Why the U.S. Dollar Chart Tells a Drastically Different Story than Financial Pundits

The fact that I’ve been able to accurately predict the significant stages of this ongoing crisis for over 3 years has nothing to do with intelligence or my ownership of a crystal ball. It merely has to do with the fact that I have understood from the very beginning of this crisis that the origin of this crisis was rooted in our global monetary system. It really is that simple. The “experts” that parade around TV and in the media have consistently been egregiously incorrect about their assessments regarding this crisis not because they are incapable of reaching the same conclusion as I. To the contrary, as insiders at the highest levels of the US Treasury, the US Federal Reserve and Wall Street, they almost certainly understand the mechanisms of this crisis even more than I do. However, they have been consistently wrong about the direction of this crisis because most of them have ulterior motives that are better served through the deliberate and systemic concealment of the true nature of this crisis.

Ever since I was a child, I was fascinated by factors that dictated that different monetary values should be charged for the exact same goods merely based upon the global currency that was being used to consummate its purchase. After I graduated from college and truly began to travel around the world, I noted that during certain years, my travel expenses would be significantly higher than in other years, primarily due to the strength or weakness of the US dollar. As I continued to spend a great deal of my adult life residing and traveling in many different countries, the weakness of the US dollar was always much more apparent to me than to other Americans that never left the United States for business or holidays. Thus, it was infinitely easier for me to predict the 2007 global stock market crash, as I did in this September 2007 article, “Why the Fed’s 0.50% Interest Rate Cut Won’t Save the US Markets“, even when appearances on the surface were rosy.

A mere six months after I wrote this article, financial “pundits” continued to sucker retail investors with predictions of stock market bottoms, with one such pundit predicting in March of 2008 that the US Dow Jones index would skyrocket from 12,361 to 20,000 by March of 2009 (by the way, this particular pundit was touted as being famous for accurately predicting previous historical market bottoms) . Many times after such ludicrous predictions are made to pump an industry, it’s quite difficult to find them as financial sites remove them from their websites due to their embarrassing nature. Fortunately, for your reference, I was able to find an existing link to that absurd article here. To give you an idea of how ludicrous that prediction was, the US Dow Jones stands at 8,422 today.

The strength of a nation lies in the strength of its currency. That phrase has always stuck with me. Thus, during the early fall of 2007 when the US market bubble was being inflated to a tipping point by the US Federal Reserve, I never bought into the lies being propagated in the mass media that the bubble was sustainable. Why? Throughout my various business travels in different countries as US stock markets continued to climb higher late in the third quarter of 2007, I noticed that the US dollar’s purchasing power was still declining strongly and barely more worthy than monopoly money. Thus, given the huge disconnect between the strength of the American currency and all the “experts” on TV that were applauding the strength of the US economy, I positioned myself to benefit from a crash instead. In fact, now that I spend more time in Asia than in the United States, my only saving grace is that I started converting dollars into gold years ago and have since converted my business model into a gold standard, which I believe many other businesses worldwide will emulate in future years as this crisis deepens.

Today, the situation is no different than it was back in October of 2007. CEOs from every industry imaginable are saying that the global economic crisis has bottomed and that the recovery will definitely be recognizable and reach a sustainable status by the latter half of this year. But in my opinion, every single one of these CEOs falls into one of either two categories. (1) CEOs that have zero understanding of this global crisis; or (2) CEOs that understand this crisis yet will unethically lie to the masses.

Today, in my business travels throughout Asia, the US dollar is still only nominally stronger than monopoly money. Two years ago, when I spoke to a friend of mine whose family owns a large construction business in Dubai, when I asked him if his family business accepts US dollars for payment, his response was laughter.

The truly ugly US dollar chart below also confirms the stance I take in this essay. It does not surprise me at all that the banking elites continue to lie about the true state of this crisis. In fact I would expect no less from this sector of society that former US President Andrew Jackson once labeled as “vipers” and “thieves”. However, I am still, at times, astounded at how easily the masses allow themselves to be manipulated by their nonsense. Just a month ago, in this article here, when again, some currency experts called for the US dollar to break out higher, I predicted the end of the rally with a break downward instead, which is the scenario that indeed materialized.

US dollar approaching a dangerous stage above.

Additionally, everything I have mentioned in this article applies to any country in the world. If the economic and financial leaders in your country are telling you a recovery is on the way, but your Central Bank is in the process of flooding your country with hundreds of billions or trillions of local currency to jump-start the economy, then you can be assured that your leaders are full of nonsense as well. In the past, the tactic of flooding markets with free money has cut short prolonged recessions (i.e. think the dot com crash in America), and for this reason, analysts believe they can re-create this scenario today; however, bubbles can only be re-inflated over and over and over a finite number of times before this tactic fails. Unlike Keynesian economists believe, this is not a tactic that can be employed indefinitely without dire consequences. If it could be, then this crisis would have been nipped in the bud in 2007, just as the effects of the US dot com crash were quickly stifled through the artificial creation of a US real estate market bubble, the consequences of which we are paying for now.

The most appealing part of an investment strategy that is based upon an understanding of the faults of our global monetary system is the following: As long as one positions assets to benefit from a monetary crisis, clients will profit despite an occasional prediction about the direction of traditional stock markets that may turn out to be incorrect. How can this be? I explain the answer to this seeming conundrum in this article here, Monetary Inflation: How Increased Paper Wealth Can Translate into a Lower Standard of Living.

Bear market rallies that are created by imminent monetary inflation will leave investors poorer in terms of real wealth. Thus, investing in traditional stock markets is not a suitable wealth creation strategy right now. It will be in the future, but just not right now. This is why I maintain an aversion to all traditional stocks in US and European markets unless it is to play the downside when these markets reach an irrational, overbought status. However, I guarantee you that the following two statements are true. (1) There is no wealth management professional, anywhere in the world, that has been profitable over the past several years without understanding that the origins of this crisis is a monetary crisis and appropriately positioning assets based upon this belief (unless he or she has been exceedingly lucky); and (2) There will be no wealth management professional in the world that will be profitable over the next three years without understanding that this crisis will deepen in future years because we are still firmly in the throes of a monetary crisis.

Disclaimer: The above is my opinion and one based upon many dedicated years of detailed and continuing research. One should never blindly form an investment plan without understanding the complexities of our current monetary crisis and without understanding the link between nimbleness and success in today’s investment environment. An investor needs to understand that in today’s environment, the timeline for successful investing strategies has become greatly condensed.

Comments

[Leftfield:]

To add to fireball's observation, the fact that Wall St. and DC have put $trillions on to our debt and scarcely any of it to help the strapped ordinary citizen is ominous also. How this leads to prosperity or any improvement in our quality of life escapes me. I see this rally as a further shakedown of the gullible with our trillions. Obviously a recapitalization of the banks has been facilitated. Selling out to the types of people who peddle paper assets and government promises is empowering our slavemasters who seem to get away with absolutely all they can. It's the Stockholm Syndrome and we've trusted the fancy promises of suits and titles way too long with our money, votes and kid's futures.

May 22 09:14 AM

[Crude Oil T...:]

You my friend are one of the few who are speaking the truth. Others who have seem to have their post mysteriously disappear. You should be on the front page of the times, Others [I won't mention names of "crazy" people on CNBC] should be in jail for mis leading retail investors.

Keep up the good work!

May 22 10:12 AM

[LilBob:]

You do need to address the benefits of a weaker dollar though for a country that's in the position of the United States right now. A large part of the reason for current economic problems in this country has been the out-sourcing of jobs to other countries, and the transitioning of many Americans into lower paying service sector jobs. Along with that we've had the mass extension of credit that has promulgated belief that the United States is the "ultimate market," for other nations' goods. Right now what the Obama administration needs to do-and what I believe they seem to be doing is to devalue the dollar to minimize the real cost of debts that accrued during the real estate crisis. They are also hoping to make the United States a more attractive as a source for manufactured goods by making those goods comparatively less expensive than they are with a stronger dollar. Finally, they are attempting to generate a controlled degree of inflation and (Obama actually stated this directly at the economic conference earlier this year) discourage other countries from the notion that the US is still the "ultimate market," for consumer goods.

None of the parts of this puzzle-taken individually-make any sense. You have to take a step back and look at the big picture to see what Summers is trying to do here. If the strategy works-and there's a very good chance that it may-he'll be called brilliant. If it fails, then, in the words of J.M. Keynes: "In the long run, we're all doomed."

May 22 11:46 AM

[yodoc:]

I think that the trigger for this collapse of the dollar has to do with China converting it's $US reserves into commodities.
This causes at least a few things.
1. Commodities speculators will start to go long based on the belief that China will take delivery and not just roll over the contracts to a future month.
2. Some have said that the Fed will reel in the money at some point in the future to prevent inflation ( anyone want the Brooklyn Bridge?). If China is in the process of unwinding it's $ holdings via commodities, how does the Fed plan to reel in those trillions?
Naturally a falling $ gives a boost to commodities.
Stocks will go up in price but the purchasing power of the dollar will be falling. This may all get us back to stocks with growing Div yields, that in the very long run may prove to be wise investments.
Just watch out for when the interest rates rise. Personally I think rates will be low until the last bolus of the alt morgages has reset. They can't raise rates until then unless the $ has already tanked so much that almost all houses are safely in the black, and I just don't see that happening

May 22 12:12 PM

[LilBob:]

> Just watch out for when the interest rates rise. Personally I think
> rates will be low until the last bolus of the alt morgages has reset.
> They can't raise rates until then unless the $ has already tanked
> so much that almost all houses are safely in the black, and I just
> don't see that happening

Exactly yodoc, I agree with you that the Fed isn't trying to devalue the dollar to anywhere near that degree. It would be virtually impossible to manage such a high degree of inflation that all of those underwater mortgages end up above-board again. There's absolutely no way that wages in this country would keep up with such a huge change. What I would expect to see is a waiting period as those at the Fed watch the economy to see if there is an improvement in the unemployment picture based on circulation of stimulus funds, and increased hiring in the non-profit (endowment backed) portion of the economy based on a rise in the stock market. Once we have stabilization of unemployment I would expect to see legislation for an increase in the minimum wage and some punitive measures against those corporations whose business models employ the import of vast quantities of foreign made goods, and inadequate salaries and benefits for floor-level employees.

May 22 12:58 PM

[Mad Hedge F...:]

Reality is such a bitch! The prospective US rating cut is also cutting the legs out from the US dollar, which is hitting fresh 2009 lows against everything. It turns out that if the world is not going to zero, you don’t need a safe haven like the dollar any more. And safe havens with a zero yield were not that great anyway. The New Zealand dollar has rocketed 30%, and the Euro has gapped through to a new yearly of $1.40. A lower dollar is one of the few certainties of life. The only question is how far, how fast. This further underlines my arguments to buy emerging markets and commodity producing countries.

May 22 01:55 PM

[Dave Wrixon:]

So basically, the answer to China is to turn the US into a sweat economy by introducing controls to trade and exchange and devaluing the dollar until you are cheaper than they are?

On May 22 12:58 PM LilBob wrote:

> Exactly yodoc, I agree with you that the Fed isn't trying to devalue the dollar to anywhere near that degree. It would be virtually impossible to manage such a high degree of inflation that all of those underwater mortgages end up above-board again. There's absolutely no way that wages in this country would keep up with such a huge change. What I would expect to see is a waiting period as those at the Fed watch the economy to see if there is an improvement in the unemployment picture based on circulation of stimulus funds, and increased hiring in the non-profit (endowment backed) portion of the economy based on a rise in the stock market. Once we have stabilization of unemployment I would expect to see legislation for an increase in the minimum wage and some punitive measures against those corporations whose business models employ the import of vast quantities of foreign made goods, and inadequate salaries and benefits for floor-level employees.

May 22 02:22 PM

[Dave Wrixon:]

Somebody is talking sense at last!


On May 22 01:55 PM Mad Hedge Fund Trader wrote:

> Reality is such a bitch! The prospective US rating cut is also cutting
> the legs out from the US dollar, which is hitting fresh 2009 lows
> against everything. It turns out that if the world is not going to
> zero, you don’t need a safe haven like the dollar any more. And safe
> havens with a zero yield were not that great anyway. The New Zealand
> dollar has rocketed 30%, and the Euro has gapped through to a new
> yearly of $1.40. A lower dollar is one of the few certainties of
> life. The only question is how far, how fast. This further underlines
> my arguments to buy emerging markets and commodity producing countries.

May 22 02:23 PM

[I am not a ...:]

Regarding the last post..I would also like to point ot the Australian dollar which is compared locally by many to the US dollar .Last year it rose to 95 cents US and yesterday at end of trade it was again at 78 cents.
Unfortunately for Australia this paragraph from the article relates most succinctly to us.But our country is being flooded with US dollars borrowed from China. Something tottally unecessary as just last Year,we had a surplus of 20Bn.Not bad for a country of only 9 9 Mn taxpayers. Keynseianites have a lot to answer for here.
"...Additionally, everything I have mentioned in this article applies to any country in the world. If the economic and financial leaders in your country are telling you a recovery is on the way, but your Central Bank is in the process of flooding your country with hundreds of billions or trillions of local currency to jump-start the economy, then you can be assured that your leaders are full of nonsense as well..."

May 22 04:57 PM

[snagglesnarf:]

Okay, Nostradamus, if you were so smart in 'predicting' this crisis then what exactly is going to happen next? And if you are wrong, which you will almost certainly be, then you must stop telling us what a smart-ass you are. These charts are voodoo nonsense. We are in such trouble that no one has the capacity to understand what is going to happen except that it is going to be bad.

May 22 05:50 PM

[Ionikios:]

Good response fireball; I also am a fan of Jackson excepting the Trail of Tears.


On May 22 08:52 AM fireball wrote:

> you are to kind when you say full of nonsense. you are a gentleman
> sir.
> financial advisors and brokers will say what is necessary to sell
> advice or get you to buy and sell so they get their commissions.
> on the insider level i think it is more sinister. i do believe they
> intend to bleed every bit of real wealth into their holdings to leave
> the common (middle class) man little more than a serf or slave. the
> pundits are their lapdogs and the politicians are their guarddogs.
>
> a couple of months back i said we should prepare ourselves to help
> family, friends and neighbors to the best of our abilities. when
> possible even strangers who do not try to intimidate or threaten.
> i knew that paper "assets" and debt instruments were one of the root
> causes. i will accept your expertise that it is the main root.<br/>i
> have heard and read we are 1/4 to 1/3 through the unwinding. hopefully
> this will not explode into an "eat the rich" populist madhouse with
> a crushing govt. military response but instead will create an organized
> resolved resistance that will be wise enough to move for constitutional
> restoration.
> jackson was one of my heroes.

May 22 06:43 PM

[TheReaper!:]

There is a book , out of print now I imagine , the title of the book was the "Secrets of the temple" by Steven Solomon . Any way long story short it was a book about the Federal Reserve from 1913 on . Great book , it really gave the reader an inside view of how a central banker operates and thinks .

To get to the point , in the rear of the book there is a chronology , which by date gives the reader an over view of all that has happened in this country financially over many years . When you read this over view , you quickly see that this country has basically gone from one financial disaster to another . This is not the first mega banking disaster I've seen in my life time , but I probably won't live long enough to see another . The reason for that is this one is going to last another 20 or 30 years , that is how long it's going to take to dig our way out of this .

TheReaper!

May 22 08:48 PM

[perceptions...:]

It appears that I may be unkind, as the phrase "Self Interest" comes to mind, with Financial Advisors & others.

Also, I agree with JSK that there is a monetary crisis, but that is only part of what is happening.

Finally, I also believe that we are very much at the beginning, not the end!


On May 22 08:52 AM fireball wrote:

> you are to kind when you say full of nonsense. you are a gentleman
> sir.
> financial advisors and brokers will say what is necessary to sell
> advice or get you to buy and sell so they get their commissions.
> on the insider level i think it is more sinister. i do believe they
> intend to bleed every bit of real wealth into their holdings to leave
> the common (middle class) man little more than a serf or slave. the
> pundits are their lapdogs and the politicians are their guarddogs.
>
> a couple of months back i said we should prepare ourselves to help
> family, friends and neighbors to the best of our abilities. when
> possible even strangers who do not try to intimidate or threaten.
> i knew that paper "assets" and debt instruments were one of the root
> causes. i will accept your expertise that it is the main root.<br/>i
> have heard and read we are 1/4 to 1/3 through the unwinding. hopefully
> this will not explode into an "eat the rich" populist madhouse with
> a crushing govt. military response but instead will create an organized
> resolved resistance that will be wise enough to move for constitutional
> restoration.
> jackson was one of my heroes.

May 23 01:56 AM

[Nick Rao:]

I agree with Mr Kim's general opinions and observations. I also agree with several of the comments. However, taking all facts into account, the safety of commodities and asian stocks is a worthwhile hedge for my money.

May 23 12:21 PM

[Golden Oxen:]

You are in error sir, they do not reach the same conclusions that you do because they are corrupt, intoxicated with their power and lack of oversight, paid lackeys of the lobbyists.

May 25 05:04 PM

[RiskReturnO...:]

I agree with the last sentence: " ... in today's environment, the timeline for successful investing strategies has become greatly condensed."

For a few months, gold was well correlated with all the fear trade basket (VIX, UUP, FXY); now gold is trading with the inflation basket (DBO, DBA, TBT).

Best strategy is to just go with the flow (money flow, momentum / volume flow, sentiment flow) ... experts come and go ... conventional wisdom come and go ... proven strategies come and go ... but profits taken will always be yours to keep if you are nimble and flexible.

For now, everything says US dollar is collapsing, so let's go ahead and collapse the US dollar ... buy TBT, DBA, GLD, DBO, FXE, ... until the next investing theme comes into play ... no need to fight the momentum ... keep a tight stop on your positions, or even better sell covered calls on long positions to take advantage of volatility (while you wait for the next theme).

May 25 08:20 PM

[User 379550:]

Invest in Canada. They will soon be accepting US dollars at par. :)

May 26 02:59 AM

[gilligan4949:]

Different "from" not different "than." Learn to speak English.

May 27 07:50 PM

[Scott Weitz:]

Disagree that this was all caused by a monetary crisis...this is a real estate crisis that in turn caused a monetary crisis by opening up the printing press.

Jun 01 01:47 PM

[Warren B. M...:]

quantitative easing is nothing but a bank tax that removes interest income from the private sectors (and also modestly reduces some long term rates).

the idea that it's in any sense expansionary or inflationary is true under a gold standard or other fixed fx regime, but entirely inapplicable with our non convertible currency.

all the fed's $2 trillion portfolio means is they are now 'earning' the 60 billion a year in interest income that used to be earned by the non govt sectors.

See 'quantitative easing for dummies' at:

moslereconomics.com
mosler2012.com

Oct 31 10:15 AM