Friday, February 19, 2010

Dollar Death Dance Has Begun

Jim Willie, 
The Dollar Death Dance part II began in December 2009 with the loud Dubai gong. The US$ rallies again because fiat currencies appear to be in death throes. The Competing Currency War is brisk, more like a Reverse Beauty Pageant. As monetary crisis comes full circle, pushed by gargantuan government deficits on a global basis, the US$ will again resume its powerful decline. The Enronization of US financial structures is gradually being exposed, replete with false accounting, diverse hidden tentacles, and prolific slush funds.
The credit climax will be a global shock wave, a grand restructure of financial structures, tremendous disorder & chaos, dislocations of important supply chains, and enormous challenge. Prepare for storms! Gold, silver, and platinum will be survivors left standing!! They have been offered in recent weeks at heavy discount in U$ terms, but quite the opposite in Europe. Only the alert and prudent will exploit the artificially low posted paper gold & silver prices.
The US is an oversized Third World nation. It ranks poorly relative to other nations in its debt structure and exposure. The United States is in worse condition than almost all nations in the Western world, equally bad as those in Europe currently denigrated in crisis mode. Left to finance its own debt, the USGovt would suffer an immediate cave-in. It has the Printing Pre$$ at its disposal, and a USMilitary to roam the planet, thus creating an unstable system. The US has an 80% debt/GDP ratio, easily to hit 100% next year. The US meanders with false confidence, yet besides Greece, the US is worse off than all the PIIGS nations criticized as basket cases so readily.
USGovt spending and tax revenue are diverging. The path is actually a pathogenesis, not sustainable. A monetary crisis comes, accompanied by a sovereign debt crisis. The United States will not be spared. Focus on war is the ruin on the exterior, while destructive focus on inflation is the ruin from within. Witness the climax of the Fascist Business Model, a final chapter. The status of USGovt finances reads like a Banana Republic. Often a picture is 1000 times more clear than any concisely written paragraph. The red line is spending. The blue line is tax revenue.

Bubbles approach their climax before the bust by demanding, draining, and destroying an exponentially increasing amount of money. The USTreasury Bond is no different, whose securities finance the yawning USGovt debt. Both are manifested bubbles. The difference between spending and revenue is deficit, and the USGovt will rack up well over $1.5 trillion in fresh 2010 deficits despite claims last year to the contrary, all false.

When a system reaffirms itself with an endorsement of grand errors and corruption, it guarantees its failure. Identify the endorsements of failure. The signature of the Obama Admin is no change. Nations often are given opportunities to change course. The United States with these important decisions, has chosen to seal the path of ruin, institutionalizing further its banker devotion, even after fraud has been exposed, failed policy recognized, and participants identified. At the end of the road lies firm rule by a police state and USTreasury default, my ongoing unswerving forecasts. Both might be disguised. The complete lack of moves toward reform or true remedy, in my view, serves as an EPITAPH on the imperial tombstone. To date we only see bigger funding lifelines to the same big financial locations that caused the problems. The USEconomy is moribund and is simply not going to recover, stuck in deterioration mode, lifted only by USFed steriods and Congressional adrenalin. Next comes shock. The important decisions of endorsed failure:
  1. Approval in October 2008 of the TARP funds totaling $700 billion to be distributed like a vast slush fund to Wall Street banks, with Goldman Sachs in charge of dispensation and first in line for reception.
  2. Selection and confirmed appointment of Tim Geithner as Treasury Secy in January 2009. The Wall Street financial center continues its stranglehold, enabling easier continued lack of resolution for insolvent banks and mortgage bond loss claims.
  3. Decision made at several points in time to continue the endless wars. The USCongress approved the sacred status of war, instead of rebuilding the US economic structures. Still nobody searches for the missing $50 billion from the Iraq Reconstruction Fund.
  4. Empty Economic Stimulus Bill signed into law in February 2009, when it was only a set of important plugs to the massive state budget shortfalls. In this sense, the bill was merely a grand band-aid patch applied to a hemorrhage wound, not even a tourniquet.
  5. Blessing given to the relaxed accounting rules offered by the Financial Accounting Standards Board, approved by the USCongress, effective in April 2009. The rule change enabled big banks to declare any value for assets they wished, according to any model they chose, without scrutiny, without any connection to reality of markets.
  6. Confirmed reapointment of Bernanke as Chairman of US Federal Reserve in late January. Bernanke was confirmed by the weakest vote (70 - 30) in the history of the USFed. Threats of calamity accompany calls for full disclosure of the USFed itself. A NO vote would have signaled an upheaval of the USFed as command center. The US Supreme Court is next in line for a crucial vote.

Nobody can dispute that Europe has captured global attention with the threat of sovereign debt defaults, a string of them potentially. During the misdirection toward the paper gold price in US$ terms, pushed down by incredible shorting of futures contracts at a time when never the COMEX nor LBMA metals exchanges have been in possession of less gold & silver metal in inventory, the real story is the Gold price in Euro terms. It has broken out past €800. A runup should continue for around an 18% move, like to the €940 to €945 range. What a strong uptrend in Euro terms, a strong moving average uptrend, and strong stochastix index! The strength of the Gold price in Euro terms should continue until the Germans establish clarity with the New Core Euro. They will order the financial surgeons to remove the PIIGS surplus matter, leaving the Central Europe core without the shattered nations that boast busted housing bubbles, busted banking systems, outsized federal deficits, heavy import needs, and capital requirements impossible to meet. When the New Core Euro is clear, then the surviving form of the Euro currency will rise and rise and rise, certainly challenging the USDollar. Only then will the Euro push toward 200/US$ in its exchange rate.

The Gold price in US$ terms, despite the hue & cry, is hanging on well. It maintains support above the $1050 price. It has succumbed to two powerful downdrafts, aided to be sure by selling golden papyrus. In fact, the suppression of the paper gold price has resulted in production ironically of physical metal placed by honest brokers as margin collateral. See margin calls and forfeited collateral. Its long-term 50-week moving average remains in uptrend. In the last week, gold investors have been treated to a bullish stochastix crossover in the making. When the New Core Euro is clear, watch the US$ DX long-term decline resume, and do so powerfully. The globe will face the worst monetary crisis in history, with epicenter the USDollar. The sovereign debt defaults will come full circle, the start being September 2008, the conclusion an attack on the USTreasury Bond. The USGovt debt is unsustainable, growing worse, and will eventually break. Pure financial physics. Gravity will sink the US Flagship and its economic flotilla. The global reserve currency in the USDollar stands as the biggest travesty in the history of global finance.

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