Entering text into the input field will update the search result below

The Dollar Crash Is An Illusion

Mar. 03, 2020 1:12 PM ETSLV, GLD2.6K Comments
Doug Eberhardt profile picture
Doug Eberhardt


  • The dollar priced in other currencies is an optical illusion as it takes more of all currencies over time to buy gold.
  • Technically, a dollar crash can't occur as all governments are similar with debt to GDP increasing with future obligations.
  • Fed odds of rate reduction increase but gold fell.
  • We have only had a tease of deflation with coronavirus spreading.
  • Commodities will all get hit when deflation really hits.

We have all heard the dollar will crash from so many over the years, that we think it's the boy who cried wolf and most of us just ignore.

This Is the Illusion That Most Don't Understand

The reality is that if the dollar crashed, by definition, that would mean that primarily the euro, yen, and pound would skyrocket. Why? Because of what the dollar is, or should I say, what the Dollar Index is because that is what makes up the dollar. You can see from the following what a dollar really is; a bunch of other currencies, primarily from Europe.

This isn't open for debate. If the dollar crashed, all of these currencies above would have to shoot up as a whole. Some may outperform the others as a group, but the real issue with a dollar crash scenario is the problem that currencies are priced in each other. Every country that a currency listed above represents, as well as the United States and its dollar, have Debt to GDP problems as well as future unfunded liability issues as shown in the following table. Notice the euro area is just above Argentina who saw its peso devalued.

World Debt

What About A Euro Crash? Pound Crash?

If there are doomsayers writing books and articles here in the U.S. about a dollar crash, there are doomsayers in Europe writing about a euro crash or pound crash with the exact same reasoning; out of control government spending and no plan for future obligations leading to more debt and more problems along with eventually higher interest obligations to service the debt and absolutely no plans to

This article was written by

Doug Eberhardt profile picture
Sign up for the announcement of my upcoming book, "How To Profit In Up and Down Markets" by going to https://profitinupanddownmarkets.com/ Author of Buy Gold and Silver Safely and Illusions of Wealth. ETF Trading Service where we trade triple leveraged ETFs and seller of physical gold and silver precious metals through Buy Gold and Silver Safely

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (2,600)

Doug Eberhardt profile picture
Hi all, we are coming over to this article temporarily until we decide where we can continue the trading group we have established for several years now. You can contact me at a later time if reading this down the road and I'll share where we are congregating. info@illusionsofwealth.com

DSI data close of business 12/26

67 T-Bonds low of week
72 T-Notes and low of week
83 S&P 500 and high of week
76 Nasdaq and high of week
36 Volatility
28 Euro
41 Yen
65 Dollar Index and low of week
45 Bitcoin and high of week
53 Crude oil high of week
41 Nat gas and low of week
48 Gold and high of week
41 Silver and high of week
62 CRB Index high of week
65 and Nikkei Index high of week
@Doug Eberhardt

Got your message. I'll pass along that another SA blog group is working out the bugs on Slack and Blogger. Each site has their advantages and disadvantages. I'll try to pass long what I learn to hopefully save us some time. I believe each will require an administrator to initiate the blog and regulate it.

That's all for now.
@Doug Eberhardt
Thanks for the update on the DSI data.
How are the premiums on gold and silver now? Any supply issues?
Thanks for the response.
justusforall profile picture
If the fed is going to start buying ETF's they better start sending us all dividend checks.
I bought 10k JDST at 1.33
Doug Eberhardt profile picture
New Blog post out. Let's move the conversation there. You'll like what I wrote in Chapter 4 of my book Buy Gold and Silver Safely on deflation and the markets and it is posted there:

The absurdity of TVIX being down while the vix is up and markets are down over 35 defines just how stupid these ETFs can be!

Sh*ts extremely aggravating to watch!

I bought another 10k JDST at 1.49
Brian Cellars profile picture
I was with you in JDST at 1.49 but am out now on stop at 1.47. I was hoping for a pullback in gold and the miners so I could add to my longs. GDXJ looks focused on 42.50 before taking a breather, so I'm not willing to let go of my longs till then.

I just bought 10k more JDST at 1.42 an will keep adding until the reversal!

I am not exception gold or miners to continue higher without correction!
With you on expecting pullback in miners, but went with 1st batch of DUST at 1.64.
Started a new TQQQ position @ 53.90. Unfortunately, my sell order over 55 didn't take. It is only a 1/4 position, so I'll play it out. Plenty of dry powder.
Doug Eberhardt profile picture
Will be adding a blog later today which will highlight Chapter 4 of my book Buy Gold and Silver Safely as well as a free PDF copy of the book. Chapter 4 is titled: How A Deflationary Credit Contraction Will Unfold - Thanks @Baggya60 for the suggestion to get something out.

A reminder, and to tag onto what @gelstretch was talking about before concerning negative rates, I wrote this as a warning of what's to come in July of 2018 which addressed negative rates and what was to come: buygoldandsilversafely.com/...
It is very difficult to add comments as already the # of comments are close to 3000. Appreciate if we ha your new topic in SA.
Thanks... kind regards
OlderThanDirtDave profile picture
Perhaps a short article about the different vehicles for investing in gold and their advantages and disadvantages (GLD, miners - junior vs major, Mr. T's favourite method - though it ought to be remembered since he used to bodyguard Mohammed Ali that Mr T is particularly qualified to overcome some of the downside to owning physical....)?

Steve C...'s comment from yesterday is interesting - thoughs yea or nay?


Good morning, Dave. I hope you're keeping well.

Mr. C's 90% retail long sounds very compelling for someone to come and pull the rug. I think Greg and Ninja are in JDST. I have some DUST that needs a good boost.

What do you make of the banks buying up the oil producers? A very interesting turn of events, for sure.
The fed said last week that they were buying junk bonds. They've never done that before. What's next? Steve C uses charts only, not fundamentals from what I can tell. That may hurt him. There is no correlation in oil and gas to 1999, for example. Those data points are meaningless. A cartel has been destroyed. Central banks and central governments have gone nuts. Good luck with the wave counts in a sea of panic.
gelstretch profile picture
GILD (Gilead Sciences, Inc) is looking opportunistic. Their COVID-19 drug ( Remdesivirs) has now completed the Phase 3 FDA testing process with positive results. This drug is being "fast tracked" for approval and production has already started.

I like the appearance of the charts and their structure.... very bullish, with Squeezes in many time frames... 30 min, Daily, 2 Day, 3 Day, 4 Day.. On the 30 min chart the MACD is very bullish, as are some of my other custom indicators.

I will be trading this one buying the stock, as the spread on the options are very wide and are very expensive. Because of the high Implied Volatility the premium in the options ladders are elevated, and I will be selling puts in the April 24 options expiration period to take advantage of this . Earnings are scheduled to be announced on April 30, and I will not be holding options positions through the ER, although I will hold the stock.
OlderThanDirtDave profile picture
Interesting video interview with the chairman of FrancoNevada and his take on gold, miners, how the current events will change the future....


Happy and a Safe Easter all!
Heimerdinger profile picture
With $5T stimulus not including oil/airline bailout (and more to come!), anything is possible now ;)
gelstretch profile picture
So where is Volatility headed ???? I keep an eye on VVIX charts for this assessment. VVIX is the Volatility of the VIX,, which leads the other VIX products, and it clearly is trending downward, which means volatility is likely to follow in the same direction. Looking at the 30 minute chart of VVIX, the direction is clearly headed downward, so I am assuming the VIX, TVIX and UVXY will also follow suit, as volatility loses downward momentum.
gel, that volatility analysis is in sync with the SP500 chart pattern.
On the daily /es, there is a sloppy cup and handle formation in play.
Based on the pattern, the upside target is approx 3000.
Also in the vicinity of 3000 are the 200 day ma and my long term trend algorithm. Chart pivot is 2650.
Net volume flow for the futures contract has been positive since March 25th.
None of my technical indicators are stretched, they have room to run.
Upward trend is so strong that it is unlikely to reverse on a dime; more likely, the upward movement is followed by a sideways consolidation before rolling over.

Anecdotally, recent stock market action appears to be correlated to the trajectory of new Covid-19 cases. As long as the curve is flattening and health experts are optimistic, stock prices move higher.

Maybe the market is taking heed of the words from the late Marty Zweig - Don't fight the Fed.
Heimerdinger profile picture
Thrust !
gelstretch profile picture
@Avoid the Herd

I have the 161.8% resting at $2,932.41, which I believe is attainable on the /ES. I am watching the Weekly chart. As you say, the VIX positioning and trajectory is in sync with this projection.

On my Daily chart of /ES, I also have a TTM Squeeze that is yet to fire. I upgraded the indicator to the Squeeze Pro version, that shows three different intensities of the Squeeze, and the version you have probably reflects a green dot on the Daily, whereas my Daily chart has a black dot that indicates the Squeeze is still accumulating energy prior to the breakout. This will fire to the upside, and I am confidant. The 161.8 is not far away on the Daily chart, and the Squeeze will provide the momentum.

My 15 minute chart of the /ES also has a Squeeze Pro (Black Dots) that will fire to the upside... so I am targeting the 161.8 at 2,932.41.
The continuing good news regarding the COVID-19 direction should contribute to the recovery.

I still believe we will get another test of the lows, but the catalyst will be the dismal economic and earnings news that is yet to surface during April and early May.
My last act for the day, I bought another 10k JDST at 1.57 and 500 TVIX at 244.

Hey maybe this will be the first time in history that something can rise straight to the top without correction, or just maybe there's a correction coming!

Either way, i'm going to have a beer and relax, this has been one aggravating day!
Brian Cellars profile picture
I don't suppose you sold out of JDST off the high this morning. That wouldn't be your style. I'm now joining you short with a tight stop. Hope it works out for both of us.
TradeNvest profile picture
Bought SCO@20.02, sold @26.14. Still holding UCO @2.18.

UCO and BOIL set for reverse split: www.businesswire.com/...
Direxion to reverse split 12 ETFs effective April 23rd

gordenchen777 profile picture
Brother, can you spare a nugget... once again, the Queen is stalking the 1720 level..into the long weekend...remember past fed chief Janet yelling ''no more crisis in our lifetime''.. echoes of Chamberlain's bombast before the Luftwaffe crossed the pond... miner's may be on care and rest for a month but this may prove to be a blessing in disguise... yet more shortages in the physical metal and Smaug can protect his golden hoard.. watch for record dismal headlines in the weeks ahead as the gold bears crash through doors where their were no doors before.. Suspect a short squeeze in the wings as the feds bury the tea party and embrace the tequila party... bottoms up boyz.. ''honor the charge they made'''... sub $$25 price on oil yet another tailwind for my miners... still holding ABX,KL,NGT,BTO,... suspect a glass of JDST on the purge Monday mourning.. Happy and safe Easter to all .. Gorden..
Doug Eberhardt profile picture
Classic @gordenchen777 - the feds bury the tea party and embrace the tequila party... bottoms up boyz.
gelstretch profile picture
Yep, Gorden.....all those cries for "Long live the Queen", and God Save our Gracious Queen" are now proving to be paying off. Patience, and an unrelenting dose of unexpected economic malaise that will live far longer than the pandemic will turn the Golden Lady into the antidote therapy for those that stood guard next to her side.

The next boot to drop will be the corporate earnings reports that will cause convulsions in the P/E ratios, that will need surgical reconstruction.

The markets are, in typical historical patterns, bouncing upward in sympathy of those traders that believe this will soon pass, but I expect a "roll over" to the downside in early summer as the retest of market levels now prevailing, and we take out the lows as reality of the severity of the damage is known.
This pattern typically follows similar catastrophic market declines..... 1929, 2008 etc.

Meanwhile, the Queen lives up to her anticipated favorable expectations !
Doug Eberhardt profile picture
All I can think of when it comes to the Fed is: www.youtube.com/...
The Fed is now buying junk debt - a first. Can equities be far behind (Yellen already suggested it)?
America is getting socialism without electing Bernie Sanders, huh.

But, but.... It's only Socialism when the recipients need it:)

Place your best on what the Fed will be buying. Energy?

And I just saw that the FDA is refusing authorization to distilleries to produce hand sanitizer unless the add a "bitterant". Apparently the kids will drink it if it tastes so good. But clearly nobody in the FDA has bothered to look up the price of sanitizer against vodka.
Added SDOW and started on JDST; sold SCO yesterday postmarket for decent gain.
I sold TQQQ at 54.50 for a 1950 profit, NASDAQ is lagging huge today against the others.

And bought 500 TVIX at 254
I sold most of my TQQQ over 56 and got stopped out of the rest when it hit 54. Nice trade overall.
Greg and bbm
I missed the earlier action but made a quick tqqq scalping for a profit of 600$
Btw .. how the today market is going to end .. up by 5% or down . Planning to scalp TQQQ one more time

I also did a quick TQQQ scalp. Not sure how it will end. The Powell news has put in a new wrinkle. If TQQQ drops below 53, I will seriously consider starting a small position. Do not underestimate this ETF.
I bought another 10k JDST at 1.66, which has now become my next TVIX like trade. Gold is at double top here, and at 8 year highs. I may be stubborn but I feel a correction is due as nothing goes up in a straight line.
I bought 10k JDST at 1.76, boy the fed is fighting against me on this trade, pumping up markets.
Yes it is true.. you noted the timing of job less report and FED announcement?
Brian Cellars profile picture
I'm not surprised to see the miners up with gold up, and have stayed long, but the rally in the markets certainly has me shaking my head. Hope I get the timing right to go short.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.