If you haven’t already heard, a 3-day dollar rout has caused the US Dollar index to drop to its lowest levels EVER—breaking through KEY DOWNSIDE SUPPORT. Today it would have cost $1.523 to buy a Euro (Side note: the US dollar has now fallen > 60% against the Euro since just 2000).
So what happened and why the rout?
1. Durable Goods Orders fell 5.3% this week
2. January New Home Sales fell much more than expected
3. Initial Jobless Claims came in higher than expected
Despite this bad news and bad timing (possibly because of the timing?):
1. Alan Greenspan urged OPEC to abandon their dollar peg--why would he do this if it weren’t pre-coordinated with the PPT?
2. Helicopter Bernanke telegraphed further rate cuts despite rising inflationary pressures--why would he signal new cuts so far in advance and with bad dollar news all around?
What was the overall impact?
1. US Dollar Index hit a record low of 73.625 today, and was en route to post its biggest weekly loss in more than two years—without Plunge Protection Team (PPT) interference
2. Oil topped $102 + Barrel w/o PPT stopping the rise
3. Gold, Silver and numerous other commodities all hit new highs without PPT interference
My thoughts on the issue:
Personally, I have a very hard time believing that all the negative Fed “dollar talk” this week was completely coincidental. I think the bashing was an orchestrated attempt to keep equities in the green, lest they fall back into bear territory and through key downside support levels. (Note: lower dollar usually brings higher equities markets)
Rationale for my thoughts: tomorrow several KEY economic reports are due and equities will likely take a significant hit: (Due tomorrow: Personal Income; Personal Spending; Core PCE Inflation; Chicago PMI; Mich Sentiment Revision). Could this have been an attempt to beef up equities prior to?
Fed success in orchestrating dollar’s fall?
Yes, possibly too much! This three day orchestrated dollar fall was too successful even for the actors… Things got so out of hand, President Bush took to the airwaves today in an effort to restore dollar confidence. Said: “We Believe in a strong dollar policy.”
We may soon see a short term bounce in the dollar, but as I’ve stated before: I believe it has now become a matter of (unwritten) policy to try to hyper-inflate our financial system out of its current and future insolvency crisis -- Dollar routs help this cause.
In their attempt to inflate, the world will experience significant dollar devaluations which will (over time) allow the United States to 1) eliminate much of its foreign debt and 2) pay for future (currently $60 Trillion in un-funded) obligations through devalued payouts--it's our only way out of the mess we're in--aside from default!!
Long-term impact of Falling Dollar:
Our standard of living in the US will drop significantly--No if's and's or but's about it!
Ultimately, I hope we Americans finally wake up (after the fall -- because it won't happen until we feel significant pain) and press to get rid of all the crooked slime running our government and economy. It's about time we restore a government of the people for the people vs a government for big business, bottom lines and special interest groups.