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US DOLLAR Fundamentals

+ $ 1 bn more debt each day !!!

ʘ ʘ ʘ Updated August 3, 2011

In 2008 the Dollar was UP for the wrong reasons and turned on a dime .

1. What happened in reality [there is clear evidence of this today] was that by the means of a 'currency swap' between central banks 2008 the Dollar was artificially pumped up. This is possible but we favor the next explanation.

2. If not we had a similar scenario as we had in Japan prior to the 1990 crash of the Yen...and in Germany prior to the beginning of the Weimar hyperinflation.

The Long Term Chart clearly indicate that what we lived from August on to end October 2008, was nothing more than a ABC Bear Market correction. Disbelievers will, in due time, be in for a bad surprise. So far our Mother of all necklines keeps on doing her job well.

  • Really scary: technically, once the neckline is broken, the objective for the Dollar index is .20.

  • Many astute analysts have declared that the Corrupt Powers that control the vast manipulated machinery cannot conceivably keep both the US$ and US-Bond market levitated for long. One had to fall. Any sell off of the US Treasuries, pushing bond yields higher, would trigger a credit derivative sequence of events that would result in overnight bank failures and collapse of entire financial markets, starting with a JP Morgan meltdown. It would occur much like a financial nuclear bomb. So the victim will be the US Dollar, clearly, by default.  March 2009 the Fed has clearly confirmed it will follow a policy of Quantitative easing.

  • The question is which problem is worse: the one of the EU and Eastern Europe or the one of the USA and China/Japan? As the Authorities have used most of their arrows, PROPAGANDA has become an important instrument.

  • Time to make your own home work. The cheaper your Fiat paper currency, the easier you can export and the harder it becomes to import. It is for a country 'A LOT EASIER' to let the Dollar slide than it is for Europe and the EU to even get a political agreement as to when and by how much the Euro should be devaluated. Last but not least it is important to understand the impact of a lower Euro would be even more devastating to Europe because of the already extremely high taxes.

  • Derivatives and Fractional Reserve Banking are the Tumors which will ultimately destroy the greedy irresponsible Bankers and the USA.

May 2011 - Half of the actual American budget goes to the defense.





April , 2010 - Considering the fundamentals it is a miracle the Dollar is still being accepted!

14.3 TRILLION DEBT and growing...[click on the debt clock]

The deficit will get larger as a results of Jim's Formula

  • It's one of those numbers that's so unbelievable you have to actually think about it for a while...

Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?

Click here to watch CNN's video on pensions…

Posted October 23, 2009

The odds are the US dollar won't exist in 5 years time from today. It will die because of Debt, Deficits, Derivatives, Real Estate and Deflation.

Updated November 2008

In truly perverse fashion, the Dollar has been rallying as a prelude to a US financial system breakdown. If I remember well, 1998 the same action was seen in Japan and Weimar Germany as they had to sell foreign assets and repatriate these in a run for survival.

One of the reasons behind the Dollar correction could be found in the forced repatriation of foreign American debt. Earlier in 2008 the BIS (Bank of International Settlements) urged the USA to bring international Bond obligations back to the USA so they could die on the domestic market. By doing so, a relatively large quantity of Dollars had to be bought. What we see now, is the result of this request.  Another reason is the deleveraging of Banks and Hedge funds and also the repatriation of the foreign funds.

As the Euro fell back on its LONG TERM support zone in a parabolic way, the Commercial Shorts are at a historic high and the market has become extremely unbalanced (funds were long).  Add to this that there is NO CASE for a fundamental strong Dollar, extreme caution is requested.  We remain BEARISH on the Dollar!!

Posted August 4, 2008

This is to highlight how rapidly the fundamentals of the Dollar are deteriorating.

The historical culprit of inflation and hyperinflation has always been the use of fiat currencies. This results in massive printing of paper money as the issuing authority sees no alternative to raise money through taxation for its huge needs.  Additionally, the efforts by the FED to prevent a meltdown of the banking system has spiked the broad Money growth (monetary inflation) to almost 20%. Additionally, the Fed has created money by exchanging liquid versus illiquid assets from the illiquid banks. As a result, these have been able to resume their daily activity of lending money and creation of even more fiat money.

Bernanke vowed not to allow a Deflationary crisis. The Fed will take and takes whatever action is necessary to prevent a deflation and hence the Money supply is - even under pressure of the Credit Crunch - not collapsing. On the contrary!  As of August and September 2008 the markets are INCORRECTLY anticipating a DEFLATION.

With an actual federal deficit over $4 trillion and outstanding obligations of $62 trillion, the Fed can either increase the interest rates, hope to attract more foreign funds and kill the domestic economy or PRINT more Dollars.

Oil prices are off historic highs, the dollar off a historic low and Money supply growth at an all-time high. Hence, fundamentally, there is little or no room for the Dollar to reverse its secular bear trend, let alone to strengthen momentarily.

Add to this situation the  Trade Deficit of $ 700 bn (the highest for any country in history), the inability for the American consumer to increase his personal consumption and the fact that fiscal stimulus by Tax cuts and increased federal spending have reached their practical limits.

Globalism, Taxation and Profit maximalization have ruined the American manufacturing sector and it will take years before this stupidity can be repaired.

The perception that the dollar will be the preferred safe haven during the remainder of this global financial crisis is being blown away by the reality of exponential currency creation, budget deficit  and zeroed interest rates.

A similar situation occurred in the 1920's just before the great Crash of the German Mark. From 1919 to 1920 there was a 1st dip for the Mark. Because of its low level, Marks were bought massively . Investors were convinced the Mark would soon find back its AAA status. The currency recovered slightly in 1921.  Only months later, as the economic situation got worse, they massively started to offload these Marks, adding the to final crash and the initiation of the Weimar hyperinflation. The second down leg lasted until 1929.

The dollar, due to the creation of mountains of derivatives and now the bailing out the world, might just be in worse shape. The Weimar mark didn't do so well .

Nobody makes a strong currency and certainly not a Reserve currency with a situation like following chart shows:


We are seeing a GLOBAL crisis. As the dollar will be reaching its long term objective it will become clear that problems have also  spread in Europe. Britain, Japan, and the Antipodes are stalling. Denmark is in recession. Germany contracted in the second quarter. May industrial output fell in Holland and  in Sweden. The coalitions in Belgium and Austria have just collapsed. Germany's left-right team is fraying.  Further south, the BNP Paribas has just issued an alert for Spain.

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