US Dollar Very Long Term Chart - La Douleur du Monde

 

The US Mega-Banks and SWIFT money transfer system for the world's reserve currency are Financial Dreadnoughts in time of currency war.

 Le privilège stratégique

 

 

US Dollar Very Long Term Chart

 

"I postulated some years ago (2002) that, when push came to shove, the Fed would gather around itself a few 'friendly banks' which would act on its behalf in private to enforce certain policy decisions in markets in which the Fed and Treasury do not wish to openly operate.   It is hard to think of any other somewhat moral reason for the government to babysit and subsidize these very expensive and dangerous TBTF monstrosities, except as instruments of policy to provide some degree of freedom to shape events and responses.

If you want to wage a currency war, you need to have some dreadnoughts packing serious financial throw-weight, and economic muscle.  It may be Machiavellian, counter-democratic, and expensive, but that is the diktat of strategy if you want to control things and wield power to do what you will, both at home and abroad."

Jesse, Financial Dreadnoughts in Times of Currency War, 22 February 2013

Stocks and Precious Metals Charts - This Is Our Calling - Retesting the Lows

 

"God beholds you.  He calls you by your name.  He sees you and understands you as He made you.  He knows what is in you, all your peculiar feelings and thoughts, your dispositions and likings, your strengths and your weaknesses.  He views you in your day of rejoicing and in your day of sorrow.

He encompasses you round and bears you in His arms.  He notes your very countenance, whether smiling or in tears.  He looks tenderly upon you.  He hears your voice, the beating of your heart, and your very breathing. 

You do not love yourself better than He loves you.  You cannot shrink from pain more than He dislikes your bearing it; and if He puts it on you, it is as you would put it on yourself, if you would be wise, for a greater good afterwards.

Therefore I will trust Him. Whatever I am, I can never be thrown away. If I am in sickness, my sickness may serve Him; in perplexity, my perplexity may serve Him. If I am in sorrow, my sorrow may serve Him.  He does nothing in vain. He knows what He is about.

Let us feel what we really are— sinners attempting great things.  Let us simply obey God's will, whatever may come.  He can turn all things to our eternal good. The more we do, the more shall we trust in Christ; and that surely is no morose doctrine, that leads us to soothe our selfish restlessness, and forget our fears, in the vision of the Incarnate Son of God."

John Henry Newman

"In the Incarnation the whole human race recovers the dignity of the image of God. Thereafter, any attack, even on the least of men, is an attack on Christ, who took on the form of man, and in his own Person restored the image of God in all.   Through our relationship with the Incarnation, we recover our true humanity, and at the same time are delivered from that perverse individualism which is the consequence of sin, and recover our solidarity with all mankind."

Dietrich Bonhoeffer

“Come to me, all you who labor and are burdened, and I will give you rest. Take my yoke upon you and learn from me, for I am meek and humble of heart; and you will find rest for yourselves. For my yoke is easy, and my burden light.”

Matthew 11:30

The hawkish Fed, economic troubles in Europe and the UK, and a fresh appreciation of risk, triggered heavy selling in the equity and commodity markets. 

The VIX rose sharply as one might expect on a 'risk off' day.

A look at the stock index charts, especially the SP 500 futures, shows that we retested the prior second low intraday.

If we break further past that low and stick a close or two down that way, things could get interesting, quickly.

Gold and silver were hammered by a much stronger dollar, which shot to just shy of the 113 handle.

This is the highest that the DX index has been since the dot com bubble bust.

There will be a lot of Fed speakers gadding about next week, apparently things to say.

Let's see if they say anything that soothes the nerves of investors, especially in light of the mess in the UK and the potential contagion effects.

Or not. 

It might matter which way the winds of insider trading are blowing, especially out of Washington and NY.

Lord, pierce our hardened hearts, enlighten our minds, heal our blindness, and break the self-imposed chains of pride and self-deception, so that we may choose life through repentance, forgiveness, and life.

Have a pleasant weekend.

US Dollar DX Index Very Long Term Chart

 

US Dollar Very Long Term Chart

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin.  But both are the refuge of political and economic opportunists."

Ernest Hemingway

US Dollar Very Long Term Chart for Year End 2014

The US dollar has ended this year on a high note not seen in some time, not since the time of the financial crisis and collapse in 2008.

Dollar strength, at least in this index, is largely a reciprocal function of weakness in the euro, and to a lesser extent the yen, the pound, and the loon.

I have not worked the data yet, and may not do so for some time, but I would imagine that this spike in dollar strength will see the same sort of demand coming out of Europe as we saw in the two prior instances labeled Eurodollar Squeeze I & II.

This time it is most likely helped by the ongoing crisis in the yen and the ruble, the first being the objective of Abenomics, and the latter being the target of the West, through the actions of their sanctions and the currency action of their Banks, in this phase of the ongoing currency war.

In general, a stronger currency helps the financial and foreign investment sectors of a nation, and is much less helpful for the manufacturing and producing sectors.  It tends to make exports more expensive, and imports more affordable. And it gives purchasing power for those of a mind to acquire and privatize major foreign assets.

This is not a prescription for a recovery in a real producing economy, but it is a boost to the moneyed class of financiers.  This is in keeping with the financialization of the economy that came to fruition during the 1990's, and has continued to dominate the economy and the political process ever since.

Let's see how things develop in 2015.

 

 

 

 

 

US Dollar Long Term Chart

I would like to reiterate that because its weightings and composition no longer reflect the reality of the international monetary system that the US Dollar Index will continue to become increasingly less informative and relevant.

 

The existing weightings and inclusions are shows in the pie symbol on this dollar chart. 

But it does serve as a vehicle on which to locate certain key events.

You may 'right click' on the chart to save it to your computer for closer inspection.

US Dollar Very Long Term Chart - Coiling

It has been quite while since we have taken a look at the US Dollar Very Long Term Chart.

And with good reason, since it has been moving within a fairly tight range, in a slowly tightening coil. So there will not be much to see until it breaks out of this formation.

And as you can see from the composition of this dollar DX index on the chart, it hardly reflects the new realities in the world today, since it is so heavily weighted to the Euro, the Yen, and the Pound, with no representation at all from the BRICs.

But it has some indicative value in addition to historical value.

US Dollar Index Very Long Term Chart - A Rake's Progress

Here is an end of year update on the very long term US dollar chart, la douleur du monde.

As a reminder, this is a chart based on the DX dollar index.

That index is woefully out of date with the progress of the world economy and the currency wars with their competitive devaluations and rising currencies of the developing nations.

The DX Index is far too heavily weighted to Europe and Japan, and does not include any of the BRICs.

What it has to its merit is a history of pricing points, that were more meaningful in the past.

A Rake's Progress is a series of eight paintings by William Hogarth that show the decline and fall of Tom Rakewell, the spendthrift son and heir of a rich merchant, who comes to London, wastes all his money on luxurious living, prostitution and gambling, and as a consequence is imprisoned in the Fleet Prison and ultimately Bethlem Hospital, or Bedlam.

Below is painting number six, in which young Tom begs for help from the almighty after a losing night of gambling.

One of my favorite pied-à-terres in London for short layovers many years ago was the Hogarth Hotel off Earl's Court Station on the Piccadilly Line, a serviceable route to and from Heathrow. The area was at one time called Aussie Alley because of the tendency of Australians to cluster there for some reason.

For longer term stays there was a favorite hotel in Mayfair, which was closer to the book stores and my bank, and a small residence in Hampstead Heath which was convenient to almost nothing, but pleasant in the summer. This was my favorite time of the year in London for long walks, the theatre of course, and Christmas shopping in Knightsbridge.

As Samuel Johnson observed, "You find no man, at all intellectual, who is willing to leave London. No, Sir, when a man is tired of London, he is tired of life; for there is in London all that life can afford." And I think the emphasis is well-placed on 'afford.' New York is extravagant, Paris is comfortable, Rome is expansive, but London is civilized.

This is not to be confused with The City, of course, which is a bastion of vipers and thieves. lol.

US Dollar Very Long Term Chart

As I have said previously, the US Dollar DX index may be less useful now because of its almost quaint concentration in the Euro, Yen and Pound, and lack of representation in the currencies of the high growth countries of the emerging markets, particularly India, Brazil, Russia and China.

The Anglo-American banking cartel would like to keep it that way as well. Encouraging the western central banks to inflate their currencies will maintain the appearance of stability while monetization and even devaluations can occur.

Still it is nice to have some historical context.

US Dollar Very Long Term Chart

Please bear in mind that the DX dollar index will become increasingly irrelevant because of its outdated structure, heavily weighted to the euro yen and the pound, to the exclusion of the emerging currencies and the precious metals.

The shorter term chart has been rallying largely on euro weakness. We might see another eurodollar short squeeze if things continue to deteriorate in the European banking system.

A stronger dollar is something that the wealthy and the financial sector may enjoy, to the detriment of the rest of the country and any hopes of economic recovery.   However the realities of things make a stronger dollar problematic. 

So the next best thing is to slowly devalue the dollar by printing money and selectively distributing it, with tax benefits, to the most powerful and fortunate members of society.

In a 'free market' for currencies the dollar would have been much lower by now because of the persistent trade deficit, and the enormous dollar balances held by some of her trading partners.

The financial engineers favor a slow decline so as not to disclocate any of the major banking concerns. The currency discussions between China and the US are political theater for their respective peoples and the currency tourists, i.e. the small speculators who provide a snack for the wolves.

Very Long Term US Dollar DX Index Chart, and Two Dollar Charts From the Fed

The DX Index I normally show is the continuous futures contract on the DX index. The front month is now June.

The Fed also publishes two other dollar indices: major currency index, and the broad currency index. The major currency index is essentially the basis for the Wall Street DX futures index.

I have included charts of both of these Fed dollar indices below.

“If those in charge of our society - politicians, corporate executives, and owners of press and television - can dominate our ideas, they will be secure in their power. They will not need soldiers patrolling the streets. We will control ourselves.”

Howard Zinn

US Dollar Intermediate and Long Term Charts

A weak chart yes, but a burial would likely be premature.

Currencies notoriously overshoot. A clean break of 71 and we'd be out of Kansas, Toto, and into some brave new world.

Still, if the buck wishes to gather itself together, it might well do so soon. Or better yet, the yen and euro must weaken, because the DX index is a primarily a mirror of their own relative positions.

US Dollar Very Long Term Chart: Emperor et Ses Amis du Vins

The weakness with this US Dollar DX index is that it is highly weighted to the developed economies of Europe and Japan. As such it may not reflect erosion of dollar purchasing power vis a vis the BRICs, and external measures such as gold, oil, and silver. It may be masked by the mutual weakness of central banks all inflating their currencies in unison.

This is what the Federal Reserve desires: to repair its economy and unpayable debts by expanding its monetary base while exporting much of the negative effects of such monetary inflation to the rest of the world, keeping things relatively stable to maintain confidence in their paper. And this is why the central banks attempt to control the price of less manageable currencies such as gold and silver. Silver is the most problematic because its supplies are difficult for the banks, as they have none of their own, and the world has largely depleted its discretionary strategic stockpiles of this metal. Long term price suppression breeds underinvestment and the inevitable shortages of real goods.

The support levels are as marked and fairly obvious. With the dollar index around 76.28 today it is threatening to break down out of the chart formation. Lateral support around 74 and 71 is fairly strong.

Rather than rallies through economic vitality and recovery, the dollar rallies have been marked by relative declines primarily in the euro on their sovereign debt problems. It is almost like a couple of drunks leaning on each other for support, except that the US is picking the Eurozone's pockets while they do it.

Very Long Term US Dollar Chart

The revaluation of the SDR should be occurring around the end of 2010. As you know it is composed of a valuation basket of currencies that is adjusted every five years. There has been a recent change in voting power in the IMF that may give more weight to the BRICs and those who favor a broader basket that includes gold and silver. India, China and Brazil Become Major Players in the IMF.  This is also of importance because we forecast that the SDR is going to be a likely candidate to supplant the Dollar as the world's reserve currency, a move that will be resisted and delayed by the Anglo-American financiers.

I do not know of any plans to change the valuation basket of the DX US dollar index. It is obviously out of date as the breakdown on the chart below shows. In previous postings of the very long term Dollar Chart I have warned that the projections may not be realized because the index is heavily weighted to the developed nations. 82 percent of the valuation is attributed to the euro, pound, and yen.

US Dollar Index Still Up For the Year, But Not By Much

The Dollar has tested key support and broken down lower. The next levels of support are obvious. It appears to be renewing its long term downtrend after the short squeeze in the eurodollar that drove it higher.

The dollar is short term oversold and could find some support around this level.

At some point the DX index needs to be reconstituted as the SDR will eventually be. The weighting to Europe and Japan are much too heavy for the current volumes of world trade and reserves.

SP 500 and NDX December Futures Daily Charts

Nice stick save on the indices for the end of quarter.

US Dollar Very Long Term Chart

"A sentiment of trust in the legal money of the State is so deeply implanted in the citizens of all countries that they cannot but believe that some day this money must recover a part at least of its former value. To their minds it appears that value is inherent in money as such, and they do not apprehend that the real wealth, which this money might have stood for, has been dissipated once and for all.

This sentiment is supported by the various legal regulations with which the Governments endeavor to control internal prices, and so to preserve some purchasing power for their legal tender. Thus the force of law preserves a measure of immediate purchasing power over some commodities and the force of sentiment and custom maintains, especially amongst peasants, a willingness to hoard paper which is really worthless...

If, however, a government refrains from regulations and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer."

John Maynard Keynes, Economic Consequences of the Peace, NY, 1920, p. 239-40

US Dollar (DX) Longer Term Charts

Here is the longer term view of the US Dollar as measured by a basket of currencies.

Can it 'break out' here? Yes, certainly. Europe and Japan have their problems, and in the world of fiat, the grading of the paper is done 'on a curve.' The central banks and their mavens, who intervene at least indirectly in the currency markets with a certain obsessiveness these days of non-stop financial engineering, like to shove their manipulation around the plate as well. They don't 'tweak' the economy; they are the economy, at least at the margins.

Can it also fail and break down here? Yes, certainly. A stronger dollar will step hard on the weak US economic recovery. It will serve to lower import prices, but dampen exports, which is what they call 'bad news' when your domestic demand is slack.

There is the fundamental detail an enormous amount of dollars being held overseas that are not in circulation so to speak. At some point they, like the swallows of Capistrano, will return, and have trouble finding a place to comfortably roost.

But the market does not care about our theories, or even the charts. They are just rough estimates of a very complex reality. This is a disclosure that all pundits should place on their prognostications.

And in these days of thin markets and bank prop desks as a major source the income, the fundamentals are less relevant than the short term reality of the squid's need to feed.

Let's see what happens. Then we will know something actionable.

US Dollar Very Long Term Chart