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Last Gasp of a Doomed Currency

Mr. Schiff is certainly correct, that according to economics 101 the Greenback should be disappearing into a black hole. What he perhaps did not consider is that the Brics are willing to accumulate devaluing dollars at inflated prices in order to further their own export growth. It's fairly simple: China wants to create 1 million jobs a month, for that they need export markets and of course they need to print domestic currency, which is not a problem as long as they have enough cheap labor flowing from the country into the cities. While they loose FOREIGN purchasing power in the process, that will occur on paper on the national level and is perhaps a small price to pay relative to what they can achieve at the domestic level.

Moreover, market corrections (such as the recent dollar appreciation) are a normal occurrence. In fact, the most recent dollar correction was no more in magnitude and time than the 12/2004-2005 correction, at least for now. What is obvious, is that the pivot point was July 15, the day the initial support for the GSE's was voiced by Treasury. That was also the morning when crude fell abruptly at 9:30. Perhaps a good catalyst for what would have happened on technical grounds anyway. One might find another hint in the fact that, according to Treasury stats the EURO reserve position (not overall) fell abruptly by about 6.5 billion dollars some time in June. Where did it go? Intervention? The dollar will run its course, down that is, since its 20 year mean is still in the area of 90 (as expressed by the DXY) and I would not be surprised to see it teetering out at DXY 60 not too far down the road.

As for commodities, perhaps it is in order to put history in perspective:
The commodities bubble of the 70's, which lasted about 8 years, was followed by about 20 years! of "nothingness" in that sector. So why should it be so different this time? The market always sells dreams and the incalculable, and since people got hurt on stoxx in 2000 it had to re-invent itself with the inflation phantom as a catalyst. How boring would it be to peddle GE with it's relative predictiveness, when one can "make" 400 and 1000 % in gold and crude? So the market invented another theme : Inflation. The only inflation we can observe, is the self created one, caused by rampant speculation of the leveraged traders and the moronic state pension funds that needed to find a tool that bailed them out due to underfunding. Inflation, however, was the evil of the seventies and the Central Bankers, who had their founding years during that period are still obsessed in "controlling" it. What else would their justification be? They have managed to kill most major economic cycles with they arbitrary ivory tower theories. The seventies were a closed economy (sans the entire Communist bloc) we did not trade with majority of the world and the flee flow of goods was interrupted for about half a century, which afforded labor the big stick to blackmail employers (the auto industry still pays the price), with the advent of "free" world trade, this stick is gone and with it the threat of inflation.