The grand symphony of currency manipulation seems more finely orchestrated than ever before. However, it’s not necessarily the fundamentals that are moving currencies so much as global perception. In the battle between the Fed’s quantitative weakening of the dollar versus the eurozone debt crisis, the dollar is winning this round of who sucks less.
On October 1st, I posed the question, will the dollar rebound before being dissolved into a global currency? At that time, no one was predicting the dollar to gain strength with the Federal Reserve planning more quantitative easing. The windbag media promoted QE2 as a stock market stabilizer and a boost to U.S. exports, yet most experts openly called it a backdoor bailout, or monetizing debt, or plain old money printing. Nearly everyone agreed it would ultimately erode the value of the dollar even further and cause measurable inflation.
Indeed, it was a well-justified gloom-and-doom 6 months for the dollar by Fed critics. After all the media build-up, the Fed’s announcement of the $600B easing plan came strategically on the day after mid-term elections, when most of the media was focused on feeding the false left-right frenzy by digesting the election results. In other words, QE2 got some mention, but the timing was clearly a tactic to keep a lid on the talking-head backlash. Then, Obama rushed out of the country for the G20 economic summit taking the remaining media distraction with him. Between stories of Michelle’s shopping trips, it was revealed that China and other foreign economic players were not very happy about the Fed’s move. Yet, the dollar started to rally.
Recent commentary by Chuck Butler in the Daily Reckoning questions the commodity sell-off and dollar rally:
But does it all make sense, given what I mentioned above that the FOMC is looking for inflation to inject into our economy? No… But since when, going back to the financial meltdown, does anything the markets do make sense?
Nothing makes sense if we still believe fundamentals actually matter. Sure the dollar is nearly dead, fundamentally, but it seems that perception now trumps concrete analysis. As I reported in October:
The fundamentals suggest that it (the dollar) should be finished, but just as the world is about to declare it dead, miraculously a global storyline seems to emerge just when needed and foreign investors rush back in for “safety.” A clear example was the steady drumbeat of a sovereign-foreign-debt war that resulted in reports of whether the Euro would even survive, while the dollar enjoyed a triumphant ride up victory mountain.
|Dollar on the Rise: 2-month Dollar/Euro Chart (source advfn)|
Today’s major headlines from leading UK papers show how “critical” the eurozone debt crisis has become. The first story appeared in the London Guardian titled Ireland crisis could cause EU collapse, warns president, where EU President Van Rompuy warned in a speech in Brussels, that “We’re in a survival crisis . . . we all have to work together in order to survive with the eurozone, because if we don’t survive with the eurozone we will not survive with the European Union.” The article went on to define the pressure cooker facing the PIIGS:
Van Rompuy’s speech added to the pressure on the Irish government, which was continuing to resist international pressure to accept a bailout this morning.
Shares fell across Europe as pressure mounted on Ireland to accept an EU or International Monetary Fund bailout to stem contagion to other high-deficit eurozone countries. Portugal, which has seen its borrowing costs rocket along with Ireland’s, warned last night that it too might need a rescue package.
But despite fears that the crisis could bring down the euro, Ireland’s minister for European Affairs Dick Roche denied this morning that Ireland needed emergency financing.
The next article that encapsulates the heightened fear surrounding the debt crisis was written by the brilliant financial reporter Ambrose Evans-Pritchard of the Telegraph titled The horrible truth starts to dawn on Europe’s leaders where he states: “The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict.” Granted, he was basing his analysis on the same Van Rompuy speech, which seems eerily reminiscent of Hank Paulson’s dire warning of complete collapse and martial law in the U.S. if the Congress did not pass the TARP bailout.
The situation for the PIIGS hasn’t changed in the last six months. It isn’t incredibly more severe than it was then. And despite mildly encouraging retail numbers this quarter, the U.S. is not much better off than it was when the dollar was sinking like a stone. So, it is vividly transparent that the global banksters use the media to move the FOREX at times of their choosing and in contrast to fundamentals. In turn, we all buy in and post and repost the crisis headlines feeding the manipulation machine.
The video below shows the absurd shell game that is the eurozone debt mess. It’s comically and obviously robbing Peter to pay Paul to prop up the Ponzi scheme:
The media machine seems unbeatable, but luckily it’s somewhat predictable. I reiterate what I said when I predicted the dollar to rebound in October:
The severely debased dollar is unlikely to rebound to previous highs given the international awareness of America’s financial problems. Understanding that the goal of the global elite is to move toward a global currency, ultimately they must kill the dollar and other major currencies.
Although the end may be very near for the dollar we will likely see the establishment play them off each other for as long as possible. These cycles have seemed to run for about six months, but I don’t think we’ll see the dollar rise again for that amount of time. Nor do I think it will reach its twelve-month highs against the euro again, but I would wager that we’ll see very strong gains to the dollar by year end. The European Union heads are to meet again in December to determine amendments to the Lisbon Treaty, which some leading diplomats are calling “mission impossible.” The lead-up to this meeting, coupled with the eurozone debt issues, will drive this quarter’s news cycle and the FOREX.
Another development to watch in regards to the strength of the dollar is food, oil, and gold commodities. Since they trade in dollars, it would make sense that they would sink if the dollar starts beating up on the euro. And we already have witnessed some slight movements downward. However, I predict that they will remain relatively stable and fall far less than the euro will against the dollar. And by the first quarter of next year, commodities will be off to the races again where we will likely see $100 oil and $2000 gold by mid-year. That may be the real start of the end of the dollar, and the euro.
As a final note: They can’t allow the euro to fail before the dollar because the European Union is the banking model they desire for the world currency; separate nation states with local currency but where consolidated economic governance is dictated by a grand central bank. Incidentally, the eurozone debt crisis 2.0 is a dog and pony show.