"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


Friday, May 17, 2013

Surging US Dollar derailing Gold and Silver

This past Wednesday I posted a chart of the US Dollar detailing its strength from a technical chart perspective. Based on today's price action, in response to a surprisingly strong Reuters/University of Michigan Consumer Sentiment Index, the Dollar has cleared  a major chart resistance level and now looks to be on target to challenge the 85 level, which is the last major block preventing it from returning to its former double top up near the 89 level. I would refer you to that chart in the previous post from Wednesday to see for yourself the remarkable strength currently being exhibited by the US currency.

I should also note here the continued extremely weak showing by the Australian Dollar, a currency whose fortunes typically tend to parallel the overall commodity sector. After falling below par with the US Dollar last Friday, May 10, it has continued moving lower dropping a further 3% against the greenback this week. A falling Aussie does not bode well for the overall commodity sector in general.

With the US Dollar soaring higher, with consumer sentiment ramping up towards the economy (no doubt the precisely desired outcome by the Central Banks when they created the perfect conditions for a bubble in the equity markets), consumers are feeling the wealth effect which comes from seeing their 401K's, pensions and other retirement plans increasing nearly every single day, while at the same time poor demand for unleaded gasoline has sent prices dropping at the pump. Hey, what could be better than this?  My investments are soaring, my costs are the gas pump are dropping and my food bills are even going lower, is the thinking of the average consumer out there right now. Smile, relax, enjoy life, be happy, - there isn't a care in the world.

You have to hand it to the Central Banks; they appear to have made fools out of the honest money crowd and upended the laws of economics and the very theory of money itself. Apparently we can have our cake and eat it too. All we need to do is to have the Central Banks create unlimited amounts of paper money and we can forego any concerns whatsoever about debt.

I must admit to being an adherent to the Austrian school of economics. Right now, we look like well-read DOLTS with all our predictions having been proved utterly wrong.

I tend to use sarcasm here at this site quite frequently to make my point but this time around I am not being sarcastic at all - if the Fed, the Bank of Japan, etc., can create Trillions in Dollars, Yen, etc, with no inflationary fall out whatsoever, If they can create these sums of "money" with absolutely NO EFFECTS OR CONSEQUENCES,  if they can create a runaway bull market in equities, if they can simultaneously drive commodity prices LOWER in the process of so doing, and if they can create conditions in which consumer sentiment can actually move higher, why stop at all? Why not merely have the Fed and the Bank of Japan just keep their bond buying programs in place indefinitely? I am serious - why even bring up the subject of an exit from the QE stuff? After all, they have been engaging in this stuff for years now without any fallout so why stop? Just keep it up into perpetuity thereby guaranteeing a permanently rising stock market with a never ending wealth effect for the average citizen. After all, who wants to leave Nirvana and go back to the messy details of the real world where things like debt and living way beyond one's mean can pour cold water on our wondrous illusion!

Or to put it in terms of popular culture - who in the hell would want to take the RED PILL when they can eat the BLUE PILL and blissfully live in the Matrix? The RED PILL brings pain, discomfort and despair that comes from understanding the truth. Those in the MATRIX can continue to watch Reality TV shows and live out their own lives vicariously through that of others.

Interestingly enough, wages remain flat so while consumers are not bringing home more disposable income, their costs are dropping making them feel better about things in general. I am sure it is now only a matter of time before they start rushing out and begin loading up on those big ticket items; cars and trucks, ATV's, recreational vehicles, new appliances and big screen TV's.

Given this state of mind, is it any wonder that gold is being unceremoniously jettisoned over here in the West? Heck, even the "safe haven" bond market is breaking down. Just today, the yield on the Ten Year note has reached as high as 1.95%! Less than three weeks ago it was yielding 1.6%!

"Safe Havens?" "We don't need no stinking safe havens"!


  1. Hi Dan

    Remember the alternate reality of Bedford Falls that George Baily experienced in the movie "it's a wonderful life"?
    Sadly, this is our reality, only we will not wake up only to realize it was just a vision or a cautionary dream.

    It is as though the only industry remaining is a giant Casino, one in which you either play or work in..there is no other choice.

    I agree with Jim Rogers when he states that this is going end very very badly. The distressing part is that it can go on for a very very long time.

  2. Dan,
    I really do appreciate your thoughts and your time here. I am taking every penny out (mining stocks) today. I can do it and not pay one red cent to the IRS. I am going to do it and the IRS is going to have to come find me. When they do find me I will be broke so they will not get a red cent. (Whoops, no copper in penny's anymore so brown cent). I am done, the CSPAN taping session did it for me. Crooks, cons, Obama, and all his cronies. I would go on, but who cares. Losses, losses, losses. I am going to put my worthless dollars right next to my AR 15 and at this point really dont care. His administration has taught me that complete and utter disregard for law is finally gotten to me. If I uttered words that I want to say you would not print them, but, in this fashion basically I am saying to the Federal Govt, state governemnt, good luck selling a house I kept up but no longer want because it is in a Socialist State Maryland O malley land. See you later guys. Love all the Libertaraians in this world. Bye bye.

    1. White Wolf,
      Don't go away. If you do it is one more victory for all these people you are talking about.

      Stand up, count how many fingers you have and use them.

      I, once, sent an email to Jim Sinclair when he was not sure what to do -continue his site or not- because of the losses in the gold market and the pain inflicted to his readers and asked for feedback. I am telling you what I said to him:

      "Don't give up. Every voice counts"

      Hubert, one of those "Libertarians" trying to wake up all the zombies of this world.

  3. History is not on the side of the central banks re: money creation and the avoidance of inflation. It's difficult to see how their machinations could end well.

    Guess that means I already swallowed the red pill?

  4. Dan,
    This is the definition of ZOMBIE:
    "A soulless corpse said to be revived by witchcraft"

    This is exactly what you have described. I am sure anyone can replace corpse and witchcraft with the appropriate names.

    I am not joining the crowd. I have 5 fingers in each hand and know exactly how and when to use them.


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