Is the Dollar Signaling Another 2008-Type Autumn is Coming?

At this point the Greek crisis is beyond farcical; you couldn’t make up a more absurd plot if you tried.


Greece’s Prime Minister Alexis Tsipras allowed Greece to default on a debt payment to the IMF in order to give the Greek people the opportunity to vote on whether or not to accept a particular EU offer.


Last week, the Greek people overwhelmingly voted against the offer. Tsipras then went to the EU to seek a compromise… only to be told that EU leaders were fed up and wanted Greece out of the Euro. So Tsipras agreed to a deal that is much worse for Greece.


The whole deal has blown up in his face. And it’s going to consolidate Germany’s control of the EU. Instead of shifting power away from Germany by introducing the threat of “default” to negotiations, this deal added a new weapon the Germany’s arsenal: the threat of Euro expulsion.


The threat has worked. Greece must fork over €50 billion in assets in exchange for the deal. By assets, I mean “airports, infrastructure, and most certainly banks.”


This represents an incredible 27% of Greek GDP. Greece, in essence, is handing over a quarter of its economy to Germany control. So much for any notion of borders, independence, or even sovereignty. Greece is now, for all extensive purposes, something of a German colony.


Greece also has to submit to six months of capital controls.


Interestingly, stocks are moving higher on the news… but so is the US Dollar. This is likely due to the fact that while Greece will remain in the Euro, Greek banks remains completely insolvent. Also, why anyone would want to move capital into an economy or currency in which confiscation of assets, capital controls, and the like are allowed is beyond me.


Remember, stocks are the “dumb” money. The currency markets are ALWAYS ahead of them. So the US Dollar’s strength is indicative that “all is not fixed” in Euroland.


Indeed, the Dollar has just broken out of a falling wedge pattern.  This is a BULLISH development.


The whole thing feels a bit like the summer of 2008 all over. Once again, the global economy is weakening, a significant crisis has erupted, and temporary solutions to said crisis are being hailed as a success.


And then, as now, the US Dollar’s strength was the first sign that all was NOT well, the crisis was nowhere near over, and that big trouble was stirring in the financial system.



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