The US dollar enjoyed a rally for several weeks peaking around October 27th and then flirted around many fluctuations stirred by market news. While some may mistake the dollar rally as an indication of the US economic crisis stabling out and moving towards recovery, others like me would stay wary of the strength of the dollar until the damage of the now defunct financial structure is fully comprehended. Now it seems like the US dollar has peaked out, let us examine if there are any factors that can be future stimulation.
- Drum roll please. And our winner is……. The main factor for the rally is the payoffs of death contracts or transfer of toxic financial products under the false security of guarantees from a crippled government. All these transactions involve US dollars thus pushing it higher.
- The government rescue packages basically dumps money into the market but what is more important is the consensus among other countries to simultaneously buy US dollar to help the US economy.
- The market is undergoing liquidation. People understand that “money is king” and is sitting on as much cash as they can. Of course, the smart ones understand that the US is past tense and play to exit quickly. You can interpret the market fluctuations as reactions to the good/bad news or you can see it as part of the game where the players are trying to cover their positions using false movements of the markets as bait.
- How many times have we seen the US stock market go down, non-government bond yields rise, the US dollar rise and the US Treasury Bond yields fall? The US economy cannot afford liquidation and constricted credit amidst falling confidence, more bank distress measures, more job loss and more home foreclosures. These seem like danger signs more than anything.
- Next big shoe to drop? Credit cards. Cash only please.
- We all love Obama for what he symbolizes but let’s face it. He is not God and nothing short of a miracle can restore order. When questioned recently how long this economic crisis will last, he was dumbfounded for an answer.
- Economic indicator numbers coming out in January and with interest already sitting at near 0%, it is hard to foresee a stronger US dollar any time soon. But, rest assured there will not be a huge drop in US dollar value any time soon either. My question is if people are losing their jobs, what good is 0% financing to promote spending?
Enough talk about parking in gold stocks or what’s not. Do you realize that the gap between physical and paper gold market is widening. The more massive the paper manipulation, the more violent the coming correction. The paper-physical arbitrage is at the brink of losing control. Then again, I have never been a dedicated fan of gold seeing as to how unpredictable it is.
Expect more fluctuations in the US dollar but it is going no where soon. I think we are at the stage of the crisis when you know, I know and the government knows that we can only drag this crisis out and hope for a long and slow recovery.
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Meanwhile news of the US interest cut to at least 0.25% exploded. The following were found for comments....
Joe V from Canada writes: "If the problem was caused by excessive debt, what makes him think that letting people borrow money for free is going to fix the problem? Even elementary school students could tell that such a plan is insane. It seems like these brainwashed Keynesian economists are the only ones stupid enough to believe their own garbage, and the tragedy is that they are in control of economic policy.God help the USA."
truth betold from Canada writes: "It's a terrible idea. Savings = Wealth. Spending is not wealth. The lower interest rates go and the more money gets thrown from helicopters, the less the colorful paper in your wallet can buy. Therefore, the only prudent response is to buy things. i.e. convert your increasingly worthless paper into hard goods: gold, paid-for real estate, work vehicles, tools. And when hyper-inflation kicks in: toilet paper, canned goods and heating fuel. See you Keynesian sheep on the other side. "
Ryan Lemay from Canada writes: "Well there you have it! Socialism for the rich! "Okkkaaay, sir lets see everything on your application looks good. You stole from investors, cooked the books, borrowed beyond your means, come from a ivey league background, friends of the Republicans. Everything looks in order. Application approved. How much do you want for your bail-out?" "Next application please... Okay, I see here you are penniless, been living on the street for 6 months, you have a full-time job but it pays minimum wage so you can't afford rent, you work hard, seems your record check confirms you are a fairly honest individual, no criminal record came up as well, says here on your application you wish to better yourself with education and hard work? Sorry sir, I don't think you fit the criteria for 'true need'. Application denied!! Security get this undeserving guy out of here!" "
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