"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Tuesday, July 10, 2012

More Long Term Bearish News for the US Dollar

While the near term chart picture for the US Dollar is decidedly friendly, more and more frequently we are reading reports such as the following out of Dow Jones.

It is not difficult to see where all of this is heading. The US is declining and going the way of all empires and kingdoms throughout history who spent themselves into oblivion and refused to consider the long term implications of their policies.

Esau squandered his birthright for a bowl of stew. The US monetary authorities and inept political leaders have squandered the Dollar's reserve currency status for what??? A pox on the whole pathetic batch of them all.

DJ Australia's Swan: To Discuss With China Possible Direct Conversion of Australian Dollar, Yuan

 HONG KONG--Australia will discuss with China officials the potential for
direct conversion of the Australian dollar and the Chinese yuan for
transactions completed in mainland China, Australian Treasurer Wayne Swan said

  "This has the potential over time to help reduce the cost of trade between
Australia and China," said Mr. Swan, who spoke at a forum in Hong Kong before
heading to Beijing for discussions with officials on yuan internationalization.

  Mr. Swan said Australia has strongly supported China's move toward a freely
traded currency, and toward "a fully integrated economy that will very soon
lead the world."


  1. Being of chinese descent even I must say...

    Sick of China this, China that...

    China looking like it might be on the road to blowing apart or civil war instead.

    Gee I wonder what THAT will do to deflationary forces?...

    LOL @ the world pinning its economic hopes on china.

    1. Economy always pins its growth on the productive sector rather than the deadbeat consumptive one. When China, a productive nation, talks to Australia, another productive one, about a straight trade to by-pass the US$, a currency of the deadest deadbeat sucker debt-holic nation, people living in US better pay attention.

    2. Thank you for making your bias transparent, as you did the other day when you, with a large degree of indignation and arrogance, called for a major crash in precious metals.

    3. And you are NOT "bias, transparent, indignant and arrogant"?...lol

      Stop falsely attributing words to me. I NEVER wrote "a major crash in precious metals". That is YOUR interpretation of my suggested price levels that any enlightened trader would more properly interpret as a correction or bear market. To key fib points that in time correspond to just last year in gold. Silver is more volatile and $17 would be a 100% retracement of the rise since two summers ago, yet still 100% higher than four years ago... $20 is a nice round number to test if 25-26 fails, which I think more likely than not.
      But there are no certainties in these uncertain markets.

      I agree with Norcini that you sound angry. Go see a shrink or take it out on your dog instead of me. And please stop with the name-calling and character assassination, which simply undermine the credibility of your argument (such as it is).

      Thank you and good luck.

  2. Brent;

    I am not sure to whom you are referring but if it is to me, please show me where I called for a "major crash" in the precious metals?

    You might want to keep in mind that getting angry because a market does not go in the direction that you hope it does, accomplishes nothing. I am a professional trader - that means that I only make money if I am on the right side of any market at any given time. One does this by reading the charts correctly and interpretting the prevailing sentiment at the time. If you can consistently do this, you will make money and succeed in this extremely challenging business. If you do not, you lose money. Lose enough money and you are out of the business.

    One can rail to the cows come home but it is not going to change the direction of any market nor will it put one cent into your pocket. If you are long the precious metals in the futures markets, then you must be aware of the danger of a breach of downside chart support which will result in additional selling. If you are not careful you will be wiped out.

    Right now the precious metals markets are all about additional QE whether we like it or not. If traders think that they are going to get it, they will move higher. If they do not think that they are going to get it, they are going to move lower. What is so hard to understand about that? You may not agree that is the reason these metals should move but the facts are that this is what the sentiment is IN THE MARKET AT THIS POINT IN THE GAME. Either you accept that or get out of the futures markets.

    In the meantime, use price weakness to accumulate PHYSICAL METAL and forget about all the day to day gyrations and shifting sentiment that causes this idiotic volatility.

    1. Mr. Norcini,

      I was not referring to you. I was replying to "J".....

      I was referring to this comment on your Silver Chart Post the other day:

      J July 10, 2012 3:50 PM
      $30 ?? LOL ... Maybe in about five more years.

      As I wrote on on harvey organ, silver will be $25 this week and $20 or less later this summer...
      $17 support will be tested

      Gold $1444, 1310 for sure.
      Might even retrace 50% to test $1000

      I apologize for any confusion. I do not trade precious metals, I only accumulate PM's on a regular scheduled basis. I made a decision to cease futures trading (and other forms of short-term trading for that matter) when it became clear that volatility was going to become "spiritual"...in the words of Mr. Jim Sinclair. And clearly it has.

      Best of luck to you and anyone else that is still brave enough to stick their heads in the mouth of the lion, especially in light of the most recent FCM/IB fraud at PFGBest. That's 2 in less than a year....wonder who's next.....Rosenthal-Collins perhaps?

      Sorry again for the confusion. But a good response, and one that I completely agree with none-the-less!

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  4. Dan, I am trying to understand what this means,

    "the potential for direct conversion of the Australian dollar and the Chinese yuan"

    Okay, they trade directly with their own currencies, but how long does it take for them to complete the transition since everything so far in is US$?

  5. Dan,
    Thanks for what you do. More than anything you supply a forum for those of us who no longer see any truth anywhere. How about if the US powers that be came out and told us all the truth, repeated several times, such that the truth actually became what we believed. What then? Most cannot handle the truth. The US is broke, the "pox people" spout so many untruths, repeated several times, in several different venues, that it all becomes a blur. I have several times taken positions when your triangles tell me I have opportunity or failure. Some times I win, sometimes I lose, most of the time when I win, it is not the reasons I think I win. Wisdom dictates the long term trends are clear. FoFu had a point. When the powers that be need to change our foreign exchange mechanisms and pegs, we will be the last to learn. So, bet here, bet there, but always maintain a long term hedge. Increase the hedge when the media beats the gold glume, as that is exactly the time they intend on starting the uphil climb, and the hedgies will quickly join and en masse. Thanks again, Dan.

  6. By the way the xau/gold is looking pretty oversold. I know, I know, GG just got its butt kicked in the MSM world. You notice Dan? I think it will indeed soon be the beginning of a very large fish on a hook for all markets, or... QE for everyone. In that light the xau/gold indicates that the miners may just give us old faithfuls some serious spouts. Just sayin.

  7. Don't fool yourself - the US dollar ceasing to be the world's reserve currency is the best thing that could ever happen to the US economy.

    PLEASE read up on the Triffin Dilemma. The nation with the world's reserve currency is FORCED to regularly run trade deficits in order to supply the world with the dollars they need to conduct trade with each other. Eliminating the need to run trade deficits by eliminating the USD as the world's sole reserve currency would liberate us to run trade surpluses again.

    In fact, this problem is one reason why the markets "want" the euro to go higher: It's one of the few candidates as an alternate reserve currency (unfortunately for now, the ideal alternative - the yuan - is not ready for this role).

    Interesting article here on how this dilemma is playing out right now.

    1. But the reserve status of the dollar is what has allowed Americans to live beyond their means (or what they produce).

      If the dollar loses its reserve status and takes a dump, the American standard of living will plunge too.

    2. The dollar losing its reserve status has nothing (directly) to do with its value. Read my second link: The need to flood the world with dollars via our deficits to support world trade sends the dollar down (trade deficits tend to do that with *any* nation, trade *surpluses* tend to make a currency *rise*, see Japan for example). So, all else being equal, if the US dollar lost its reserve status, and we started running trade surpluses, that could actually lend *support* to the dollar.

      Of course there are other factors affecting the value of a currency, but trade is one of the more important ones. So losing its reserve status would not necessarily mean the USD would go down. It might actually help support its value, or have little effect at all.

  8. There is another side to that coin, as follows...

    Reserve status of the dollar supports the dollar immensely because international trade and transactions has been conducted in dollars. Such as when Japan buys oil from Russia, UK buys tea from China, etc. International settlement in dollar terms creates enormous demand for dollars. Take that away, and the demand and value of the dollar will fall, along with Americans' standard of living.

    1. Then why has the dollar generally fallen over the past 40 years (aside from 2 big "bumps" centered around 1984 and 2000)? Note this phenomenon began long before the euro existed, or before any other currency was a candidate for alternate reserve currency.

      As I said, trade deficits (especially persistent ones) usually drive down the value of a currency. If the US dollar loses its reserve status, thus letting us run trade surpluses, the dollar is just as likely to go up as it is to go down.

  9. the evolution of alternative currencies is fascinating.

    i suppose the US $ started out as an alternative currency.

    i lived in Canada for about 5 months in 2004. there was a small island near Vancouver Island that had a functioning exchange system whereby 1 ounce of BC bud was accorded a value of $100 in commercial transactions. taking into account the price of gold & the US$-CAD exchance rate, that 1 ounce (avoirdupois) of marijuana was given a value of about 1/5 Troy Ounce of Gold.

    there was also a movement in Willits, associated with WELL, to establish an alternative currency tied to various weights of various grains.

    $10 = 11 pounds of pinto beans or rice, or 17 pounds of triticale.

    i have to wonder how the Can. Revenue or the IRS feel about these alternative currencies.

    i began to lose faith in the US $ when i witnessed the Bush deficits in the early '00's.


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