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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.

Bust, Bail, Repeat: The U.S. Enters into an Ever-Worsening Cycle

To wav 76: Everyone gets the Gov they deserve...

Bust, Bail, Repeat: The U.S. Enters into an Ever-Worsening Cycle

Archman wrote: "Self, what is it that has made the american people so complacent and uncaring about their own future that we sit back and watch a select few plot out our destiny."

Excellent piece and full of premonition...

What is it Archman? The Gordon Gekko (Wall St.) effect: Greed is good!

Bust, Bail, Repeat: The U.S. Enters into an Ever-Worsening Cycle

who wrote: what else can be done?

Hej, Who, these Gov shenanigans only prolong the process and increase the cost of the inevitable :"deja vu all over again".

Bust, Bail, Repeat: The U.S. Enters into an Ever-Worsening Cycle

Maveric wrote: Why are there so many articles here with blatant typographical errors? Surely one can take the time to proof read their own arguments.

Hey, Mav, you are like all these pols, all show no substance. What does a typo matter, if the issues are dealt with?

Bust, Bail, Repeat: The U.S. Enters into an Ever-Worsening Cycle

"griz" writes: ....we crater into 2009-2010 and they (either Dems or Repub) hope a recovery in time to get re-elected in 2012.

Yep griz, we have already Hanky Mea. But prior to your scenario we will have Obama Airlines and BillAry Banks. Not for their own doing...but the stage has be set by unfettered capatalism while the regulators were assleep after taking election money dope.

Bust, Bail, Repeat: The U.S. Enters into an Ever-Worsening Cycle

The Gov. has their back to the wall. Howelse would one explain the move of the GOP to support policies to the left of Moscow? See how they act in relation what they used to stand for and you know it's High Noon!
Why do the GSE's need a rescue? Confidence, friends, confidence.
The foreigners got sucked into holding depreciating $$$, buying CDO's and GSE (government backed - by what law) shares...Eventually they are going to stop and then the $ will go into the basement and long bonds will be 8.5% 'cause no "sovereign" will support us anymore with their taxpayers' funds. No need for them to sell, just abstain, and how will about 1.8bln external deficit be funded every day? With money coming out of worthless stoxx into "flight to quality"? You do the math!