Monday, June 13, 2011

US Dollar Collapse

Never mess with the FED! Even if you are US Dollar. What Maestro started General Bernanke
has taken to the new level with choppers and a lot of heavy armor with Quantitative Easing.

No prisoners will be taken, it is deadly serious now.

Quantitative Easing does not work or does it? You need to answer what is the real target. Officially it was supposed to bring the Yields down and Mortgage rates with it. It look like it worked for a while, but from April, 20th Long Term rates are rising! They are out of FED control - suspicious foreigners must be stoped to buy Treasuries all together and Treasury Bubble is bursting pushing Yields higher despite FED buying. Inflation is back. With record low Short term rate at effectively zero controlled by FED and rising Long term rates controlled by buyers of IOUs we are in negative Real rate territory again. Welcome to 2002 again: Gold will flourish, Silver will fly. On another note according to Jim Puplava interest payments in March with record Budget Deficit of almost 200 billion dollar were at 20 billion dollars. With rising Yields monthly payments of interest will double very soon deteriorating the situation further.

Here we can see why we have raised our Crash Alert to Pandemic level: US Dollar is in a Waterfall mode after a Bearish Flag resolution. Now the dollar is below not only MA50, but also below so important MA200 and it has slid through this important support without any thoughts about a bounce. The real idea of QE is to debase the US Dollar by any means and bring inflation back, it is the only idea left to survive for a while and inflate the debts out. Real taxation will be rising and it is an old trick of all governments based on FIAT currency: with inflation you will have always to pay taxes based on nominal values even if the real purchasing power of your income or realised capital gain will diminish in real terms.

And on a weekly chart US Dollar now is under MA200 with Confirmed Head and Shoulder Bearish Reversal and Green Fellow has a lot of room to fall further before first hesitation.