31October

Dollar Stabilizes, Rally Slows

The "stronger" dollar is a result of lowered velocity of money and temporary deflation. 42 states lost jobs in August 2009, up from 29 in July. Employers have eliminated 7 million jobs since December 2007. States with drops in unemployment show up that way because the jobless gave up. None of those states actually added jobs.

If velocity picks up, then how far south can the dollar go? Look very far south, maybe Argentina, to find out. Americans do not have the savings mentality of the Japanese, so I suspect that the Fed/Treasury/Congress will eventually get what they want and devalue the dollar by at least 40% to avoid true debt repayment. The paragraph about Treasury bonds being a safe haven play is interesting: I pity the fool who moves into T-bills for safety. Non dollar based energy / minerals stocks will be the safe bet.

The dollar stabilization is just like the time I fell off a cliff. I smacked a ledge on the way down. There was a brief moment when I was not falling.

25 years later, I am not likely to go repelling again. And the lenders whom we shafted with dollar devaluation will not be likely to buy our treasury debt again.