It should be pretty obvious by now that the U.S. Government, Fed and Wall Street are flooding the airwaves with nothing but fraudulent claims and lies. One of the biggest ones currently is this idea that the U.S. dollar all of a sudden is strong and will continue to stay strong. Part of this is seeded in the Fed’s constant threat to raise interest rates. They’ve been threatening us with that for well over a year now. But anyone with half a brain cell left in their skull knows that if the Fed raises interest rates, it will be like pulling the foundation out from under the Empire State Building.
The popular narrative coming from the idiots proliferating the airwaves of financial media tv holds that “the dollar is the least dirty shirt in the closet and that’s why investors are selling euros and yen and buying dollars.” That’s utter bullshit. When all the shirts in my closet are dirty, I don’t put the least dirty one on – I take them all to the cleaners. Dollar-based investors are about to get taken to the cleaners.
Let’s take a look at long term chart of the dollar (click on it to enlarge):
This is a 6-year daily graph. Now, I heard some idiot on Bloomberg News the other day say that this was the biggest move the dollar has made since, like, Christ was a child. But how does this move look compared to the two moves the dollar made from late 2008 to mid-2010? The USDX ran from 70 to 90 in 2008 in just 4 months.
You can see that since late 2009, the dollar has been trending in a sideways pattern between 74 and 86. Can we really call this a “strong” move? The dollar index is made up of a basket of 6 western hemisphere U.S. puppet currencies. Here’s the composition: euro 57.6%, yen 13.6%, pound sterling 11.9%, Canadian dollar 9.1%, krona 4.2% and Swiss franc 3.6%. Yes, the dollar has moved up to the top end of its 5-yr trading range vs. primarily the euro and the yen. Big deal.
One thing on the graph above I’d like to point out is the red line in the bottom panel. This is the “accumulation/distribution” metric. It measures the cumulative flow of money in and out of a security. As you can see, the degree of money flowing into the U.S. is not even close to the level that was flowing into it during the 2008-2010 moves. This indicates that the demand for dollars is actually not very strong. It means that the money that is leaving the euro and yen is going somewhere besides in to dollars.
And how come no one on Wall Street is talking about the dollar vs. the currency of the largest import/export nation in the world? The country that is currently accumulating gold at a rate that is soaking up most of the amount of gold that is mined annually?
Here’s the dollar vs. the Chinese renminbi/yuan (click to enlarge):
The dollar is down 2% against the yuan since May. So much for the strong dollar theory. What this whole situation means is that U.S. exports to Europe are going to get pole-axed and the cost of everything the hoi polloi buys in this country that originates in China is becoming more expensive. Better stock up on halloween stuff now because those costumes will likely become a lot more expensive by the end of October…
Next time someone asserts that the dollar is really strong right now because our economy is getting better, try not to laugh out loud to hard…