USDCAD reaches 12 year high; but here comes the reversal

zenkick2000's picture




 
  • Weakness in the Canadian Economy driving its currency lower
  • Inverse relationship between commodity prices and USDCAD exchange rate
  • Why there could be a reversal in trend

How did the Canadian currency reach a twelve year low?

The US Dollar reached a recent high against CAD at 1.41081 on January 6th a level not seen since August 2003. The general bull trend the green back has been in picked up momentum since talk begun by the Fed of a return to higher interest rates.

A weaker economy will cause a currency to devaluate compared to the currency of a country with an expanding economy. It will also be enough for an economy expanding faster to see its currency appreciate against the currency of an economy that is expanding but at a slower pace.

The chart below shows annual GDP Growth for Canada and the US on a quarterly basis. It’s clearly visible how the US economy has been outperforming the Canadian economy.  The US economy since 2014 has seen a GDP Growth rate above 2% while the Canadian GDP Growth rate has faltered to 1.2%

Another Macroeconomic factor that will drive FX rates is unemployment, again as it is considered a gauge for economic health. Unemployment in Canada is currently at 7.10% and is on the rise coming from 6.6% in January 2015. The unemployment rate in the US is currently at 5% and looks like it is on the way down coming from 5.7% in January 2015.

Inflation also has an effect on exchange rates as a currency that experiences high levels of inflation will see its FX rate depreciate against currencies with lower inflation. Canadian inflation is currently at 1.4% compared to inflation in the US at 0.50%.  Add to this general macroeconomic narrative an increase in interest rates in the US and the Loonie had nowhere to go but down.

 

Commodity price and the Canadian Dollar

The Canadian Dollar is considered to be The commodity currency for its high correlation to commodity prices. This is due to the large percentage of exports that commodities like crude oil and other energy products account for.

Canada is a major exporter of various commodities, Crude Oil and other energy products being its main export. Crude Oil exported 2.6 million barrels per day in 2013, even at today prices that’s around $91 billion worth of exports. Gold is also an important export for Canada; in 2014 the country exported a total of $20.3 billion in precious metals and gems.

Canada on a global level ranks only 6th as a producer, but it is the world’s second largest exporter of wheat. The country exports $7.2 billion of this commodity per year, second only to the US.

The USDCAD exchange rate can add pressure to the price of these commodities and vice versa, as all of these commodities are quoted in US Dollars. If a commodity falls in price by 10% but the exchange rate increases by 10% then a Canadian producer will see his revenues unchanged. The decrease in commodity price is offset by the increase in USDCAD. Basically as the exchange rate rises a Canadian producer will receive more Canadian Dollars when they sell the US Dollars they cashed in from the sale of the commodity.

It’s hard to determine which moves which, or to establish which is the driver of the other. But there is a clear correlation between the two prices. The chart below shows the price movement of a basket of commodities versus the USDCAD exchange rate from September 2012.

 

Why is a reversal likely?

The USD has had an amazing bull run over the past 2 years with increases against all major currencies. It is currently at a 30 year overbought level according to some technical indicators. This alone could see a correction in the bull trend. But when comparing the Loonie to other major currencies we also see that it’s the currency that has lost the most.

In 2015 alone the Canadian Dollar lost 17.35% compared to 9% decline for the Euro. Over the past 2 years the Loonie has depreciated by 33%, while the next biggest loss was for the Euro which has dropped 20% over the same period. Other currencies like the Pound Sterling and the Japanese Yen have lost 10.50% and 11.75% respectively over the last 2 years.

There may also be a rebound in commodity prices over the next year. This will put downward pressure on the USDCAD exchange rate as we saw earlier. Crude Oil may see a spike due to geopolitical events in the Middle East. Gold may see its price increase if there is a sharp correction in the broad stock market, something which is beginning to seem more likely recently. Other commodities may see an increase due to inflationary pressure. Many commodities, or their derivatives, are constituents of inflation baskets. When considering Wheat by looking at the ETF WEAT:Arca we see  price has fallen by 65% since it reached a high in August 2012.  There certainly seems to be a lot oversold pressure on most commodities.

The fundamentals of these currencies have not changed, so the medium term trend is most likely to remain intact. But high overbought levels of the US Dollar and a rebound in commodity prices could see a major correction in the USDCAD exchange rate.

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Fri, 01/08/2016 - 09:27 | 7016548 U4 eee aaa
U4 eee aaa's picture

Inflation is 1.7% yet housing prices in Vancouver are going up 15% - 25% yoy and have been rising double digits for many years. It would be interesting to see how they square that circle

And the real reason the dollar is tanking is because the BoC has painted itself into a corner. For years the Canadian interest rates were required to be higher than the US rates because our economy was very much dependent on the US. That changed significantly after the Feds balanced the budget but those things have changed again with commodities tanking.

The only problem is that the BoC has encouraged so much consumer borrowing, that they can no longer raise interest rates to protect the dollar. If they do, one of the few things supporting the Canadian economy, the housing market ponzi scheme, with implode and take the economy with it. Traders know this and, like sharks when blood is in the water, they are shorting the dollar for one of the easiest trades in the world right now

Fri, 01/08/2016 - 00:40 | 7015630 Dude-dude
Dude-dude's picture

It isn't just oil.  We Canadians export 'people' - like Mark Carney for example.  This move was a definite GDP value-add.

Thu, 01/07/2016 - 22:09 | 7015139 FIAT CON
FIAT CON's picture

Check out this link  http://www.waterwarcrimes.com

 Canadian water diverted to US and Mexico overtaking Oil as Canada's biggest export.

 

Peruse this site for political corruption of Priministers , the Queen and BC preimers.

 Murders and corruption, Just makes you want to say Hmmm.

Thu, 01/07/2016 - 22:01 | 7015130 FIAT CON
FIAT CON's picture

I could not have said it any better myself. (Gerald Celente)

https://youtu.be/SROM52ibmpw?t=21m31s

watch about a minute of this, although I highly recomend this entire 23 minute video.

Thu, 01/07/2016 - 21:53 | 7015096 FIAT CON
FIAT CON's picture

The GDP is calculated using the inflation rate, also the unemployment rate affects the value of a nations currency.

So, you cannot trust the GDP hence the false inflation rate and unemployment rate numbers.

It's all make believe except PM's and oil, pm's are easier to take with you.

Thu, 01/07/2016 - 20:25 | 7014652 chickadee
chickadee's picture

THREE PERCENT- THREE. That's the percentage of the Canadian GDP that is made up of crude oil production. Anyone saying the Canadian dollar is a petro-currency is a liar and stands to make a lot of money perpetuating that lie.

Read it yourself:

http://www.economist.com/news/americas/21641288-growth-shifting-oil-prod...

Thu, 01/07/2016 - 18:44 | 7014192 pitz
pitz's picture

Huge amounts of deflation in the Canadian pipeline, especially with so much overconsumption being driven through debt expansion.

Throw in Canada's dominance of the gold sector, and the CADUSD could easily be back to par and beyond in the next few years.  Of course, Canadians who over-induldged in RE won't be able to participate and will have to pay back debt in more expensive CAD$.

 

Thu, 01/07/2016 - 18:25 | 7014105 theyjustcantstop
theyjustcantstop's picture

surely Canadian economist are not truly believing us govt. reports on gdp, unemployment, and inflation #'s.

 

 

Thu, 01/07/2016 - 17:00 | 7013621 walküre
walküre's picture

Are Canadians still showing up for work and getting paid in C$? They should all demand to getting paid in US$ for the sake of preserving their lifestyles.

NZD, AUD are only one side of the resource currency basket. What about RUB or BRS?

Aren't all these economies in the same sinking boat?

Thu, 01/07/2016 - 22:56 | 7015342 FIAT CON
FIAT CON's picture

How do you compare currencies? what is the common denominator? GOLD! I want to be paid in GOLD.\

Thu, 01/07/2016 - 18:46 | 7014201 pitz
pitz's picture

CAD$ has only lost 1.4% YoY according to StatsCan.  Hardly 'toilet paper', and not even meeting the Bank of Canada's target of a 2% annualized loss.

Thu, 01/07/2016 - 17:36 | 7013830 Dark Daze
Dark Daze's picture

Get paid is US$? HAhahahahahaha. The toilet paper of the world. I don't think so.

Thu, 01/07/2016 - 19:01 | 7014267 FredFlintstone
FredFlintstone's picture

The best toilet paper in the world. Edited it for you.

Thu, 01/07/2016 - 19:28 | 7014399 Dark Daze
Dark Daze's picture

You Americans never learn, do you. Always with the hubris. Well, here are some facts for you about Canada, it's economy, our dollar and what is going to happen to yours. 

First off, we don't print excess dollars like the US does and we didn't do QE, thank God, so there are no excess dollars in circulation and no need to go with negative interest rates to suppress buying of Canadian dollars, there are only so many available. We print based on economic growth, not predatory capitalism.

Next, despite the fact that our trade with the US has dropped from 85% to 62%, our currency reserves, currently at 75 Billion US are growing by 2 billion PER MONTH. How is it that an economy that is in such bad shape has so much excess US dollar reserves and they are growing, even as the price of oil is sinking? Well, I will tell you why. China and Russia and a lot of other 'smart' countries are dumping Treasuries, then dumping US dollars to buy Canadian government bonds, which are the most sought after in the world right now. So we end up with your funny money that can't be used for anything, because you no longer make anything of significance. If anything, we are taking on massive risk by allowing so many US dollars to accumulate along with the fact that all four Canadian banks have been Primary Dealers for the Fed since the financial crisis and our banks are stuffed with your soon to be defaulted/worthless Treasuries.

Next, the days of US global hedgemony are over. Your government, financial system and military capability have been exposed as frauds. Your own IMF initiated Chinese Yuan as official reserves at 10% of the SDR basket, soon to rise to 20% and byond as China emerges with a gold backed Yuan and trades in gold only, at the expense of the US dollar. OUr banks, slowly but surely are buying up your insolvent banks and penetrating into the heart of the empire. Who controls the money controls everything. 

Finally, we have done all this, despite destructive 'free' trade deals, default by you on the Auto Pact, bullying behavior in softwood lumber, fisheries, cow/calf operations, beef and dairy supply, and a host of other punitive punches that you have thrown at us over the years. We have a highly educated, highly engaged population that is completely diverse with no problems, we don't have crazy mother fuckers running around with guns, we don't fear our government and we actually take care of our people, and our Supreme Court doesnt waste it's time deciding on whether or not employers should pay for womens birth control.

So when the CAD starts to rise and the US $ starts to sink, remember that you can always move your money to a country where it will be safe and still worth something at the end of the day.

 

Fri, 01/08/2016 - 08:44 | 7016288 headhunt
headhunt's picture

By the way;

You are welcome for the protection of living under the umbrella of our military for these oh so many years - for free.

You are welcome for the cheap pharmaceutical drugs developed in America and subsidized by the US citizens because Canada has passed law (can you say tariff) restricting the price of drugs sold in Canada.

You are welcome for having a neighbor who allows any Canadian citizen to enter the US and make use of the best medical system (changing due to the leftists running things these past years)  in the world.

You are welcome you fucking knucklehead.

Fri, 01/08/2016 - 09:18 | 7016477 Dark Daze
Dark Daze's picture

Read my other reply about your so called 'nuclear umbrella'. It was never necessary. It was your own fucking Pentagon and the psychopath Allen Dulles that wanted nuclear war with Russia. They had a plan in 1959 to destroy 1,100 cities and sites all over Europe and Russia. Some 'friends' you are. During the war of 1812, your commanding General, General Hull issued a proclamation to Canada that said that if we didn't accept your 'liberty' we would be wiped out to every last man, woman and child. People don't forget those kinds of things and it is small comfort that Hull was eventually declared a coward by congress.

As for pharmaceuticals, do you think you are the only people in the world who do research? Brtain, France, Germany, Canada, Spain, the Nordic countries have all contributed to pharmaceutical research and unlike your useless and dangerous drugs, they produce stuff that is actually safe and effective.

You certainly DON'T have the best medical system in the world, the Swiss do. The only thing your medical system is good for is robbing people of their money. Better not get sick in the US because if you do you will probably end up bankrupt. Check out travel medical products that are sold around the world. Nobody wants to insure anybody for treatment in the US. You spend 10 times the money we do for less than half the benefit.

And as for tarrifs, get educated. Mulroney extended patent protection for your drugs from 10 to 20 years in the 1980's.

We in Canada don't want you and don't need you. We never did. We simply had the unfortunate circumstance of being physically located next to the biggest bunch of crooks and hooligans on the planet. Everything you have ever achieved has been by force. You are evil little shits. You stole 4 Trillion in bought and paid for land from Canadian patriots during the war and never paid for it, nor have you ever paid any interest on it, but you DEMAND that Cuba compensate YOUR people and companies for land and businesses they lost. What a double standard and how typical.

And here is a cautionary tale for you that is typical of how American treats it's own. My neighbour, a combat veteran of WWII owned millions and millions of dollars worth of land, real estate development companies, and a bank that financed the operations. That wealth was built up over generations. But when the crisis hit in 2008/9, even though he had millions and millions in assets, as the people lost their jobs they coluldn't pay their debts, the bank became insolvent and he lost everything; all the land, all the assets, all his money and the bank. Wherre did it go? Well, to a subsidiary of JP Morgan funded by US taxpayers money that's where. You see, even though his enterprises employed hundreds of people and put thousands more into their own homes, he was deemed 'too small' to save with TARP. BUt JP Morgan wasn't 'too small'. Had to save the CIA bank now didn't we. Now he is broke, living on Social Security and Jamie Dimon, the gangster from Chicago, is a billionaire. Sounds fair to me. /sarc

So don't go preaching to me about how you have 'helped us out'. We have helped you out time and time and time again. IN WWI, WWII, Korea and on and on. We saved your diplomats in Iran. We send hundreds of billions south every year in profits. 

In other words, buddy, just stick your Yankee Doodle Dandy up your ass.

Fri, 01/08/2016 - 07:17 | 7016051 Vendetta
Vendetta's picture

The same monetary forces are working against CAD and its people as are working against the US.  They want to control and manipulate into their grand schemes.  I heard the same type of propaganda on Canadian television 'news' that I hear all the time in the US when I was in Canada for work.  My mother was Canadian and her brother was a NATO commander in the Canadian forces and I never had a problem with Canada as a neighbor.  Can we focus on the real problem we are all facing with these monetary mutants playing with their giant monetary 'experiment on everyone?

Fri, 01/08/2016 - 06:16 | 7015967 Farqued Up
Farqued Up's picture

Some of us moved a majority of our money there because of the derivative mania here. Unfortunately, some of us drank the CAD and AUD kool-aid and are pissing red ink.

You seem to think its all OK and that the rise of the Phoenix is on the verge of flapping its wings. I certainly hope so but I don't get the warm fuzzies that it's imminent.

It would be best for all if you Canadians would hate our Free Shit govt and slack back on us Hamsters turning the wheel.

Fri, 01/08/2016 - 08:11 | 7016181 Dark Daze
Dark Daze's picture

We aren't 'pissing red ink'. We have positive GDP, a balanced budget, 75 Billion in foreign reserves, low but positive inflation, wildly popular government bonds, the safest banks in the world for 8 years running, the largest gold desposit and gold mining industry anywhere, the most mineral resources on the planet, the larges unconventional oil reserves in the world,  and a stable country. You on the other hand have debt to GDP of 125%, which you will never repay, your productive capacity was stripped out and sold to China and India, you have an annual deficit that is soon to return to 1 Trillion a year, you have no health care to speak of and what there is the Repuplicans keep trying to kill, you have Billionaires that are trying to buy what's left of the government while purchasing the federal lands and parks to make even more money, and 78% of the population believe/know that your system is corrupt to the core.

No compairson as far as I can see. But then getting a Yankee to admit anything is wrong is like trying to pass a turd sideways.

And you're on the hamster wheel because you CHOOSE to be on the hamster wheel. You can quit it anytime.

Thu, 01/07/2016 - 20:42 | 7014743 Boing_Snap
Boing_Snap's picture

As a fellow Canadian I'd say your views are idealized at best. Inflation in Canada is running wild, the price of gas has dropped 20% since the peak, while oil has dropped 70%. Our governments are either corporate stooges or debt stoking machines, both suit the banks whom own this country just like they own the rest of the world.

We once were an independent nation, while the US warmongered after WWII, we specialized in peacekeeping. While the rest of the world succumbed to the private central bank control scheme, we were the only country to have a public central bank, that history should be a lesson on how to pick up the pieces when this current corrupt mess all falls apart.

#######

"The Bank of Canada was instituted in 1934 to combat the Depression, the BOC had the charter to fund public infrastructure projects through the issuance of legal tender from the Treasury. Starting in 1936 the BOC funded farmers to replant the drought ridden prairies. Other public projects were funded and by 1939 Canada was out of the Depression, the only country to claim that in the world. The BOC was used to build the 3rd and 4th largest Navy and Army in WWII, funded the vets when they came back by getting them into a house and paying for college.

The BOC then went on to build modern Canada, the second largest nation on earth, airports, the St. Lawrence seaway, national highways, roads, railway spur lines, telecommunication infrastructure, hospitals, social programs, health care, etc. etc.. By 1974 the bill for these expenditure was $18 Billion, however in 1974 that changed.

The IMF and World Bank applied pressure on the Canadian government and Canada then began to fund itself through debt financing, issuing bonds to private Banks whom then issued currency to the government. The interest on the bonds then began to accrue, meanwhile infrastructure spending declined and the debt grew. By 2014 the debt grew to $600 Billion, the principle on the debt being an additional $19 billion, total of $37 billion in 80 years, the remaining $563 Billion was the interest owed from 1974 on.

This illustrates how destructive debt financing is, and how credit financing by issuing legal tender from the Treasury works, you have to praise Iceland for using credit based financing, a proven workable system."

 

Thu, 01/07/2016 - 23:21 | 7015425 Greendawg
Greendawg's picture

Heh yeah daddy Trudeau really screwed us over in 74.   We do have a few good people fighting the good fight over at COMER, however its rather unfortunate that they get no publicity.  Little Trudeau had the nerve to publicly call the COMER vs BOC lawsuit a conspiracy theory and Harper did his part to keep them from getting any media attention.  Rocco Galati and his team really deserve more recodnition for thier efforts.

http://thetyee.ca/Opinion/2015/04/17/Liberate-Bank-of-Canada/

https://www.youtube.com/watch?v=ZhlCM7NcRxw

 

Thu, 01/07/2016 - 23:03 | 7015362 pitz
pitz's picture

Inflation has not been running "wild" in Canada.  Over the past year, inflation has been only 1.4% YoY, which is beneath the Bank of Canada's usual target of 2%. 

Thu, 01/07/2016 - 19:37 | 7014458 nmewn
nmewn's picture

I wouldn't put my all faith in any government. 

Especially a "constitutional" monarchy ;-)

Thu, 01/07/2016 - 19:54 | 7014524 Dark Daze
Dark Daze's picture

Well, Canadians have been on this continent as long as Americans have. You take a look at Canada, peaceful, prosperous, healthy, lots of pure water and pure air, tons of living space, advanced technlogy and then you take a look at the US and I think the comparison is quite stark. Their entire government from the Presidency to Congress to the Supreme Court has been throughly corrupted, their land has been destroyed, their people live in poverty, their cities are a dangerous cell pool of guns, drugs and violence, and I'd say that our system is much better. Thanks.

Fri, 01/08/2016 - 04:01 | 7015838 cheech_wizard
cheech_wizard's picture

>You take a look at Canada, peaceful, prosperous, healthy, lots of pure water and pure air, tons of living space, advanced technology and then you take a look at the US and I think the comparison is quite stark.

Yes, because when you've been sitting under the protection of the empire's nuclear umbrella since 1945, there really isn't any need to spend money on things like defense, is there?

Standard Disclaimer: You do however, have very well manicured lawns, so you do have that going for you. Maybe we should try burning each other's capitols again, just for something completely different in 2016.

 

Fri, 01/08/2016 - 07:55 | 7016073 Dark Daze
Dark Daze's picture

Here's a new flash for you fuckhead. Each and every year, biliions and  billions of dollars of profits flow from Canada into the US, to keep your stupid, ineffective and corrupt MIC alive. Each year, you borrow the entire amount of money you spend on the military from the rest of the world. You can't afford it and haven't been able to afford it for a long time now.

So as I said previously, the cash flow from cash positive countries, which typically have been the oil producing countries are actually PAYING you to bomb them and kill them. Such is the measure of your greed and duplicity. And when one or more of them like Saddam or Moamar decide they are going to leave the US dollar, well, you just kill them and destroy their country, even though you used Saddam as a tool to try to destroy the Iranians.

And we never needed your 'nuclear umbrella' anyhow. It was your own Pentagon that had plans for a massive first strike (1,100 cities/sites) nuclear war, imagined by your head psychopath, Alan Dulles, not the Russians or Chinese, so just flock off.

As for burning each others capitals, you didn't burn our capital in the first place, you burnt York (Toronto), so try to correct your ignorance please. Your capital will be burnt by your own citizens. We won't have to do a thing.

Thu, 01/07/2016 - 15:12 | 7012932 wobbleybob
wobbleybob's picture

This is written by an idiot with ZERO understanding of whats going on economically in Canada. Allow me to fill you in..

1. The 20 year long commodity cycle is OVER hence HURT Canada

2. New Liberal Gov't spend spend spend

3. National Debt UP UP UP

4. Canada is a massive Energy producer of OIL & GAS yes 6th largest in World but on a relative basis to its economy its far more important. To tax revenue, supply industries, balance of payments, etc etc

5. Canada's manufacturing sector is GONE GONE GONE left in last 20 years.....

6. Expect the dollar to fall through all time lows in 2016

Thu, 01/07/2016 - 18:48 | 7014209 pitz
pitz's picture

The "new" Liberal government actually ran on a platform of fiscal austerity compared to the previous Harper Conservatives.  Harper ran $25B/year deficits during his decade in power on average.  Justin Trudeau promised $10B/year deficits for a few years and eventually a return to no deficits like the Liberals ran in the 1990s and early 2000s until they were turfed over, in hindsight, a relatively minor affair of corruption involving some of their Quebecois friends.

Thu, 01/07/2016 - 18:02 | 7013995 edifice
edifice's picture

Let them do the chicken dance!

CHEEP CHEEP CHEEP

FLAP FLAP FLAP

WRIGGLE WRIGGLE WRIGGLE

CLAP CLAP CLAP

Fri, 01/08/2016 - 01:38 | 7015742 Albertarocks
Albertarocks's picture

Let me guess... you ran out of meds a week ago?

Thu, 01/07/2016 - 17:10 | 7013683 Never_Put_Down
Never_Put_Down's picture

...and don't forget Stephen Poloz has also reduced interest rates in the past year, this immediately created weakness. The real US economy is in the tank so there's no Canadian export advantage with the lower dollar. Poloz should have been raising interest rates for the past 3 years, instead he's been in lock-step with the US dishing out free credit. Poloz is a complete moron and a Corporate puppet, what he has given us is unaffordable housing, highly leveraged banks and an economy that's in recession. Fire his ass

Thu, 01/07/2016 - 18:45 | 7014195 pitz
pitz's picture

The Canadian economy doesn't even justify the high interest rates that are currently being set by the BoC.  Poloz should have been into negative rates by now.

Thu, 01/07/2016 - 18:58 | 7014251 Dark Daze
Dark Daze's picture

 I see. negative interest rates eh? And what is that exactly? Well, I'll tell you what it is, it's a TAX and I though you Yankee's hated taxes. But apparently you don't hate them so much that you wouldn't wish them on everybody else.

Thu, 01/07/2016 - 18:36 | 7014151 Dark Daze
Dark Daze's picture

And yet a certificate of deposit in Canada yields 500% more than a CD in the US and we are supposed to believe the Canadian economy is in the tank but the US economy is doing great. Our government bonds sell out at 1.4% on a ten year but US bonds just sell and are parked in the bad bank in Brussels, which is currently overflowing with over 1.5 Trillion in US Treasuries that nobody wants.

Yeah, like I believe the bullshit.

Thu, 01/07/2016 - 16:56 | 7013431 Dark Daze
Dark Daze's picture

Listen bud, you're the fucking idiot. Oil and gas amounts to 6.5% of GDP. PERIOD. That's all, so stop trying to lie your way around this story. As for the government spending, well, the Liberals have proposed 10 billion per year for 2 or 3 years in infrastructure spending. In a 1.8 Trillion dollar economy that is a fractional percentage, but, for every dollar of infrastructure spending it generates 1.5 dollars in economic activity, so it's a good policy.

CAD shouldn't even be called a commodity currency. The only reason it is, is because every cycle the pricks on Wall Street love to pick over the bones of the best and most promising oil and gas startups. They get a 50% discount on the stock price and an additional 40-45% discount on the currency exchange so in effect they scoop up world class assets at 10 cents on the dollar. It is the way it has always been with the Americans, wherever they have gone. Sell the foreign currency short, convert your foreign currency holdings into US dollars. Wait for the price to drop like a stone then step in and buy. Predatory to say the least. Evil to say the most.

So stop with the stupid, lying hyperbole and go have a beer.

Thu, 01/07/2016 - 18:39 | 7014165 Dark Daze
Dark Daze's picture

ooooh. Pardon me for exposing the American mythological bullshit.

Thu, 01/07/2016 - 22:52 | 7015324 FIAT CON
FIAT CON's picture

Great Posts DD!

 When Nixon closed the gold window the whole world should have threatened WWIII and demanded the gold for the US ink and paper right then and there, most of the world would be far better off.

This thing called the internet was first used for porn and jokes, now it's being used to share knowledge about the elite and their corruption, it's starting to spread fast.

 

 

 

Thu, 01/07/2016 - 22:37 | 7015268 swmnguy
swmnguy's picture

You'll notice we're very protective of our mythological bullshit.

Thu, 01/07/2016 - 16:57 | 7013595 walküre
walküre's picture

The commodity super cycle lasted actually 40 years.. about the same amount of time that interest rates have consistently gone down

Interest rates are reverting and turning 40 years of what commodities and rates traded at upside down

Fed's mandate is to preserve the Dollar above all else.

Gold is up and so are gold miners. Could be the end of the end to the Dollar/Gold standard.

Thu, 01/07/2016 - 18:37 | 7014157 Dark Daze
Dark Daze's picture

Uh, sorry to tell you this but the dollar/gold 'standard' hasn't existed for 45 years now. Nixon killed it in 1971 when he decide that everyone should accept paper instead of gold that he didn't have to fund the Vietnam war.

Thu, 01/07/2016 - 19:45 | 7013960 Dark Daze
Dark Daze's picture

It's not just the commodity super cycle, that was an aberration. Here is how the Americans play the game. Beginning at the start of the cycle when the US dollar is high and EM and other currencies are depressed. Step 1. Wait for the bankruptcies to finish. Step 2. Use your (overvalued) US dollar funny money to buy up foreign currency in markets where you want to buy productive capacity, be it bananas or steel, resources or human capital. You get a lot of foreign currency for your money. Buy up the bankrupt or near bankrupt production for 10 cents on the dollar. Step 3. Extract every ounce of wealth you can, while paying the workers peanuts, making sure that any shit disturbers are 'disappeared' as they say in Latin America through the use of your 'enforcers', the CIA and the US military. Keep on pumping out the product and the profits until prices become too high and demand drops, then Step 4. Sell out to the local yokels while their currency is high and the US dollar is low. Finance their purchase with bonds that pay 12, 14 16%. Step 5. Leave for a 2 year cruise with your family and your maids and security detail while the cycle turns to recession, enjoying the ever rising value of the US dollar that 'people' have been told to move into for 'security'. Rinse and repeat.

Is it smart? Perhaps, if all you care about is winning and the short term, and as long as there is a steady supply of desperate poor people at home who will jump at the chance to join the military to 'defend' the 'interests' of their masters and learn a trade, if they survive. Is it wise. Definitely not. It is corrupt, nasty, brutish and parasitic. If you want to be a smart parasite, enter into a symbiotic relationship with the host, don't destroy it. Business practices like this are the number one reason that Americans are despised around the world, and with good reason. The ordinary person never cared about it much. As long as they had lots of money to flash around and a big house in the suburbs with a new car every 2 years. Such is the general and wilfull ignornance of the American population.

But something strange happened on the way to the forum. You're own serfs gamed the system and brought the whole fucking thing down. But then you can't really blame them because they had been taught the 'greed is good' principal. Now everything is a mess. There is no middle class anymore, 90% of the population is lower class. They don't pay nearly as much in taxes to keep the war machine going. And, China, now there is the real reason you are in such a pickle. They went along with you right up to the point where you were going to take your windfall profits and sink their economy, and then they said no way, Jose. Suddenly, you had trillions in captured capital. Your banks were insolvent and still are. As there are 1.4 Billion of them, invading wasn't an option. It's been 8 years now and your so called 'brilliant minds' in economics haven't been able to move the needle. In fact, the prescription they have applied to their 'friend and partner' Japan has created an economy with debt to gdp of 350%, far beyond the 140% of Greece. Poor Japan. I think it is the last time they will listen to you.

So, Russia threw you out. China threw you out. Europe is in the process of throwing you out. Latin and South America don't want to see another yankee for the next thousand years and your population, formerly compliant and sated, is in revolt. And what does the average American want to do? Well, they want to elect your own Hitler, Donald Trump, who will (a) throw out all the Mexicans (now that you've used their services for 40 years), default on the debt, spend trillions more on the military so you can go steal Iraqi, Syrian and Libyan oil and cut off any and all services to the population, including health care and pensions. Nice.

It couldn't have happened to a nicer bunch of scumbags.

Fri, 01/08/2016 - 05:55 | 7015946 Farqued Up
Farqued Up's picture

Whew! Do you feel better now?

Fri, 01/08/2016 - 07:49 | 7016126 Dark Daze
Dark Daze's picture

I always feel better when I speak the truth. Or as Sanders says, "Be a truth speaker".

THe real question is, did anybody learn anything?

Thu, 01/07/2016 - 15:30 | 7013064 mtl4
mtl4's picture

"The general bull trend the green back has been in picked up momentum since talk begun by the Fed of a return to higher interest rates."

 

Sorry but the dollar's rise has abosultely diddly squat to do with interest rates and everything to do with a flight to safety (soverign debt problem).

Thu, 01/07/2016 - 14:44 | 7012755 Librarian
Librarian's picture

Just a heads up that the technicals on the CAD show a bounce is coming,

The Bieber Bounce?

When did we release the sanctions against Canada for Bieber and Cruz?

Thu, 01/07/2016 - 13:59 | 7012406 taketheredpill
taketheredpill's picture

 

 

 

haven't looked at it for a long time but I thought the ranking of "Commodity Currencies" was:

 

1. NZD

2. AUD

3. CAD

 

But C$ definitely being hammered by Oil regression right now.  best model uses both Oil and Copper.

 

Also important to note that the drop in C$ so far has been "orderly".  If we ever do get a sudden snap lower in risk assets like in 2008, you could easily get a snap oabove 1.600.

 

On the other hand it would only take one word from Saudi Arabia re production cutbacks and the C$ would reverse in a second.

Thu, 01/07/2016 - 18:52 | 7014228 Dark Daze
Dark Daze's picture

On the other hand it would only take one word from Wall Street and the C$ would reverse in a second.

 

Fixed it for you.

Thu, 01/07/2016 - 13:46 | 7012341 nope-1004
nope-1004's picture

When it was at 1.33 CAD I read about "the reversal is now taking place".  But that didn't happen.

I believe this is a global concerted effort by all western central banks to keep the USD strong, then revalue it soon.  That is the only way that it can be retained as the global reserve currency and the US can wash away some of its debt.  The effect will be instant increasing value for all other currencies, like CAD, but without the massive shock that would otherwise occur if done at much lower levels.

We'll see I guess.  Without question the USD strengthening is done for a reason and by design, as Yellen increasing rates puts further pressure on foreign currencies.

Thu, 01/07/2016 - 15:16 | 7012464 Albertarocks
Albertarocks's picture

It's definitely not a case of a concerted effort by all western central banks to keep the USD strong.  Beyond question it is a case of high demand for the USD, "real" need for it.  That's because as defaults loom large, and as prices for darned near everything on the planet are falling, investors (including central banks) who have to raise cash to meet margin calls need to raise cash quick... American cash.  That's the demand side of the equation.

On the supply side, every time a debt gets paid off, the dollars that were created on the day that loan was taken out... those dollars don't go back into a vault somewhere, they vanish back into the thin air they were birthed from in the first place.  Those dollars were "loaned into existence" and when the loan is paid off, they vanish right off the face of the earth.  So as difficult as it is to believe, this actually results in a shortage of US dollars.  How is that possible you ask?  Because the amount of global debt based on USD is $600 trillion.  That's the kind of numbers of USD that the insane people in the dirivatives markets will have to come up with.  There's no way the FED or the BIS or the IMF or any other of those phantom central banks, who are flat broke themselves, can handle that other than to open up the spigots and wreck any currency left standing.  That day will come in time, absolutely guaranteed.

There is nothing the banks can do about USD strength.  In fact they are horrified by it because that's what deflation is... a reduction in the amount of currency available.  This is just an expected effect of the deflationary cycle.  It will be the central bankers' response to this crisis of deflation that will result in the massive money printing that everybody is expecting.  And that will happen.  And when it does, that will represent the end of the USD as we know it.  All currencies are in a race to the bottom.  The USD should be the last to fail.

Thu, 01/07/2016 - 18:54 | 7014239 Dark Daze
Dark Daze's picture

Yes, high demand because you made damn sure, just like inthe 1970's that you shoveled as much currency into the EM's as you possibly could, regardless of credit worthiness. Now with liquidity disappearing at the rate of 1 Trillion for every 1/4 point rise, of course they are desperate for American $. It's how the game works.

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