USD: The race to debase
The “race to debase” went into high gear yesterday. First, Brazil imposed a tax on foreign investment to try and stem the real’s climb. Second, the Bank of Canada warned that the strong Loonie could offset the favorable economic developments since July. Third, the EU whined about the strong euro and complained that the US was “flooding the world” with dollars and creating dollar weakness that was “unbearable.”
So, basically we’re seeing the dollar’s weakness begin to turn from a global positive to more of a concern -- or to put it differently, the “dollar crisis” may slowly be getting recognized for what it is.
We obviously can’t really know what exactly is going on here, but my suspicion is that we’re seeing shorts in the gold stocks (which we know are already pretty heavily positioned in the gold stocks given the record short interest in the GDX) reacting to the moves in the dollar even though gold is increasingly shaking off those bounces in the dollar.
It suggests that the dollar’s decline may be entering a whole new phase that's increasingly less and less of a gentle glide and more and more of a potential crashette.
If so, then other central banks are going to increasingly feel pressure to try and weaken their own currencies in an attempt to stabilize the dollar, and that means other fiat currencies are going to become increasingly suspect, too, versus gold and many commodities.
After all, what we're watching isn't a “weak dollar trade” anymore than “short financials” was just a trade in 2008. This is the beginning of a currency crisis, and the dollar is at the center of the storm.
JFC - I think the PPT best better get those printing presses in full steam. Looks like there will be lots more USD and T-bills to buy soon. Sad day for America. Sad day indeed...
Give thanks to Benny and Timmy for wrecking our standard of living. I hope these buggers rot in hell for what they are doing.