The biggest issue facing the finacial system today is the US Dollar rally.
The Fed and other Central Banks are trying to maintain the illusion that they have everything in control by talking about interest rates, but the reality is that the US Dollar carry trade is ABOVE $9 trillion in size. That is almost as big as ALL of the money printing that occurred between 2009 and 2013.
And it's imploding as we write this.
Globally, the world is awash in borrowed money… most of it in US Dollars. The US Dollar carry trade is north of $9 trillion… literally than the economies of Germany and Japan COMBINED.
When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.
And the US Dollar has been rallying… HARD. Indeed, the move that began in July 2014 is already larger par in scope with that which occurred during the 2008 meltdown.
Moreover, this move has occurred with little to no rest. The US Dollar barely corrected 2% after rallying a stunning 16+% in a matter of months before beginning its next leg up.
You only get these sorts of moves when the stuff hits the fan. CNBC and the others are babbling about the Fed’s FOMC changes, but all of that is just a distraction from the fact that a $9+ trillion carry trade, arguably the largest carry trade in history, has begun to blow up.
Rate hikes, QE, all of this stuff is minor in comparison to the carnage the US Dollar is having on the financial system. Take a look at the impact it’s having on emerging market currencies.
Here are the monthly charts for the USD/ Aussie (black line), USD/ Brazilian Real (blue line), USD/South African Rand (red line), and USD/ Mexican Peso (green line) pairs. The carnage over the last six months has been extreme with double digit moves across the board.
The US Dollar took down Oil, commodities, even emerging market currencies. Stocks will be next. The first REAL sign that the 2008 Crash was coming occurred when the US Dollar began to skyrocket in the summer of 2008.
The time to prepare is now, BEFORE the crash hits.
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