Rather than answer this question many times, why don't I economically tell everybody now why I believe the dollar is rising, some fact, some opinion. Main determinant of currency exchange rates is relative interest rates. Other things being equal (OTBE), the currency paying the highest interest rate will have the highest exchange rate -- just a matter of equalizing prices. But other things never are equal (OTNAE), because central banks depreciate ("inflate") their currencies at different speeds. Generally, the market discounts currencies they expect to depreciate. Right now European & Japanese short term rates are actually negative. This is so stupid, so outlandish, that it could only arise from central banking. If a bond pays negative 4%, you give some government $1000 today & a year from now they give you $960. Right, they actually CHARGE you for holding your money. Low as the Fed has screwed them down, US interest rates are still higher than negative, and higher also than long term rates in Europe or Japan. Therefore, folks dump euros & yen and buying dollars, i.e., dollar bonds. More than that, the guaranteed low interest and erstwhile steady exchange rates for years gave speculators a green light on the carry trade: sell euros or yen for dollars to invest in the Wall Street Casino. Only problem there is you have "borrowed" dollars and must pay them back. When the dollar begins rising, your short dollar position goes against you fast, and hell hath no torment like a short squeezed in a rising market. Now the loudly & publicly proclaimed intent of the Euros & Japanese to depreciate their currencies AND relatively higher US interest rates are driving the dollar higher, not to mention whatever crowd of losing dollar carry trade shorts remain. One last thing: demand for dollars is rising because corporations want to finance in euros or yen to take advantage of lower rates there. But to do that without currency exchange rate risk, they have to find dollar swaps from somewhere to hedge that risk. More upward pressure on the dollar's price. And who knows what other Central-Bank-spawned cancers are eating at the economy's vitals and working out as symptoms in the currency market. Whoops! And the Mexican peso is falling out of bed. Dollar has risen from 13.65 pesos when November began to about 15.65 today, a 12.8% loss. And Mexican authorities are making noises about selling US$52 million a day to "stabilize" the peso. No surer sign of a crisis than that. Fellow Mushrooms, as part of its propaganda campaign today the blackhearted Federal Reserve criminals announced they had administered a "stress test" to all ("31") of the large US banks (fellow criminals) and all passed. "I dunno about you, Margaret, but that cinches it fer me -- if them starchy examiners at the Fed say the big banks is good, I reckon they is good." Look at the propaganda: "stress test," to resonate with the test the doctor gives you to check your heart. Clean bill of health! There's a word for this cheap propaganda, but it's too scatological for me to use and remain a gentleman. Stocks inched lower today, pausing in their earthward trajectory. Looking at today's chart, www.nasdaq.com, you might spy the fingerprints of the Nice Government Men preventing the plunge. Dow fell only 27.55 (0.16%0 to 17,635.39. S&P lost 3.92 (0.19%) to 2,040.24. No panic yet, no blood on the floor, but the rally is broken. Panic erupts when the Dow closes below 17,037.76, the 1 February low. Soaring dollar & plummeting stocks make me feel like a goldfish at an otter convention. Makes me think of September 2008. Drops in silver & gold today sent the Dow in Gold & Dow in Silver back up to touch the top gator jaw again. Need confirmation before we can call an end to their upward travel. US dollar index soared 115 basis points (1.17%) to reach 99.75 at close. Touched 99.97 high. Y'all remember back in mid-January when the dollar broke out upside again, I told y'all that when a market exceeds a top boundary line like that, you can double the size of the channel. That pointed the dollar index to 100. Here's a chart. http://scharts.co/1HEYhF1 Euro might as well go home. Lost another 1.26% to close at $1.0546, closing in on parity with the dollar. Ne'er a sign of turning up. Yen lost 0.26% to end at 82.35. It has broken down out of its sidewise range, but the bottom line of that range might as well be 82.20. WTIC remains in its range although it fell 1.21% to $48.17/barrel. Gold lost $9.40 (0.8%) for a Comex close at $1,150.70. Silver gave up 26.8 cents (1.72%) to 26.8. Gold/Silver Ratio closed at 74.989, up only 0.9% from yesterday, but clearly broken out above the downtrend line. This is, or could be, a stout blow to our hopes. Silver's greater resilience than gold has been an upholder of optimism throughout this decline. Now it appears to have broken. Look at the chart, http://scharts.co/1Fq4lmt I won't repeat all I've said about Bollinger bands, but silver closed below its 2 standard deviation BB today, not below 3 sigma. Clearly wants to break down & unless it turns up immediately, it will. Oddly enough, the 3-sigma BB today is at 1504c, the November low. Gold's 3 sigma BB stands at $1,139. today, against a low of $1,146.50. Gold is heavily oversold (RSI at 25 today where 30 is oversold), but there is precious little other evidence it might turn around. We just have to watch and wait. Closing in on a bottom.. On 11 March 1918 the first case of Spanish flu was reported at Fort Riley, Kansas. An estimated 10 to 20% of those infected died. 3% to 6% of the entire world population died, 50 - 100 people. Influenza may have killed more than the Black Death. By 1920 it had burned itself out. Oddly, it killed mostly young adults (20-40). Most likely to die were pregnant women. God preserve us from another epidemic like the flu!
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger
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