Doyenne of the gold bugs Jim Sinclair has set a countdown to a crisis in the US dollar with 85 days to go. In an email to his fans he explains his reasoning:
‘Today’s incoming emails exceeded the 1200 mark, a great degree of which are asking me what is the motivation behind a countdown of days for the USDX.
There are various answers to this question of which TA is the least important.
The primary reason for this “out on the limb statement” is that the recent China/US financial Summit meeting in Washington which was requested by China, was not significantly pre-planned.
As I understand it there are two things wanted and one thing disapproved of.
The US financial leadership wants, but more so needs, Chinese buying of US Treasury offerings to remain at these levels but more so to increase to offset the wholly unavoidable increase in offering of US Federal Debt.
The Chinese wish to see the USA support the creation of a Super Sovereign Currency as an offset to dependence on the dollar for international settlements and national reserves.
The Chinese rightly feel that the greatest risk to their present dollar position’s valuation is quantitative easing. or simply put, the monetization of one’s own debt by the electronic creation of money for funding yourself.
I am informed that Chinese interests want to see both in 2009.
You will note that the QE program was extended until October, particularly the end of October. This is what Bernanke would like to see, hoping the Management of Perspective Economics will succeed. The Chairman as the academic he is really believes it is possible.
As market related, I know MOPE works only when it has the wind at its back such as from 1981 until 2001. After that it loses it strength until it evaporates into reality and the law of economics such as now.
Quantitative easing cannot be curtailed in 2009 or 2010. To curtail QE as the US Federal Deficit explodes would be to release interest rates to the marketplace that could easily take them to late 1979 early 1980s levels due to a currency event.
The USA cannot support a Super Sovereign Currency. To do so would be to disavow the US dollar as the universal reserve currency which the financial leadership of the USA still adheres to, seeing this period as only an aberration in the constant.
The USA, due to market considerations, cannot yield to Asia and China as spokesperson for the BRIC on the two criteria required to remain as purchasers of the US Treasury instruments, which is the only real support the dollar presently has.
Further, other reasons why the dollar could collapse may be because:
- It has always been overvalued
- It is undergoing the bear cycle
- Other currencies are rising fast against the dollar
- Central banks have started diversifying their currenciesaway from the dollar and have started shifting their reserves
For more insights, do not forget to visit this website.
I have given you two tools for timing as well as other resources like Martin Armstrong who was at one time nearly unknown in our crowd.
Tools of timing, some I have not shared with you, indicate a major potential turning point that could easily see a break below .7600 or .7200 coming in the final quarter of this year.
Add this all together and you get a November bull’s eye for a loss of confidence in the US dollar internally as well as externally. That will end the misguided belief that MOPE, via its tool SPIN, defeats economic law.
Van Mises, Ricardo and Adam Smith have not been laid to rest by market manipulation. The wind is in the face of business now as a long-term trend. We are returning to basics and moving away from the fancy, complex and fraudulent.
All of this could have been fixed prior to the event of Lehman declaring bankruptcy. Now there are no PRACTICAL SOLUTIONS and NO PRACTICAL EXITS FROM CONSTANT QE.
Pandora’s Box is open, only to be closed by markets as the downward spiral goes to its practical end, a return to commodity money.