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The US Dollar Bull Market Could Trigger a $9 Trillion Debt Implosion
The US Dollar rally, combined with the ECB’s policies and the Fed’s hint at raising rates in December, is at risk of blowing up a $9 trillion carry trade.
When the Fed cut interest rates to zero in 2008, it flooded the system with US Dollars. The US Dollar is the reserve currency of the world. NO matter what country you’re in (with few exceptions) you can borrow in US Dollars.
And if you can borrow in US Dollars at 0.25%... and put that money into anything yielding more… you could make a killing.
A hedge fund in Hong Kong could borrow $100 million, pay just $250,000 in interest and plow that money into Brazilian Reals which yielded 11%... locking in a $9.75 million return.
This was the strictly financial side of things. On the economics side, Governments both sovereign and local borrowed in US Dollars around the globe to fund various infrastructure and municipal projects.
Simply put, the US Government was practically giving money away and the world took notice, borrowing Dollars at a record pace. Today, the global carry trade (meaning money borrowed in US Dollars and invested in other assets) stands at over $9 TRILLION (larger than the economy of France and Brazil combined).
This worked while the US Dollar was holding steady. But in the summer of last year (2014), the US Dollar began to breakout of a multi-year wedge pattern:
Why does this matter?
Because the minute the US Dollar began to rally aggressively, the global US Dollar carry trade began to blow up. It is not coincidental that oil commodities, and emerging market stocks took a dive almost immediately after this process began.
The below chart shows an inverted US Dollar chart (so when the US Dollar rallies, the chart falls), Brazil’s stock market (blue line), Commodities in general (red line) and Oil (green line). As you can see, as soon as the US Dollar began to rally, it triggered an implosion in “risk on” assets.
This process is not over, not by a long shot. As anyone who invested during the Peso crisis or Asian crisis can tell you, when carry trades blow up, the volatility can be EXTREME.
Indeed, the US Dollar as broken out of a MASSIVE falling wedge pattern that predicts a multi-year bull market.
The market drop in August triggered by China devaluing the Yuan (another victim of the US Dollar bull market) was just the start. Once the US Dollar rally really begins picking up steam, we could very well see a crash.
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Best Regards
Graham Summers
Phoenix Capital Research
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Those who are predicting a dollar collapse aren't putting a date on that prediction, and that's only sensible. These things go in cycles at the best of times - and these aren't the best of times. Of course the USD will collapse, eventually. How could it not, if the Fed continues to create new debt ad infinitum?
Wise investors will have a portfolio of different currencies, and be prepared to take losses on some of them. That stands to reason. 18 months or so ago I blogged about this future collapse; I've just re-read it, and can't think of anything that needs revising.
http://barlowscayman.blogspot.com/2014/02/might-us-dollar-collapse.html
All you need is a FREE pamphlet
Lower lows, lower highs...hmmm..I think I misremembered what the CMT course said...ah, fuckit. Just make up chart theory as you go along! Move along people..nothing to see here....just a bunch of douchebags spouting shit....good luck with the $US rally...see how that helps the economy.
So this is really good news then right? We'll have something interesting to watch on TV for once!
How those gold holdings working out for ya now?
Now? Not so well unless you live in Brazil, Greece, or Venezuela and other USD denominated debt slavelandia's experiencing hyperinflation- get the picture of the future and the importance of protecting "purchasing power"? Or is that too complicated for you?
Greece is mired in deflation, along with the rest of Europe. Might as well use your gold as a suppository there. Brazil is posting 10% inflation, which is hardly considered "hyper" inflation. Venezuela is at 27%, which is bad, but still a long way from hyperinflation. Oh, and if you think gold is saving their purchasing power there, think again!
https://www.goldbroker.com/charts/gold-price/vef
Of course, when has reality ever meant anything to the gold bug crowd. Just keep loading up and reciting the mantra, "Gold has INTRINSIC value!" Whatever that means. Mark Dice can't give away his silver bars on the street corner, but you guys will seek out charlatans to take your money for it. Then you call it "currency," when no one else wants it. Don't worry about any of that though, just keep buying. It's sure to turn around some day. Hopefully before you go broke.
I love these clowns like Dr_Snooz who think buyers of gold hold no other assets and plow all their money into gold, or borrow to buy gold as a short term investment. Anyone with a significant net worth and a decent amount of descretionary income, along with a knowledge of history that dates back further than 30 years, understands the value of holding a percentage of your portfolio in PMs as wealth insurance.
So go back to sleep Dr_Snooz and spare us from having to read your idiotic commentary.
Uh huh. I was the Series 7 Registered Rep. I worked for a major Wall St. firm for 8 years. I recited the party line about a "properly diversified portfolio based on your risk tolerance and time horizon" plenty times. I resigned when I learned it was all a den of thieves. I'm here citing facts and figures, trying to save you all some money. If that makes me an idiot, then I guess I should go find fellow idiots to try to warn. The technicals for gold are abysmal. If you want to buy the stuff, rock on. Just be ready for your broker to tell you that your precious metal allocation was one of your losers at your next yearly review. If you're indeed wealthy enough to warrant one of those. Happy Thanksgiving!
Buddy, if you're married and wear a gold wedding ring don't forget to throw it away and use a rolled US banknote around your finger. Make it the middle one
we have an export market
So you're saying there is a chance?
A "multi-year bull trend"...? In DOLLARS!?
NOT going to happen, not least because it would destroy the US export economy.
The Fed will be forced to PRINT. QEternity... currency wars...START YOUR ENGINES!
The currency war began in 1974 and is in or nearing the final stages (since before Lehman) & in the beginning stages of the trade wars, which will be followed by world war, which has already begun by proxy. The QE has never ended and is in the "shadow version" of at lest a trillion per month. Once they do bring some "official" form of QE4, then the end is nearer. It is possible they do not need an "official QE" if the cashless society becomes a reality, then the bankers will have full control of all money flows, but people will go along and the few who will resist will be demonized from many angles.
Keep in mind that if the FED's were to increase interest rates (if 15-25 bp's counts), then you know they already have the mechanism in place to mitigate the fall out. This continues until TPTB decide to wreck the system and begin anew at the further enslavement of the masses. This will continue to grow worse and worse until divine intervention puts a stop to it, but not before 50% of the world's population is destroyed by war, famine and pestilence. Is that even hard to see as becoming a reality? It is written and it will come to pass as it was written.
The better question is the following:
Why is the dollar rallying?
The answer is that a huge head fake by the FED about raising interest rates. This will never happen, and the dollar will reverse course when the launch the next round of QE.
2000 sixteen party over
Out of time
So tonight we're gonna party
Like it's 1999
My theory is that since large part of world debt is denomindated in dollars, it takes dollars to pay down the debt. As the debt rises, which it has been for a very long time, so is the burden to service this debt. Servicing debt will create demand for dollars, which in turn drives the dollar higher. Higher dollar in turn makes it even more difficult/expensive to pay down the debt -- hence asset liquidations (gold, silver, etc). Basically deflationary spiral. Central bankers must print to counteract this deflationary force. Thoughts?
That's the way I see it, too, tm.
Oh Silly Pheonix....first you say dollar is going to crash in value, then when you are sur you are wrong you say, dollar strengh will cause havoc? Which is it, lol
deflation first...then the reaction...hyperinflation...
Keep watching these pages for further updates....
Deflation and inflation need to be defined from whatever view point; consumer or Banking elitists. Deflation is bad for asset pimps and good for consumers if it passed along as it would be in normal markets, but it is all trashed now. Everything is awesome until one dies and faces the judge of all the world. Then as bad as things appear now will pale by comparison.
Thnaks, I have been, since 2009 the inception on ZH and Pheonix Bullshitcapitol....been wrong every step of the way
Report yourself for thinking ungood thoughts.......
Duly noted...
The dollar is rallying because there is no place else for the ocean of digital money to go. Once all the rats are in the abattoir, the slaughter will commence.
Spoctor Din
So let me see if I understand: as carry trades unwind, there is a phenomenal demand for dollars to pay off the bets, else a wave of defaults? Which spikes the dollar much higher and out of the control of the Fed to reverse it? Because interest rates can't be lowered much more by the Fed? And so "hints" of a rate hike now are like playing with matches? Did I get it right?
I'd say so. Add to it that the rise in the dollar is getting the rest of the world upset enough that they have reason to start a competing financial system to keep this from ever happening to them again- at which point the dollar drops like a stone on Jupiter.
That dosnt sound good for my precious metals hmmm more dollar cost avg ntill it all blows up in our face. I cant think of any other investment
Except; there is the digital money casino without end in sight; so the fewer the players the easier to control/mange/ manipulate. Since the Bank of International Settlements (BIS), the Central Bankers Bank, the main hive, this can go on for a long time to fleece the flock with the intended goal of reducing the population to 500 million according to Agenda 21. That is the bigger picture. Yet there is an even bigger picture playing out that not many are capable of understanding; so I won't go down that road.
Do tell!
I can handle it, give it to me straight!
...more like Jupiter falling into a black hole...but the results will be 'smashing' either way.
Yes these certainly appear to be the events one would expect as a reserve currency, the product of a single nation managed for the benefit of that nation (and not for the world as a whole) reaches the end of it's usefulness.
When Nixon closed the gold window in 1971, the rest of the world noticed. They benefitted in some ways as oil drove planetary growth, but these other countries (namely the Eurozone) made plans. They would have a new, better currency ready to support world commerce when the dolllar finally failed. It would be a currency not under the control of just one county. It would hold gold, marked to market, as a reserve. When the dollar failed it would not lose all it's reserves, only the treasuries it holds. Any country with gold reserves will come through a dollar demise essentially unscathed...you should too.
Do you have any feel for how much Euro countries have in Unallocated gold? The US?
it's all Unallocated, if you screw the people who think they own it,