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The US Dollar is MAJOR Trouble
Earlier
today I wrote a piece forecasting the end of the Euro. At that time, I speculated
that the Euro would be broken up within the next year.
Then I
looked at the US Dollar’s chart.
I've said
before that the US Dollar was in BIG trouble... but as of tonight, it's on
DEFCON 1 RED ALERT TROUBLE.
As the below
chart shows, the greenback needs to rally and rally hard if we’re not going to
head into a SERIOUS collapse shortly.
What you're
looking at is the US Dollar right on its multi-year trendline. If we take this
out now, then we are heading into an inflationary death spiral in very short
order.
Indeed, once
we take out this line, we're just a few ticks away from triggering the MASSIVE
Head and Shoulders pattern the greenback has formed over the last 20 years.
In case
you're wondering, this pattern has an ultimate target of 40... a full 50% lower
than where the US Dollar is today.
We're
talking about hyper-inflation on an order that would make Weimar Germany proud.
And if we break the green line above, we're THAT much closer to this becoming a
reality.
In plain
terms, the end game is fast approaching if not already here. I've long thought
the US Dollar had one last rally in it, but looking at the charts tonight I
could very likely be wrong.
Indeed,
inflation is already exploding worldwide, which means paper money in general is
going to be worth less and less on its way to worthless.
If you think
the US is immune to this situation, you're in for a very RUDE surprise in the
coming months. Indeed, the Fed’s Hoenic just announced there might even be QE 3…
and he’s supposed to be one of the Fed HAWKS!
The writing
on the wall is clear: the Fed will stop at nothing to destroy the US Dollar in
order to prop up the Big Banks. The 308 million of us who don’t work on Wall
Street are all going to be thrown under the bus. Don’t let it happen. Take
steps now to prepare yourself for what’s to come.
Good
Investing!
Graham
Summers
PS. If
you’ve yet to take steps to prepare your portfolio for the coming inflationary disaster,
our FREE Special Report, The Inflationary
Holocaust explains not only why inflation is here now, why the Fed is
powerless to stop it, and three investments that absolutely EXPLODE as a result
of this.
All in all
its 14 pages contain a literal treasure trove of information on how to take
steps to prepare AND profit from what’s to come. And it’s all 100% FREE.
To pick up
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FYI, the link is broken.
And if the dollar doesn't strengthen to 80, will you go away?
Pretty please?
In that case I'll admit that I was wrong :-)
Really, as long as it stays within reasonable bounds, inflation and a weak dollar is something you should hope for, not fear - and as you can see it in the fine graphs even +-40% swings in the dollar index, over the course of a decade or two can be normal.
PCE core inflation [*] hit 0.0% just this week - what other red flashing lights do you need?
See:
http://krugman.blogs.nytimes.com/2011/02/01/the-un-cola-era/
[*] core inflation is a metric that measures "hard to get rid of" types of inflation and it does not intend to track "cost of living" inflation. The latter is trending higher in the US currently, due to oil and other commodity price increases.
First, it is hard to say that commodity prices such as food, oil and metals simply fluctuate, when in fact they have trended up. Krugman seemingly discounts the trend as if it does not exist. Certainly there are fluctuation of 10%+ but are you arguing that we will see $30 oil or $5.50 silver again?
Second, in addition to food, oil and other commodity inflation, which has trended up relative to dollar buying power, other things have shown very high inflation: medical costs, education and at least in my area taxes, especially property taxes.
Third, debt hides inflation and seemingly has hidden massive inflation. Instead of entities charging more, they borrow more and pay their expenses with borrowed money. Nowhere is this more evident than in government. What government charges for services grows only at a small rate because they do not charge the full cost of the service and borrow money instead to pay the expenses. Look at the salary inflation and increase in the federal payroll under Obama ... and the corresponding debt as examples. What is coming home to roost in Illinois and California is the fact that these states borrowed more and more for many years so that they could meet their obligations, figuring that as long as they were able to pay the interest on their debt they were fine ... as many people have found out, that rubber band can only be stretched so far before a decision has to be made. But the point is that debt hides inflation (potential as it were) and that potential can be released either in default or massive inflation that people then have to pay for... and this is the argument for hyperinflation. It is paying for the past sin of excessive debt that has built up as potential and not defaulted. Hyperinflation is a choice.
Given that no fiat currency has ever lasted more than 62 years, it seems logical that either route leads to fiat destruction, no matter how far they try to kick the can down the road.
...and, the stability of governments world wide is determined almost solely by their ability to borrow. What kind of business model is that? The typical American's worth is determined by their credit score. And what's that? Their ability to service debt. That's no way to run a society, let alone a sovereign nation.
If you look at Krugman's "prices fluctuate" argument you will see that the time frame is always in the years scope, not months scope.
And yes, when supplies are squeezed and demand is ticking up, then the resulting situation won't rectify itself quickly. Nevertheless it will 'fluctuate back' like it did so many times in the past: seeing current high prices there's lots of investment into more production, and that inevitably leads to overproduction and lower-than-average prices.
Krugman? ...again?
Export infrastructure wont just show up because of the lower dollar. Export is initially capital intensive, the low dollar will be the problem, not the solution.
You are a brain dead keynesian, Germany has higher wages/currency then the US, yet it has trade surpluses with China, same with Japan.
clueless you are.
Well, just a few posts above you posted a factually incorrect claim, so I probably should not take your comment too seriously - but anyway, you are wrong here too: a weaker domestic currency helps productive, exporting industries beyond doubt.
Here's one of (many) links teaching you such basic facts:
http://www.businessweek.com/bwdaily/dnflash/nov2004/nf20041112_3507_db03...
That BusinessWeek article is from 2004 btw., when the effects of Bush administration policies weakening the dollar were discussed. It (of course) helped exports. That dollar weakening was around -60% during the Bush presidency - while the current QE2 dollar weakening is -5% only.
Those numbers expose the intellectual dishonesty of your argument from yet another angle.
You need CAPITAL to expand export industry. A lower dollar makes export expansion more expensive.
You are wrong again because the net effect is still positive for exporting countries: guess why China is keeping the yuan so weak or why Germany liked the Euro weak, why Korea liked its currency weak, etc. etc.? :-)
But your real problem is that you need to start READING if you want to understand how economies work. I gave you a link to the explanation - these basics are all described there - but you can also google for more material yourself if you don't trust that link ...
US dollar(USDX) fell from 120 in 2001 to 75 in 2008 and yet the trade deficit was kept rising. Mhmmm .... back to the drawing boards.
Erm, his factually incorrect claim was that it does not help exports.
Exports of course rose from 2001 to 2008.
Trade deficit rose too, but that's a matter of overconsumption (imports rose), not underproduction ...
Sorry, but you are wrong on both counts.
HAHAHAHA, what? On what both counts Im wrong? I only wrote that trade deficit was rising despite the dollar decline, and that´s a fact. Dont smoke that stuff becaue then you see THINGS :D
Uhm, no.
Do you realize that the biggest trade deficit the US has is towards China, right?
Have you ever heard of this thing called the "China weakning the yuan artificially, via capital controls"?
That is what is causing the trade deficit, and that is what has shipped a good 3 million jobs from US to China.
Also, note that the argument has shifted far, far away from the original claim that an exporting country's currency weakness does not help exports, which claim I called bogus. That claim has still not been defended, it still flies in the face of all facts and thus it's still bogus.
Yes, I know that US runs the biggest trade deficit with China, that´s why I say that your idea about trade balance improvement via currency debasement won´t work. And if you start thinking a bit, instead of just keep lecturing the whole world, you may even find out why is it so.
I did not talk about "trade balance improvement". I talked about a weaker currency increasing exports.
Do you realize that the two are not the same, that it's possible to increase exports by a larger amount than the trade deficit increases?
(And yes, eventually China won't be able keep up with devaluing the yuan even more than the dollar devalues but that's besides the point.)
Yes, it´s possible to have a declining currency and exports rising somewhat faster then imports. It´s called bubblenomics 101. It´s also the best way how to destroy an economy.
And yes, you need more critical thinking. Much, much more. Way too much more.
You have to admit that the concept of exports rising faster than imports, coupled with a weaker currency worked splendidly for the Germans to get out of the crisis though:
http://research.stlouisfed.org/fred2/data/DEUIMPORTQDSNAQ_Max_630_378.png
http://research.stlouisfed.org/fred2/data/DEUEXPORTQDSNAQ_Max_630_378.png
http://finance.yahoo.com/echarts?s=EURJPY=X+Interactive#symbol=EURJPY=X;...
Nor does Germany's economy show any signs of having been "destroyed" by the successful stimulus:
http://research.stlouisfed.org/fred2/data/DEUURAMS_Max_630_378.png
http://research.stlouisfed.org/fred2/data/DEUPROINDQISMEI_Max_630_378.png
Unemployment dropped and production increased, helped in part by a weaker currency.
Yeah, let´s cherrypick selected data, so that it suits our flawed ideas. How about you look at german export between 2000-2008, when euro appreciated from 1 to 1.60, that is by 60%. Germany exports quality, not low price. But anyway, as you selected Germany as your role model, I guess you also agree with their tough austerity measures as a mean to balance budget and their insisting on central bank to NOT print money out of thin air. Mhmm ....
Im off this pointless discussion.
Erm, did you manage to follow the fine link I cited, which shows German government expenditures rising dramatically during the crisis? :-)
That graph will show you black and white that German "austerity" was just lip service. The German government sector was spending money big time during the crisis - almost twice as much as the US ...
This is a more interesting observation - but ultimately it still does not help your argument.
The gradual appreciation of the Euro from before that period could be followed by somewhat elastic pricing and by generally balanced-out trade between the EU and the US and most of the rest of the world (except China, with which the EU had regular trade friction).
A relatively quick EUR depreciation prices cannot follow though, so it helps exporting sectors: wages and other productive costs are relatively lower in real terms, income from foreign markets (which have inelastic prices as well) is higher in real terms.
Also note that the relatively quick appreciation of the Euro after the early stages of the crisis was a problem (and bigger export sectors in Europe complained about it to the ECB) - but then came the European debt crisis which thus helped European exports, almost paradoxically.
Contrast that to Switzerland where an unprecedented, sudden influx of funds drove up the CHF and has started hurting tourism and export industries ...
'Export industry'....LOL! The only export we really have is inflation.
You are quite wrong there too, the US is one of the largest exporters on the planet, with about $1.2 trillion exported per year.
You are wrong about inflation as well, a 5% weaker USD does not 'export' dollar inflation to the rest of the world - why would it?
If I get your drift, the dollar is doing fine and all is well in The Land of OZ.
Thank you for your bright view.
I'll respectfully disagree simply because the seat of my pants tells me so. That's about as scientific and analytical as I get. I find that charts and the spewings of "economists" are the tools that have gotten us this far. Fat lotta goddam good that has done.
No You're wrong.......No you're wrong......No you're wrong????
Continually responding in this way, does'nt make it so and definitely does not make you right, no matter how many links you post.
Erm, are you really suggesting that the US has not exported around $1.2 trillion in 2010? It's a simple fact of US trade relations, do you really dispute it, do you want me to link to the data?
Also, you (or rather, the post I replied to) are making the claim that USD inflation somehow inflates the world. You need to prove it, not just claim it.
I simply stated that this claim is unsubstantiated and wrong. I linked to various pieces of hard data further above to prove my claim - periods of time when the USD weakened much more but when there was no 'global inflation'. There is no link between USD inflation and global inflation, and if you claim that there is (in more practical terms, if you claim that say the current 5% USD weakening has somehow caused the 30%+ global inflation in food prices), then you need to prove it ...
Here's the link for US exports:
https://secure.wikimedia.org/wikipedia/en/wiki/List_of_countries_by_exports
3 United States $1,270,000,000,000 2010 est.The whole problem with predictions is there is no personal consequence for being completely or even partly wrong about them.
There should be an ETF fund---- that consolidates all the predictions available---- for trading purposes.
And there should be painful consequences and major disincentives for the blobbers who use these forums to espouse their worthless opinions.
Is there at least one who will venture to predict that they haven't a clue what the fuck is going to happen, and further, WHEN without which everyone with a prediction will be right eventually. And therefore for worse than silence.
Me, me, me. I'm certainly clueless, which is why I am hedgeing every bet on the board. BTW, the only paper I am hedgeing is the Charmin type.
Well, my predictions are obviously only guesses (and I've been wrong in my life more times than I care to count) - but you can fact check the main points I made: whether the dollar really weekened by 60% during the Bush presidency, when the dollar index went from 120 to 75.
You can also check whether my claim is true, that the dollar strengthened by 40% during the Clinton presidency.
To get those numbers you only have to look at the chart in this article - and a slightly different chart can also be seen here:
http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=lin...
Showing similar dollar strength dynamics.
Then you can see that a drop from 80 to 75 during QE2 is not the any obvious "inflationary death spiral", as claimed in this article - just a move that is not out of the ordinary at all, neither in its relative move nor in its absolute value - unless you are also willing to believe that during the Bush presidency this inflationary death spiral transpired 5-6 times :-)
You can also read the inflation stickiness analysis I linked to, and check the chart there:
http://krugman.blogs.nytimes.com/2011/02/01/the-un-cola-era/
And see which types of price moves and wage/price interactions result in quick inflation and which ones not.
A quick summary: the conclusion of Krugman, based on the data he cites, is that the current price moves are likely volatile and non-sticky - and that they match similar moves of the past 20-30 years.
Do not 'believe', check the facts and use critical thinking.
Sp why does germany have higher wages then the US but trade surpluses with China ?
The defintion of capital is right over krugmans head.
What you claim is factually incorrect, right in the first sentence ...
The US has significantly higher wages. Both the average gross income and disposable income is higher:
http://www.worldsalaries.org/germany.shtml
http://www.worldsalaries.org/usa.shtml
25K for Germany versus 31K for the US, for 2003 and 2005.
More recent, 2009 data shows an even bigger difference:
https://secure.wikimedia.org/wikipedia/en/wiki/List_of_countries_by_aver...
You clearly have no idea what you are talking about.
In case you didn't notice, the Euro is higher then the dollar. Europe is also a net creditor, trade neutral.
I am right in Germanys case and I am also right in Japans case, Japan has higher wages then the US, yet trade surpluses with China too.
You are factually wrong again. I have cited USD figures from 2009, when for much of the year the euro was even stronger than today.
The USD would have to drop 30% in value in addition to the 5% it has dropped in the QE2 period, for the exchange rate to even out german and US wages...
So you are wrong and wrong again. Are you lying, or are you just plain stupid?
Citing Krugman presents its own set of problems, apart from any other points you may have made. He has shown himself not to be a credible source since his views spring from a faulty set of premises. Don't ask me to explain nor cite examples -- I'd rather go get a root canal.
Note that I provided 5 links to various pieces of data, and only one of them was a link to a Krugman article with explanation in it. You ignored the other four ...
Also, if you think the Krugman article was based on "faulty premises" then you need to prove that (or link to a proof for that specific article), not just claim it.
"I do not like Krugman" is not an excuse to reject valid data and valid analysis from him. I do not "like" Bush either still I linked to one of his statements once, a statement that I found to be particularly correct and particularly fitting.
I don't have to prove shit. Thank you very much. I can have whatever opinion of Mr. Krugman that I please, with or without documentation of same. That's the beauty of an open forum. Any dickhead can post. Me, or you.
Well, if you want to convince others that what you say is true then you generally have to. If you don't want to do that then of course you don't have to.
You formulated your claim as a statement of fact:
So it was all too natural for me to ask for actual proof - because I myself have never seen such proof, nor have I found him an unreliable source myself.
I mean, it should be easy, if it's so obviously true to you.
I stand by my position: Bullheaded obstinacy.
HE WHO PREDICTS THE FUTURE LIES, EVEN IF HE TELLS THE TRUTH!