Thoughts on the US Dollar, Analysis of the USDX Long Term, Follow up on the Gold Blog
The analysis of the US Dollar is one that I wanted to tackle in my mammoth gold blog: Market Thoughts and Analysis: The Gold Blog. Gold/Silver/GSMs (and a little Oil for good measure). However, the last post was really big and this topic is big enough to warrant its own post.
But First, A Discussion with the Deflationists that I Debate With
Hey guys :). Let me say that out of the whole inflation / deflation debate, the only thing I know is that I am not 100% right. I guarantee it. There is no way I am calling the trends and the timing completely accurately. Moreover, I do realize that there are both inflationary and deflationary pressures acting in the economy all the time. I have read Mauldin, Prechter, Mish, Roubini, and Krugman. I am not going into this inflationary stance blindly. I can see the very salient points that are being from the deflation camp.
It is just that when I read all of the evidence, on both sides, I think the inflationary argument makes the most sense for the long term. (IMO).
That does not mean that I am discounting the deflation argument!. Like I said, some of the points being made are very valid. However, I think many deflationists (Mauldin and Prechter definitely do not, but Krugman does ... a lot) combine monetary deflation and price deflation and lump it into one single category (a huge no-no if you are trying to understand the true cause and effects). But even the ones that do not confuse monteary policy and price supply/demand effects, some are improperly accounting for monetary assets, what is and is not one, and using improper monetary supply indicators to look at the problem.
Now those were some bold words. But like I said. This is just my opinion. And opinions are like a**holes, everybody has one :). So I again acknowledge that I am not getting this 100% right, and look forward to good and civil debates about this issue. This issues has been debated a lot in the past on Caps (and I have been taking part in those for over a year), and will continue to do so in the future.
It is that important.
On to the Analysis
There are so many issues to consider that are all interrelated when talking about the economy / inflation-deflation / the US Dollar / US Treasury / Federal Reserve. And there is no way I will be able to do it justice in one post. But here is a list of some of the issues.
- Money and Monetary Assets
- Money Supply
- Monetary Inflation / Deflation
- Price Inflation / Deflation (NOT the same thing!)
- Velocity of Money
- The US Treasury
- The Federal Reserve
- Policy Decisions and speeches made by Chairman Bernanke
- US Treasury Bonds
- Treasury and Market Rates (Bond Yields)
- Quantitative Easing
- Debt Held by Foreign Governments
- Foreign Currencies
- Intentional Currency Devaluation and Currency Devaluation Wars
- .... !! (lots more)
Wow, that is a jam-packed list of some heaving-hitting topics. There is no way I will be able to cover all of these in one blog post. Here is a recommend reading list (highly recommended), and I will try to hit a few highlights and engage in a bit of discussion before I put up some charts at the end.
- Steve Saville: Market Value, Money and Credit - Good layman's description of TMS and its importance
- Quantitative Easing Explained - Just a good funny article on QE
- Steve Saville: Why We are Gold Bulls - A good inflationary summary
- Steve Saville: Money Confusion and Inflation/Deflation - Good discussion as to what consitutes money and why some monetary discussions are invalid
- Zeal: Big Inflation Coming 2 - Good discussion of inflation and deflation.
- Mises: TMS - Good Definition of True Money Supply (TMS).
- Saville: Inflations New Upward Trend - Misuse of the Velocity of Money concept
- John Mauldin: The Endgame - Very good deflation arguments.
Okay, I will will trying to hit the highlight and put my argument in the smallest nutshell I can manage.
.... continued in the Comments section ....