The US$ is a Piece of Crap

The Entry Points

The US$ is a piece of crap. That I agree with, hence for years my bullishness on the $ has never been about how great the Dollar is – it totally sucks. But currencies are relative to each other and to gold also somewhat, or sometimes alot of focus is on gold as the best “currency”.  That focus will become more important later this year, and not just as a passing fad. The mocking of gold as a “pet rock”, or all of the other comments from idiots, will be replaced by respect for it again from a much wider audience. The Federal Reserve and all CBs are losing their “omnipotence’, but they have such high IQs, they are blind to anything which can’t be “proven” by their stupid econometric models. However that’s looking down the road. In the meantime we have a horrific situation in Europe, both politically and banking wise – negative rates have destroyed the already weak banks, also in Japanese banks. So Japan is also a huge problem, demographically, banking, and government debt-wise. We have serious problems in China, which I’m super bullish on long term, and am waiting for a buying opportunity in Chinese stocks. I liked and owned the Yuan for years, but sold it awhile ago – their currency is going to be a big problem for the world. There is way too much complacency about how their currency situation will infect the world economy. There are also a ton of problems with India and their insane Prime Minister. The Rupee is a mess. But I’m also very bullish on India, it’s a matter of a big selloff in the stock market for an opportunity. And there’s Mexico, Venezuela, etc., etc. The other thing with the $ is the huge global short position which I’ve written about several times. So these issues, along with the huge accumulation area (linked in the previous post below), are my “reasons” for being bullish on the US$. But this is the year when all of these same issues will begin to ramp up the bullish outlook for gold, they have been building for years, it’s just about patience. A big $ rally will help to keep a lid on gold. But gold becomes the alternative currency if at least one major currency has serious problems – not just the US$. Below is a previous post from November which is my general outlook. So gold against ALL currencies is something I’ve been watching for a long time:

For years we’ve been hearing about the US$ collapse. There are blogs and books specifically devoted to this theory, and that’s all it is – a theory. Sort of like the theory of a stock market bubble and crash which I have vehemently disagreed with since 2009. And, of course, there have been fortunes made by the scam artists scaring so many decent hard-working folks into buying their product to “protect” themselves from these mythical crashes. It’s disgusting. Since getting bullish on the $ many years ago, people have given me every concocted notion about why the $ will crash and I listened and politely (hopefully) disagreed. It doesn’t mean there will be a perpetual bull market in the $. Its’ days are numbered, but like everything in markets, it’s about timing. The bull market is still on, but a pause is close. This is the basic $ chart I’ve been using for a while. Since “breaking out” (I don’t approach markets this way) above around 100.5, my belief is the 102+ area would be the first bigger resistance area. A spike in this area would likely be a short term top. A strong $ will keep a lid on gold advances, but that lid will loosen next year. It’s the main reason why for years my mantra has been to have patience with gold. It’s when the real banking troubles start to broaden (likely next year), when the $ and gold will rally together. We’ve seen glimpses of it over the last few years, but the confidence level in central bankers (CBs) was still sky high. That is changing, and it’s being reflected in the government bond markets (which are actually short term bullish now). The CBs days of total omniscience are also ending, which will cause a multitude of problems for their decades old ability to extend and pretend. 

But what we need to continue watching is the performance of gold in foreign currencies relative to the US$, which has been my view for a few years. It’s the US$ which has been a detriment to a major push higher. But this relationship is not written in stone. Way too many believe it is true, however just a bit of research can show how that relationship can breakdown for significant periods of time. So I would recommend pulling up some charts of gold in foreign currencies and keep watch on them and here is a good place.

Addendum:

So this following exchange with someone is the problem, and why too many folks have gotten off focus about what a market is actually all about. I’ve been hearing this same type of argument for years. These are good people, but I’ve not been able to dissuade them from having a different approach to markets. And this is as the $ is at almost 15 year highs. I’ll keep trying:

Q: Scott, Please explain in next weeks blog how the Dollar can be losing purchasing power and yet soaring at the same time without the use of MAJIC ?

A: a)- Currencies are all relative to each other. b)- markets move based upon supply and demand period. There is tremendous demand for US$s.

Q: Currencies are not relative to each other they are manipulated by the Central Banks for appearances to the gullible citizenry ! Question about the answer to B. You failed to account for the Dollar supply issue in your answer , has the Dollar supply gone up or down during this Dollar rally ?

A; Has the $ gone up in price or not. All markets are manipulated, no argument there. I’m in this business to make money though. You’re not accounting for the total global supply of $s. You’re only looking at it from a US centric point of view.

Q: No, That was indeed my question has the total global supply of $s gone up or down as the purchasing power went down ? ‘I’m in this business to make money though’, no again you’re in the business of collecting Electronic Federal Reserve debt notes that masquerade as money !

A: Actually, the profits I have made on my long US$ position over the last several years has increased my own personal purchasing power. Do you understand the difference between markets and theories? I don’t care about the US$ collapse theories. You will get your wish one day, but be careful what you wish for.