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Is the US Dollar About to Trigger a 2008 Collapse?
The financial world focuses far too much on stocks. The stock market, despite being at record highs (meaning record market capitalizations) remains one of the smallest, and least sophisticated markets on the planet.
Consider that stocks, even at current lofty levels, have a global market capitalization of slightly over $60 trillion.
In contrast, the global bond market is well over $100 trillion.
And the global currency market trades OVER $5.3 trillion per day.
It is currencies, not stocks, where the most significant moves occur. The currency markets are the largest, most liquid markets in the world. They are always first to move when things change. Stocks are the DUMB money compared to currencies.
With that in mind. I want to draw your attention to something that is happening in the US Dollar.
We’ve been following the greenback closely since it began a sharp rally last summer. But now things have really begun to heat up.
See the chart on the next page.
As you can see, the US Dollar has broken out of a massive wedge pattern that has been forming over the last eight years.
Why does this matter?
Because, globally, the world is awash in borrowed money… most of it in US Dollars.
When the Fed cut interest rates to zero in 2008 and flooded the financial system with liquidity, it funded an unprecedented amount of debt borrowed in US Dollars.
Everyone around the world, from traders to hedge funds to financial institutions and even global banks could borrow US Dollars at 0.25%... and invest in emerging markets, emerging market currencies with higher yields, infrastructure projects, corporate takeovers, etc.
In simple terms, the US Dollar became one of, if not the largest carry trade in the world. Globally the US Dollar carry trade is believed to be north of $3 trillion (the emerging market component alone is $2.7 trillion).
Now, a carry trade only works when the currency you are borrowing in remains weak. As soon as it begins to strengthen, your profits not only evaporate but you can end up deep in the red (remember you’ve borrowed $100 for every $1 you have in capital).
And the US Dollar rally has become a BIG problem for a financial system awash in borrowed Dollars. If the $3 trillion carry trade begins to unwind we could very well see a spike similar to that which occurred leading up to 2008:
Here’s the recent action:
Is the US Dollar about to send us into another 2008 collapse?
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Dollars kill their host
But money is victimless
Tell that to the bums
Carney's pushing for bank creditors (depositors) to absorb the next failures.
http://ca.reuters.com/article/businessNews/idCAKCN0IU0E920141110
USD monthly shows how the USD FELL during early 2008 collapse - the market started to roll over in November 2007.
http://bullandbearmash.com/chart/usd-dollar-monthly-closes-1-key-resista...
What we have today is the opposite - and this is just how much more ugly this market reversal will get.
The masses are exiting Euros and buying USD - and gold is not the safe haven it was promoted as - gold continues to deflate. The USD is the safe haven - as unpopular as that sounds.
Actually under a system wide bank failure the FDIC will be wiped out. It wont matter if you are under the limit.
I do not see any relation between a (possible) crash and 5trillion/day fx market.
You're quite right about this. The USD is going up so much that U.S. bond yields will go down. People will sell stocks to get into U.S. bonds. This correlation tells it all.
http://katchum.blogspot.be/2014/11/which-one-will-collapse-usd-or-us-bon...
So you've been following the dollar all summer.... Congratulations.
Dollar rise causing anything negative to stocks at this level is utter bullshit.
Remember the market crash of the mid 90s when people were last saying this about dollar strength weakening equities? Yea, neither do I. However I do seem to recall the DX nearly doubling from current levels as we saw one of the largest bull markets in equities history.
Call me when the Dow is trading over 30,000 and the DX passes 120. It may be time to start worrying then. .
The call may come when the black swan event you are not expecting occurs.
Nothing at all like 2008. This will be much, much bigger and far longer lasting. Last time the gubbmint was able to print a gazillion to buy off the market and pretend nothing bad was really happening. What are they going to do this time, merge BOA and Goldman? Buy the derivatives market? Even the rednecks don't trust the dollar anymore. And no pallets of 100's will protect the 'carrier battle groups' from those hypersonic re-entry vehicles.
Remember it is confidence alone that gives these currencies any value.
The TPTB can trick people into thinking the confidence is there, but the confidence can be lost very quickly.
Confidence..... and men with guns
This is all a set up to usher in the age of the SDR. One bank to rule them all and in the darkness bind them.
The falling value of both the yen and euro will reek havoc through contagion. For months the major world currencies had traded in a narrow range as if held in limbo by some great force. This has allowed people to think we were on sound footing as central banks across the world continued to print and pump out money chasing the "ever elusive growth" that always appears to be just around the corner. Recently several major currencies made multi-year highs or lows depending on the match-up .
The Fed recently whacked the dollar down but for how long? Because of weak demand for goods and most of this freshly printed money flowing into intangible investments inflation has not been a major problem, but the seeds for its future growth have been planted everywhere. John Maynard Keynes said By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
While there are not many Bond Vigilantes there are a slew of Currency Vigilantes and they are ready to make their presence known. Weakness in the value of the Yen, Pound, and Euro must not go unnoticed. More on why this may be a signal that currency trading is about to get very wild in the article below. Please note, this may also be sending a signal that the whole system is unstable and the stock market could drop like a stone due to contagion.
http://brucewilds.blogspot.com/2014/09/caution-alert-currencies-may-get-wild.html
yawn ! why is the usd rallying equate to a signal that the system is unstable ??? and the stock market could drop like a stone. love the mad max hype but some substance would be good. the world is fine. but stay in your bunker in case its not
yawn ! why is the usd rallying equate to a signal that the system is unstable ??? and the stock market could drop like a stone. love the mad max hype but some substance would be good. the world is fine. but stay in your bunker in case its not
yawn ! why is the usd rallying equate to a signal that the system is unstable ??? and the stock market could drop like a stone. love the mad max hype but some substance would be good. the world is fine. but stay in your bunker in case its not
Whatd'ja say?
"About to." As one who thought that a colapse of some sort would have happened by now the flood of these articles is now making me wonder if it will in my lifetime.
When things like this happen you never expect it to happen until it does. I bet it will happen one morning on a Thursday.
One must never underestimate TPTB and their abilities to prolong the end game.
Timing is everthing, and soon it will come, how soon nobody can tell for sure.
Did Weimar know for sure when their dollar was going to crash?
I think not, they just spent their money as soon as they got it.
All i know is that once the hyper inflation kicks in, i am going to my bank withdrawing a 20k in 1 FRN notes, and taking them to my local strip club to make it rain.
:)
It only has to happen once to change everything.
Tylers how did illigals infiltrated ZH?
Nope. The dollar has 11 carrier battle groups backing it up, plus the petro dollar and navy SEALs.
America, Fuck Yeah!
Actually the article says that it is the strong dollar, no doubt backed by all the things you mention, that could trigger the next meltdown.
A completely plausible scenario. Those who borrowed in US$ and invested in assets denominated in other currencies could get wiped out if the US$ strengthens significantly against these currencies and the returns in the other currencies are not sufficient to offset the appreciation of the US$. If these borrowers are also heavily leveraged, as is the norm these days, the losses are magnified several fold. If they then attempt to cover the losses by selling assets in US$ and currencies that haven't depreciated against the US$, it would set off an asset deoreciation in those markets. The contagion would spread around the globe. Finally a scenario that no market could have factored in and hence highly likely.
There is a sarcasm tag that is missing. Sure, unwinding dollar carry trade is the 'Black Swan' as was fashionable to call it about 3-4 years ago. The event that cannot be foreseen and hence accordingly prepared to even though a five year old could do that if paid enough attention. Paradoxically, strong dollar at this point = end of the dollar as a reserve currency and medium of exchange in international trade. I think China setting up bilateral currency swaps with anyone willing to accept yuan has something to do with Chinese preparing to inevitable moment when dollar becomes inaccessible or too expensive to most countries to use in bilateral trade. That, and a tendency to restrict access to dollars as a tool in geopolitical games, short term sanctions against either Russia or Iran pay off with strengthening dollar. Long term, however, same sanctions force key players to diversify away from greenback as its supply can easily be restricted at any given moment making it too volatile.
Unwinding of the carry trade due to dollar strengthening could itself lead to the collapse of the US$. I suspect this is how it will unfold. When the dollar carry trade unwinds, the US banking system will collapse. There will be no taxpayer bail out and banks will have to be bailed in. Many small and medium businesses that have cash balances in excess of the FDIC limit of USD 250,000 will lose the excess to bail-in and many of them will wind up or down size. Just as 2007-9 collapse was the excuse for the unconventional central banking, this collapse will be the excuse to try out recommendations of the Modern Monetary Theory with the Trillion Dollar Platinum Coin route. That will open the floodgates to dollar dumping and collapse in its value.
Again, what part of all fiat will go to zero don't you guys understand?
orale vato wassapening....go raiders
Firme guey go cowboys trece geerzeez por vida lmfao