Jim Sinclair's letter on the US dollar
Posted on 20 August 2009 with no comments from readersMy Dear Friends,
You can take your waves, percentages, algorithms, quants and quarks and throw them directly into the basket. The time for lines and squiggles are behind us. The common shares of the US dollar are and have been in a long term downtrend. That downtrend is 81 days from implosion. The selling of the US dollar and US dollar instruments is increasing in international markets, making it ever more difficult to manipulate the popular US dollar index, the USDX.
The price of gold is all in the dollar, times 100.
The manipulators have built a fundamental spring into gold by their capping activities.
COT has cooked its own goose.
Where the price of gold is concerned, there is no other focus of interest as all points of interest have but one common denominator.
That entity is the US dollar.
The Fundamental illustration below is dollar flow momentum.
China holds in its hands the future of the category, “Foreign Purchasers of US bonds.”
China wishes the annihilation of the Fed policy of “Quantitative Easing.”
The Fed wishes to accommodate China.
The US Treasury is absolutely opposed to any such consideration as it would cement the present Administration into a one term wonder.
The US Treasury must win this battle because the boss of this opposition has the power to appoint the new Chairman of the Fed, either Summers or Geithner.
Political control of the US Fed and therefore of monetary policy is in the cards.
China as spokesman for the BRICs has publicly stated their desire for the institutions of a Super Sovereign Currency. This is not an intended as an immediate substitute for the dollar as a reserve currency but rather an alternative in new commitments.
Only the misinformed assume the desire for an SSCI is a desire for a total exchange of dollar reserves.
The desire of the BRICs and in truth all other major trading nations is for dollar diversification in order to break away from the dollar dictating their futures. It means a significant decrease in purchases of US dollar denominated instruments.
Selling is not required for substantial depreciation in a major currency.
Momentum collapse in buying is all that is required for a severe depreciation in any major currency.
The USA in all probability will not be able politically to deliver support for the SSCI, however political control of monetary policy is CERTAIN as the Fed cannot win this contest against the Administration in the form of the US Treasury.
Bernanke becomes a team player or a team player will replace him.
The later is becoming a probability as it is hard to trust a prior adversary.
The depreciating dollar was a tool of Roosevelt’s failed anti-deflation program that like monetary stimulation is believed to have been abandoned too soon in the 30s by Administration intellectuals. Because of this, the US dollar is out of the picture for serious Administration consideration other than as a sales issue on US treasuries.
It is my understanding that the BRIC countries, not China alone, have given the US until early November to deliver.
As a result of the above I see 81 days left for the US dollar.
The gold price has but one criteria and that is the US dollar. Armstrong and Alf are correct on the levels awaiting the gold price.
I know $1224 and $1650 are certain.
Note: Eric’s humility is the sign of his maturity and genus. Well done eric.
Respectfully yours,
Jim
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Posted Aug 19, 2009 11:51am EDT by Henry Blodget in Investing, Media, Newsmakers, Recession, Banking
Related: TBT, TLT, UDN, UUP, BRK-A, BRK-B, SPY
A highly influential American has finally hit the panic button about the tremendous mountain of debt the country is piling up.
Last year, Warren Buffett says, we were justified in using any means necessary to stave off another Great Depression. Now that the economy is beginning to recover, however, we need to curtail our out-of-control spending, or we’ll destroy the value of the dollar and many Americans’ life savings.
Some not-so-fun facts from Buffett’s editorial today in the New York Times:
Congress is now spending 185% of what it takes in
Our deficit is a post WWII record of 13% of GDP
Our debt is growing by 1% a month
We are borrowing $1.8 trillion a year
$1.8 trillion is a lot of money. Even if the Chinese lend us $400 billion a year and Americans save a remarkable $500 billion and lend it to the government, we’ll still need another $900 billion.
So, where’s it going to come from? Most likely the printing press. And, ultimately, Buffett says, that will destroy the value of the dollar.
The American dollar is going down everyday, cause the Americans are not buying anything, saving your money will eventually turn this into the great depression.
If you want to help the economy, keep buying, the more you save the more the dollar will turn into toilet paper.