Decline of the U.S. Dollar Could Happen at ‘Warp Speed’

Stephen Roach, a Yale University senior fellow and former Morgan Stanley Asia chairman, tells MarketWatch that his forecast for a sharp deterioration of the U.S. dollar could be a very near-term phenomenon, not an event that looms off in the distance.

“I do think it’s something that happens sooner rather than later,” the economist told MarketWatch during a Monday-afternoon interview.

His comments come as the financial expert has been warning for weeks of an epic downturn of the buck that could signal the end of the hegemony of the greenback as a reserve currency — an event that would ripple through global financial markets.

Stephen Roach

Gold Price – Crossing The Rubicon

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

Gold is challenging the $1300 level for the third time this year. If it breaks upwards out of this consolidation phase convincingly, it could be an important event, signalling a dollar that will continue to weaken.

The factors driving the dollar lower are several and disparate. The US economy is sluggish relative to the rest of the world, the rise of Asia from which America is excluded is unstoppable, geopolitics are shifting away from US global dominance, and the end is in sight for monopolistic payment for oil in US dollars.

These subjects have been covered in some detail in my recent articles, which will be referred to for further clarification where appropriate. This article summarises these trends, and explains why the consequence appear certain to drive gold, priced in dollars, much higher.

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History Is About To Repeat Itself Again…And It Might Get Ugly

By Shannara Johnson – Re-Blogged From http://www.Gold-Eagle.com

Grant Williams believes that the 76 million retiring Baby Boomers will trigger a major pension crisis. He should know, because he’s been studying financial history and telltale crisis patterns for nearly two decades.

“With that potentially bad situation we could face,” the seasoned asset manager and co-founder of Real Vision TV said in a recent Metal Masters interview, “holding physical metal, somewhere safe, somewhere outside the banking system, is just a sensible precaution to take.”

His outlook has changed drastically since he started his first job trading Japanese markets in 1986: “What I walked into at that time was one of the greatest bull market bubbles the world had ever seen, in the Japanese equity market and real estate market.”

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The Death of Abenomics; the Rise of Interest Rates

By Michael Pento – Re-Blogged From http://www.PentoPort.com

Job approval numbers for Japan’s Prime Minister Shinzo Abe are in freefall. Abe’s support has now fallen below 30%, and his Liberal Democratic Party recently suffered heavy losses stemming from a slew of scandals revolving around illegal subsidies received by a close associate of his wife.

But as we have seen back on this side of the hemisphere, the public’s interest in these political scandals can be easily overlooked if the underlying economic conditions are favorable. For instance, voters were apathetic when the House introduced impeachment proceedings at the end of 1998 against Bill Clinton for perjury and abuse of power. And Clinton’s perjury scandal was indefensible upon discovery of that infamous Blue Dress. The average citizen, then busily counting their chips from the dot-com casino, were disinterested in Clinton’s wrongdoings because the 1998 economy was booming. Clinton remained in office, and his Democratic party gained seats in the 1998 mid-term elections.

Therefore, Abe’s scandal is more likely a referendum on the public’s frustration with the failure of Abenomics.

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US Dollar Testing Long-Term Support

By Mike Golembesky – Re-Blogged From http://www.Gold-Eagle.com

The US Dollar has continued to fall hitting a low of 92.72 on Monday, July 31st. The US Dollar also broke through shorter term support levels and is now closing in on long term support that could very well define the longer term trend over the next several years.

When most financial writers (to which I include myself) refer to the US Dollar they are typically referencing the DXY index. The DXY index is composed of 6 currency pairs that are based mostly in Europe. The Euro vs. the US Dollar makes up 58% of the DXY index with the Great British Pound, Swedish Krona and Swiss Franc making up an additional 19.7% of the index combined.

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US Exorbitant Privilege At Risk?!

By Axel Merk – Re-Blogged From http://www.Gold-Eagle.com

If the road to hell is paved with good intentions, American’s exorbitant privilege might be at risk with broad implications for the U.S. dollar and investors’ portfolios. Let me explain.

The US was the anchor of the Bretton Woods agreement that collapsed when former President Nixon ended the dollar’s convertibility into gold in 1971. Yet even when off the remnants of the gold standard, the U.S. has continued to be the currency in which many countries hold their foreign reserves. Why is that, what are the benefits and what are the implications if this were under threat?

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There Will Never Be A Sound Currency System

By Egon von Greyerz – Re-Blogged From http://www.Gold-Eagle.com

Most people have no idea what money is. They believe that if they have 100 dollars or euros, that this represents real value as well as durability. Few people realise that their currency which they call money has nothing to do with real money at all. All paper currencies are ephemeral and return to their intrinsic value of zero. This is because reckless governments cling on to power by printing or borrowing endless amounts of fiat money in the hope that they will placate the people and buy votes. Fiat money as the name indicates, can never be real money. It is issued by edict and is not backed by anything but debt and liabilities.

Power Corrupts And Money Corrupts

It is a lethal combination which not only destroys people but also nations. And sadly, we have now reached a point in history when the unlimited amounts of fiat money that have been created will also destroy continents.

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The Ugliest Economic Data I’ve Ever Seen (Part 2)

By Andrew Hoffman – Re-Blogged From http://www.Gold-Eagle.com

It’s Thursday morning – and there are nearly a dozen “PM bullish, everything-else-bearish” headlines worthy of distinct articles.  Such as…

1. This shocking, and hilarious, segment of the John Oliver show, depicting how subprime auto lending has officially reached the destructive lunacy of the 2007-08 subprime mortgage market. Not to mention, subprime student lending, as a whopping 37% of the $1+ trillion, government-underwritten student loan “market” is now delinquent.

2. Obamacare is literally on the brink of collapse, with insurers losing $2 billion in 2015 alone, and pulling out of the program en masse

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Japan’s “Helicopter Money” Play: Road To Hyperinflation Or Cure For Debt Deflation?

[I DO NOT agree with the Helicopter Money thesis. Governments’ expansions of their money supplies unrestrictedly were the cause of every Hyperinflation the world has known, as for example in Wiemar Germany and more recently in Zimbabwe. –Bob]

By Ellen Brown – Re-Blogged From http://www.Silver-Phoenix500.com

Fifteen years after embarking on its largely ineffective quantitative easing program, Japan appears poised to try the form recommended by Ben Bernanke in his notorious “helicopter money” speech in 2002. The Japanese test case could finally resolve a longstanding dispute between monetarists and money reformers over the economic effects of government-issued money.

When then-Fed Governor Ben Bernanke gave his famous helicopter money speech to the Japanese in 2002, he was talking about something quite different from the quantitative easing they actually got and other central banks later mimicked. Quoting Milton Friedman, he said the government could reverse a deflation simply by printing money and dropping it from helicopters. A gift of free money with no strings attached, it would find its way into the real economy and trigger the demand needed to power productivity and employment.

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Oil and the Dollar

cropped-bob-shapiro.jpg   By Bob Shapiro

Crude Oil prices broke down from $100+ about a year and a half ago. Since then, there has been minimal fallout in the US oil patch, mostly due both to price guarantees built into many contracts and to the availability of loan money.

As the price of oil still lingers in the $30 range (today at $33+), and as all that borrowed money carries interest which must be paid, oil shale producers will start to be pinched more and more this year.

Some shale oil companies will close up shop this year, and some banks with huge oil company non-performing loans also will go bankrupt. And lets not forget the collateral damage to quite a few others businesses whose sales depend on the soon to be out of business companies.

Production will be lost, at least until the price of oil rises a bit. Then there are producers which will run their wells until they’re dry (shale oil wells have a relatively short producing life span). If oil prices remain low, these producers will not replace production right away, so some additional supply decreases will occur.

The cutbacks over the next year or two will be offset by new supply elsewhere, for example Iran as they resume selling oil following the end of sanctions.

So, what could cause oil prices to rise, saving the bacon of the marginal US shale oil producers?

One possibility, both directly and indirectly, is a reversal of the soaring US Dollar, which rose over 20% during the 2nd half of 2014.

Without that rise in the Dollar, oil might be 20% higher than today, or a little over $40 a barrel.

The rise in the Dollar itself was caused in part by the Yen carry trade. As the Japanese Economy foundered, and as the Central Bank kept interest rates significantly lower than the FED did here in the US, speculators were able to borrow in Yen, using the Yen to buy Dollars. Those Dollars bought Treasuries and US stocks, helping to explain rising markets last year.

US markets rose to unsustainably high PE Ratios, at the same time that the rising Dollar was hurting corporate profits. US multinationals’ overseas profits, while still growing in the local markets, started falling in US Dollar terms. The “strong” Dollar also made US domestic companies less competitive with imports, cutting sales and profits.

High PE Ratios, together with falling profits, are a recipe for a severe pullback (50% or more) in US stocks. Falling expected returns on all that borrowed money likely will cause considerable unwinding of much of the Yen carry trade. As the Dollars are withdrawn from US markets to buy Yen to repay the loans, the Dollar will fall.

Oil Drilling

Assuming the Congressional Republicans keep their word and refuse Mr Obama’s proposed $10 a barrel oil tax, I expect the falling Dollar to raise the oil price to make many proposed shale projects profitable.

So, for 2016, expect:

  • A few oil producer bankruptcies
  • A couple of banks with oil patch exposure to fail
  • The US markets to fall quite a bit further from here
  • The US Dollar to fall 20% or so
  • The oil price to go up over $40

All this does not factor in any additional craziness coming out of Washington (and the FED), or collateral damage from a market crash. We certainly could see quickly rising unemployment and CPI numbers, even after the hacks in the agencies massage the numbers.

Sell The Bonds, Sell The Stocks, Sell The House —–Dread The Fed!

By David Stockman – Re-Blogged From http://www.DavidStockmansContraCorner.com

There is going to be carnage in the casino, and the proof lies in the transcript of Janet Yellen’s press conference. She did not say one word about the real world; it was all about the hypothetical world embedded in the Fed’s tinker toy model of the US economy.

Yes, tinker toys are what kids used to play with back in the 1950s and 1960s, and that’s when Janet acquired her school-girl model of the nation’s economy.

But since that model is so frightfully primitive, mechanical, incomplete, stylized and obsolete, it tells almost nothing of relevance about where the markets and economy now stand; or what forces are driving them; or where they are headed in the period just ahead.

In fact, Yellen’s tinker toy model is so deficient as to confirm that she and her posse are essentially flying blind. That alone should give investors pause—-especially because Yellen confessed explicitly that “monetary policy is an exercise in forecasting”.

Accordingly, her answers were riddled with ritualistic reminders about all the dashboards, incoming data and economic system telemetry that the Fed is vigilantly monitoring. But all that minding of everybody else’s business is not a virtue—-its proof that Yellen is the ultimate Keynesian catechumen.

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Q&A with Mr. Silver Market

By GE Christenson – Re-Blogged From http://www.Silver-Phoenix500.com

Q:      Most people do not value silver and prefer to invest in bonds from big governments.  Why?

A:       Most people would prefer to follow the herd because following the herd is comforting and often correct.  Occasionally it is disastrous.  I suspect the next few years will see the herd slaughtered.  (Bubbles always pop and bonds are in a bubble.)

***

Q:      Silver has gone down for almost five years.  Will it continue to drop?

A:       Probably not, but if you are stacking for the long term, you care little!  Silver was valuable and minted into coins 2,000 years ago in the Roman era.  It will remain valuable 1,000 years from now, long after the Federal Reserve, the EU, the Bank of Japan, and dollars, yen, euros, and pounds have been forgotten.

***

Q:      The global financial system is based on debt and is no longer backed by gold or silver.  Why?

A:       Banks are far more profitable if they are not constrained by a gold standard.  Also politicians can easily spend, buy more votes, and receive payoffs under a fiat paper currency system not backed by gold.  Military contractors profit from the wars that would probably not happen under a gold standard.  Borrow and spend is the “battle cry” of politicians and bankers because it works for them – at least for now.

***

Q:      Former Federal Reserve Benjamin S. Bernanke was critical of gold.  Why?

A:       Consider the source, his loyalties, and what he was selling.  Does the Chairman of Wal-Mart encourage people to shop at Target?  Do Ford managers buy Chevys?  Does the Pope advocate for Muslims?  Do US Presidents discourage military adventures or Wall Street?

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1 is Too Many And 12 Are Not Enough

By Gary Christenson – R-Blogged From http://www.Silver-Phoenix500.com

You have probably heard that phrase regarding alcoholics.  It applies elsewhere.

  • One hit of “meth” is too many, but when you NEED it, 12 hits are not enough.
  • One shot of “mainlined” heroin is too many, and you know the rest of that story.
  • One burst of monetary heroin – quantitative easing – is too much if central bankers want a financial system that does not debase their currencies. But central banks around the world are “shooting-up” with increasing amounts of fiat currency created from nothing.
  • A government sale or “lease” of 100 tons of gold is silly, but after years of deficit spending, dumping 1,000 tons on the market is not enough to stabilize fiat currencies.

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The Rise Of The Paper Machines

By Gary Christenson – Re-Blogged From http://www.Gold-Eagle.com

Since 2011 the financial markets have been dominated by rises in paper markets and declines in commodity markets.

Group One Paper Examples:  T-Bonds, US Dollar Index, S&P 500 Index

Group Two Commodity Examples:  Crude Oil, Sugar, Wheat, Gold, Silver

Group One markets are “paper” markets in fiat debt, fiat currency, and paper equities.  They are heavily influenced by “money printing,” Quantitative Easing, High-Frequency-Trading, futures, central banks, and political agendas.

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