on, if we try and pull back from this hard, very hard then we'll implode in a deflationary holocaust, it's all about which form of the destructor we chose and we'll wiggle and squirm a lot towards the end but it's comming one way or another.

Death by fire or death by suffocation?

I can see a lot of bargaining going on towards the end there, I know I'd be frantically trying to come up with a third option, trouble is at this point IMO there is no other politically palitable option, we could jettison about 50 to 70 years of New Deal stuff until we reached bedrock again and dig out of this, but how likely is that?

Central Bankers are openly again talking about a Gold standard, to me this just means they finally are getting why fiat currency always blows up, it always does and now the whole world is on it.

Could just be that the central bankers have a crapload of gold stashed, dunno, this is a logic puzzle for the ages.

What it ultimately simply boils down to is if you believe someone is controlling this or if it's just an inevitability without a real root control mechanisim steering events toward a planned conclusion.

I simply don't know.

 

[jefftheshark]

I do see a relatively decently shaped head and shoulders there with a target of about 62 that will confirm in the 75 and less range.

You must be registered for see images attach

We get a decent print on the UE yesterday and still we see a drop. At a certain point you have to wonder what it will take for this sucker to go up. Riots in Berlin?

Silver got beat up last week, just as several of us on the board predicted, and then rallied into the close ending up at $35.67 yesterday. I sold my positions at the end of the day in SLV, but I'm regretting it today as I still think $37 is the target before a true correction is possible. Gold's at a new record as well, but if you look at the last times it reached this point it faltered the next week, so I'm only watching here. Gasoline is going through the roof here in Vegas with four or five cent jumps overnight the norm. The RJA commodity play I spoke about last week was up over 3% for the week and is in a clear up trend too.

But Bernanke testified this week that inflation is under control.

I guess the American people want to believe in the existence of the Great and Powerful Oz so much that they are actively trying to ignore the exposed little man desperately shoving the levers about in the corner.

Like you said CD, keep your eye on 75, but order those 50# sacks of oats as well - just in case .

JTS

 

[Dan H]

Milk is up 20 cents from last week . . . consequence of gas prices?

At this point one almost wonders if it wouldn't be better for the system to entirely collapse and rebuild from there. I don't feel the American people as a whole have the intestinal fortitude to stomach a 50% reduction in federal outlays. There are just far too many zero-liability voters.

 

[jefftheshark]

Another day, another chart (oh, goody )

You must be registered for see images attach

It's Eurozone blow up time, which should bring the dollar up and cap silver to the high for the time being. Silver almost hit the magical $37 (which would have been a 2X run and "feels" like where things usually peter out).

When you look at the chart, however, you see that each Euro problem has less and less of an effect on the dollar going up. The wedge pattern looks bearish to me, long term, but short term I'm thinking reversal for the next week or so.

JTS

 

[conraddobler]

Man that chart above has a nasty H&S in it, which is btw confirmed on that timeline.

Has a target below 30

$7.00 gas, OH YIPEEEEE!

 

[jefftheshark]

Japan has a rash of almost Biblical plagues, the Middle East is still boiling, the piigs are barking and yet the dollar closed lower today that where it was on the first chart on this thread.

There was no dissent in today's Fed announcement, even though Hoenig and others had spoken tough earlier this month, so the chances for QE3 look better than ever.

Buy the dips, but take profits along the way, I guess, because when the elevator drops - it's gonna be fugly.

JTS

 

[conraddobler]

Remember we're a carry trade currency now.

This means we will print into any strength, QE to infinity and our debt will balloon into near infinity.

Deflation is like a printers wet dream, so they manage credit deflation, print into any currency events and buy control of the universe because they have the only money machine in our system.....

Meanwhile they're laughing as our children and grandkids are bound into debt slavery, in debt and held in check by the world largest military and the IRS who says they'll pay and keep paying forever.

Did I miss anything?

Cheney was right, deficits don't matter, neither do morals, it's all just about keeping the game going.

Forgive me God but sometimes I hope for it all to fall down around their heads.

The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.

Conrad: "Was it really that simple Mr. Jefferson"?

TJ: "Yes *******, read what I wrote"

 

[jefftheshark]

Remember we're a carry trade currency now.

This means we will print into any strength, QE to infinity and our debt will balloon into near infinity.

Deflation is like a printers wet dream, so they manage credit deflation, print into any currency events and buy control of the universe because they have the only money machine in our system.....

Meanwhile they're laughing as our children and grandkids are bound into debt slavery, in debt and held in check by the world largest military and the IRS who says they'll pay and keep paying forever.

Did I miss anything?

Cheney was right, deficits don't matter, neither do morals, it's all just about keeping the game going.

Forgive me God but sometimes I hope for it all to fall down around their heads.



Conrad: "Was it really that simple Mr. Jefferson"?

TJ: "Yes *******, read what I wrote"

We are going to see tomorrow what it looks like when a carry trade currency gets unwound, it appears. Yen hit an all time low to the dollar today, which might set off the derivative explosion you were talking about in the other thread. I suppose when the margin calls start to come in it will be like 9/08 all over again when people have to sell good assets to cover their losses in the bad one's.

This would bode poorly for gold, silver and oil - while the VIX and short ETF's would look good, at least until there's some good (and believable) news from Japan.

JTS

 

[jefftheshark]

The dollar broke below 75 today - 74.86 to be exact (at least as I write this). Naturally we see silver at a 30 year high, gold at an all time and Brent at a record when priced in Euros.

Ugh.

It's getting uglier out there.

JTS

 

[82CardsGrad]

The dollar broke below 75 today - 74.86 to be exact (at least as I write this). Naturally we see silver at a 30 year high, gold at an all time and Brent at a record when priced in Euros.

Ugh.

It's getting uglier out there.

JTS

I know there are a littany of "guesses" as to why the dollar continues to plummet while commodities continue to fly... however, if you had to cull the list down to a critical few, what would you say? Our out of control financial situation? Portugal begging for help and getting wallopped with high interest costs as a result? The specter of a potential QE 3?

I mean, the economy is supposedly improving on a steady basis... last x number of months of consecutive private sector job growth...capped by March's job report which was the best since 2008...
Companies continue to put up solid earnings reports...

 

[jefftheshark]

I know there are a littany of "guesses" as to why the dollar continues to plummet while commodities continue to fly... however, if you had to cull the list down to a critical few, what would you say? Our out of control financial situation? Portugal begging for help and getting wallopped with high interest costs as a result? The specter of a potential QE 3?

I mean, the economy is supposedly improving on a steady basis... last x number of months of consecutive private sector job growth...capped by March's job report which was the best since 2008...
Companies continue to put up solid earnings reports...

Sorry for taking so long to reply to your very good question, 82.

I would say the biggest reason behind the continuing fall of the dollar is a lack of confidence that the current administration, congress or the Fed have the ability to extricate themselves from the mess they've created.

While it is true that the numbers (employment, the S&P, tame headline inflation) appear to be improving, there is a huge feeling around the world that they are a mirage. It's easy for the government to fudge the numbers that they report, to spin them the way they want. What they can't spin is the cost of food, the price for PM's and ultimately the interest rates on bonds. This why when you see a the largest bond fund in the world (PIMCO) go short on US Treasuries, then it's time to take notice that perhaps the things being reported are not exactly on the up and up.

The Fed has two tough choices it will have to make in June. Either they continue with a QE3, which will drive the dollar even farther down and unleash huge inflationary pressures, or they will stop injecting liquidity and watch while the stock market drops like a rock. I think under normal circumstances they would let the stock market fall and protect the dollar, but that would not be the politically prudent thing to do as the current administration has tied their horse to a rising market as proof we're well into recovery. The battle therefore is going to be the so-called "bond vigilantes" who take the fight away from the politicians and the Fed and drive down the price of bonds and raise interest rates to a point where they can no longer afford to borrow any more since they won't be able to pay the debt service.

Just my .02

JTS

 

[conraddobler]

First scene of Ice Age, we're all just squirrels trying to get a nut.

Once you start echanging paper for nuts then all you have to imagine is the entire world messing with the paper instead of the nut
and it all starts to make more sense.

 

[82CardsGrad]

Sorry for taking so long to reply to your very good question, 82.

I would say the biggest reason behind the continuing fall of the dollar is a lack of confidence that the current administration, congress or the Fed have the ability to extricate themselves from the mess they've created.

While it is true that the numbers (employment, the S&P, tame headline inflation) appear to be improving, there is a huge feeling around the world that they are a mirage. It's easy for the government to fudge the numbers that they report, to spin them the way they want. What they can't spin is the cost of food, the price for PM's and ultimately the interest rates on bonds. This why when you see a the largest bond fund in the world (PIMCO) go short on US Treasuries, then it's time to take notice that perhaps the things being reported are not exactly on the up and up.

The Fed has two tough choices it will have to make in June. Either they continue with a QE3, which will drive the dollar even farther down and unleash huge inflationary pressures, or they will stop injecting liquidity and watch while the stock market drops like a rock. I think under normal circumstances they would let the stock market fall and protect the dollar, but that would not be the politically prudent thing to do as the current administration has tied their horse to a rising market as proof we're well into recovery. The battle therefore is going to be the so-called "bond vigilantes" who take the fight away from the politicians and the Fed and drive down the price of bonds and raise interest rates to a point where they can no longer afford to borrow any more since they won't be able to pay the debt service.

Just my .02

JTS

Thanks JTS... pretty much exactly my view as well. Which makes me wonder what would or could possibly occur that would make the Fed's decision to stop the printing presses any less painful? Is there anything that can possibly prevent the inevitable burst that would occur should the Fed choose to bite the bullet? Sure doesn't look that way.

 

[conraddobler]

Right now I'd be very dollar bullish not bearish.

This will be bad for the stock market, good for bonds.

There is no demographic driver of inflation, QE will not continue because it was never done to lower bond yields in the first place it was done to fund the government.

The people are tired of funding the deficit, they are tired of government it will shrink, the budget will shrink and the private sector will experience a resurgence.

There is no other path forward besides this, the only alternative here IMO is to go on full on command economy and I don't think America has the stomach for this.

I think there's enough of the American spirit left to stop this, and as always things are subject to change.

IMO we'll be in a demographic ditch along with a lot of other industrialized nations simply due to our declining birth rates but we have immigration to take up the slack and we have an echo baby boom that will hit about 10 years from now.

The world will change and evolve but betting against America long term would be assuming the bad guys win, don't know that I'd in the end take that bet, still some good guys on duty.

 

[jefftheshark]

Right now I'd be very dollar bullish not bearish.

This will be bad for the stock market, good for bonds.

There is no demographic driver of inflation, QE will not continue because it was never done to lower bond yields in the first place it was done to fund the government.

The people are tired of funding the deficit, they are tired of government it will shrink, the budget will shrink and the private sector will experience a resurgence.

There is no other path forward besides this, the only alternative here IMO is to go on full on command economy and I don't think America has the stomach for this.

I think there's enough of the American spirit left to stop this, and as always things are subject to change.

IMO we'll be in a demographic ditch along with a lot of other industrialized nations simply due to our declining birth rates but we have immigration to take up the slack and we have an echo baby boom that will hit about 10 years from now.

The world will change and evolve but betting against America long term would be assuming the bad guys win, don't know that I'd in the end take that bet, still some good guys on duty.

Dollar at 73.45 and there should have been a bounce today. Whassup?

Here is a great article from FOFOA that discusses the Deflation vs. Hyperinflation debate and for the first time a lot of what is going on makes sense. It's a long read but I think you might glean some insight as to why TPTB might be rooting for a currency crisis when you would think they'd be the ones most hurt by it.

http://fofoa.blogspot.com/2011/04/deflation-or-hyperinflation.html

This article has changed the minds of two of the most hardcore deflationists - which is quite telling in and of itself.

http://www.zerohedge.com/article/finally-hyperinflation-argument-persuades

JTS

 

[Russ Smith]

I guess I should have looked here first instead of posting in P&R about inflation yesterday this thread is fairly connected to it.

I am getting REALLY nervous about keeping much in stocks for my IRA's right now. One is 60% stocks 40% money market the other is in 2 funds that Fidelity picks and it's roughly 85% stocks right now I think.

Getting very tempted to go 75-25 money markets to stock as this thing has to come down eventually I figure.

 

[jefftheshark]

I guess I should have looked here first instead of posting in P&R about inflation yesterday this thread is fairly connected to it.

I am getting REALLY nervous about keeping much in stocks for my IRA's right now. One is 60% stocks 40% money market the other is in 2 funds that Fidelity picks and it's roughly 85% stocks right now I think.

Getting very tempted to go 75-25 money markets to stock as this thing has to come down eventually I figure.

I have been absolutely killed in stocks this last six months because I was sure the fed was going to do the right thing and never monetize the debt. Even when they announced it I thought that the bubble had to burst and I was betting against it with short ETF's. Thank goodness I hedged that outlook with SLV or it would have been very ugly instead of basically treading water while the market went up and up.

If the tea leaf readers are right from today's Fed presser (which would explain why the dollar is at a 3 year low today) then QE3 is going to happen, even if they call it something else. If true then stocks should continue to perform - as that's where the money seems to be flowing. Like everything, it will work until it doesn't.

The problem is that you might have more money in your 401k than you ever dreamed imaginable and it will all be for naught if it costs $100 a gallon for gas.

JTS

Here's a chart that graphs the S&P vs. $DXY (the dollar) and it shows that with all the gains we have seen so far this year that the market is up only 0.9% vs the 7.8 gain it shows to an unsuspecting public.

You must be registered for see images

 

[Russ Smith]

I have been absolutely killed in stocks this last six months because I was sure the fed was going to do the right thing and never monetize the debt. Even when they announced it I thought that the bubble had to burst and I was betting against it with short ETF's. Thank goodness I hedged that outlook with SLV or it would have been very ugly instead of basically treading water while the market went up and up.

If the tea leaf readers are right from today's Fed presser (which would explain why the dollar is at a 3 year low today) then QE3 is going to happen, even if they call it something else. If true then stocks should continue to perform - as that's where the money seems to be flowing. Like everything, it will work until it doesn't.

The problem is that you might have more money in your 401k than you ever dreamed imaginable and it will all be for naught if it costs $100 a gallon for gas.

JTS

Yep, totally agree, the market going up is really only helping my retirement fund since I have no regular money in the market right now. So my retirement fund may be keeping up with inflation(doubtful) but my grocery and gas money sure isn't.

 

[conraddobler]

I have been absolutely killed in stocks this last six months because I was sure the fed was going to do the right thing and never monetize the debt. Even when they announced it I thought that the bubble had to burst and I was betting against it with short ETF's. Thank goodness I hedged that outlook with SLV or it would have been very ugly instead of basically treading water while the market went up and up.

If the tea leaf readers are right from today's Fed presser (which would explain why the dollar is at a 3 year low today) then QE3 is going to happen, even if they call it something else. If true then stocks should continue to perform - as that's where the money seems to be flowing. Like everything, it will work until it doesn't.

The problem is that you might have more money in your 401k than you ever dreamed imaginable and it will all be for naught if it costs $100 a gallon for gas.

JTS

Here's a chart that graphs the S&P vs. $DXY (the dollar) and it shows that with all the gains we have seen so far this year that the market is up only 0.9% vs the 7.8 gain it shows to an unsuspecting public.

You must be registered for see images

Best performing stock market in the world was.....

http://en.wikipedia.org/wiki/Zimbabwe_Stock_Exchange

Their dollar was rendered so worthless that the exchange went to trading in US dollars.

How pathetically ironic.

Ben Bernanke is smiling and laughing.

 

[conraddobler]

Dollar at 73.45 and there should have been a bounce today. Whassup?

Here is a great article from FOFOA that discusses the Deflation vs. Hyperinflation debate and for the first time a lot of what is going on makes sense. It's a long read but I think you might glean some insight as to why TPTB might be rooting for a currency crisis when you would think they'd be the ones most hurt by it.

http://fofoa.blogspot.com/2011/04/deflation-or-hyperinflation.html

This article has changed the minds of two of the most hardcore deflationists - which is quite telling in and of itself.

http://www.zerohedge.com/article/finally-hyperinflation-argument-persuades

JTS

I read the article.

My current thesis is OMG EVERYTHING IS BS, IT'S NEARLY ALL FAKE!!!

I can't tell you for sure anything other than the above, the level of devastation comming is as I have said, on a scale which can't now be imagined by most people.

I tend to think he's right, I'd say he swayed me, it's all an illusion anyhow.

We went around counting banks in my town today, there's nearly two per block and it makes no sense, there can't be that many customers.

No one has any money so what's with all these banks?

The answer would be it's all a scam, they don't need money they make it up.

Hoarding gold or silver though is just inviting a thug government or thug whoever to steal it from you.

In Guns and quality Toilet Paper we trust.

 

[Russ Smith]

I read the article.

My current thesis is OMG EVERYTHING IS BS, IT'S NEARLY ALL FAKE!!!

I can't tell you for sure anything other than the above, the level of devastation comming is as I have said, on a scale which can't now be imagined by most people.

I tend to think he's right, I'd say he swayed me, it's all an illusion anyhow.

We went around counting banks in my town today, there's nearly two per block and it makes no sense, there can't be that many customers.

No one has any money so what's with all these banks?

The answer would be it's all a scam, they don't need money they make it up.

Hoarding gold or silver though is just inviting a thug government or thug whoever to steal it from you.

In Guns and quality Toilet Paper we trust.

The crazy thing about banks is how liberal they are with money again.

We signed my girlfriend up for a bank account about 6 months ago, she immediately got an offer for a CC from that bank, they'd cancelled her card a year earlier for lack of use. then we opened an account for her mom and dad to draw from while overseas, we used our home address, and we immediately got offers for CC's from that bank for both of them, the accounts we opened had $100 per account, and they had absolutely zero financial information on them.

We are now up to 5 CC offers for her parents based on a checking and savings account that currently have $100 each.

 

[conraddobler]

The crazy thing about banks is how liberal they are with money again.

We signed my girlfriend up for a bank account about 6 months ago, she immediately got an offer for a CC from that bank, they'd cancelled her card a year earlier for lack of use. then we opened an account for her mom and dad to draw from while overseas, we used our home address, and we immediately got offers for CC's from that bank for both of them, the accounts we opened had $100 per account, and they had absolutely zero financial information on them.

We are now up to 5 CC offers for her parents based on a checking and savings account that currently have $100 each.

They aren't liberal with their money it's anything they can sell off.

They collect fees and such from any card generated by them, ie sold by them, but they don't retain the credit risk.

It's all packaged up and sold and the only reason there is a buyer at all is because eveyrone now believes the guy JTS posted a link to, eveyrone believes they will print forever until infinity.

It kind of makes sense they will because I can see no other option.

The ratings agencies that are making noise about the US paying it's bills haven't read Ben Bernanke's helicopter stuff or don't believe he'll do it.

We could in theory payoff every debt we have this instant, just one accounting entry and presto, it's all paid off.

It would then cost you 500$ to go to McDonalds but we'd be out of debt.

Doing that all at once then never again would be humane in a sense, at least the economy could adjust to the new price level and move on debt free but they have no intention of being that humane, they will milk this giving themselves the access to the money first and we'll all die a slow financial death along the way.

 

[jefftheshark]

If accurate, it appears that the Greeks will save BB's bacon.

Athens Mulls Plans for New Currency

Greece Considers Exit from Euro Zone

By Christian Reiermann

You must be registered for see images

You must be registered for see images

REUTERS​

A protest against austerity measures in Athens. Greece is considering leaving the euro zone, according to sources in the German government.



The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.

*******

If they actually remove themselves from the EU and go back to printing their own currency then you'd have to think the Irish and the rest of little PIIGies will be pondering the same action. Look at what the dollar did the last two days to see what might be in store.

It's deflation "on" everyone. Everybody run to the other side of the ship!

JTS

 

[82CardsGrad]

If accurate, it appears that the Greeks will save BB's bacon.

Athens Mulls Plans for New Currency

Greece Considers Exit from Euro Zone

By Christian Reiermann

You must be registered for see images

You must be registered for see images

REUTERS​

A protest against austerity measures in Athens. Greece is considering leaving the euro zone, according to sources in the German government.



The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.

*******

If they actually remove themselves from the EU and go back to printing their own currency then you'd have to think the Irish and the rest of little PIIGies will be pondering the same action. Look at what the dollar did the last two days to see what might be in store.

It's deflation "on" everyone. Everybody run to the other side of the ship!

JTS

Moved 50% of my 401k into PIMCO's Total Return Fund about 2 months ago... Might it actually pay off??