The US Dollar remains in a long term bear downtrend, and we see no evidence yet on the charts of any reversal in the primary trend. Gold remains in its long term bullish trend, along with other contra-dollar plays such as select currencies and commodities, some of which have had remarkable gains.
The fundamentals for the dollar are rather bad, and the Fed is not helping by accommodating the addition of liquidity to try and resolve the capitalization crisis in the investment banks in the securitization bubble implosion.
Until the US is put on a sound financial basis, which is something beyond the power of the Fed alone, the dollar outlook will remain long term negative, no matter the short term technical bounces and the pressure on other countries to debase their currencies in sympathy with the dollar.
Adding to the problem are the selective supply shortages being experienced in some of the commodities as the continued market intervention of the banks and governments shows the inherent weakness of command economies not allowing market forces to establish sustainable equilibrium.
The irony is that the United States 'won' the Cold War, but may lose the peace by not adhering to the very principles that make up its fundamental character embodied in the Constitution of free markets and free citizens operating not at the sufferance of the government, but rather with the government acting at the behest of the public good.
Nothing short term embodies this more for us than the policy of diverting agricultural products used to feed human beings in order to produce inefficient amounts of ethanol when other alternatives are available and more financially productive. At least they have not yet started using the people themselves to make fuel for the SUVs and limos of the wealthy.
Such are the last terms of lame duck presidents when they provide farewell favors for corporate financial supporters, including Big Oil, Big Banks, and Big Agriculture.
